FMCG Sector Study and M&A Perspective

INSTITUTE OF MANAGEMENT TECHNOLOGY
FMCG Sector Study and M&A perspective
2010
DECLARATION
I, Richa Agarwal, hereby declare that the project report on FMCG Sector Study and M&A Perspective is a genuine research work undertaken by me based on publicly available information All care has been taken to keep this report error free and I sincerely regret for any unintended discrepancies that might have crept into this report. I shall be highly obliged if errors (if any) be brought to my attention.
Signature RICHA AGARWAL (Student)
Richa Agarwal, PGDM Finance (09-11)
2010
ACKNOWLEDGEMENT
A work is never a work of an individual. I owe a sense of gratitude to the intelligence and cooperation of all those people who made easy to let me understand what I needed from time to time for completion of this exclusive project. I would like to forward my sincere gratitude to Mrs. Gagan Ahluwalia, Additional General Manager Corporate Affairs, Dabur India Ltd., who gave me the opportunity to work on this project and always endured me; stood by me and without whom I couldnt have envisaged the completion of this project. I would like to express the deepest appreciation to Mr. Dhruv Sharma, Assistant Manager Corporate Affairs, Dabur India Ltd., who has the attitude and the substance of a genius: he continually and convincingly conveyed a spirit of adventure in regard to project and an excitement in regard to learning. Without his guidance and persistent help this dissertation would not have been possible. In addition, a thank you to Professor Kamble of Institute Of Management Technology, who introduced me to various models like Porter five forces model, BCG matrix etc. and whose enthusiasm for these had a lasting effect. Also, I would like to thank DABUR INDIA LTD. for allowing me to use various resources and material during commencement of my internship in their office. Last but not least I wish to avail this opportunity for expressing a sense of gratitude and love to my friends and my beloved parents for their manual support, strength, cooperation and for everything.
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CERTIFICATE OF COMPLETION
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CERTIFICATE OF ORIGIN
This is to certify that Ms. Richa Agarwal, a student of Post Graduate Diploma in Management (2009-2011), Institute Of Management Technology, Nagpur has worked in Dabur India Ltd. under the able guidance and supervision of Mrs. Gagan Ahluwalia (Additional General Manager Corporate Affairs).
The period for which she has worked was for 9 weeks, starting from 6 th April10 to 11th June10. To the best of my knowledge no part of this report has been reproduced from any other report and the contents are based on original research.
Signature Prof. R. Kamble Institute Of Management Technology, Nagpur

(FACULTY GUIDE)
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Table of Content Executive summary ...................................................................................................................8 Objectives of the Study .............................................................................................................9 Methodology Followed ............................................................................................................ 10 PART-1- STUDY OF FMCG SECTOR ................................................................................. 11 Chapter 1- Introduction .......................................................................................................... 12 1.1. Introduction of FMCG Sector ........................................................................................... 1.2. FMCG Sector Segments ................................................................................................... Chapter 2 Socio Economic Contribution............................................................................. 14 2.1. Sectors Contribution ........................................................................................................ Chapter 3- Key Drivers and Players of FMCG Sector .......................................................... 15 3.1 Key Growth Drivers. ........................................................................................................... 3.2 Key Trends ......................................................................................................................... 3.3 Major Issues and Challenges of FMCG Sector. ................................................................... Chapter-4 FMCG Players ....................................................................................................... 18 4.1. Dabur India Ltd................................................................................................................. 4.2. Hindustan Unilever Ltd. ................................................................................................... 4.3. ITC Ltd. ........................................................................................................................... 4.4. Procter & Gamble Hygeine and Healthcare Ltd. ............................................................... 4.5. Nestle India Ltd. ............................................................................................................... 4.6. Colgate Palmolive Ltd. .................................................................................................. 4.7. Godrej Consumer Care ProductsLtd.................................................................................. 4.8. Marico Ltd........................................................................................................................ 4.9. GlaxoSmithKline Healthcare Limited ............................................................................... Chapter-5 FMCG Sector Analysis .......................................................................................... 22 5.1. SWOT Analysis ................................................................................................................ 5.2. U- Cuvre Analysis ............................................................................................................ 5.3. Y-O-Y Change .................................................................................................................
