Financial Analysis of FMCG Companies

PROJECT REPORT
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR
DIPLOMA IN MANAGEMENT DEGREE
(2014-2016)

Submitted To:
Dr. Meena Bhatia

Submitted By:
DWIBHASHYAM SUSRUTH 14DM080
HITANSHU VERMA

14DM094

HIMANSHI AGGARWAL
MANISHA SHARMA

14DM119

HIMANSHU KATYAL

14DM092

K SHREE RAM

Industry profile
FMCG
Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that
are sold quickly and at relatively low cost. Examples include non-durable goods such as soft
drinks,toiletries,over-the-counterdrugs, toys, processed foods and many
other consumables. Though the profit margin made on FMCG products is relatively small (more
so for retailers than the producers/suppliers), they are generally sold in large quantities; thus, the
cumulative profit on such products can be substantial. FMCG is probably the most classic case
of low margin and high volume business.
Fast-moving consumer electronics are a type of FMCG and are typically low priced generic or
easily substitutable consumer electronics, including mobile phones, MP3 players, game players,
and digital cameras which are of disposable nature.
Companies chosen
1.
2.
3.
4.
5.

Colgate Palmolive Ind.

Dabur India
Pidilite
Hindustan Unilever
ITC

Colgate Palmolive Ind.

The Colgate-Palmolive Company is an American multinational consumer products company
focused on the production, distribution and provision of household, health care and personal
products, such as soaps, detergents, and oral hygieneproducts
(including toothpaste and toothbrushes). Under its "Hill's" brand, it is also a manufacturer
of veterinary products. The company's corporate offices are on Park Avenue in Midtown
Manhattan. Colgate is willingly to introduce manufacturing plant in Nepal where household
products are used at around 4.7% of the household products used in world.
In 1992, Colgate established its first factory in China to produce toothpaste for the domestic
market, and by 1999 became the highest selling brand in that world. Colgate products are
marketed in China which is pronounced gaolujie, similar to Colgate, and has a positive meaning
of high-quality cleaning gel. As of 2002, Colgate occupied 20% of the market share for
toothpastes in China. As of 2009, Colgate and its four core businesses including Oral Care,
Personal Care, Home Care and Pet Nutrition surpassed sales of over $15, selling in over 200
countries worldwide.

On comparison of its balance sheets and profit and loss accounts in India it was found that the
negatives seriously outweigh positives.
Negatives:
1. Net profit and gross profit has been reducing gradually.
2. Negative working capital.
3. Negative quick ratio which implies the company the being short of current assets to pay
off its obligations over past 5 years. This would be a serious threat for the company due
to any unforeseen incidents.
4. Declining net worth

Positives:

1. Days of inventory is approx. two months which is a good number to keep cash rotating.
2. Zero debt for last year and zero interest expense for last two years which is a good sign
of turnaround.

Suggestions:
1. Should reduce current liabilities
2. Improve in asset management.

PIDILITE
Pidilite Industries Limited is the largest adhesive manufacturer in India. Pidilite has been a
pioneer in consumer and specialties chemicals in India. Over two-third of the companys sale
come from products and segments it has pioneered in India. Its product range includes

Adhesives and Sealants, Construction and Paint Chemicals, Automotive Chemicals, Art
Materials, Industrial Adhesives, Industrial and Textile Resins and Organic Pigments and
Preparations. Most of the products have been developed through strong in-house R&D. Pidilite
is also growing its international presence through acquisitions and setting up manufacturing
facilities and sales offices in important regions around the world. Fevicol is now the largest
selling adhesives brand in Asia. Pidilite's most famous product is the Fevicol range of adhesives.
Its other famous brands are "Fevikwik", Dr. Fixit, Cyclo, Ranipal, Hobby Ideas, and Acron.
Pidilite's corporate office is located in Andheri (East), Mumbai. The company has
manufacturing facilities at various locations in India including
Mahad(maharastra), Vapi (Gujarat) Baddi (Himachal Pradesh) and Kala Amb (Himachal
Pradesh). It also makes Fevi Kwik India's first ever One Drop Instant Adhesive. This brand is
the most popular Instant Adhesive in South Asian countrie Pidilite is dominant player in
Construction Chemical Industry and the MARKET.Leader in Retail Segment. Hitherto, the
competitors were focusing only on projects. But Pidilite has changed the Industry Paradigm
when it forayed in Retail segment. This step ensured that latest in Construction Chemical
technology was made available to the common man. The company further enhanced its
Customer Centric Policies by being the first in the industry to start an in-house Technical
Services Cell, which assists customers in diagnosing the problem and selecting the right
product.

The following negatives and positives were observed on comparison of its balance sheets and
profit and loss accounts in India.
Negatives:
1. Net profit has been reducing gradually gross profit has maintained almost constant level.

2. Days of inventory turnover is around three months which is very high when compared to
its peers selected.
3. Negative quick ratio which implies the company the being short of current assets to pay
off its obligations over past 5 years. This would be a serious threat for the company due
to any unforeseen incidents.

Positives:
1
2

Asset turnover increased 25% over past 5 years.

Net worth of the company is increasing gradually which is good sign also with zero

debts.
Interest coverage ratio is increasing drastically showing the debts are being paid off
along with principal.

Suggestions:
1. Pidilite has to work on its miscellaneous expenses which have overshooted over past
three years amounting 25-30% of its total expenses. Which would further increase its
ROE.

