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ths project is based on financial positon of dabur
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1
Chapter 1
Executive Summary
The project is associated with Corporate Bridge Pvt. Ltd. on “Objective” The aim of the
project to develop a Financial Model of Dabur Pvt. Ltd.
For the purpose of this project it is suggested to take in consideration the Webinar of
Corporate Bridge where they help the student learning through videos. There are 700+
Videos on the Website of Corporate Bridge to which only subscribers can access.
The lessons learnt from Corporate Bridge evaluation and of Dabur India Pvt Ltd
Performance which are helped in studying their Financial Position and can estimate the
Future risk and Potential through Ratio Analysis.
Awareness of Financial Modeling and Ratio Analysis were the key learning through this
project.
2
Chapter 2
Introduction
2.1 Introduction to the Ratio Analysis
Financial statement analysis is the process of reviewing and evaluating a
company’s financial statements thereby gaining an understanding the financial
health of the company and enabling Effective decision making for owners and
managers, prospective and present investors, financial institutions, government
entities etc. It involves analysis of past, current and projected Performance of the
company.
Financial Statements are released by companies not only for acceding to the
norms set up by the exchanges on which they are listed and to follow the rules
put down by the regulator of that country but also to provide prospective
investors and financial institutions a brief insight into the company. It helps them
take decision to make investment or give loan, both long term and short term to
the company.
Financial statements are normally available in company’s website, prospectus as
also the Annual and the quarterly results declared by the company. These
statements by themselves contain a lot of numbers which are in comprehensible
unless a proper analysis of such documents is carried out to arrive at a
conclusion on the company's financial health. The pages that follow, aim to
provide a simplified explanation of some of the basic analysis company for
different objectives of the investor/lender. The objectives include Short term and
long term investment, short term and long term lending and future strategy.
3
Classification of Ratios
Accounting Ratios are classified on the basis of the different parties interested in
making use of the ratios. A very large number of accounting ratios are used for
the purpose of determining the financial position of a concern for different
purposes. Ratios may be broadly classified in to:
Classification of Ratios on the basis of Balance Sheet.
Classification of Ratios on the basis of Profit and Loss Account.
Classification of Ratios on the basis of Mixed Statement.
This classification further grouped in to:
A. Liquidity Ratio
B. Profitability Ratios
C. Turnover Ratios
D. Solvency Ratios
E. Overall Profitability Ratios
A chart for classification of ratios by statement is given below showing clearly
the types of ratios may be broadly classified on the basis of Income Statement
and Balance
4
1. Liquidity Ratios
Liquidity Ratios are also termed as Short-Term Solvency Ratios. The term
liquidity means the extent of quick convertibility of assets in to money for
paying obligation of short-term nature. Accordingly, liquidity ratios are
useful in obtaining an indication of a firm's ability to meet its current
liabilities, but it does not reveal h0w effectively the cash resources can be
managed. To measure the liquidity of a firm, the following ratios are
commonly used:
a) Current Ratio.
b) Quick Ratio (or) Acid Test or Liquid Ratio.
c) Absolute Liquid Ratio (or) Cash Position Ratio.
a) Current Ratio
Current Ratio establishes the relationship between current Assets and
current Liabilities. It attempts to measure the ability of a firm to meet its
current obligations. In order to compute this ratio, the following Formula
is used:
Current Assets
Current ratio= ----------------------------------
Current Liabilities
The two basic components of this ratio are current assets and current
liabilities. Current asset normally means assets which can be easily
converted in to cash within a year's time. On the other hand, current
liabilities represent those liabilities which are payable within a year.
b) Quick Ratio
Quick Ratio also termed as Acid Test or Liquid Ratio. The acid test ratio is
a more severe and stringent test of a firm's ability to pay its short-term
obligations 'as and when they become due. Quick Ratio establishes the
relationship between the quick assets and current liabilities. In order to
compute this ratio, the below presented formula is used:
Liquid Assets
Liquid Ratio = --------------------------
Current Liabilities
5
Current liabilities represent those liabilities which are payable within a
year. The ideal Quick Ratio of 1: 1 is considered to be satisfactory. High
Acid Test Ratio is an indication that the firm has relatively better position
to meet its current obligation in time. On the other hand, a low value of
quick ratio exhibiting that the firm's liquidity position is not good.
c) Absolute Liquid Ratio
Absolute Liquid Ratio is also called as Cash Position Ratio (or) Over Due
Liability Ratio. This ratio established the relationship between the
absolute liquid assets and current inabilities. Absolute Liquid Assets
include cash in hand, cash at bank, and marketable securities or
temporary investments. The optimum value for this ratio should be one,
i.e., 1: 2. It indicates that 50% worth absolute liquid assets are considered
adequate to pay the 100% worth current liabilities in time. If the ratio is
relatively lower than one, it represents that the company's day-to-day
cash management is poor. If the ratio is considerably more than one, the
absolute liquid ratio represents enough funds in the form of cash to meet
its short-term obligations in time. The Absolute Liquid ratio Can be
calculated by dividing the total of the Absolute Liquid Assets by Total
Current Liabilities.
Liquid Ratio
Absolute Liquid Assets = ----------------------------
Current Liabilities
6
2. Profitability Ratio
The term profitability means the profit earning capacity of any business
activity. Thus, profit earning may be judged on the volume of profit margin of
any activity and is calculated by subtracting costs from the total revenue
accruing to a firm during a particular period. Profitability Ratio is used to
measure the overall efficiency or performance of a business. Generally, a
large number of ratios can also be used for determining the profitability as
the same is related to sales or investments. The following important
profitability ratios are:
a) Gross Profit Ratio
Gross Profit Ratio established the relationship between gross profit and
net sales. This ratio is calculated by dividing the Gross Profit by Sales. It is
usually indicated as percentage.
Net Sales
Gross Profit= ------------------------ x 100
Gross Profit
Higher Gross Profit Ratio is an indication that the firm has higher
profitability. It also reflects the effective standard of performance of firm's
business.
b) Operating Ratio
Operating Ratio is calculated to measure the relationship between total
operating expenses and sales. The total operating expenses is the sum
total of cost of goods sold, office and administrative expenses and selling
and distribution expenses. In other words, this ratio indicates a firm's
ability to cover total operating expenses. In order to compute this ratio,
the following formula is used:
Operating Cost
Operating Ratio = -------------------- *100
Net sales
Operating Cost = Cost of goods sold + Administrative Expenses+ Selling
and Distribution Expenses.
7
c) Operating Profit Ratio
Operating Profit Ratio indicates the operational efficiency of the firm and
is a measure of the firm's ability to cover the total operating expenses.