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PART-2- STUDY ON DABUR INDIA LIMITED ................................................................. 29 Chapter1 Introduction ............................................................................................................ 30 1.1. Introduction to Dabur Indian Limited ............................................................................... 1.2. Strategic Business Unit ..................................................................................................... Chapter2 Strategic Business Unit ........................................................................................... 32 2.1. Consumer Care Division ................................................................................................... 2.2. Customer Health Division................................................................................................. 2.3. International Business Division ........................................................................................ Chapter 3 DABUR Analysis ................................................................................................... 38 3.1. SWOT Analysis ................................................................................................................ 3.2. BCG Matrix...................................................................................................................... 3.3. Porter Five Forces Model.................................................................................................. 3.4. Fundamental Analysis ...................................................................................................... 3.5. Share Price Performance Analysis(20DMA & 50DMA) .................................................. PART-3- MERGER AND ACQUISITION SIMULATION.................................................. 51 Chapter1 Amrutanjan Healthcare Ltd. - An Introduction ................................................... 52 Chapter2 Merger Rationale .................................................................................................... 53 Chapter3 Valuations ............................................................................................................... 55 3.1. Financial Projection .......................................................................................................... 3.2. Beta Calculation ............................................................................................................... 3.3. WACC Calculation ........................................................................................................... 3.4. Working Capital and CAPEX Projection .......................................................................... 3.5. DCF Valuation ................................................................................................................. Chapter4 Valuations after Merger ......................................................................................... 63 4.1. Financial Projection .......................................................................................................... 4.2. WACC Calculation ........................................................................................................... 4.3. Working Capital and CAPEX Projection .......................................................................... 4.4. DCF Valuation ................................................................................................................. Chapter5 Conclusion............................................................................................................... 67
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APPENDIX A FINANCIALS .................................................................................................. 68 APPENDIX B FORMULAE USED ......................................................................................... 86 APPENDIX C ABBREVIATIONS .......................................................................................... 87 REFERENCES ........................................................................................................................ 88 DISCLAIMER ........................................................................................................................ 90
List of Tables
Table 1 Liquidity and Leverage Ratio ............................................................................................................... 47 Table 2 Management Efficiency Ratio ............................................................................................................... 48 Table 3 Profitability Ratio ................................................................................................................................. 49 Table 4 Market Based Return ............................................................................................................................ 49 Table 5 Financial Projection - Amrutanjan ....................................................................................................... 55 Table 6 Financial Projection - Dabur ................................................................................................................. 56 Table 7 Beta Calculation .................................................................................................................................... 56 Table 8 WACC Calculation - Amrutanjan ........................................................................................................ 57 Table 9 WACC Calculation - Dabur .................................................................................................................. 58 Table 10 a & b Working Capital and CAPEX Calculation - Amrutanjan ........................................................ 59 Table 11 a & b Working Capital and CAPEX Calculation - Dabur ................................................................. 60 Table 12 DCF Valuation - Amrutanjan ............................................................................................................. 61 Table 13 DCF Valuation - Dabur ....................................................................................................................... 62 Table 14 Financial Projection post merger ........................................................................................................ 63 Table 15 WACC Calculation.............................................................................................................................. 64 Table 16 Working Capital and CAPEX Calculation ........................................................................................ 65 Table 17 DCF Valuation..................................................................................................................................... 66
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EXECUTIVE SUMMARY Merger and acquisitions are critical phenomena: From an economic perspective, M&A transactions are increasingly frequent events, which reshape entire industries. From a firm perspective, it represents the single most important economic decisions in the life of a firm, bearing great opportunities as well as great risks. From an employee perspective, it is a source of uncertainty and change. Many M&A transactions fail to create value. Although the main motive for M&A is the generation of synergies, often the synergy targets are misused and the M&A transactions do not live up to the expectations. Based on information in the public domain, I found after acquiring `Fem care, a leading personal care brand in the domestic market, FMCG major Dabur India is inspecting for acquisitions. Like Dabur, other FMCG players are also scouting for acquisitions. These trends in FMCG sector uncover important implications for operating models. Global growth will continue to be a strategic focus for many Indian companies and M&A is a legitimate strategy to achieve this. This requires an adequate understanding of various financial models that will enable effective and integrated projections across merged entities.
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OBJECTIVE OF STUDY
To develop a basic knowledge of FMCG Sector To analyze FMCG sector on the basis of various key players past financials using various analytical tools such as SWOT, U Curve Analysis, Y-O-Y Changes. To learn the application of analytical tools. To analyze Dabur India Ltd. using various analytical tools. To understand the market movement by analyzing the historical share price. To understand synergies for M&A To develop a simulation model for Dabur India Ltd. acquiring Amrutanjan Healthcare Ltd. operating in a different market segment.
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METHODOLOGY FOLLOWED
The initial step of the project was to study about the FMCG sector and Dabur India using its Annual reports, website and research reports and then evaluating the financial position of the company on the basis of ratio analysis.
Analysis of FMCG sector using various tools SWOT Analysis, BCG Matrix, UCurve Analysis and financial performance based on y-o-y change.
Studying the companys product portfolio in various segments. Analysis of company on the basis of ratios, SWOT, BCG, Porter five forces model, Share price performance with 20 days and 50 days moving average.
Extracting financials for Dabur India Ltd. and a Amrutanjan Healthcare Ltd. company to design a merger model.
