FA Project - HLL

HINDUSTAN LEVER LIMIETED
FINANCIAL ANALYSIS ON HLL
Submitted to
Prof. D.V.Ramana
SUBMITTED BY:
Avnish Tyagi (11)
Naman Ajitsaria (31)
Rashima Mittal (40)
Samir Kapur (43)
Siddharth Gandhi (47)
1 Hindustan Lever Ltd

TABLE OF CONTENTS
ACKNOWLEDGEMENTS . 1
EXECUTIVE SUMMARY ... 2
ENVIROMENTAL ANALYSIS .3
INDIAN FMCG INDUSTRY ......4
HLL COMPANY OVERVIEW 9
FINANCIAL STATEMENT ANALYSIS 15
o Interpretation (Ratio Analysis overview)
DUPONT ANALYSIS......... ..28
ANALYSIS OF CASH FLOWS ....31
ACCOUNTING POLICIES .......33
ACCOUNTING TRANSACTIONS .. 35
APPENDIX
o Financial statements ..39
ACKNOWLEDGEMENTS
We wish to put to record the heartfelt gratitude and immense respect to Prof
D.V.Ramana (Faculty, Financial Accounting). We wish to thank him for the valuable
time he gave us and the immense patience he had, in answering even the seemingly
trivial queries we had to ask.
He had explained the concepts so minutely to us that even while analyzing the annual
reports of companies we encountered very few problems.

EXECUTIVE SUMMARY
The project assigned to us is to study the financial health of Hindustan Lever Limited. The
main purpose of the project is to analyze the Environment in which HLL is operating.
EIC - Environment Industry and Company analysis is done thoroughly to understand the
external factors influencing the company. All various ratios are calculated and analyzed in
length to appreciate their impact on company s performance. Dupont analysis is done to
check the credibility of company as per shareholders, financial analysts and other mutual
funds.
The three financial statements of last three years are identified, studied and interpreted in
light of company s performance. Critical decisions of distributing dividends, Issue of bonus
Debentures and other current news are analyzed and their impact on the bottom line of the
company is assessed.
Accounting policy of the company is also studied with respect to valuation of Fixed Assets,
Inventory, Investments and Employee related liabilities.
ENVIRONMENTAL ANALYSIS
At the macro level, the evolution of the FMCG industry would continue to be driven by a
number of factors. These include economic growth, (Indian economy is poised to remained
buoyant and grow at more than 7 %.) which would impact large proportions of the
population thus leading to more money in the hands of the consumer. Changes in
demographic composition of the population and thus the market would also continue to
impact the FMCG industry.
For example: In a recent survey conducted by a leading business weekly, approximately 47
per cent of India's one billion people were under the age of 20, and teenagers among them
numbered about 160 million. Together, they wielded INR 14000 Cr worth of discretionary
income, and their families spent an additional INR 18500 Cr on them every year. By 2015,
Indians under 20 are estimated to make up 55% of the population - and wield
proportionately higher spending power. Obviously, companies that are able to influence
and excite such consumers would be those that win in the market place.
At the firm level, companies that are able to spot trends early and those that are committed
to continuous innovation and those that endeavor to delight the consumer by meeting her
changing needs will lead and prosper in the future. Product superiority married with a
favourable price-value equation will form the basis of winning initiatives in the coming
years.
As the retail environment changes and organized retail takes shape, the second potential
opportunity for value creation is in the area of distribution & availability. Exemplar
companies that have used distribution and availability differentially will achieve
sustainable business growths. With an eye on the future, firms would need to take a
leadership stance and invest in upgraded in-store infrastructure; in-shop and market level
presence and thereby improve presence and availability.
Over the long term, the efforts on the infrastructure front (roads, rails, power, and river
linking) are likely to enhance the living standards across India. Till date, India's per capita
consumption of most FMCG products is much below world averages. This is the latent
potential that most FMCG companies are looking at. Even in the much-penetrated
categories like soaps/detergents companies are focusing on getting the consumer up the
value chain. Going forward, much of the battle will be fought on sophisticated distribution
strengths.
3
Hindustan Lever Ltd
INDIAN FMCG INDUSTRY
Background
The FMCG sector has been the cornerstone of the Indian economy. Though, the sector has
been in existence for quite a long time, it began to take shape only during the last fifty-odd
years. The sector touches every aspect of human life, from looks to hygiene to palate.
Perhaps, defining an industry whose scope is so vast is not easy.
The FMCG sector consists mainly of sub segments viz. personal care, oral care
and household products. This can be further sub-divided into oral care, soaps and
detergents, Health and Hygiene products, beauty cosmetics, hair care products,
food and dairy-based products, cigarettes, and tea and beverages.
Major Indian consumer product companies (like Britannia, P&G, HLL, etc.) have a very
strong presence through their strong brands. Diversified portfolios, wide distribution
networks and scale economies of these companies deter new players from entering. Brand
equity, therefore, is an extremely important factor in FMCG industry. One of the other
most critical factors is the ability to build, develop, and maintain a robust distribution
network.
Post-reforms, the industry's growth has been hinging around a burgeoning rural population
which has witnessed significant rise in disposable incomes. Consequently, the rural markets
have been witnessing intense competition in almost all the consumer product classes.
Another reason which has led to rise in this trend is the saturation in urban markets in most
of the consumer non-durable goods categories. This has led to the industry players
scrambling for greater rural penetration as a future growth vehicle, the area which accounts
for 70% of the total Indian household s .So far, it has been a chequered graph for the
MNCs operating in the Indian FMCG industry. Domestic companies are only beginning to
make their presence felt in the industry. It has taken tremendous consumer insight and
market savviness for the FMCG players to reach where they are today. But, the journey
seems to have just now begun for the players as the majority of the rural populace are yet to
get access to the items of daily usage like toothpastes, soaps and shampoos.
4
Hindustan Lever Ltd
Industry Characteristics
Typically, a consumer buys these goods at least once a month. The sector covers a wide
gamut of products such as detergents, toilet soaps, toothpaste, shampoos, creams, powders,
food products, confectioneries, beverages, and cigarettes. Typical characteristics of FMCG
products are: -
1. The products often cater to 3 very distinct but usually wanted for aspects -
necessity, comfort, luxury. They meet the demands of the entire cross section of
population. Price and income elasticity of demand varies across products and
consumers.
2. Individual items are of small value (small SKU's) although all FMCG products put
together account for a significant part of the consumer's budget.
3. The consumer spends little time on the purchase decision. He seldom ever looks at
the technical specifications. Brand loyalties or recommendations of reliable retailer/
dealer drive purchase decisions.
4. Limited inventory of these products (many of which are perishable) are kept by
consumer and prefers to purchase them frequently, as and when required.
5. Brand switching is often induced by heavy advertisement, recommendation of the
retailer or word of mouth.
Competition
1. Significant Presence of Unorganized Sector - Factors that enable small, unorganized