Operating Profit Ratio can be calculated as:
Operating Profit
Operating Profit Ratio = --------------------------- x 100
Net Sales
d) Net Profit Ratio
Net Profit Ratio is also termed as Sales Margin Ratio (or) Profit Margin
Ratio (or) Net Profit to Sales Ratio. This ratio reveals the firm's overall
efficiency in operating the business. Net profit Ratio is used to measure
the relationship between net profit (either before or after taxes) and
sales. This ratio can be calculated by the following formula:
Net Profit after Tax
Net Profit Ratio = -------------------------- X 100
Net Sales
Net profit includes non-operating incomes and profits. Non-Operating
Incomes such as dividend received, interest on investment, profit on sales
of fixed assets, commission received, discount received etc. Profit or Sale
Margin indicates margin available after deduction cost of production,
other operating expenses, and income tax from the sales revenue. Higher
Net Profit Ratio indicates the standard performance of the business
concern..
e) Return on Investment Ratio.
This ratio is also called as ROL This ratio measures a return on the
owner's or shareholders’ investment. This ratio establishes the
relationship between net profit after interest and taxes and the owner's
investment. Usually this is calculated in percentage. This ratio can be
calculated as :
Net Profit (after interest and tax
Return on Investment Ratio = ------------------------------------------ X l00
Shareholders' Fund
8
f) Return on Capital Employed Ratio.
Return on Capital Employed Ratio measures a relationship between profit
and capital employed. This ratio is also called as Return on Investment
Ratio. The term return means Profits or Net Profits. The term Capital
Employed refers to total investments made in the business. The concept
of capital employed can be considered further into the following ways:
(1) Gross Capital Employed
(2) Net Capital Employed
(3) Average Capital Employed
(4) Proprietor's Net Capital Employed
Operating profit
Return on Capital Employed Ratio= ------------------------------------
Proprietors Fund
g) Earnings Per Share Ratio
Earnings per Share Ratio (EPS) measures the earning capacity of the
concern from the owner's point of view and it is helpful in determining
the price of the equity share in the market place. Earnings Per Share Ratio
can be calculated as:
Net Profit after Tax and Preference Dividend
Earnings per Share Ratio = ---------------------------------------------------------
No. of Equity Shares
h) Dividend Pay-out Ratio.
This ratio highlights the relationship between payment of dividend on
equity share capital and the profits available after meeting tax and
preference dividend. This ratio indicates the dividend policy adopted by
the top management about utilization of divisible profit to pay dividend
or to retain or both. The ratio, thus, can be calculated as:
Equity Dividend
Dividend Pay-out Ratio = --------------------------------------------------------
Net Profit after Tax and Preference Dividend
9
i) Dividend Yield Ratio
Dividend Yield Ratio indicates the relationship is established between
dividend per share and market value per share. This ratio is a major
factor that determines the dividend income from the investors' point of
view. It can be calculated by the following formula:
Dividend Per Share
Dividend Yield Ratio = -------------------------------- X 100
Market Value per Share
j) Price Earnings Ratio.
This ratio highlights the earning per share reflected by market share.
Price Earnings Ratio establishes the relationship between the market
price of an equity share and the earning per equity share. This ratio helps
to find out whether the equity shares of a company are undervalued or
not. This ratio is also useful in financial forecasting. This ratio is calculated
as:
Market Price Per Equity Share
Price Earnings Ratio = ----------------------------------------------
EarningsPer Share
k) Net Profit to Net worth Ratio.
This ratio measures the profit return on investment. This ratio indicates
the established relationship between net profit and shareholders' net
worth. It is a reward for the assumption of ownership risk. This ratio is
calculated as:
Net Profit after Taxes
Net Profit to Net Worth = ------------------------------------------------- X 100
Shareholders' Net Worth
10
3. Turnover Ratio
Turnover Ratios may be also termed as Efficiency Ratios or Performance
Ratios or Activity Ratios. Turnover Ratios highlight the different aspect of
financial statement to satisfy the requirements of different parties interested
in the business. It also indicates the effectiveness with which different assets
are vitalized in a business. Turnover means the number of times assets are
converted or turned over into sales. The activity ratios indicate the rate at
which different assets are turned over. Depending upon the purpose, the
following activities or turnover ratios can be calculated:
a) Inventory Ratio
This ratio is also called as Inventory Ratio or Stock Velocity Ratio.
Inventory means stock of raw materials, working in progress and finished
goods. This ratio is used to measure whether the investment in stock in
trade is effectively utilized or not. It reveals the relationship between sales
and cost of goods sold or average inventory at selling price. Stock
Turnover Ratio indicates the number of times the stock has been turned
over in business during a particular period. Supply condition etc. In order
to compute this ratio, the following formulae are used:
Cost of Goods Sold
Stock Turnover Ratio = ------------------------------------------
Average Inventory at Cost
b) Debtor's Turnover Ratio or Receivable Turnover Ratio
Debtor's Turnover Ratio is also termed as Receivable Turnover Ratio.
Receivables and Debtors represent the uncollected portion of credit
sales. Debtor's Velocity indicates the number of times the
receivables are turned over in business during a particular period. In
other words, it represents how quickly the debtors are converted into
cash. It is used to measure the liquidity position of a concern. This ratio
establishes the relationship between receivables and sales. Two kinds of
ratios can be used to judge a firm's liquidity position on the basis of
efficiency of credit collection and credit policy. They are Debtor's
Turnover Ratio and Debt Collection Period. These ratios may be
computed as:
11
Net Credit Sales
Debtor's Turnover Ratio = -------------------------------------
Accounts Receivable
Months (or) Days in a year
Debt Collection Period Ratio = --------------------------------------
Debtor's Turnover
c) Creditor's Turnover Ratio
Creditor's Turnover Ratio is also called as Payable Turnover Ratio or
Creditor's Velocity. The credit purchases are recorded in the accounts of
the buying companies as Creditors to Accounts Payable. The Term
Accounts Payable or Trade Creditors include sundry creditors and bills
payable. This ratio establishes the relationship between the net credit
purchases and the average trade creditors. Creditor's velocity ratio
indicates the number of times with which the payment is made to the
supplier in respect of credit purchases. Two kinds of ratios can be used
for measuring the efficiency of payable of a business concern relating to
credit purchases. They are: (1) Creditor's Turnover Ratio (2) Creditor's
Payment, Period or Average Payment Period. The ratios can be calculated
by the following formulas
Credit Purchases Net
Creditors turnover ratio= -------------------------------------
Average Account Payable
d) Working Capital Turnover Ratio
This ratio highlights the effective utilization of working capital with
regard to sales. This ratio represents the firm's liquidity position. It
establishes relationship between cost of sales and networking capital.
This ratio is calculated as follows:
Net Sales
Working Capital Turnover Ratio = ----------------------------
Working Capital
12
e) Fixed Assets Turnover Ratio
This ratio indicates the efficiency of assets management. Fixed Assets
Turnover Ratio is used to measure the utilization of fixed assets. This
ratio establishes the relationship between cost of goods sold and total
fixed assets. Higher the ratio highlights a firm has successfully utilized the
fixed assets. If the ratio is depressed, it indicates the underutilization of
fixed assets. The ratio may also be calculated as
Cost of Goods Sold
Fixed Assets Turnover Ratio = ---------------------------------------
Total Fixed Assets
f) Capital Turnover Ratio.