Financial projections for both the companies Calculating cost of equity, cost of debt and finally WACC. Projecting cash flow by DCF Valuation In the end deriving the equity value post merger.
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STUDY OF FMCG SECTOR

Introduction Socio Economic Contribution Key Drivers of FMCG Sector Key Players FMCG Analysis
P A R T
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1. F
MCG SECTOR An Introduction
CNX FMCG: Index Profile
The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 25 billion (Rs. 120,000 cr.). It has a strong MNC presence and is characterized by a well established distribution network, intense competition between the organized and unorganized segments and low operational cost. Availability of key raw materials,
The CNX FMCG Index is a market cap weighted index. It is a 15 stock Index from the FMCG sector that trade on the NSE. The base period is December 1995 and the base value is 1000.
cheaper labor costs and presence across the entire value chain gives India a competitive advantage. It has grown consistently over the last 3 4 years. Indias FMCG sector is
BSETMCG: Index Profile
fragmented and substantial part of sector comprises of unbranded and unpackaged products. Based on latest trend, a report on FICCI and Technopak project a growth of 10 12 percent for the next 10 years, reaching a size of US$ 43 billion (Rs. 206,000 cr.) by 2013 and US$ 74 billion (Rs. 355,000 cr.)
BSE FMCG Index is a subset of the BSE500 index. BSE-500 index represents nearly 85% of the total market capitalization on the Stock Exchange, Mumbai. 1998-99 is chosen as the base year, and within this, the date February 1, 1999 is selected as the base date for its proximity to the current period. 12 Richa Agarwal, PGDM Finance (09-11)
by 2018. Implementation of the Goods and Service Tax (GST) and opening up of Foreign Direct Investment (FDI) in retail can accelerate this growth.
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FMCG comprises of following segments: Personal Care: Oral care, hair care, skin care, personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; feminine hygiene; paper products.
Household : Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, airfresheners, insecticides and mosquito repellents, metal polish and furniture polish).
Food & Beverage : Health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.
Tobacco
Lighting
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2. S
OCIO - ECONOMIC CONTRIBUTION
SECTORS CONTRIBUTION Employment: It is amongst the largest employers in India. With about 9 million kirana stores selling FMCG produces, it supports livelihood of 13 million people. Another 25 million people are employed at wholesalers, distributors, stockist, etc
Intake of Agricultural Output: US$ 2 billion (Rs. 9600 cr.) of agricultural produce is purchased by the FMCG sector, processed and converted into value added products.
Consumption of Media and Advertising: 40% of media earnings from advertising come from the FMCG sector, contribution of US$ 2 billion (Rs. 9600 cr.).
Contribution to Contract Manufacturing: About 10 percent of FMCG production is outsourced to contract manufacturing units, with ancillary industry contribution at about US$ 1.5 billion (Rs. 7200 cr.).
Fiscal Contribution: The FMCG sector contributes US$ 6.5 billion (Rs. 31,000 cr.) through direct and in direct taxes to the exchequer. Indirect taxes are about 30 percent of MRP, while direct tax includes corporate income tax.
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3. K
3.1 Key Growth Drivers reasons:
EY DRIVERS OF FMCG SECTOR
The FMCG industry has undergone substantial growth on account of the following
Favorable Indian Economy & Demographics: 45% people in India are under 20 years of age. Per capita disposable income has increased from $550 to $600 in 2007 (9% increase). GDP is growing at a CAGR between 8 to 9%.In the next five years, affluent and aspirers as a total will supersede strivers and will be dominated by aspirers, as per NCAER.
Large Domestic Market: Increasing disposable income has resulted in a rise in the domestic market size. Increasing income has translated into higher consumption levels.
Disposable Income: There is increase in disposable income, observed in both rural and urban consumers, which is giving opportunity to many rural consumers to shift from traditional unorganized unbranded products to branded FMCG products and urban fraternity to splurge on value added and lifestyle products.
Buying Pattern Shift: The crisis of declining FMCG markets during 2001-04 was driven by new avenues of expenditure for growing consumer income such as consumer durables, entertainment, mobiles, motorbikes etc. Now, as many consumers have already upgraded, their income is being directed towards pampering themselves.
Presence across value chain: Indian FMCG firms have a presence across the entire value chain of the industry, from raw material supply to final processed and packaged goods, both in the personal care products and in the food processing sector. As a result firms located in India have become more cost competitive.
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Growing share of organized retail: The modern trade format provides a wider visibility to the FMCG products. Organized retail has led to a boom in consumption by generating wide spread employment opportunities.
3.2 Key Trends Underpenetrated Growth Categories: Within the Indian FMCG industry, there are few categories that grew more than 20% during 2008-2009, like shaving cream, skin/fairness cream, shampoos, skin care & cosmetics, tooth powder. Some other growth categories were hair color, skin care, anti-aging solution, deodorants and mens products.