players with local presence to flourish include the following:
2. Basic technology for most products is fairly simple and easily available.
3. The small-scale sector in India enjoys exemption/ lower rates of excise duty, sales
tax etc. This makes them more price competitive vis-à-vis the organized sector.
4. A highly scattered market and poor transport infrastructure limits the ability of
MNCs and national players to reach out to remote rural areas and small towns.
5. Low brand awareness enables local players to market their spurious look-alike
brands.
6. Lower overheads due to limited geography, family management, focused product
lines and minimal expenditure on marketing.
5
Hindustan Lever Ltd
A general assessment of this would lead to the conclusion that FMCG is not a
Structurally Attractive Industry to Enter.
Entry barriers are high due the nightmare logistics associated with distributing a FMCG
and the limited mass media options available to build a brand. Likewise, the intensity of
competition from branded and unbranded goods and the power of retailers make the FMCG
a structurally unattractive industry in which to enter and difficult industry in which to
remain a competitive player.
Value for money
Ever since the global recession of 1991-94, which hit consumer spending hard, value-for-
money has become the buzzword for FMCG companies globally. These FMCG companies
embarked upon major restructuring and cost rationalization exercises as business continued
to become fiercely competitive. Several packaging innovations were also resorted to. India
was no different. There was a paradigm shift towards value-for-money products and, to
some extent, towards the rural market.
What Nirma did all these years suddenly become the buzzword for many FMCG players.
Price cuts became inevitable to keep the market share from shrinking. Sometimes, the cuts
touched ridiculous levels. P&G and Smith Kline Beecham, nonetheless, are interesting
cases. With small product portfolios like theirs, they have been able to achieve what others
could not and proved that what you need is a good product, marketed effectively and sold
at the right price
Who says rural is not rich!
Economic recession hit the urban pockets badly and forced companies to train their guns on
rural India, which was witnessing a major change in its aspiration and lifestyles and even
had an income that translated into increasing volumes. India s agrarian economy is
fundamentally strong. Rural India accounts for as much as 70 per cent of the nation s
population. That means rural India can bring in the much needed volumes and help FMCG
companies to log in volume-driven growth. Companies such as HLL, Colgate and Britannia
6
Hindustan Lever Ltd
who already had a strong rural focus, stepped up the gas further. HLL unleashed its
"Operation Bharat". Britannia pushed its Tiger biscuits to every nook and corner of the
country, while Colgate went about wooing the rural masses by offering low-priced products
in convenient packaging. Those who could not do it on their own went piggyback on
somebody else. P&G, whose distribution is largely urban, chose to leverage Marico's retail
reach.
Rural marketing has become the latest marketing mantra of most FMCG majors. True, rural
India is vast with unlimited opportunities all waiting to be tapped by FMCGs. Not
surprising that the Indian FMCG sector is busy putting in place a parallel rural marketing
strategy. Among the FMCG majors, Hindustan Lever, Marico Industries, Colgate-
Palmolive and Britannia Industries are only a few of the FMCG majors who have been
gung-ho about rural marketing.
Certainly, rural marketing holds the key to success of FMCG companies, which are
desperate to find ways out to gain deeper penetration. Not just the rural population is
numerically large; it is growing richer by the day. Of late, there has been a phenomenal
improvement in rural incomes and rural spending power.
FM CG se ct or pe r for m a nce in la st de ca de The FMCG sector in India

showed a constant decline in the last
decade. What started as 20-25% growth
rate in year 1994-96, had reached a
negative growth rate of -2.8% in Q1 04.
The FMCG sector is now mockingly
called SMCG or slow moving consumer
goods. Year 2004 brought signs of relief
for the FMCG industry. In this year the
industry experienced average growth of
over 1.52%, with over 6% growth in
Q4 04. This growth was majorly due to
the price cuts initiated by P&G, which
led to increase in volumes.
7
Hindustan Lever Ltd
Key Positives Key Negatives
Rural penetration levels are still low. Weakness in the economy has led to a
Also, according to estimates, only about slowdown in demand for FMCG
7-8% of the total food production is products. The top line growth of many
consumed in processed form (US$ 75 FMCG majors has thus, declined.
bn). This speaks for itself, highlighting Resurgent economic numbers in FY04
the scope for growth. The planned did nothing to change the scenario. New
development of roads, ports, railways entrants in the sector have heightened
and airports, will increase FMCG competition in key segments like soaps
penetration in the long term. and detergents, putting pressure on
As growth has shown signs of profitability.
slackening companies are increasingly The infrastructure for free transport of
focusing on key products and brands, goods is not adequate in the country.
cost efficiencies and rural markets. This Also, the fall in agricultural output
is a sign of market sophistication, both continues to cast on FMCG sector's
from the manufacturer's point of view prospects in the short term.
as well as the consumer's point of view. A large part of the branded market
Owing to India's cost advantage, many continues to be threatened by spurious
MNC companies have started using goods and illegal foreign imports. In
their Indian operations as their times of weakened consumer demand
manufacturing base. Alternatively, such menaces continue to nightmares to
some Indian companies have tested large companies.
foreign shores like Bangladesh, Sri
Lanka and the Middle East among
others.
The proposed introduction of VAT at
the start of FY06 is a long term positive
for the FMCG sector. This had been a
long pending demand of the FMCG
sector. Post this; the tax ambiguity will
get reduced, benefiting the sector.
8
Hindustan Lever Ltd
1888
Sunlight
soap
introduced
in India.
HLL INTRODUCTION
1895
Lifebuoy
Hindustan Lever Limited (HLL) is India's largest fast soap
launched
moving consumer goods company, with leadership in Home
& Personal Care Products and Foods & Beverages. HLL's
brands, spread across 20 distinct consumer categories, touch
the lives of two out of three Indians. They endow the
company with a scale of combined volumes of about 4
1902
million tonnes and sales of Rs.10,000 crores. Pears soap
introduced
in India
Various leading business publications, like Forbes Global,
Far Eastern Economic Review, Asia money, The Economic
Times has rated Hindustan Lever as the best consumer
household products company, best managed Indian company
& most respected company.
1903
Brooke
Bond Red
HLL is India's largest marketer of Soaps, Detergents and Label tea
Home Care products. It has the country s largest Personal launched.
Products business, leading in Shampoos, Skin Care Products,

Colour Cosmetics and Deodorants. HLL is also the market
leader in Tea, Processed Coffee, branded Wheat Flour,
Tomato Products, and Ice cream, Soups, Jams and Squashes.
1905
Lux flakes
introduced
HLL is also one of the country's biggest exporters and has
been recognized as a Golden Super Star Trading House by
the Government of India; it is a net foreign exchange earner.
HLL is India's largest exporter of branded fast moving
consumer goods. The company's Exports portfolio includes
HLL's brands of Soaps and Detergents, Personal Products, 1913
Vim
Home Care Products, Tea and Coffee. HLL is also driving scouring
powder
introduced.
1930
Unilever is
formed on
January 1
exports in chosen areas where India has a competitive
advantage Marine Products, Basmati Rice, Castor Oil and
its Derivatives. It is India's largest exporter of Marine
products, and one of the largest global players in castor.
1931
Hindustan
Vanaspati
Market leading brands
Manufacturing
Company
registered on
HLL s brands have become household names. The November 27
Mumbai,
company s strategy is to concentrate its resources on 35 Chennai,
national power brands, and 10 other brands which are strong
in certain regions. The top five brands together account for
1932
sales of over Rs.3000 crores. Each of these mega brands has a Vanaspati
manufacture
potential scale of Rs.1000 crores in the foreseeable future.
starts at
Sewri
Some of the big brands in Soaps and Detergents are Lifebuoy,

