VALUATION REPORT ON GILLETTE INDIA LTD.

CVR | Section B | IIM LUCKNOW

Submitted to Prof. Ajay Garg

BY Group No.6

Ameya Supreet Ravi Khatri Paridhi Soumya

Thakur Narang Shrimali Gupta
PGP31223
PGP31242 PGP31238 PGP31395
 IIM Lucknow

Table of Contents

INDUSTRY ANALYSIS................................................................................................................... 2
Cash Flow Projections and Discount Rates.................................................................................5
Financial Statement Analysis...................................................................................................... 6
Valuation from Different Methods............................................................................................... 7
INDUSTRY ANALYSIS
The Indian mens grooming market is dominated by mass brands, with the penetration of
premium mens grooming products remaining limited in 2015. Mens razors and blades
remained the most important mens grooming area and registered current retail value growth
of 13% in 2015, with sales reaching INR25 billion. Mens shaving accounted for 42% of mens
grooming sales in 2015 and registered current retail value growth of 14%, with sales reaching
INR32 billion. Mens razors and blades remained the main contributor to mens shaving sales
in 2015.

Source: Euromonitor Database

Gillette India continues to lead mens grooming in 2015, recording a retail value share of 23%.
Gillette Mach3 and Gillette Vector Plus were the most popular Gillette variants among
consumers during 2015. The company recorded revenues of INR19098.3 million
(approximately $308.4 million) in the fiscal year ended June 2015. Its net profit was INR1581.3
million (approximately $25.5 million) in fiscal 2015.

Gillette India is the most important player in the mens grooming in India and continues to
hold its dominance during 2015 with a value share of 23% in the market. The strong presence
of the company within mens shaving and mens razors and blades helped drive sales in 2015
and the company has a strong Gillette portfolio. It comprises of variants such as Gillette
Mach3, Gillette Vector Plus, Gillette Series, Gillette Foamy, Gillette Aftershave Splash and
other Gillette brands. The company offers products within varying price points in order to tap
into all possible price segments in the market and its Wilkinson brand is also positioned well in
the semi-urban market. This helps Gillette to reach out to consumers across various segments
and geographies.
 Brandwise Market Shares
25.00

20.00

15.00

10.00

5.00

0.00
Gillette Park Avenue Axe/Lynx/Ego Wild Stone Super-Max Fogg

2012 2013 2014 2015

Source: Euromonitor Database

Within mens razors and blades, other razors and blades remains the largest area, accounting
for 38% of overall retail value sales in 2015. Disposable brands are focussing on the ease of
usage provided by such products and mainly target consumers buying other razors and
blades to upgrade to disposables. Refill blades accounted for around 18% of value sales in
2015 while razors accounted for close to 16% of sales. The penetration of advanced electric
shavers in India remains limited due to the huge price differential between conventional
traditional shaving products and advanced electric shavers. The mens post shave market in
India remained a niche area in 2015, with mens post shave players needing to invest in
educating Indian consumers about the benefits of using these products. The following chart
shows the significant advantage Gillette holds over other brands in the mens grooming
market in India. However new brands like Fogg which started out in 2012 have managed to
grow in volumes within a very short duration obtaining close to 3% of the market share.

India Market Share- Men's Grooming Products

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2010 2011 2012 2013 2014 2015

Procter & Gamble Co Raymond Ltd

Unilever Group Malhotra Shaving Products Pvt Ltd
McNroe Chemicals Pvt Ltd

Source: Euromonitor Database

Mens grooming is expected to continue to perform well over the forecast period, with the
trend towards increased focus on physical hygiene, health and wellness and image set to
continue to rise among Indian men. Continued celebrity endorsement of mens grooming
products is also expected to help increase awareness of mens grooming products among
male consumers from smaller towns and villages. Increased awareness of mens grooming
products and their benefits and usage, coupled with increased availability of these products
over the forecast period, is expected to help drive sales of mens grooming products. Mens
grooming has a projected forecast period constant 2015 price value CAGR of 14% - an
increase from the review period CAGR of 11%. Increasing awareness among Indian male
consumers about mens grooming products and their usage due to continued promotions by
leading brands and celebrity endorsements is expected to help fuel this stronger growth.

Further, Indian mens grooming market will grow at a CAGR of 22% by 2020. This growth is
mainly due to the rising need to look well groomed, increasing per capita income, and rapid
urbanization.
The demand for mens grooming market has seen a rise in the last few years because of
increased consciousness of their looks among the male customer. Also as more than 50% of
the population is under the age group of 30, the industry has huge local market. Moreover,
rising urban middle class population, and improved distribution channels in tier II and tier III
cities, are also expected to stimulate growth in the market through 2020. Indian shaving
products market is expected to grow at a CAGR of 20% till 2020 and maintain its market
share position even in 2020.

Source: Euromonitor Database

Cash Flow Projections and Discount Rates
Financial Statement Analysis
Valuation from Different Methods

We find that multiples valuation yields highly varying results as compared to the DCF
valuation. The industry P/E ratio yields an expected price that varies substantially from the
prevailing market price.
We can attribute this to the fact that, even the closest peer set for Gillette India as assembled
by us does not match either its product portfolio or its target customer base. Gillette India
caters to largely urban men, unlike its various peers. Hence, we are less inclined to favour the
results of the relative valuation exercise.