Hindustan Unilever Limited

Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai,
Maharashtra. It is owned by Anglo-Dutch Company Unilever which owns a 52% controlling
share in HUL. HUL's products include foods, beverages,cleaning agents and personal care
products.
HUL was established in 1933 as Lever Brothers India Limited and, in 1956, became known as
Hindustan Lever Limited, as a result of a merger between Lever Brothers, Hindustan Vanaspati
Mfg. Co. Ltd. and United Traders Ltd. It is headquartered inMumbai, India and employs over
16,500 workers, whilst also indirectly helping to facilitate the employment of over 65,000
people. The company was renamed in June 2007 as "Hindustan Unilever Limited". The
Hindustan Unilever Research Centre (HURC) was set up in 1967 in Mumbai, and Unilever
Research India in Bangalore in 1997. Staff at these centres developed many innovations in
products and manufacturing processes. In 2006, the company's research facilities were brought
together at a single site in Bangalore. HUL also runs Hindustan Unilever Network (HULN),
a direct selling business arm. Under HULN, health products are marketed by Ayush Therapy in
collaboration with Arya Vaidya Pharmacy, Coimbatore; beauty products by Aviance; home
products by Lever Home; and male grooming by D.I.Y. There are also premium products for
beauty salons and others.
Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its
products are available in over 6.4 million outlets in the country. As per Nielsen market research
data, two out of three Indians use HUL products. Currently it is second largest FMCG
manufacturer in India as per Market Capitalization.

The following negatives and positives were observed on comparison of its balance sheets and pl
accounts in India.

Negatives:
1. Decreasing gross profits over the years
2. Quick ratio has been negative for all the years which is a serious concern.
3. Cash ratio has been improved over the past years but the ratio is not satisfactory.

Positives:
1. Least days of inventory of one month in the sector
2. Accounts received in a cycle of 12 days
3. Zero debt
Suggestions:
1. Need to improve its working period cycle as the net working capital has always been

ITC
ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its
diversified business includes five segments: Fast Moving Consumer Goods (FMCG), Hotels,
Paperboards & Packaging, Agri Business & Information Technology.
ITC was formed on 24 August 1910 under the name of Imperial Tobacco Company of India
Limited and the company went public on 27 October 1954.The earlier decades of the company's
activities centered mainly around tobacco products. In the 1970s, it diversified into non-tobacco
businesses. Established in 1910 as the Imperial Tobacco Company of India Limited, the
company was rechristened as the Indian Tobacco Company Limited in 1970 and further to
I.T.C. Limited in 1974. The company acquired a hotel in Chennai, which was rechristened the
'ITC-Welcomgroup Hotel Chola ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepali
and British joint venture, with the shares divided between ITC, British American Tobacco and
various independent domestic shareholders in Nepal. In 2002, Surya Tobacco became a
subsidiary of ITC and its name was changed to Surya Nepal Private Limited. ITC launched
the Expressions range of greeting cards, the Wills Sport range of casual wear, and a wholly
owned information technology subsidiary, ITC Infotech India Limited.ITC introduced
the Kitchens of India brand of ready-to-eat gourmet Indian recipes.ITC entered
the confectionery and staples segments and acquired the Bhadrachalam Paperboards
Division and the safety matches company WIMCO Limited. ITC entered the Agarbattis (incense
sticks) business in 2003, selling its products under the Mangaldeep brand. ITC diversified into
body care products in 2005. In 2010, ITC launched its handrolled cigar - Armenteros - in the
Indian market.The company completed 100 years in 2010 and as of 2012-13, had an annual
turnover of US$ 8.31 billionand a market capitalisation of US$ 45 billion. The company began
online sales in 2014. It employs over 25,000 people at more than 60 locations across India and
is part of Forbes 2000 list.

The following positives and negatives were observed on comparision of its balance sheets and
profit and loss accounts in India though positives outweighed negatives largely:Positives:
1. Increasing net profit
2. One month in days of accounts turnover
3. Zero debt and high interest coverage
4. Though the Net profit is less the company is being rich in cash flow as the depreciation
is very high which a non cash expense.
Negatives:
1. High days of inventory turnover being 3 months which needs to be worked on.

Dabur India Limited

Dabur (Dabur India Ltd.) is India's largest Ayurvedic medicine manufacturer. Dabur was
founded in 1884 by Dr. SK Burman, a physician in West Bengal, to produce and dispense
Ayurvedic medicines. Dr. Burman designed Ayurvedic medication for diseases such as cholera
and malaria. The Dabur name is derived from the Devanagri rendition of DaktarBurman.
Through our comprehensive range of products, we touch the lives of all consumers, in all age
groups, across all social boundaries. And this legacy has helped us develop a bond of trust with
our consumers. Thatguarantees you the best in all products carrying the Dabur name Dabur's
Ayurvedic Specialities Division has over 260 medicines for treating a range of ailments and
body conditions, from common cold to chronic paralysis. Dabur International, a fully owned
subsidiary of Dabur India formerly held shares in the UAE based Weikfield International, which
it disposed of on 25 June 2012.

The following negatives and positives were observed on comparision of its balance sheets and
Profits and loss accounts in India.
Negatives:
1. Constant net profit margins over the years though the companys sales higher increased.
2. Needs to work on the days of inventory where cash is getting struck
Positives:
1. Net worth of the company almost tripled in the last 5 years.
2. High interest coverage ratio.