Lux, Liril, Hamam, Pears, Rexona & Dove, (all soaps), Surf
Excel, Surf, Rin, & Wheel (all detergents). HLL also markets
the Vim and Domex range of Home Care Products.
1939
Garden
Reach
In the Personal Products business, HLL's Hair Care franchises Factory
purchased
are Clinic, Sunsilk and Lux shampoos. In Oral Care, the outright
portfolio comprises Close-up and Pepsodent toothpastes and
toothbrushes. In Skin Care, HLL markets Fair & Lovely Skin
Cream and Lotion, the largest selling Skin Care Product in
India; a brand developed in India, it is now exported to over 1943
Personal
30 countries. It has been extended as an Ayurvedic cream, an Products
under-eye cream, soap and talc, in line with the strategy to manufacture
begins in
take brands across relevant categories. The other major Skin India at
Garden Reach
Care franchises are Pond s, Vaseline, Lakme and Pears. In Factory
Colour Cosmetics, HLL markets the Lakme and Elle-18

ranges. In Deodorants, the key brands are Rexona, Axe,
Denim and Pond's, while the Talc brands are Pond's, Liril,
1947
Pond's Cold
Cream
launched.

1959
Surf
launched.
Fair & Lovely, Vaseline and Lifebuoy. Axe and Denim are
HLL s franchises for Men s toiletries.
HLL has recently launched Lever Ayush Ayurvedic Health &

Personal Care Products. Health Care is among the new 1964
Etah dairy set
businesses HLL has chosen to enter. The product range up, Anik ghee
launched;
comprises Cough Naashak Syrup, Headache Naashak Roll- Animal feeds
plant at
on, Dandruff Naashak Shampoo, Hair Rakshak Oil and Body Ghaziabad;
Sunsilk
Rakshak Soap. shampoo
launched.
HLL has started franchised Lakme Beauty Salons, offering

standardized services, in line with the strategy to add a
1969
service dimension to relevant brands. Rin bar
launched
The company has also begun an e-tailing service, called

Sangam, which can home-deliver on order by phone or
through the Net, a diverse range of about 5000 branded and
unbranded products. The service is now available in select
1995
areas of Mumbai and Navi Mumbai, besides Thane. HLL
enters
branded
staples
HLL is one of the world s largest packet Tea marketers. Its business
with salt
Tea brands Taj Mahal, Red Label, Taaza, - are among the
top brands in the country; it also markets Lipton Ice Tea.
HLL and Pepsi have formed an alliance to distribute a full
range of tea and coffee and soft beverages through vending
1996
machines. The coffee business comprises Bru Instant Coffee HLL
introduces
and Deluxe Green Label Roast & Ground Coffee. branded atta;
Surf Excel
launched
2002
HLL
enters
Ayurvedic
health &
beauty
centre.
Hindustan lever took the decision to simplify the company it merged all the different
business units into two large divisions: home and personal care (HPC) and foods and
beverages (F&B). This gave each division the advantage of enormous scale. The
company decided to whittle its brands down from 110 to 35, over the next three years.
This is known as HLL s Power Brand strategy.
To identify these power brands, managers were asked to consider their growth potential,
profit delivery and the size of the opportunity. And to ensure that Lever would not lose
sales, it was decided to migrate these brand users to the designated power brands. For
one, the drastic slimming down of the brand portfolio which threw up huge problems in
execution is now over.
HLL is already combining its scale advantage to offer retailers a bigger basket of products
and better service. Instead of different sales teams servicing the same retailer, the company
has integrated both HPC and Foods portfolios for modern trade chains like Margin Free.
Once again, its large portfolio range helps Lever to use the power of customer relationships
to corner greater shelf space and a disproportionately higher share of the branded segment.
Modern trade, it reckons, is already growing at 15-20 per cent and will continue that way
for a long time. By bulking up the businesses, it is possible for Lever to service these
modern trade outlets on a daily business. As a result, these retailers do not have to
maintain high inventory levels.
Hindustan Lever Limited (HLL) has undergone a complete transformation

in the last five years, which has returned the company to growth and
reversed the trend of down trading in the FMCG industry
Focussed FMCG Company: HLL is now a focussed FMCG company with branded
businesses accounting for over 90% of sales, consisting of 35 brands across 20 categories.
The company had disengaged from all non-FMCG or commodity businesses, with sales of
Rs.1750 crores as in 1999, while deriving excellent value for these divestments.
Foods building blocks in place: The Foods business which was fragmented and lacked
scale, has been consolidated and gross margins have been improved by over 13% through
product mix and cost reduction. The supply chain has been cleared of all old stock and
geared up for fresh availability on shelf. The Foods business will now invest for growth
through relevant innovation.
35 brands with better value & bigger role in consumers lives: HLL, as a company, is
now focussed on 35 powerful brands, covering all consumer appeal and price segments. They
have been strengthened by ensuring that they offer better value, and play a bigger role in
consumers lives, backed by appropriate technology. Wherever necessary, it has reduced
prices to make the brands more affordable, and launched several low unit size and price
packs to make them more accessible.
Vitality through nutrition, hygiene & personal care: The most significant challenge has
been to move the brands beyond merely making functional claims to playing a bigger and
deeper role in the lives of consumers. The company had to move from selling a soap or a
detergent to something far more important and central to the consumer s life. Consumers

today are looking for ways to look good and feel good so that they can get much more out of
life. In short, consumers are seeking Vitality in their lives. The portfolio of 35 brands is
uniquely positioned to offer nutrition, hygiene and personal care benefits and thereby deliver
Vitality.
Investment in the future: To ensure HLL s competitiveness in the long-term, it has made
significant investments in product quality, pricing and marketing. The investment in product
quality alone has been over Rs.400 crores, or 5% of sales, in the last three years. This is in
addition to the cost of defending market position, in the face of recent competition action.
.Distribution & customer management reinvented: The Company has also reinvented the
management of distribution channels and customers, who are now being serviced on
continuous replenishment. It is leveraging scale and building expertise to service Modern
Trade and Rural Markets. The sales force has been delayered to improve response times and
service levels. IT tools have been deployed for connectivity across the extended supply chain
of about 2,000 suppliers, 80 factories and 7,000 stockists. Backend processes have been
combined into a common Shared Service infrastructure.
Acorns for the future: HLL has also begun to nurture some acorns new businesses and
new ways of engaging with consumers -- for the future. The entry into water purifiers, with
Pureit, shows great promise. In urban India, Hindustan Lever Network, which has already
reached 1,400 towns with over 3 lakhs consultants, is HLL s direct selling initiative. In rural
India, Project Shakti, already touching 75 million people in 60,000 villages of 12 states,
complements HLL s rural reach. Simultaneously, it is providing a sustainable source of
income to underprivileged rural women, HLL s partners in this initiative.
Simpler, leaner, empowered organization: The Company, as a whole, has been