This ratio measures the efficiency of capital utilization in the business.
This ratio establishes the relationship between cost of sales or sales and
capital employed or shareholders' fund. This ratio may also be calculated
as:
Cost of Sale
Capital Turnover Ratio= ---------------------------------
Capital Employed
13
4. Solvency Ratio
The term 'Solvency' generally refers to the capacity of the business to meet
its short-term and long term obligations. Short-term obligations include
cre++ditors, bank loans and bills payable etc. A long-term obligation consists
of debenture, long-term loans and long-term creditors etc. Solvency Ratio
indicates the sound financial position of a concern to carry on its business
smoothly and meet its all obligations. Liquidity Ratios and Turnover Ratios
concentrate on evaluating the short-term solvency of the concern have
already been explained. Now under this part of the chapter only the long-
term solvency ratios are dealt with. Some of the important ratios which are
given below in order to determine the solvency of the Concern:
a) Debt - Equity Ratio
This ratio also termed as External - Internal Equity Ratio. This ratio is
calculated to ascertain the firm's obligations to creditors in relation to
funds invested by the owners. The ideal Debt Equity Ratio is 2:1. This
ratio also indicates all external liabilities to owner recorded claims. It may
be calculated as
External Equities
Debt - Equity Ratio= ------------------------------
Internal Equities
b) Proprietary Ratio
Proprietary Ratio is also known as Capital Ratio or Net Worth to Total
Asset Ratio. This is one of the variant of Debt-Equity Ratio. The term
proprietary fund is called Net Worth. This ratio shows the relationship
between shareholders' fund and total assets. It may be calculated as:
Shareholders’ Fund
Proprietary Ratio =--------------------------------------
Total Assets
14
c) Capital Gearing Ratio
This ratio also called as Capitalization or Leverage Ratio. This is one of the
Solvency Ratios. The term capital gearing refers to describe the
relationship between fixed interest and/or fixed dividend bearing
securities and the equity shareholders' fund. It can be calculated as shown
below:
Equity Share Capital
Capital Gearing Ratio = -----------------------------------------
Fixed Interest Bearing Funds
d) Debt Service Ratio or Interest Coverage Ratio
Debt Service Ratio is also termed as Interest Coverage Ratio or Fixed
Charges Cover Ratio. This ratio establishes the relationship between
the amount of net profit before deduction of interest and tax and
the fixed interest charges. It is used as a yardstick for the lenders to
know the business concern will be able to pay its interest periodically.
Debt Service Ratio is calculated with the help of the following
formula:
Net Profit before Interest and Income Tax
Interest Coverage Ratio= --------------------------------------------
Fixed Interest Charges
15
2.2 Introduction to the Industry: Fast Moving Consumer Goodsin
India (FMCG)
Introduction
Products which have a quick turnover, and relatively low cost are known as Fast
Moving Consumer Goods (FMCG). FMCG products are those that get replaced
within a year. These products are purchased by the customers in small quantity
as per the need of individual or family. These items are purchased repeatedly as
these are daily use products. The price or value of the products is not very high.
These products are having short life also. It may include perishable and non-
perishable products, durable and non-durable goods. Examples of FMCG
generally include a wide range of frequently purchased consumer products such
as toiletries, soap, cosmetics, tooth cleaning products, shaving products and
detergents, as well as other non-durables such as glassware, bulbs, batteries,
paper products, and plastic goods. FMCG may also include pharmaceuticals;
consumer electronics, packaged food products, soft drinks, tissue paper, and
chocolate bars. Subsets of FMCGs are Fast Moving Consumer Electronics which
include innovative electronic products such as mobile phones, MP3 players,
digital cameras, GPS Systems and Laptops. These are replaced more frequently
than other electronic products. White goods in FMCG refer to household
electronic items such as Refrigerators, T.Vs, Music Systems, etc.
The Indian FMCG sector is explained below in detail:
A. Fast Growing Sector
In 2005, the Rs. 48,000-crore FMCG segment was one of the fast growing
industries in India. According to the AC Nielsen India study, the industry
grew 5.3% in value between 2004 and 2005. The Indian FMCG sector is
the fourth largest in the economy and has a market size of US$13.1 billion.
Well-established distribution networks, as well as intense competition
between the organized and unorganized segments are the characteristics
of this sector. FMCG in India has a strong and competitive MNC presence
across the entire value chain. The middle class and the rural segments of
the Indian population are the most promising market for FMCG, and give
brand makers the opportunity to convert them to branded products.
16
Most of the product categories like jams, toothpaste, skin care,
shampoos, etc, in India, have low per capita consumption as well as low
penetration level, but the potential for growth is huge.
The Indian Economy is surging ahead by leaps and bounds, keeping pace
with rapid urbanization, increased literacy levels, and rising per capita
income. The big firms are growing bigger and small-time companies are
catching up as well. According to the study conducted by AC Nielsen, 62 of
the top 100 brands are owned by MNCs, and the balance by Indian
companies. Fifteen companies own these 62 brands, and 27 of these are
owned by Hindustan Lever. Pepsi is at number three followed by Thumps
Up. Britannia takes the fifth place, followed by Colgate,Nirma, Coca-Cola
and Parle. These are figures the soft drink and cigarette companies have
always shied away from revealing. Personal care, cigarettes, and soft
drinks are the three biggest categories in FMCG. Between them, they
account for 35 of the top 100 brands.
Top 10 Companies in FMCG Sector
A. Hindustan Unilever Ltd.
B. ITC (Indian Tobacco Company)
C. Nestle India
D. GCMMF (AMUL)
E. Dabur India
F. Asian Paints (India)
G. Cadbury India
H. Britannia Industries
I. Procter & Gamble Hygiene and Health Care
J. Marico Industries
The companies mentioned in Exhibit I, are the leaders in their respective
sectors. The personal care category has the largest number of brands, i.e.,
21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are
11 HUL brands in the 21, aggregating Rs. 3,799 core or 54% of the
personal care category. Cigarettes account for 17% of the top 100 FMCG
sales, and just below the personal care category. ITC alone accounts for
60% volume market share and 70% by value of all filter cigarettes in
India.
17
The foods category in FMCG is gaining popularity with a swing of launches
by HUL, ITC, Godrej, and others. This category has 18 major brands,
aggregating Rs. 4,637 crore.
Nestle and Amul slug it out in the powders segment. The food category
has also seen innovations like softies in ice creams, Chapattis by HUL,
ready-to-eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury.
This category seems to have faster development than the Stagnating
personal care category. Amul, India's largest foods company has a good
presence in the food category with its ice-creams, curd, milk, butter,
cheese, and soon. Britannia also ranks in the top 100 FMCG brands,
dominates the biscuits category and has launched a series of products at
various prices.