Penetrated Growth Categories: Even mainstream categories with high penetration levels such as washing detergents, soaps and hair oils have shown strong underlying volume growth, despite sharp inflation led price increases in FY08. This is partly related to the growth in organized retail (3-5% of turnover for most FMCG players) that gives more visibility to national brands with strong brand equity.
Health Food Categories: FMCG majors are widening their health food portfolio to cash in on the rich, urban, health conscious Indian. Sugar free Chyawanprash, organic spices and multi grain pastas and biscuits are few examples. Urban India is high on health and FMCG majors are cashing in on the opportunity. Also, with the Indian consumer becoming increasingly health conscious, the demand for juices has witnessed rapid growth.
Impact on sector due to economic slowdown:

o
During economic slowdown, consumer expenditure of a household has declined more than decline / slowdown in their income. This suggests a decline in the share of consumption in income and a greater weight given by consumers to the precautionary motive of saving. Also, Indian consumers have reduced their expenditure share on Durables and Semi- durable goods.
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In many parts of rural India, we found consumption increasing due to growing incomes led by rising food price realizations and Government schemes like the National Rural Employment Guarantee Scheme (NREGS).
Simultaneously, there are some signs of down trading in urban homes with fixed incomes given the more direct impact that such consumers have experiences due to the downturn.
Most FMCG products (non durables) are necessities, and therefore their volume consumption has been largely unaffected in the current economic slowdown. A report by FICCI and Technopak states that the sector has coped well with recent challenges and grew by 15 percent in 2009.
3.3 Major Challenges to the Indian FMCG sector
Highly unorganized: Although the organized market is gaining strength, majority of the share is still captured by the unorganized market. Rising income levels and a growing middle class allows players selling branded products to push consumers towards branded products.
High competition between large and small players: Rise in disposable incomes and more young population have spruced up demands for products in the personal care, processed food etc segments. This has led to competition among the FMCG companies may put the profit margins under pressure.
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4. K
4.1 DABUR India Ltd.
EY PLAYERS
Dabur India Limited is the fourth largest FMCG Company in India with Revenues of US$750 Million (Rs 3390 Crore) & Market Capitalizations of US$3.5 Billion (over Rs 16,000 Crore). The brand name Dabur is derived from the words 'Da' for Daktar or Doctor and 'bur' from Burman. From those humble beginnings, the company has grown into India's leading manufacturer of consumer healthcare, personal care and food products. Building on a legacy of quality and experience of over 125 years, Dabur operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care & Foods with key brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. The company has kept an eye on new generations of customers with a range of products that cater to a modern lifestyle, while managing not to alienate earlier generations of loyal customers.
4.2 HUL Ltd. Hindustan Unilever Limited is amongst the top five exporters of the country and also the biggest exporter of tea and castor oil. The product portfolio of the company includes household and personal care products like soaps, detergents, shampoos, skin care products, color cosmetics, deodorants and fragrances. It is also the market leader in tea, processed coffee, branded wheat flour, tomato products, ice cream, jams and squashes.HUL operations involve over 2,000 suppliers and associates and distribution network covers 6.3 million retail outlets including direct reach to over 1 million.. In the future, the company plans to concentrate on its herbal health care portfolio (Ayush) and confectionary business (Max). Its strategy to grow includes focusing on the power brands' growth through consumer relevant information, cross category extensions, leveraging channel opportunities and increased focus on rural growth.
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4.3 ITC Ltd. Indian Tobacco Corporation Ltd is an associate of British American Tobacco with a 37 per cent stake. In 1910 the company's operations were restricted to trading in imported cigarettes. The company changed its name to ITC Limited in the mid seventies when it diversified into other businesses. ITC is one of India's foremost private sector companies with a turnover of 15,388 crore INR (FY09). While ITC is an outstanding market leader in its traditional businesses of cigarettes, hotels, paperboards, packaging and agro exports, it is rapidly gaining market share even in its nascent businesses of branded apparel, greeting cards and packaged foods and confectionary. After the merger of ITC Hotels with ITC Ltd, the company will ramp up its growth plans by strengthening its alliance with Sheraton and through focus on international projects in Dubai and the Far East. ITC's subsidiary, International Travel House (ITH) also aims to launch new products and services by way of boutiques that will provide complete travel services.