restructured. Its eight Profit Centers have been integrated into two Divisions of Home &
Personal Care and Foods. The result is a simpler and leaner organization, less hierarchical
with fewer levels and greater empowerment. This has eliminated complexity and speeded up
decision making. Today the company is far more youthful in attitude and spirit. There is
greater openness and transparency.
Over the next 10 years, India s per capita income is likely to double, with opportunities to
catalyse penetration, increase usage, and upgrade consumers. As a result, the FMCG market
is expected to grow to over Rs.100,000 crores from its current base of Rs.40,000 crores.

HINDUSTAN LEVER LIMITED --- BOARD OF DIRECTORS
Mr. Harish Manwani Non Executive chairman
Mr. M. K. Sharma Vice Chairman
Mr. Arun Adhikari Managing Director (Home &

Personal Care)
Mr. S. Ravindranathan Managing Director (Foods)
Mr. D. Sundaram Finance & IT Director
Mr. A. Narayan Director
Mr. V. Narayan Director
Mr. D. S. Parekh Director
Mr. C. K. Prahlad Director

Financial Statements
All figures in Rs lakhs
Income and Expense statement of HLL 2004 2003 2002
INCOME
Sales 1,088,837.69 1,109,601.80 1,095,161.03
Less: Excise Duty (96,143.05) (95,766.48) (99,675.73)
992,694.64 1,013,835.32 995,485.30
Other Income 31,883.38 45,982.83 38,454.22
1,024,578.02 1,059,818.15 1,033,939.52
EXPENDITURE
Operating Expenses 848,957.90 816,168.31 799,899.50
Interest & Finance Charges 12,998.43 6,676.45 918.40
Depreciation 12,089.94 12,478.43 13,410.06
874,046.27 822,844.76 814,227.96
PBIT 163,336.90 227,916.85 224,471.86
PROFIT BEFORE TAX AND EXTRAORDINARY ITEMS 150,531.75 224,494.96 219,711.56
TAXATION FOR THE YEAR - CURRENT YEAR (26,600.00) (42,736.00) 45,894.00
DEFERRED TAX (5,473.62) (6,094.00) 2,091.00

Taxation adjustment of previous year 1,469.52 4,769.00 1,405.17
PROFIT AFTER TAX AND BEFORE EXCEPTIONAL
ITEMS 119,927.65 180,433.96 171,726.56
Exceptional items (193.28) (3,254.56) 3,841.90
NET PROFIT 119,734.37 177,179.40 175,568.46
Balance brought forward from Previous 81,860.74 119,815.96 75,997.56
BALANCE AVAILABLE FOR APPROPRIATIONS 201,595.11 296,995.36 252,971.19
Interest on non trade inv 2421.17 2600.63 1754.55

Balance Sheet of Hindustan Lever Ltd ALL figures in rs lakhs
2004 2003 2002
SOURCES OF FUNDS
SHAREHOLDERS FUNDS
Share Capital 22012.44 22012.44 22012.44
Reserves & Surplus 187,258.51 191,860.16 343,875.14
209,270.95 213,872.60 365,887.58
LOAN FUNDS
Secured Loans 145,305.78 160,369.65 1,961.50
Unsecured Loans 1,805.67 10,060.79 3868.26
147,111.45 170,430.44 5,829.76
DEFERRED TAX LIABILITY 13,984.61 10,965.19 11,738.49
TOTAL 370,367.01 395,268.23 383,455.83
APPLICATION OF FUNDS
FIXED ASSETS
Gross Block 231,421.91 214,171.54 199,436.41
Less : Depreciation 89,108.07 84,608.96 -77,889.64
Net Block 142,313.84 129,562.58 121,546.77
Capital Work-in-Progress 9,442.22 7,384.26 10,686.88
151,756.06 136,946.84 132,233.65
DEFERRED TAX ASSET 36,584.66 37,709.13 38,730.63

INVESTMENTS 222,956.27 257,493.08 236,474.10
CURRENT ASSETS, LOANS & ADVANCES

Inventories 147,044.26 139,263.34 127,873.60
Sundry Debtors 48,926.97 47,085.01 36,785.00
Cash & Bank Balances 69,804.80 80,648.11 94,262.60
Other Current Assets 5,277.71 6,249.81 4,630.22
Loans, Advances & Deposits 59,441.79 76,932.62 79,555.40
330,495.53 350,178.89 343,106.82
Less :
CURRENT LIABILITIES AND PROVISIONS
Liabilities 259,079.14 255,948.32 246,534.09
Provisions 112,346.37 131,111.39 120,555.34
371,425.51 387,059.71 367,089.43
NET CURRENT ASSETS -40,929.98 -36,880.82 -23,982.61
370,367.01 395,268.23 383,455.77

Ratio Analysis of HLL
Profitability Ratios:
Profitability Ratios show how successful a company is in terms of generating returns or
profits on the Investment that it has made in the business i.e. the Profitability ratios speak
about the profitability of the company. The higher these ratios the better it is for the
company.
There are two types of profitability ratios:
Profit Margin ratios

o Operating Profit Margin ratio
o Net Profit Margin ratio
Rate of Return ratios
o Return on Total Assets (ROTA)
o Return on Capital Employed (ROCE)
o Return on Net Worth (RONW)
A) Profit Margin ratios measure how much a company earns relative to its sales. A
company with a higher profit margin than its competitor is more efficient. The
Profit Margin of a company determines its ability to withstand competition and
adverse conditions like rising costs, falling prices or declining sales in the future.
The ratio measures the percentage of profits earned per rupee of sales and is thus
a measure of efficiency of the company.
i) Operating Profit Margin ratio measures the earnings before Interest and
Tax, and is calculated as
Profit before Interest and Tax (PBIT) / Net Sales x 100 %
Particulars Dec 2004 Dec 2003 Dec 2002
Operating Profit Margin 16.45% 22.48% 22.55%

ii) Net Profit Margin ratio measures the earnings after Interest and Tax, and is
calculated as
Profit after Tax (PAT) / Net Sales x 100 %
Sales 992,694.64 1,013,835.32 995,485.30

PAT 119,734.37 177,179.40 175,568.46
Net Profit Margin Ratio (%) 12.06% 17.48% 17.64%
Profit
Operating profit margin ratios
margin(%) Net profit margin(%)
25
22.55 22.5
20
17.64 17.48
16.45
15
% age
12.06
10
0
2002 2003 2004
years
Operating Expenses
860000
848957.9
840000
820000
Value
816168.31
800000 799899.5
780000
760000
2002 2003 2004
YEARS
Operating Expenses