In the household care category (like mosquito repellents), Godrej and
Reckitt are two players. Good knight from Godrej is worth above Rs 217
crore, followed by Reckitt's Mortein at Rs 149 crore. In the shampoo
category, HUL's Clinic and Sunsilk make it to the top 100, although P&G's
Head and Shoulders and Pantene are also trying hard to be positioned on
top. Clinic is nearly double the size of Sunsilk. Dabur is among the top five
FMCG companies in India and is a herbal specialist. With a turnover of Rs.
19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like
Dabur Amul, Dabur Chyawanprash, Vatika, Hajmola and Real. Asian Paints
is enjoying a formidable presence in the Indian sub-continent, Southeast
Asia, Far East, Middle East, South Pacific Caribbean, Africa and Europe.
Asian Paints is India's largest paint company, with a turnover of Rs.22.6
billion (around USD 513 million). Forbes Global magazine, USA, ranked
Asian Paints among the 200 Best Small Companies in the World. Cadbury
India is the market leader in the chocolate confectionery market with a
70% market share and is ranked number two in the total food drinks
market. Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs,
and Gems. The Rs.15.6 billion (USD 380 Million) Marico is a leading Indian
group in consumer products and services in the Global Beauty and
Wellness space.
18
There is a huge growth potential for all the FMCG companies as the per
capita consumption of almost all products in the country is amongst the
lowest in the world. Again the demand or prospect could be increased
further if these companies can change the consumer's mindset and offer
new generation products.
Earlier, consumers were using non-branded apparel, but today, clothes of
different brands are available and the same consumers are willing to pay
more.
B. Scope of the Sector
The Indian FMCG sector with a market size of US$13.1 billion is the fourth
largest sector in the economy. A well-established distribution network,
intense competition between the organized and unorganized segments
characterizes the sector. FMCG Sector is expected to grow by over 60% by
2010. That will translate into an annual growth of 10% over a 5-year
period. It has been estimated that FMCG sector will rise from around Rs
56,500 crore in 2005 to Rs 92,100 crores in 2010. Hair care, household
care, male grooming, female hygiene, and the chocolates and
confectionery categories are estimated to be the fastest growing
segments, says an HSBC report. Though the sector witnessed a slower
growth in 2002-2004, it has been able to make a fine recovery since then.
For example, Hindustan Unilever Limited (HUL) has shown a healthy
growth in the last quarter.
C. Growth Prospects
With the presence of 12.2% of the world population in the villages of
India, the Indian rural FMCG market is something no one can overlook.
Increased focus on farm sector will boost rural incomes, hence providing
better growth prospects to the FMCG companies. Better infrastructure
facilities will improve their supply chain. FMCG sector is also likely to
benefit from growing demand in the market. Because of the low per capita
consumption for almost all the products in the country, FMCG companies
have immense possibilities for growth. And if the companies are able to
change the mindset of the consumers, i.e. if they are able to take the
consumers to branded products and offer new generation products, they
would be able to generate higher growth in the near future.
19
It is expected that the rural income will rise in 2007, boosting purchasing
power in the countryside. However, the demand in urban areas would be
the key growth driver over the long term. Also, increase in the urban
population, along with increase in income levels and the availability of
new categories, would help the urban areas maintain their position in
terms of consumption.
At present, urban India accounts for 66% of total FMCG consumption,
with rural India accounting for the remaining 34%. However, rural India
accounts for more than 40% consumption in major FMCG categories such
as personal care, fabric care, and hot beverages. In urban areas, home and
personal care category, including skin care, household care and feminine
hygiene, will keep growing at relatively attractive rates.
D. Factors favoring India to Get Competitive Edge
The following factors make India a competitive player in FMCG sector
i. Availability of Raw Material: Because of the diverse agro-climatic
conditions in India, there is a large raw material base suitable for food
processing industries. India is the largest producer of livestock, milk,
sugarcane, coconut, spices and cashew and is the second largest
producer of rice, wheat and fruits & vegetables. India also produces
caustic soda and soda ash, which are required for the production of
soaps and detergents. The availability of these raw materials gives
India the location advantage
ii. Labour Cost Comparison: Low cost labor gives India a competitive
advantage. India's labor cost is amongst the lowest the world, after
China & Indonesia. Low labor costs give the advantage of low cost of
production. Many MNC's have established their plants in India to
outsource for domestic and export markets.
iii. Presence across Value Chain: Indian companies have their presence
across the value chain of FMCG sector, right from the supply of raw
materials to packaged goods in the food-processing sector. This brings
India a more cost competitive advantage. For example, Amul supplies
milk as well as dairy products like cheese, butter, etc.
20
Analysis of FMCG Sector in India
The analysis of the FMCG sector of India is carried out on the basis of following:
A) Pest Analysis
Pest analysis of FMCG sector in India is carried out on political, economical,
social and technological aspects. It is explained below:
Political
• Tax exemption in sales and excise duty for small scale industries.
• Transportation and infrastructure development in rural areas helps in
distribution network.
• Restrictions in import policies.
• Help for agricultural sector.
Economic
• The GDP rate of Indian economy is increasing every year. It is expected in
future it would-be better only in comparison with other counters.
• Inflation rate is increasing across the world and India is also no exception.
The Government and Reserve Bank of India both are trying to control the
inflation rate with the help of different measures.
• Increase in disposable income has taken place due to higher GDP rate. The
per capital income is increasing so the customers are having more income
to spent for various reasons.
• Indian FMCG sector recorded 16% sales growth in last fiscal year and it is
expected it would further improve in the forthcoming years.
• The FMCG sector is a 4th largest sector of Indian economy with market
size of more than 60,000crore. The Indian Territory is very large and
number of customers is also very high.
21
Social
• The Indian culture, social & life styles are changing drastically. The total
population is nearly 115 crores and population includes rich, poor, middle
class, male, female, located in rural, urban and sub urban areas, different
level of education etc.
Technology
• Technology has been simplified and available in the industry. Where
technology is not available then it is brought from foreign countries to
meet FMCG sector requirements.
• Foreign players help in high technological development. With research
and Development facilities the new technologies are developed alone or
with the help of foreign players.
B) Industry Analysis of FMCG Sector
• The FMCG sector in India is expected grow at a compound annual growth
rate at 9% to assize of 1, 43,000 cars by 2010 from Rs93000 cars at
present.
• The industry is growing double digit growth in last 2 yrs.
• Annual revenues of us $14.74 billion.
• Market growth rate – Rural -40%, urban -25%
C) Main Competitors
• The FMCG sector is developing fast and at present there is high level of
competition in this sector. The main competitors are HUL, Britannia,
Nestle, Cadbury, Colgate, Amul, ITC, Dabur, Emami, Nirma and Marico.