4.4 Procter & Gamble Hygiene and Health Care Limited Richardson Hindustan Limited (RHL), manufacturer of the Vicks range of products, was rechristened 'Procter & Gamble India' in October 1985, following its affiliation to the 'Procter & Gamble Company', USA. Procter & Gamble Hygiene and Health Care Limited (PGHHCL) acquired its current name in 1998, reflecting the two key segments of its business. P&G, USA has a 65 per cent stake in PGHHCL. The parent also has a 100 per cent subsidiary, Procter & Gamble Home Products (PGHP). The overall portfolio of the company includes healthcare; feminine-care; hair care and fabric care businesses. P&Gs Beauty Business is over US$ 10 Billion in Global Sales, making it one of the worlds largest beauty companies. The P&G beauty business sells more than 50 different beauty brands including Pantene, Olay, SKII, Max Factor, Cover Girl, Joy, Hugo Boss, Herbal Essences and Clairol Nice n Easy. In India, P&Gs beauty care business comprises of Pantene, the worlds largest selling shampoo, Head & Shoulders, the worlds No. 1 Anti-dandruff shampoo and Rejoice Asias No. 1 Shampoo.
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4.5 Nestle India Ltd. Nestle India Ltd a 59.8 per cent subsidiary of Nestle SA, Switzerland, is a leading manufacturer of food products in India. Its products include soluble coffee, coffee blends and teas, condensed milk, noodles, infant milk powders and cereals. Nestle has also established its presence in chocolates, confectioneries and other processed foods. Soluble beverages and milk products are the major contributors to Nestls total sales. Some of Nestls popular brands are Nescafe, Milkmaid, Maggi and Cerelac. The company has entered the chilled dairy segment with the launch of Nestle Dahi and Nestle Butter. Nestle has also made a foray in non-carbonated cold beverages segment through placement of Nestea iced tea and Nescafe Frappe vending machines. Exports contribute to 20 per cent of its turnover (FY09).
4.6 Colgate Palmolive India Ltd. Colgate Palmolive India is a 51 per cent subsidiary of Colgate Palmolive Company, USA. It is the market leader in the Indian oral care market with 51.3% market share (year to date). The company also has a presence in the premium toilet soap segment and in shaving products, which are sold under the Palmolive brand. Other well known consumer brands include Charmis skin cream and Axion dish wash. The company's strategy is to focus on growing volumes by improving penetration through aggressive campaigning and consumer promotions. The company plans to launch new products in oral and personal care segments and is prepared to continue spending on advertising and marketing to gain market share. Margin gains are being targeted through efficient supply chain management and bringing down cost of operations.
4.7 Godrej Consumer Products Ltd. Godrej Consumer Products (GCPL) is a leader among India's Fast Moving Consumer Goods companies, with Personal and Home Care Products. Their brands, which include Cinthol, No. 1, Expert and Ezee, among others, are household names across the country. Their Branch Offices in Mumbai, Delhi, Kolkata and Chennai ensure pan-India coverage, while factories located at Malanpur (Madhya Pradesh), Thana (Himachal Pradesh), Katha (Himachal Pradesh), Guwahati (Assam) and Sikkim cater to the diverse requirements of their products GCPL now owns international brands and trademarks in Europe, Australia, Canada, Africa and the Middle East. Their mission is to continuously enhance the quality of life of
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consumers in high-growth markets with superior-quality and affordable personal care and hygiene products.
4.8 Marico Marico is a leading Indian Group incorporated in 1990 and operating in consumer products, aesthetics services and global Ayurvedic businesses. The company also markets food products and distributes third party products. Marico owns well-known brands such as Parachute, Saffola, Sweekar, Shanti Amla, Hair & Care, Revive, Mediker, Oil of Malabar and the Sil range of processed foods. It has six factories, and sub-contract facilities for production. The overseas sales franchise of Marico's branded FMCG products is one of the largest amongst Indian companies. It is also the largest Indian FMCG company in Bangladesh.
4.9 GlaxoSmithKline Healthcare Ltd. GlaxoSmithKline Consumer Healthcares (GCH) core business is manufacturing of health drinks under the brand Horlicks. The history of the company goes way back in 1950s when bottled Horlicks was imported from England. But in the year 1955 due to change in import policy, import of Horlicks was stopped. During 1956-57 a team of Horlicks visited India to explore possibilities for setting up a plant in India. For this the company approached Maharaja of Nabha Pratap Singh in Punjab. Later in October 1958 with the support of Maharaja, Hindustan Milk food Manufacturer (HMML) was established to produce Horlicks. In the year 1969 Beecham plc acquired Horlicks England, which led the company to become major shareholder in HMML. In 1979 Beecham India was merged with Hindustan Milk food Manufacturer. Later Beecham plc, UK got merged with SmithKline USA. In January 2000 the name was changed to GlaxoSmithKline Consumer Healthcare. It exports products to countries like Bangladesh, Myanmar, Sri Lanka, Middle East, Fiji, Mauritius, Nepal, Bhutan and many more. GCH has manufacturing plants located at Punjab, Andhra Pradesh, Haryana, Hyderabad, Chennai, Guwahati, Ghaziabad, Bangalore and Gurgaon.