Interpretation: For the year ended 2004
HLL earns 16.45 paisa on every Re. 1 of Sale before Interest and Taxes It ultimately
makes 12.06 paisa on every Re. 1 of Sale after Interest and Taxes.
It is visible that Hindustan Lever Ltd has not been able to increase its Operating Profit
margin constantly over the years. We can see that the operating margin has decreased
considerable in the last year. This is mainly due to the fact that the Sales have dropped by
almost 1.8% in 2004 over the last year. Moreover the company s operating expenses have
increased by almost 4% in the year 2004.The efficiency has certainly decreased over the
last few years mainly owing to high operating expenses , increased interest burden and
high indirect taxes. The Net Profit Margin has also decreased from 17.48 % in 2003 to
12.06% in 2004.This is mainly due to increase in the interest burden because of a
debenture issue by the Company to the tune of Rs 132074 lacs in the middle of 2003.The
interests costs have increased by approximately 95% which has reduced the company s
Net profit.
B) Rate of Return ratios
i) Return on Total Assets (ROTA) ratio tells us how well management is performing
on all the firm's resources. However, it does not tell how well they are performing for the
stockholders. The ROTA of a company determines its ability to utilize the Assets
employed in the company efficiently and effectively to earn a good return. The ratio
measures the percentage of profits earned per Rupee of Asset and thus is a measure of
efficiency of the company in generating profits on its Assets. It is calculated as --
Profit before Interest and Tax (PBIT) / Total Assets x 100 %
Particulars. Dec 2004 Dec 2003 Dec 2002

PBIT 163,336.90 227,916.85 224,471.86
Total assets 370,367.01 395,268.23 383,455.83
ROTA (%) 49.87% 63.25% 63.62%

Interpretation:
HLL generates 49.87% return on the Total Assets (ROTA) that it employs in
its operations in the year ended 2004. ROTA has decreased in the last year mainly
due to the fact that its profit margin has decreased. We have already discussed the
underlying reasons for decrease in profitability i.e. increase in Operating
Expenses , Decrease in sales , increase in expenses like Carriage and freight by
almost 8 % etc.
Looking at ROTA from another angle in order to do, Dupont Analysis, we have,
ROTA = PBIT / Sales (Profit Margin) x Sales / Total Assets (Asset Turnover)
For HLL, Profit Margin ratio is 16.45 % & Asset Turnover ratio is 3.03 for the
year ended 2004.
Interpretation:
Clearly, HLL is a company which survives more on volume of sales than the
profit margins on its products.
ii) Return on Capital Employed (ROCE) ratio explains the overall utilization of funds
by a business enterprise. It says how much profits we earn from the amount invested by
the Shareholders. Capital Employed means the long-term funds employed in the business
and includes the shareholder s fund, debentures and long-term loans. Profit before
Interest and Tax is considered for computation of this ratio to make numerator and
denominator consistent. It is calculated as --
Profit before Interest and Tax (PBIT) / Capital Employed x 100 %
Where, Capital Employed = Owner s Fund (Share Capital plus Reserves &
Surplus) + Long-term Debt

PBIT 163,336.90 227,916.85 224,471.86
Net worth 180,428.63 189,919.04 347,002.04
Capital Employed 153,154.63 190,088.54 273,130.62
ROCE 105.07% 118.53% 81.54%
As we can see that the ROCE for HLL has decreased considerably in the last year mainly
due to lower profit margins. The company is earning a return of 105.07% on the funds
employed by it. Though the ROCE has seen a considerable change even now the
company is getting good enough returns and can pay good enough dividends to the
shareholders as we saw the case in the year 2004 where the rate of dividend was 250%.
Moreover the underlying reason for such a huge ROCE is that the company has high
amount of Non- Trade investments which are not a part of Capital employed. We have
excluded interest income received from such non trade investments which was minimal
and therefore had little impact on the PBIT.
iii) Return on Networth = PAT________

Net worth

PAT 119,734.37 177,179.40 175,568.46
Net worth 180,428.63 189,919.04 347,002.04
Return on Net worth (%) 66.36% 93.29% 48.38%
The Return on Net worth ratio states how much profit a company earned in
comparison to total amount of shareholders equity on the balance sheet of the company.
Here, we see that the RONW of HLL has increased in comparison to the year 2002 but
this cant be concluded as a favourable situation for the company as looking at the figures
in detail we can notice that there has been a near to 30% decrease in RONW in
comparison to the year 2003 , also we do see that the PAT of the company has fallen by
about 32%as compared to the previous year i.e. 2003 and the Net worth has also
decreased by 48% in comparison to the year 2002.Even now an RONW of about 66.23%
is considered to be very good. The primary reason for Net worth going down from 2002
is the Bonus Debenture issued by the Company which has been capitalized from the
General reserve.

Rate of Return Ratios Dec-04
Dec-03
66.36 Dec-02
Return on
NetWorth(%) 93.3
50.6
Return on 105.07
Capital 118.53
Employed(%) 81.54
Return On 49.87
Total 63.25
Assets(%) 63.6
Liquidity Ratios
Ability of the firm to meet short term obligation comes from holding of liquid assets
which are readily convertible into cash. It s the responsibility of the treasury manager to
maintain the right balance between investments and liabilities to get the maximum
liquidity. It involves constant monitoring of cash flow position. We will analyze the two
popular measures of the liquidity of the company.
Current Ratio:
Current Ratio = Current Assets / Current Liabilities
Quick ratio:
Quick ratio = (Current assets Inventories- doubtful debtors) / Current Liabilities+ short
term loans + provisions
Also known as the acid test ratio, it is a stringent test that indicates if a firm has enough
short-term assets (without selling inventory) to cover its immediate liabilities. It is similar
but a more strenuous version of the "working capital" ratio, indicating whether liabilities
could be paid without selling inventory. It s more reliable then current ratio because it
considers only the most liquid assets and does not include the hidden factors like window
dressing that may skew the actual scenario.