22
D) SWOT Analysis
SWOT analysis of this sector is carried as follows:
Strengths
• Well-established distribution network extending to rural areas.
• Strong brands in the FMCG sector.
• Low cost operations
Weaknesses
• Low export levels.
• Small scale sector reservations limit ability to invest in technology and
achieve
• Economies of scale.
• Several "me-too’’ products.
Opportunities
• Large domestic market.
• Export potential
• Increasing income levels will result in faster revenue growth.
Threats
• Imports
• Tax and regulatory structure
• Slowdown in rural demand
E) Factors Affecting the Growth
Over the years, demand for consumer durables has increased with rising
income levels, double-income families, changing lifestyles, availability of
credit, increasing consumer awareness and introduction of new models.
Products like air conditioners are no longer perceived as luxury products.
The biggest attraction for MNCs is the growing Indian middleclass. This
market is characterized with low penetration levels. MNCs hold an edge over
their Indian counterparts in terms of superior technology combined with
steady flow of capital, while domestic companies compete on the basis of
their well-acknowledged brands, an extensive distribution network and an
insight in local market conditions.
23
With companies opting for information technology a reduction in inventory
levels and an improvement in the working capital cycle is likely. This will
benefit companies by controlling costs and improving margins.
F) Major Government Policies/Changes:
In the context of the positives and the negatives, investing in FMCG stocks is
a tricky prospect. Given this, one has to be active with FMCG stocks and
should book profits as soon as the targeted returns are reached. Unlike
earlier times, nowadays, one cannot afford to buy an FMCG stock and forget
about it for a long time.
It is unlikely that the government's initiatives will boost the sector overnight.
The ongoing price wars mean that company earnings will continue to be
volatile. Hence, in the short-term, one should look at individual companies'
prospects rather than the overall sector’s prospects.
This means that it is better to leave mutual funds that concentrate on FMCG
companies and instead buy shares depending upon the company. It is not
necessary that an MNC will be better than an Indian company.
One should look at company’s profile and analysis its prospects before
investing in its shares. It is not that you will lose out by buying FMCG stocks.
But, in buying an FMCG stock, it will be ideal to cash in during short bursts of
activity.
G) Major Mergers nod Acquisitions in the Past
Vijay Mallya's United Breweries Group (through Group entities Mc
Dowell &Co,Phipson Distillery, United Spirits & United Breweries
Holdings) acquired a controlling stake in Jumbo Group's Shaw Wallace &
Company for a total deal value of Rs 16.2billion ($371.6 million).
The other Jumbo Group Company to be sold was Shaw Wallace
Breweries. SAB Miller increased its stake by 50 percentage points to 99
per cent in the company through its Indian subsidiary, Mysore
Breweries. The stake was held by Shaw Wallace & Company and, hence,
had SAB Miller not undertaken this acquisition, Shaw Wallace Breweries
would effectively have been a joint venture between two rivals — UB
and SAB Miller.
24
H) Expected Future Trends
Following trends are expected in future:
Huge investments in promoting brands, setting up distribution networks and
intense competition are what FMCG companies face. Creating strong brands
is important formic companies and they will have to devote considerable
money and effort in developing brands. Given the fragmented nature of the
Indian retailing industry and the problems of Infrastructure, FMCG
companies also need to develop extensive distribution networks to achieve a
high level of penetration in both the urban and rural markets.
This will require allot of resources. The unorganized sector has a presence in
most product categories of the FMCG sector. Small companies from this
sector have used their vocational advantages and regional presence to reach
out to remote areas where large consumer products have only limited
presence. Their low cost structure also gives them an advantage. And this
will only lead to price wars, which, though good for consumers, will affect the
bottom lines of companies.
Key Players
Here are many domestic and MNCs in Indian FMCG sector and they are
mentioned in the list:
01. Hindustan Unilever Ltd.
02. ITC (Indian Tobacco Company)
03. Nestlé India
04. GCMMF (AMUL)
05. Dabur India Ltd.
06. Asian Paints (India)
07. Cadbury India
08. Britannia Industries
09. Procter & Gamble Hygiene and Health Care
10. Marico Industries
11. Britannia Industries Ltd.
25
2.3 Introduction to the Corporate Bridge
Corporate Bridge Group is formed by graduates from leading institutes (IITs,
IIMs & AIM). "Corporate Bridge" as the name suggest, helps in bridging the gap
between the aspiring entrant and the corporate world. Corporate Bridge is
globally recognized training firm, providing blend of instructor-led and online
financial training programs along with e-learning services. With Corporate
Bridge's entrepreneurial spirit coupled with unparalleled experience (CLSA
India, KPMG, YES Bank, JPMorgan, SBI Capital Markets, CRISIL etc) and
comprehensive capabilities (MBA, CFA, FRM, CAs) across all industries and
business functions, we commit to deliver a world class professional training and
learning services that continues improving knowledge efficiency.
Corporate Bridge Group; has two verticals "Educorporatebridge" and
"Elearninglabz"
Educorporatebridge deals with Online and Instructor Lead Training Programs in
various financial courses viz. Equity Research, Wealth Management, Technical
Analysis Investment banking, Private Equity, Fundamental Analysis, Investment
Research, Credit Research etc and preparatory courses like CFA Level I & II and
FRM Level I & II, Campus Placement Trainings
26
Elearninglabz solution portfolio consists of custom e-content development for
training and learning needs in collaboration with our clients and subject matter
specialist, custom Learning Management System (LMS) suite, Test & Assessment
solutions.
27
Dabur India Pvt. Ltd
Dabur (Dabur India Ltd. Derived from Daktar Burman) is India's
largest Ayurvedik medicine manufacturer. Dabur was founded by Dr. SK Burman,
a physician in West Bengal. He founded Dabur in 1884 to produce and dispense
Ayurvedic medicines. His initial goal was to successfully produce and market
effective medicine for ordinary villagers. Dr. Burman designed Ayurvedic
medication for diseases such as cholera and malaria. Soon the news of his
medicines travelled, and he came to be known as the trusted 'Daktar' or Doctor
who came up with effective cures. That is how Dabur got its name - derived from
the Devanagri rendition of Daktar Burman.
Dabur's Ayurvedic Specialties 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.
Future Prospects of Dabur India
Favorable Economic Development: Bright Industry prospects
The Indian FMCG industry has benefitted majorly by favorable economic
development and change in consumer lifestyle over the last decade. Major
economic developments like growth in GDP, higher disposable income, growing
urbanization, rural expansion, infrastructure development, increased
participation of women in the workforce etc. have helped the industry record
growth even in recessionary periods. Therefore, FMCG industry has grown by
around 14% and 11% in FY 08 and FY 09 (economic slowdown period),
respectively.
Considering favorable economic development and change in consumer lifestyle
(willingness to spend more on better quality products), the industry is expected
to grow around 12-17% in next decade. The FMCG industry has now shifted its
focus to rural areas and low income groups. These segments present an
enormous growth opportunity for the FMCG sector as a whole.