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5. F

MCG ANALYSIS
5.1 SWOT ANALYSIS STRENGTHS Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well known brands in FMCG Sector WEAKNESS Lower scope of investing in technology and achieving economies of scale, especially in small sectors. Low export levels Me-too products, which illegally mimic the labels of the established brands, these products narrow the scope of FMCG products in rural and semi- urban market.
OPPORTUNITIES Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market population of over one billion Export potential High consumer good spending a
THREAT Removal of import restrictions resulting in replacing of domestic brands. Slowdown in rural demand
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5.2 U Curve Analysis
In Rs. Crore Sales PBDIT PBDIT / Sales
HUL
Dabur
Marico
Godrej
Colgate
GSK
P&G 815.64 246.04
Emami 739.79 141.57
21,215.15 2,476.52 3,241.48 15.28% 473.4 19.12%
1,902.34 1,113.67 222.1 11.68% 209.11 18.78%
1,786.87 2,025.76 364.04 20.37% 402.14 19.85%
30.17% 19.14%
Specialists
Generalists
Ditch
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HUL Dabur Sales (in Rs. Cr) 10,151.54 1,246.01 PBDIT (in Rs. Cr) 1,712.66 188.28 PBDIT/Sales 16.87% 15.11%
Marico Godrej 957.05 89.94 9.40% 580.07
Colgate 999.17
GSK 1025.37 209.67 20.45%
P&G 719.51 159.69 22.19%
Emami 224.01 36.39 16.24%
105.79 202.53 18.24% 20.27%
Through market forces, markets that are largely free of major entry barriers are eventually characterized by two kinds of competitors: full-line generalists and product/market specialists. Full-line generalists compete across a range of products and markets, and are volume-driven players for whom financial performance improves with gains in market share. Specialists tend to be margin- driven players, and their financial performance deteriorates as they increase their share of the broad market. Contrary to traditional economic theory, then, evolved markets tend to be simultaneously oligopolistic as well as monopolistic. Figure plots financial performance and market share of various key players of FMCG sector viz. Emami, HUL, Godrej, Colgate Palmolive, P&G, Dabur, Marico and GSK. The figure indicates that both at the lower volume end and at the higher volume end, there are big profits / margins Though there are big profits at the two ends of the parabola, the game is totally different at the lower revenue end compared to the higher revenue. Similarly, at the middle end of the curve [where we have medium volumes], there is a sharp fall in returns (a phenomena that is seen across industries). This Mid- Zone has been defined as the Ditch.
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In a competitive, mature market, there is room for only three generalists but there can be more number of product / market specialists as is evident from the figures. Here is a classification of the two:
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5.3 Y-o-Y Change 5.3.1 COGS as a % of Sales
Company Dabur Marico Godrej Consumer HUL ITC Colgate GSK Consumer Healthcare P&G Hygiene and Healthcare Nestle
FY10 45.40% 47.40% 46.40% 49.86%
FY09 48.60% 53.50% 55.20% 52.46%
9MFY10 45.60% 48.20% 47.00% 50.60% 40.00% 43.10% 37.00% 31.30% 51.00%
9MFY09 49.30% 54.50% 56.70% 53.70% 42.40% 43.60% 38.00% 30.50% 52.80%
36.0% 37.5%
37.10%
38.6% 33.5%
38.00% 30.10%
47.70%
48.70%
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5.3.2 Gross Profit Margin

Company Dabur Marico Godrej Consumer HUL ITC Colgate GSK Consumer Healthcare P&G Hygiene and Healthcare Nestle 52.30% FY10 54.60% 52.60% 53.60% 50.14% 64.05% 62.54% 62.90% FY09 51.40% 46.50% 44.80% 47.54% 61.36% 66.51% 62.00% 69.90% 51.30% 9MFY10 54.40% 51.80% 53.00% 49.40% 60.00% 56.90% 63.00% 68.70% 49.00% 9MFY09 50.70% 45.50% 43.30% 46.30% 57.60% 56.40% 62.00% 69.50% 47.20%
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5.3.3 EBITDA Margin

Company Dabur Marico Godrej Consumer GSK Consumer Healthcare P&G Hygiene and Healthcare Nestle Q4FY10 20.53% 14.98% 23.52% 24.20% 29.60% 21.50% 04FY09 18.81% 14.48% 22.96% 26.80% 27.90% 24.40%
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P A R STUDY OF DABUR INDIA LIMITED T

Dabur India Ltd. An Introduction Strategic Business Units Dabur Analysis
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1. D
ABUR INDIA LIMITED An Introduction
Dabur India Ltd. with revenue of Rs. Rs 3390 Crore (FY10) made its beginnings with a small
pharmacy and has marked its presence with significant achievements and today commands a market leadership status. The Company has come a long way in popularizing and making easily available a whole range of products based on the
DABUR: IN SENSEX: IND
traditional science of Ayurveda. And Dabur has set very high standards in developing products and processes that meet stringent quality norms.