Current liabilities &
provisions +Short term loans 373,231.18 397,120.51 370,957.69
Current assets 330,495.53 350,178.89 343,106.82

Current assets Inventories-
Doubtful Drs 176365.78 204498.92 211557.8
Current Ratio 0.89 0.88 0.92
Quick Ratio 0.47 0.51 0.57
Absolute Cash Ratio 0.25 0.20 0.25
It can be seen from the above table that the current ratio for all the years is less than 1.
This signifies that HLL has short term liabilities greater than the short term assets. It
implies that the company would have problems in managing its short term liabilities and
liquidity requirements. The company might resort to financing its short term liquidity
requirements by long term sources of finance.
We can observe that the current assets have decreased by 14 % and at the same time the
current liabilities have decreased by just 6 % in the last year. The reason is that since the
company is using long term sources of finance to fund its short term obligations therefore
the interest burden has increased and as a result the cash balance has gone down by 13.5
% in the last year. Liquid Ratio is much lesser than the current ratio which signifies that
inventory forms a major part of the Current Assets. Similarly we can see that the
Absolute Cash ratio is much lesser than the Quick ratio Amount of Debtors constitutes a
sizeable portion of the current assets.
.
Liquidity Ratios
1 0.92 0.89
0.88
0.9
0.8
0.7
0.57
0.6 0.51
0.47
ratio
0.5
0.4
0.3
0.2
0.1
0
2002 Current Ratio
2003 Quick Ratio
years 2004

Solvency Ratios
It s the company s ability to meet long term liability. Also called the capital structure it is
one of the major financing decisions for the company. A proper mix of equity and debt is
said to be always beneficial for the company rather than pure equity. Existence of debts
disciplines management to some extent. We will have a look at few of the solvency ratios
for HLL.
DER: Debt to Equity Ratio
DER = Long-term debt / Shareholders Equity

Shareholders Equity 180,428.63 189,919.04 347,002.04
Long term Debt 145,305.78 160,369.65 1,961.50
Debt Equity Ratio 0.81 0.84 0.0056
The company was highly unleveraged in the years 2001 and 2002. It was
risky as the company had invested a huge amount of its own funds as
compared to debt. However in the last 2 years the company has changed its
policy and is leveraging the advantage of debt along with equity. Though
the debt equity ratio of 0.81 is not good enough as compared to industry
norms of 2:1 but the company is moving towards a favourable debt equity
mix. It has realized the importance of trading on equity .The Company has
increased its debt burden by 1470% in the last 4 years which is mainly on
account of issuing Debentures of the amount of Rs1320 cr in the middle of
2003.However the Shareholders equity has gone down from 2002 mainly
because the issue of Bonus Debentures has been adjusted with the General
Reserve.

Interest Coverage Ratio:
ICR = (PBIT) / Interest
Interest charges 12998.43
Particulars Dec 2004 Dec 2003 Dec 2002 14000

12000
10000 6676.45
PBIT 163,336.90 227,916.85 224471.86 value

8000
6000
918.4
4000
Interest 12,998.43 6,676.45 918.40 2000 Interest charges

0
Interest Coverage 2002 2003 2004
Ratio 12.57 34.14 244.42 years
Interest Coverage ratio basically signifies the ability of a firm to service its interest
burden through the profits generated .In the initial years when the firm had not employed
debt its interest burden was very low. As a result the Interest Coverage ratio is very high
gradually the company has employed more debt and as a result of which the interest s
burden has increased significantly. Moreover due to high competition and operating
inefficiency the earnings of the company have declined. PBIT has gone down 28% in
2004 as compared to 2003. As a result the ICR has reduced from 244.42 to 12.57 in the
last 3 years. We can see from the chart above that the interest burden has gone up
considerably from Rs 918.4 lacs to Rs 12998.43 lacs This is on account of the Bonus
Debentures issued by the company to the tune of Rs 1320 cr by the company.
Efficiency ratios:
It measures the quality of a business' receivables and how efficiently it uses and
controls its assets, how effectively the firm is paying suppliers, and whether the
business is overtrading or under trading on its equity (using borrowed funds).
Debtor Days:
(Total No. of Debtors/Total Sales)* 365
This ratio actually indicates the no. of days of sales that are on the balance sheet of the
company as debtors. This ratio is expressed in no. of days. A higher debtor day s ratio
signifies general problems in the collection of funds faced by the company or the
financial position of the debtors.

Avg Debtors 48006 41935 39631.75
Sales 992,694.64 1,013,835.32 995,485.30
Debtor days 16.09 15.10 14.53
The Debtor days for the company have seen an increase from 14.53 days in 2002 to 16.09
days in the year 2004.The reason could be poor receivables management by the company
.The Debtors have increased by about 14.5% where as the sales have seen a decline of
1.87%.
Creditor Days:
(Total No. of Creditors/Total Purchases)*365
This ratio indicates the no. of days of purchases that are on the balance sheet of the
company as creditors. Expressed as no. of days, a lower creditor day s ratio signifies that
the company is liberal in paying its creditors and follows a policy of paying them at a
faster rate.

Avg Creditors 193494.15 195631.74 210787.57
COGS 706253.64 704127.65 691572.7
Creditor days 100.00 101.41 111.25
Here, we see that the creditor days which the company enjoys from its suppliers are
pretty high throughout the time period under consideration. The Creditor Days for the
company has seen a slight decrease from 111.25 days in the year 2002 to 100 days in the
year 2004. Hence, we can say that the payment policy followed by the company is not
very liberal and the payment made by the company to its creditors is pretty late. However
the Company is improving its payables management and it could be mainly because of
reduction in the cost of purchases by making cash payments to the suppliers. This helps
the company to avail of cash discounts which significantly reduce the cost of production
and hence improve profitability in a high competition intensified industry.

Total Assets Turnover Ratio =
______ Net Sales___________

Total Assets- Misc Expenses

Sales 992,694.64 1,013,835.32 995,485.30
Total assets 370,367.01 395,268.23 383,455.83
MISC EXP 42826.93 34918.75 30624.03
Total assets turnover ratio 3.03 2.56 2.60
Total Assets turnover ratio signifies how efficiently the company is utilizing its assets to
generate returns. We see an increase in the turnover ratio in the year 2004 because of a
combined effect of a decrease in Total Assets and increase in miscellaneous expenses
simultaneously. The company has maintained a constant turnover ratio in the years 2002
and 2003. It indicates efficient usage of assets by the company to generate constant sales.

DU PONT RATIO ANALYSIS:
The Du-Pont ratio analysis is a combination of financial ratios in a series in order to
assess the investment returns of the company. It combines the financial ratios of both the
Income Statement as well as the Balance Sheet in order to assess either the Return on
Equity or the Return on Investment. One of the Plus points of this method is that it
provides a clear understanding of how the company generates its return. This analysis
provides an insight into the importance of asset turnover as well as sales to overall return.
This formula shows the relationship of profit margin and turnover how these two
complement each other.
The Du-Pont ratio divides the Return on equity into three parts: Net Profit Margin, total
asset turnover, and the company s use of leverage referred to as Equity Multiplier also.
We shall now see the decomposition of RoNW / RoE to do the Dupont Analysis.
RoNW = PAT / Net Worth
RoNW = PAT / Sales * Sales / Assets * Assets / Net Worth
DUPONT 2004 2003 2002

RONW 66.36% 93.29% 48.38%
Profit Margin 12.06% 17.48% 17.64%
Asset Turnover 3.03 2.56 2.60

Equity Multiplier 1.81 2.08 1.05

DUPONT Analysis of RONW for the year 2004
PAT/NW
= 66.36%
PAT / SALES = 12.06% SALES/TA TA/NW

= 3.03 = 1.81
SALES / FA = 6.54 SALES / CA = 3
SALES / DEBTORS = 20.28
SALES / STOCK = 6.75
SALES / CASH = 14.22
Implications:
There has been huge erosion in the profit margin in the recent years but the company has
increased the leverage and maintained its Return on Net Worth. It also shows that the
company has managed to use its assets efficiently to generate sales.
ROCE as seen above can be decomposed further into Net profit margin, Asset turnover
and Asset Leverage. We can see that the company is utilizing its fixed Assets very
efficiently which is evident by a high sales / FA ratio of 6.54 as compared to using its
Current Assets.
We can see that the Sales / Debtors ratio of the company is very high at 20.28. This
shows that the company is operating at high volumes and low margin. The Sales/ Cash
ratio is very high which shows that the company has a deficit of cash. This could be
attributed to the fact that the company is operating in negative working capital scenario
and it has also a high interest burden.