28
Strong Brand Image: A Competitive Advantage
Dabur India has created a strong brand image in Indian as well as global markets.
It has five flagship brands with distinct brand identities – Dabur Chawanprash as
the master brand for natural healthcare products, Vatika for premium personal
care, Hajmola for digestives, Real for fruit juices and beverages and Fem for
fairness bleaches and skin care products.
With this brand image, Dabur India can pass on the increased raw material prices
and would also help to successfully launch a new product in the market.
Geographical Expansion through Acquisition: A Key Growth Driver
Dabur India has made its presence across 60 countries and 4 continents (Asia,
Africa, North America and Middle East). Therefore, the export contributes
around 30% to total revenue of the Dabur India Pvt.Ltd. The Dabur India Pvt.Ltd
has been expanding globally through acquisition in the overseas markets. In FY
11-12, Dabur India has acquired Hobi Group in Turkey and Namaste
Laboratories in USA. These acquisitions have given access to a new market as
well as to a wide range of high margin personal care products. Thus, overseas
expansion is helping the Dabur India Pvt.Ltd to diversify its product mix as well
as its global reach. Table, given below, lists the companies acquired by Dabur
India.
29
Entering into High Margin Products category: Strong Product-mix
Dabur’s core product portfolio comprises categories like Ayurvedic tonics and
oral care which are mature categories and hence the growth has been stagnant
over the last few years. Therefore, it has been increasing its presence in other
traditional categories like hair care, household care and foods. For example-
Dabur's acquisition of Fem Care in June 2009 has given it a strategic presence in
the high potential and high margin skin-care segment. Fem Care has helped
Dabur to become the third largest player in the skincare market. The growth in
these high-margin categories will increase its revenue as well as earnings of the
Dabur India Pvt.Ltd.
Intense Competition in Domestic market: A key Cause for Concern
Dabur India will continue to face tough competition in some of its key products
category such as toothpaste, hair oil, shampoo and skin care. This is because of
the entry of MNCs (like P&G entering into toothpaste), aggressive marketing by
leaders (like Marico in hair oil and HUL in shampoo) and innovative launches by
major competitors (like Garnier in skin care). Considering the increasing
competition, we feel that it might slow down margins in future.
30
2.4 Introduction to the Financial Statement Analysis
Financial statement analysis is defined as the process of identifying financial
strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account. There are
various methods or techniques that are used in analyzing financial statements,
such as comparative statements, schedule of changes in working capital, common
size percentages, funds analysis, trend analysis, and ratios analysis.
The objective of financial statements is to provide information about the
financial position, performance and changes in financial position of an enterprise
that is useful to a wide range of users in making economic decisions. Financial
statements should be understandable, relevant , reliable and comparable.
Reported assets, liabilities and equity are directly related to an organization's
financial position. Reported income and expenses are directly related to an
organization's financial performance
Financial statement analysis helps the business owners and with other
interested people to analyze the data in financial statement to provide them
with better information about such key factors for decision making and ultimate
business survival. Financial statement analysis involves analyzing the
information provided in financial statement to provides information about the
organization past performance , it’s present condition & how the organization
will perform in its future. It also helps to access the organization earnings in
term of power , persistence , quality &growth along with its solvency.
31
Types of Financial Statements
There are three types of financial statement:
1. Income Statement
The income statement shows all items of income and expense of any business.
It reflects a specific time period. So, an income statement for the quarter
ending March 31, shows revenue and expenses for January, February and
March; if the income statement is for the calendar year ending December 31, it
would contain all your information from January 1 to December 31.Income
statements are also known as statements of profit and loss or P&Ls. The
bottom line on an income statement is income less expenses. If income is more
than expense, then there happen to be a net profit. And if Expense more
than income then there is a net loss.
2. Balance Sheet
Accounting is based upon a double entry system - for every entry into the
books there has to be an opposite and equal entry. The net effect of the entries
is zero, which results your books being balanced. The proof of this balancing
act is shown in the balance sheet when Assets =Liabilities + Equity. The
balance sheet shows the health of a business from day one to the date on the
balance sheet. Balance Sheets are always dated on the late day of the reporting
period. If you’ve been in business since 2009and the balance sheet is dated as
on December 31 of the current year, the balance sheet will show the results of
your operations from 2009 to December 31
3. Statement of Cash Flows
The statement of cash flows shows the ins and outs of cash during the
reporting period. The statement of cash flows takes aspects of the income
statement and balance sheet and kind of crams them together to show cash
sources and uses for the period.
32
Chapter 3
Project Details
3.1 Objective
To evaluate the liquidity, Solvency & profitability position of Dabur India Pvt Ltd
33
3.2 Study Methodology
To carry out the present study, Dabur India limited has been selected
purposively based on secondary data. It is one of the leading companies in
India.
Data Source
The data required for the study has been collected from the published annual
reports of the selected company.
Study Period
The study period ranges from 2009 to 2013.
Tools & Techniques of Data Analysis
The data collected from the published annual reports of the selected company
for the five years period have been suitably arranged, classified and tabulated
as per requirement for the study.
Secondary Data: Internet, Books, videos and Data of Dabur India Pvt. Ltd
Sample Frame: Oone company ( Dabur India Pvt. Ltd)
34
3.3 Limitations of the Report
1. The study has been conducted over a limited period of five years only which
doesn’t forecast the vital valuation of firm.
2. The study is mainly based on secondary data which limits the information
collects by others so there is a lack of evidence for the data.
3. The study is based on consolidated financial statement, which may lead to
some errors and assumptions.
4. The present study is limited to a single Dabur India Pvt.Ltd and based on
many assumptions.
35
Chapter 4
Analysis & Findings
A. Solvency Ratios
A1. Current Ratio
Current Ratio = Current Asset/Current Liability
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Current Assets
Inventories 499.74 528.57 460.58 298.44 261.72
Sundry Debtors 255.32 224.17 202.46 130.48 112.36
Cash and Bank Balance 319.4 261.2 26.08 48.8 32.16
Total Current Assets 1074.46 1013.94 689.12 477.72 406.24
Current Liabilities 771.96 695.7 539.05 471.73 381.87
Ratio 1.39 1.46 1.28 1.01 1.06
Interpretation
The above chart indicates that current ratio is higher in the mar 12 as 1.46:1
followed by the mar 13 as 1.13:1.
From the above it clears that the current ratios are below the standard ratio
hence liquidity position Dabur India ltd is lower. It may find difficult to meet
its obligation as and hence they become due, though its working capital may
be higher.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
36
A2. Quick Ratio
Quick Ratio = Quick Asset/Quick Liability
Interpretation
Quick ratio indicates immediate ability of as Dabur India Pvt. Ltd to pay off its
current obligation.
From the above chart it is clear that in past five year the liquidity are not
satisfactory since they are below the standard ratio i.e. 1:1.