LAST PRICE (INR)

(as on June 4, 2010)
190
BSE Code NSE Code Bloomberg Code
500096 DABUR DABUR IN
3 Subsidiary
Group
companies
Dabur
International, Fem Care Pharma and newu
8 step down subsidiaries: Dabur Nepal Pvt. Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer
FUNDAMENTALS
Care (Pakistan),
African Consumer
Care
(Nigeria), Naturelle LLC (Ras Al KhaimahShares (Millions) Market Cap (Millions) Earnings Price/Earnings ROE Beta vs. Sensex 867.586 166,923.50 5.820 33.058 54.372 0.604
UAE), Weikfield International (UAE) and Jaquline
17 ultra-modern manufacturing units spread around the globe over India.
Products marketed in over 60 countries. Wide and deep penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retails outlets all over India
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The Company's business is structured in three strategically aligned strategic business units:
Consumer Care Division (CCD) which markets a wide range of products across various consumer categories. This division accounted for 72.8% of the Companys
consolidated sales in 2008-09.
Consumer Health Division (CHD) which offers over-the-counter (OTC) products, branded ethical and classical products based on the Ayurveda platform. This Division accounted for 7.3% of Consolidated Sales in 2008-09.
International Business Division (IBD) which has made rapid strides and become a key growth driver for the Company. With its business spread over Middle East, North Africa and South Asia, the division contributed to 18.5% of the consolidated sales in 2008-09.
31
2010
2. S
TRATEGIC BUSINESS UNITS
2.1 Consumer Care Division Extension of existing brands to more sub-categories and making more choice available to consumers, coupled with increased focus on rural penetration, was the key platform on which CCD leveraged its growth during 2008-09. The division reported growth of 13.8%, supported by strong performance
across various segments. The CCD business is divided into four key portfolios: healthcare, personal care, home care and foods. These cater to a number of consumer market segments including hair care, oral care, baby and skin care, health supplements, digestives, home care and foods. Share of these product segments in CCD sales is presented in Figure.
32
2010
Products Health Care
33
2010
Personal Care Hair Care
34
2010
Skin Care
Home Care
Food
35
2010
2.2 Consumer Health Division (CHD) The Consumer Health Division, comprising a range of healthcare products that provide Ayurveda-based solutions for health related issues, continued to be key focus area for the Company during the year. With both the OTC (Over the Counter) and Classical product categories continuing to drive the Companys CHD business, that was initiated in 2008. CHD registered an 18.9% growth (FY09), with both, the Ethical &OTC portfolio doing well across the range driven by packaging up gradation, mass media activities and a whole range of on ground consumer activations including Dabur Ayurvedic Health Camps. With Juhi Chawla as its brands ambassador, the Womens Health portfolio comprising Dashmularishita did well growing by 13.25 and 14.2% respectively. The newly launched Dabur Active Blood Purifier also gained market share in this segment. Other new product launched during the year-Dabur Super Thanda Tail and Dabur Active Antacid evoked a good market response. Dabur Badam Tail, launched during the previous year, recorded 20.6% growth, with sales touching about Rs.6 crore in the second year of its launch. The Honitus franchise in this segment grew 13.6% during 2008-09 with new variants Mulethi Power and Honey Mint, adding to the brand portfolio. 2.3 International Business Division The division, which has been transformed from being a small operation into a multi location business spreading through the Middle East, North Africa, West Africa and South Asia, grew by 39.9% during the year 2009 and emerged as the fastest growing division of the Company. The divisions performance was supported by strong volume-led growth as well as price increases undertaken to offset the impact of high inflation on input costs during the year. This
2010
acceleration in growth of IBD led to its contribution to Daburs consolidated revenue going up to 18.5% for FY09 from 15.7% a year ago. The key categories accelerating the divisions growth are Hair Creams, Toothpastes, Hair Oils and Conditioners. It is pertinent to mention that the brand architecture in the Companys overseas markets remains similar to that in India, though the product sold under these brands are customized and modified to the requirements of these markets. A significant contributor to the divisions growth during 2008-09 was geographical expansion, resulting from opening up of fresh markets like Lebanon, Turkey, Algeria, Morocco and Mauritania that offer new avenues for growth. The divisions top line growth was boosted by robust performance in key geographies like GCC, Nigeria and Bangladesh. GCC, which is one of the Companys key markets, grew by 46%during the year as a result of excellent off takes witnessed in the Vatika Hair Oil franchise, and also high growth in Vatika Naturals styling hair cream. Egypt, which has emerged as another key geography, doubled itself with a growth of 99% during the fiscal with strong performances from Vatika Hair Cream and Vatika Olive Lite Hair Oil. Nigeria, which is predominantly an Oral Care market for IBD, delivered a strong 36% growth for the year .Brands that delivered strong performances during the year in this market were Dabur Herbal Toothpaste and Dabur Herbal Gel. Asian Consumer Care, Bangladesh, performed exceedingly well, reporting a growth of 56% during the fiscal. The growth was led by increased distribution penetration and focused brand approach. Nepal which is one of the key markets in the Indian subcontinent, recorded a steady growth of 11%. The Pakistan operation was, however, impacted by the political uncertainty prevailing in the country.