DUPONT Analysis of ROCE
DUPONT 2004 2003 2002
ROCE 105.07% 118.53% 81.54%
Profit Margin 16.45% 22.48% 22.55%
Asset Turnover 3.03 2.56 2.60
Asset Leverage 2.1 2.05 1.39
ROCE
PBIT/CE
=105 %
Profit Margin Asset Turnover Asset Leverage

PBIT/SALES Sales/TA TA/CE
=16.45% =3.03 =2.1
Depreciation/Sales
=1.22%
General exp / Sales

=31%
Cost of raw mat/ Sales

=54%
Implications:
The ROCE shows an increasing trend except for the last year. This was largely due to
decline in Profit Margins. The company has however tamed the buck by increasing the
asset turnover to arrive at a better overall ROCE. The company has also been efficiently
utilizing its assets over the previous years thus increasing the ROCE.
The ROCE is very high because the company has invested a huge amount in non trade
Investments and as a result it has been excluded from Capital Employed. The Company
has high percentage of Operating expenses to that of sales. This has reduced profitability
for the company and it must look to reduce the operating expenses and administration
charges.

ANALYSIS OF CASH FLOWS OF HLL FOR 2002, 2003, and 2004
Cash flow from operating activities before working capital changes for all the three
years was higher than the use of cash for investment in fixed assets and working capital ,
for payment to investors and payment of income tax .Those used as a percentage of
cash flow from operating activities before working capital changes are presented
below :
2004 2003 2002

Investment in Working Capital (%) 5.57% 7% 2.15%
Investment ( net of sales) in Fixed Assets(%) including trade

marks 18% 9% 7.50%
Dividend Including tax paid 85% 150% 53%
Interest paid 7.70% 0.04% 0.45%
Income tax paid 10.30% 19.27% 21.40%
Dividend payment consumed most of the cash flow from operating activities before
working capital changes and it showed a huge increase in 2003. This is mainly because
the company has paid dividend on Bonus Debentures issued by it in the middle of 2003.
Investment in Fixed Investments has been increasing over the last 3 years. This is in
synchronization with the fact that the company has identified investment opportunities
that would increase the ROCE. This is depicted by the trends in ROCE which has
increased significantly over the last 3 years.
In the year 2004 the sale of investments (net of purchases) was 26.4% of cash flow from
operating activities . However in the previous 2 years the company had resorted to more
purchase of investments than sales. It was 10.94% in 2003 and 44 % in 2002. This
basically is again in consonance with the operating results of the company. The Company

had resulted in lower operating and net profit margins in the last year. This had reduced
the liquidity of the company. Therefore the decision of selling the investments could be a
resort to finance the liquidity requirements of the company.
Another underlying reason for selling investments could be that the company had
declared dividends and also paid interests on the debentures issued by it of the amount of
Rs 1320 crores. This might have also resulted in poor liquidity position for the company.
Owing to all this reasons the company would have sold investments to improve its
liquidity position.
We can say that the company has utilized the cash generated from Operating activities
and Investing activities and invested in long term Fixed assets. The major underlying
reason for this is tracking of growth opportunities and expansion of business as well.
As a result of these actions the cash flow from investing activities has increased
substantially in 2004 over the last year and cash flow from financing activities has
decreased.
We can safely conclude that the company has managed its cash position very efficiently
and utilized cash to generate future returns and as well as reward the shareholders. It is
evident from the investment in Fixed Assets and dividend paid to the shareholders.

Accounting Policies Analysis
Basis for preparation of accounts

The accounts have been prepared to comply in all material aspects with applicable
accounting principles in India, the Accounting Standards issued by the Institute of
Chartered Accountants of India and the relevant provisions of the Companies Act, 1956.
Fixed Assets
Fixed assets are stated at cost less depreciation except in the case of certain Land and
Development in the Tea Estates Division shown at revalued amount. In Tea / Coffee
estates, the cost of extension planting of cultivable land including cost of development is
capitalized.
Depreciation is provided (except in the case of leasehold land which is being amortized
over the period of the lease) on the straight line method and at the rates and in the manner
specified in Schedule XIV of the Companies Act, 1956. However,
- Certain employee perquisite-related assets are depreciated over four to six years, the
period of the Perquisite scheme.
-Computers and related assets are depreciated over four years.
-Certain assets of the cold chain are depreciated over four / seven years and
- Motor vehicles are depreciated over six years
Assets identified and evaluated technically as obsolete and held for disposal are stated at
their estimated net realizable values.
Goodwill and other Intangible Assets

Goodwill and other Intangible assets are amortized over the assets useful life not
exceeding.

Investments
Investments are classified into current and long-term investments. Current investments
are stated at the lower of cost and fair value. Long-term investments are stated at cost. A
provision for diminution is made to recognize a decline, other than temporary, in the
value of long-term investments.
Inventories
Inventories are valued at the lower of cost, computed on a weighted average basis, and
estimated net realisable value, after providing for cost of obsolescence and other
anticipated losses, wherever considered necessary. Finished goods and work-in progress
include costs of conversion and other costs incurred in bringing the inventories to their
present location and condition.
Employee related Liabilities

Contributions to defined contribution schemes such as Provident Fund and Family
Pension Fund are charged to the profit and loss account as incurred. The Company also
provides retirement / post-retirement benefits in the form of gratuity, pensions, leave
encashment and medical. Such benefits are provided for based on valuations, as at the
balance sheet date, made by independent actuaries.