Step should be taken to improve their liquidity position.
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
0.740.85 0.78
0.68
0.99
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Quick Assets
Debtor 255.32 224.17 202.46 130.48 112.36
Cash & bank balance 319.4 261.2 26.08 48.8 32.16
Total quick assets 574.72 485.37 228.54 179.28 144.52
Quick liabilities 771.96 695.7 539.05 471.73 381.87
Quick ratio 0.74 0.70 0.42 0.38 0.38
37
A3. Cash Ratio
Cash Ratio = Cash &Bank Balance/Current Liability
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Cash & Bank Balance 319.4 261.2 26.08 48.8 32.16
Current Liabilities 771.96 695.7 539.05 471.73 381.87
Cash Ratio 0.41 0.38 0.05 0.10 0.08
Interpretation
From the above chart indicates that:
In the year 2013 the cash ratio was higher as compare to others.
The position of the Dabur India Pvt. Ltd is unsatisfactory it means the Dabur
India Pvt. Ltd having low cash and cash equivalents to pay its short term debt.
0.41 0.38
0.050.10 0.08
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
38
B. Solvency Ratios
B1. Capital Gearing Ratio
Capital Gearing Ratio = Interest Bearing Securities/Equity Shareholder
Fund
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Debt fund 241.58 273.27 253.35 106.07 138.98
Equity shareholder fund 1594.78 1303.27 1101.16 749.38 738.2
Ratio 0.15 0.21 0.23 0.14 0.19
Interpretation
The above chart indicates that:
Above ratio are below the standard ratio i.e. 0.25 hence it’s showed that:
Capital structure of the Dabur India Pvt. Ltd is low geared.
The Dabur India Pvt .Ltd depends on equity to a greater extent.
The Burdon of interest will be lower.
0.130.15 0.14
0.060.08
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
39
B2. Debt to Equity Ratio
Debt Equity Ratio = Total liabilities / Net Worth
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Debt fund 241.58 273.27 253.35 106.07 138.98
Equity shareholder fund 1594.78 1303.27 1101.16 749.38 738.2
Ratio 0.15 0.21 0.23 0.14 0.19
Interpretation
The above chart it indicates that:
Above ratios are the below the standard ratio i.e. 2:1
Dabur India Pvt. Ltd has satisfactory margin of safety for its loan creditors.
Dabur India Pvt. Ltd depends on equity to greater extent.
There will be lesser burden of interest,
Dabur India Pvt. Ltd can raise additional capital without any difficulty.
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
0.130.15 0.14
0.060.08
40
B3. Interest Gearing Ratio
Interest Gearing Ratio = PBIT/ Interest
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
PBDT 822.91 653.41 650.61 566.19 458.93
Interest 18.4 13.4 12.93 13.28 14.47
Interest Coverage Ratio 44.72 48.76 50.32 42.63 31.72
Interpretation
The above chart indicates that:
In March 2011 the interest coverage ratio is greater than the rest of the year,
i.e. the Dabur India ltd is 50.32 times the interest is covered by earning of the
Dabur India Pvt. Ltd.
The overall interest coverage ratio is greater than the standard ratio. Its
shown that:
The Dabur India Pvt. Ltd has the capacity to pay interest.
Larger amount of profit is available for dividend.
There is a good scope for attraction of fresh loan.
There may be less debt and the higher equity in financing the assets.
44.7248.76 50.32
42.63
31.72
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
41
C. Profitability Ratio
C1. Net Profit Ratio
Net Profit Ratio = Net Profit / Net Sales
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Net Profit 590.98 463.24 471.41 433.33 373.55
Net Sales 4349.39 3759.33 3274.43 2867.42 2408.33
Ratio 14% 12% 14% 15% 16%
Interpretation
The above chart indicates that:
The management is insufficient in management of all the actions.
It has unsatisfactory control on operating and non-operating coast.
It has leas margin available for appropriation.
There will be fewer increases in net worth.
14%
12%
14%15%
16%
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
42
C2. Earnings Per Share
Earnings per share = Net Profit / Number of Equity Shares
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Net Profit 590.98 463.24 471.41 433.33 373.55
Shares in Issue 174.2935 174.2101 174.0724 86.7586 86.5076
Earnings per share 3.39 2.66 2.71 4.99 4.32
Interpretation
From the above chart indicates that:
In the year 2010 the EPS was higher i.e. Rs4.99/ share. In March.
The above ratio are greater than the standard ratio i.e. 1:4 of equity shares,
this showing that:
Large amount is available for dividend, and transfer to reserve etc.
These will be greater increase in net worth.
There is greater scope for fresh fund from the equity shareholders.
Overall profitability position of the Dabur India Pvt.Ltd is quite satisfactory.
3.39
2.66 2.71
4.99
4.32
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
43
C3. Operating Profit Margin
Gross profit margin (%) = (gross profit/income)*100
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Operating Profit 754.42 659.92 624.38 551.52 444.1
Net Sales 4349.39 3759.33 3274.43 2867.42 2408.33
Ratio 17.35 17.55 19.07 19.23 18.44
Interpretation
From the above chart indicates that:
The above ratio are lower than the standard ratio i.e. 20%
In the year 2010 the operating profits margin was higher a compare to the
other.
There is decreasing trend after March 2010.
Operating efficiency of the Dabur India Pvt. Ltd is lower.
The management has the unsatisfactory control over operating cost.
Operating profitability is lower.
Small margin is available to meet the non-operating expenses.
17.3417.54
19.06 19.17
18.33
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
44
C4. Return on Capital Employed
ROCE = EBIT / Total Capital Employed
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Operating Profit 754.42 659.92 624.38 551.52 444.1
Proprietors Equity 1594.78 1303.27 1101.16 749.38 738.2
Ratio 47% 51% 57% 74% 60%
Interpretation
The above chart it indicates that:
In the year 2010 the Dabur India Pvt.Ltd getting higher rate of return i.e.74%
From the past five year Dabur India Pvt.Ltd having higher overall profitability.
The rate of productivity is higher.
There will be increase in net worth.
Capital employed is used more effectively.
These are more as cope of attraction of fresh fund.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
45
C5. Return on Proprietor’s Fund
Return in Proprietors Fund=Net Profits /Proprietary Equity Fund
Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Net Profit 590.98 463.24 471.41 433.33 373.55
Owners’ Equity 1594.78 1303.27 1101.16 749.38 738.2
Ratio 37% 36% 43% 58% 51%
Interpretation
From the above chart indicates that:
There is the greater scope is available for attraction of fresh capitals from
proprietors.
The overall profitability position of the Dabur India Pvt.Ltd is quite as
satisfactory.
Large amount is available for the payment of dividend, transfer to reserve etc.
Proprietor’s funds are utilized effectively.
0%
10%
20%
30%
40%
50%
60%
70%
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
46
Chapter 5
Conclusions & Recommendations
5.1 Conclusions
In case of Long term investment, Dabur India Pvt.Ltd seems to be an
attractive investment because the variables of Long Term Investment like
Net Profit, Operating Profit, and EPS are in favor of Dabur India Pvt. Ltd.
The Dabur India Pvt.Ltd having low current ratio which indicates that, It may
have problems in meeting its short term obligation.
In case of Long term lending, Dabur India Pvt.Ltd shows very attractive
interest coverage ratio which indicates that the Dabur India Pvt.Ltd have
enough cash to payout their debt holders.
Dabur India Pvt.Ltd has high EPS for over 5 years which indicates that it has
ability to attract more and more investment through equity.
Dabur India ltd has a low gearing capital structure which indicates that it
depends on the equity capital at a greater extent.
Dabur has insufficient cash and cash equivalents to pay its short term debt.
47
5.2 Recommendations
Dabur India Pvt. Ltd should try to maintain its net worth for having
satisfactory fund for equity share holders.
Dabur India Pvt. Ltd should give more emphasis to optimum utilization of
the resources and funds.
The company should improve the return on capital employed, as a source of
long term fund.
The company should improve their cash ratio by recovering their
outstanding amount from their debtors as early as possible.
The company needs to improve their profit margin to attract the new
investors.
48
ANNEXURES
A. Extra Tables
A1. Vertical Profit and Loss A/c of Dabur India Pvt Ltd Particulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
Sales Turnover 4349.39 3798.05 3305.42 2891 2435.85
(-)Excise Duty 0 38.72 30.99 23.58 27.52
Net Sales 4349.39 3759.33 3274.43 2867.42 2408.33
Other Income 86.89 6.89 39.16 27.95 29.3
Stock Adjustments -25.83 59.33 78.31 9.68 38.89
Total Income 4410.45 3825.55 3391.9 2905.05 2476.52
Raw Materials 2301.8 2092.87 1740.68 1393.97 1271.74
Power & Fuel Cost 48.12 46.41 42.39 35.43 36.63
Employee Cost 281.24 243.36 230.84 212.34 167.32
Other Expenses 0 25.22 25.21 22.74 17.59
Selling and Admin
Expenses
0 605.84 589.09 557.26 425.16
Miscellaneous Expenses 937.98 145.04 100.15 103.84 84.68
Total Expenses 3569.14 3158.74 2728.36 2325.58 2003.12
Operating Profit 754.42 659.92 624.38 551.52 444.1
PBDIT 841.31 666.81 663.54 579.47 473.4
Interest 18.4 13.4 12.93 13.28 14.47
PBDT 822.91 653.41 650.61 566.19 458.93
Depreciation 73.24 36.81 37.73 31.91 27.42
Other Written Off 0 29.07 16.6 5.66 3.94
Profit Before Tax 749.67 587.53 596.28 528.62 427.57
Extra-ordinary items 0 0 0.25 -0.19 -0.72
PBT 749.67 587.53 596.53 528.43 426.85
Tax 158.69 123.79 124.85 93.7 51.44
Reported Net Profit 590.98 463.24 471.41 433.33 373.55
Total Value Addition 1267.34 1065.87 987.68 931.61 731.38
Preference Dividend 0 0 0 0 0
Equity Dividend 261.44 226.47 200.19 173.6 151.39
Corporate Dividend Tax 43.56 36.74 32.82 29.5 25.73
Shares in issue (lakh) 17429.35 17421.01 17407.24 8675.86 8650.76
Earnings Per Share (Rs) 3.39 2.66 2.71 4.99 4.32
Equity Dividend (%) 150 130 115 200 175
Book Value (Rs) 9.15 7.48 6.33 8.64 8.53
49
A2. Balance Sheet of Dabur India Pvt Ltd Particulars Mar ‘13 Mar ‘12 Mar '11 Mar '10 Mar '09
Sources Of Funds
Total Share Capital 174.29 174.21 174.07 86.76 86.51
Equity Share Capital 174.29 174.21 174.07 86.76 86.51
Share Application Money 0 0 0 0.14 0
Preference Share Capital 0 0 0 0 0
Reserves 1420.49 1128.28 927.09 662.48 651.69
Revaluation Reserves 0 0.78 0 0 0
Net worth 1594.78 1303.27 1101.16 749.38 738.2
Secured Loans 22.47 19.12 17.57 24.27 8.26
Unsecured Loans 219.11 254.15 235.78 81.8 130.72
Total Debt 241.58 273.27 253.35 106.07 138.98
Total Liabilities 1836.36 1576.54 1354.51 855.45 877.18
Application Of Funds
Gross Block 937.7 883.23 766.88 687.23 518.77
Less: Accum. Depreciation 321.12 297.9 269.32 236.28 210.45
Net Block 616.58 585.33 497.56 450.95 308.32
Capital Work in Progress 17.07 25.12 11.92 23.31 51.71
Investments 729.41 552.72 519.23 348.51 232.05
Inventories 499.74 528.57 460.58 298.44 261.72
Sundry Debtors 255.32 224.17 202.46 130.48 112.36
Cash and Bank Balance 319.4 261.2 26.08 48.8 32.16
Total Current Assets 1074.46 1013.94 689.12 477.72 406.24
Loans and Advances 390.37 603.61 461.81 348.94 455.65
Fixed Deposits 0 30.09 166.33 115.11 111.53
Total CA, Loans &
Advances
1464.83 1647.64 1317.26 941.77 973.42
Deferred Credit 0 0 0 0 0
Current Liabilities 771.96 695.7 539.05 471.73 381.87
Provisions 219.57 592.4 535.36 440.1 315.1
Total CL & Provisions 991.53 1288.1 1074.41 911.83 696.97
Net Current Assets 473.3 359.54 242.85 29.94 276.45
Miscellaneous Expenses 0 53.83 82.95 2.74 8.64
Total Assets 1836.36 1576.54 1354.51 855.45 877.17
Contingent Liabilities 1719.07 1337.82 1075.89 173.48 174.15
Book Value (Rs) 9.15 7.48 6.33 8.64 8.53
50
B. Bibliography
Books Referred
“Financial Management”, I M Pandey; 10th edition; Vikas Publishing House
Private Limited New Delhi
“Management Accounting”, Arvind A Dhond; 2nd edition; Vipul Prakashan
“Management Accounting”, Chaudhari and Chopde; 1st Edition ;Sheth
Publication
“Research Methodology”, C R Kothari; 2nd revised edition; New Ege-
International Publisher.
“Business statistics”, C.C Beri ,2nd edition ,Tata Mc–Grow Hill Publication
Company ltd
Websites/Portals Referred
http://www.moneycontrol.com
http://www.investopedia.com
http://www.wikipedia.com
http://www.moneycontrol.com/annual-report/dabur
http://money.rediff.com
http://www.kotaksecurities.com/stock-market-news/equity/5013/Dabur-
India-Ltd.-ratios/12540103.00