Accounting Transactions
Balance Sheet of Hindustan Lever Ltd as on 31.12.2004
Amount ( Rs
SOURCE lakhs) USES Amount ( Rs lakhs)
Share Capital 22012.44 Fixed Assets 151,756.06

Reserves and Surplus 187,258.51 Investments 222,956.27
Inventories 147,044.26
Secured Loans 145,305.78 Debtors 48,926.97
Unsecured Loans 1,805.67 Cash and Bank balance 69,804.80
Other current assets 5,277.71
Current Liabilities and Provisions 371,425.51 Loans and Advances 59,441.79
DEFERRED TAX
Deferred Tax Liability 13,984.61 ASSET 36,584.66
TOTAL 741,792.52 TOTAL 741,792.52
Transaction 1
Issued Capital for Rs.10000 lakhs million at a premium of 10%
Amount ( Rs

DEFERRED TAX
TOTAL 752,792.52 TOTAL 752,792.52
Transaction 2
Sale of Finished goods on Credit - Rs.1000 Lakhs at 20% Profit
Amount ( Rs

DEFERRED TAX
TOTAL 752,992.52 TOTAL 752,992.52

Transaction 3
Sale of Finished goods on Credit - Rs.1000 Lakhs at 20% Profit
Amount ( Rs

DEFERRED TAX
TOTAL 752,992.52 TOTAL 752,992.52
Transaction 4
Investment made in ABC co. ltd of Rs 1500 lakhs
Amount ( Rs

DEFERRED TAX
TOTAL 752,992.52 TOTAL 752,992.52
Transaction 5
Drs of 2000 lakhs turned bad
Amount ( Rs

DEFERRED TAX
TOTAL 750,992.52 TOTAL 750,992.52

Transaction 6
Buyback of Shares having face value Rs.100 lakhs at a premium of Rs.100 lakhs
Amount ( Rs

DEFERRED TAX
TOTAL 750,792.52 TOTAL 750,792.52
Transaction 7
Redeemed Bonus Debentures of amount 10000 lakhs to equity share holders
Amount ( Rs

DEFERRED TAX
TOTAL 740,792.52 TOTAL 740,792.52
Transaction 8
Issued Bonus shares having a face value of 1500 lakhs
Amount ( Rs

DEFERRED TAX
TOTAL 740,792.52 TOTAL 740,792.52

Transaction 9
Repaid short term loans to the tune of 1000 lakhs
Amount ( Rs

Unsecured Loans 805.67 Cash and Bank balance 69,304.80
DEFERRED TAX
TOTAL 739,792.52 TOTAL 739,792.52
Transaction 10
Received 2000 lakhs from Creditors
Amount ( Rs

Unsecured Loans 805.67 Cash and Bank balance 71,304.80
DEFERRED TAX
TOTAL 737,792.52 TOTAL 741,792.52

APPENDIX
2004 2003 2002 Description
Liquidity
CA /CL+short term loans +
CR 0.89 0.88 0.92 prov
CA-Stock- Drs doubtful of
recovery /CL+ short term
LR 0.47 0.51 0.57 loans + prov
Cash and near cash items /
Absolute Cash Ratio 0.25 0.20 0.25 Cl + short term loans + prov
Avg Inventory / cogs per
Inventory Days 74.17 69.23 66.50 day
AVG Debtors / sales per
Debtors Days 16.09 15.10 14.53 day
AVG Creditors /COGS per
Creditors Days 100.00 101.41 111.25 day
Solvency
Debt-Equity Ratio 81% 84% 0.56% Debt/Equity
ICR 12.57 34.14 244.42 PBIT/Interest
Profitability
General
Operating Proft
Margin 16.45% 22.48% 22.55% PBIT/Sales
Net Profit Margin 12.06% 17.48% 17.64% Net Profit/ Sales
Expenses other than
Operating Expenses 97.13% 99.19% 98.24% Interest, Dep and Tax/Sales
Overall
ROTA 49.87% 63.25% 63.62% PBIT / TA- Misc expenses
PBIT-Interest on non trade
inv/Net Worth + Long term
loans- non trade
ROCE 105.07% 118.53% 81.54% investments
RONW 66.36% 93.29% 50.60% PAT/Networth
EPS 5.44 8.05 7.98 PAT/No. of shares

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HINDUSTAN LEVER LIMIETED

FINANCIAL ANALYSIS ON HLL

1 Hindustan Lever Ltd

1 Hindustan Lever Ltd

1. Significant Presence of Unorganized Sector - Factors that enable small, unorganized

Value for money

Who says rural is not rich!

FM CG se ct or pe r for m a nce in la st de ca de The FMCG sector in India

Products business, leading in Shampoos, Skin Care Products,

Some of the big brands in Soaps and Detergents are Lifebuoy,

Colour Cosmetics, HLL markets the Lakme and Elle-18

10 Hindustan Lever Ltd

HLL has recently launched Lever Ayush Ayurvedic Health &

HLL has started franchised Lakme Beauty Salons, offering

The company has also begun an e-tailing service, called

Hindustan Lever Limited (HLL) has undergone a complete transformation

12 Hindustan Lever Ltd

Simpler, leaner, empowered organization: The Company, as a whole, has been

13 Hindustan Lever Ltd

Mr. Harish Manwani Non Executive chairman

Mr. M. K. Sharma Vice Chairman

Mr. Arun Adhikari Managing Director (Home &

Mr. D. Sundaram Finance & IT Director

Mr. A. Narayan Director

Mr. V. Narayan Director

Mr. D. S. Parekh Director

Mr. C. K. Prahlad Director

14 Hindustan Lever Ltd

Sales 1,088,837.69 1,109,601.80 1,095,161.03

Less: Excise Duty (96,143.05) (95,766.48) (99,675.73)

992,694.64 1,013,835.32 995,485.30

Other Income 31,883.38 45,982.83 38,454.22

1,024,578.02 1,059,818.15 1,033,939.52

Operating Expenses 848,957.90 816,168.31 799,899.50

Interest & Finance Charges 12,998.43 6,676.45 918.40

Depreciation 12,089.94 12,478.43 13,410.06

874,046.27 822,844.76 814,227.96

PBIT 163,336.90 227,916.85 224,471.86

PROFIT BEFORE TAX AND EXTRAORDINARY ITEMS 150,531.75 224,494.96 219,711.56

TAXATION FOR THE YEAR - CURRENT YEAR (26,600.00) (42,736.00) 45,894.00

DEFERRED TAX (5,473.62) (6,094.00) 2,091.00

Exceptional items (193.28) (3,254.56) 3,841.90

NET PROFIT 119,734.37 177,179.40 175,568.46

Balance brought forward from Previous 81,860.74 119,815.96 75,997.56

BALANCE AVAILABLE FOR APPROPRIATIONS 201,595.11 296,995.36 252,971.19

Interest on non trade inv 2421.17 2600.63 1754.55

15 Hindustan Lever Ltd

DEFERRED TAX LIABILITY 13,984.61 10,965.19 11,738.49

TOTAL 370,367.01 395,268.23 383,455.83

DEFERRED TAX ASSET 36,584.66 37,709.13 38,730.63

CURRENT ASSETS, LOANS & ADVANCES

370,367.01 395,268.23 383,455.77

16 Hindustan Lever Ltd

There are two types of profitability ratios:

Profit Margin ratios

Profit before Interest and Tax (PBIT) / Net Sales x 100 %

Particulars Dec 2004 Dec 2003 Dec 2002

Operating Profit Margin 16.45% 22.48% 22.55%

17 Hindustan Lever Ltd

Profit after Tax (PAT) / Net Sales x 100 %

Particulars Dec 2004 Dec 2003 Dec 2002

Sales 992,694.64 1,013,835.32 995,485.30

18 Hindustan Lever Ltd

B) Rate of Return ratios

Net Sales_____