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2010
3. D
3.1 SWOT Analysis
ABUR ANALYSIS
STRENGTH Differentiated products Wide distribution network Brand strength
WEAKNESS Inadequate presence in South India
OPPORTUNITY Untapped Market Market Development Innovation Increasing income level of the middle class Creating pattern additional consumption
THREAT Existing Competition New Entrants
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2010
The analysis shows Dabur Indias Strengths, Weaknesses, Opportunities and Threats which is operating in FMCG sector which will give a clear picture of the business environment it is operating in at the present time. Strengths: The strengths of a business or organization are positive elements, something they do well and are under their control. The following section will outline main strengths of Dabur India
Having alliances with other strong and popular businesses is a major plus point for Dabur India as it helps bring in new customers and make business more effective.
Being a market leader in the niche market (FMCG industry), as Dabur India is, it boosts profit, turnover and market share.
Competitive pricing is a vital element of the overall success, as this keeps them in line with their rivals, if not above them.
Keeping costs lower than their competitors and keeping the cost advantages helps them pass on some of the benefits to consumers.
The products offered by them are original, meaning many people will return to Dabur India to obtain them. Dabur Indias marketing strategy has proved to be effective, helping to raise profiles and profits and standing out as a major strength.
Their innovation keeps them a front-runner in FMCG as it is regularly turning out new patents/proprietary technology.
High quality machinery, staff, offices and equipment ensure the job is done to the utmost standard.
Dabur India has an extensive customer base, which is a major strength regarding sales and profit. Moreover people view it with respect and have faith in it.
Being financially strong helps them deal with any problems, ride any dip in profits and out perform their rivals. Dabur Indias international operations mean a wider customer base, a stronger brand and a bigger chunk of the global market.
Having little competition, being one of very few companies providing this product is a major factor in Dabur Indias performance.
Supplier relationships are strong at Dabur India, which can only be seen as strength in their overall performance.
2010
Weaknesses: Weaknesses of a company or organization are things that need to be improved or perform better, which are under their control. Dabur India Ltd has not observed any failure on the part of the company to correct major weakness in internal control system except that in the South, they do not have a strong presence especially in the hair oil segment Opportunities: Opportunities are external changes, trends or needs that could enhance the business or organizations strategic position, or which could be of a benefit to them. This section will outline opportunities that Dabur India is currently facing.
Dabur India could benefit from Governmental support, in the form of grants, allowances, training etc.
Looking at export opportunities is a way for them to raise profits. Changes in technology could give an opportunity to bolster future success. They could benefit from expanding their online presence and making more money from online shoppers/internet users.
The changes in the way consumers spend and what they buy provides a big opportunity for them to explore.
They are in good financial position, which is an opportunity for them to explore in terms of investment in new projects.
Grasping the opportunity to expand the customer base is something they can aim for, either geographically or through new products.
Takeover and merger opportunities could be explored for them and used to acquire new customers, new resources and enter new markets.
Forming strategic alliances and joint ventures is an opportunity for them to maximize profit and gain new business.
Structural changes in the industry open other doors and opportunities for them.
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Threats: Threats are factors which may restrict damage or put areas of the business or organization at risk. They are factors which are outside of the company's control. Being aware of the threats and being able to prepare for them makes this section valuable when considering contingency plans and strategies. This section will outline main threats Dabur India is currently facing.

Tax increases placing additional financial burdens on Dabur India could be a threat. Change in demographics could threaten Dabur India. The financial burden of increasing interest rates could be a threat to them. Regulations requiring money to be spent or measures to be taken could put financial or other pressure on Dabur India.
New products/services from rival firms could lead to their products/services being less in demand.
Being undercut by low-cost imports is a major threat for them. Slow growth and decline of the FMCG market. Increased competition from overseas is another threat as it could lead to lack of interest in their products/services.
Extra competition and new competitors entering the market. Substitute products available in the market present a major threat to Dabur India
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3.2 BCG Matrix
R
High
A
Low
M A R K Meswak E T
High
STAR S
Question Mark
DABUR Glucose DABUR Honey Dazzl New U
G R O W T H
Low
Cash Cows
New U
Dog s
Fem Chyawanprash Hajmola Real
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3.3 Porter Five Forces Model
1) The threat of substitute products: The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand). Buyer propensity to substitute Relative price performance of substitutes Buyer switching costs Perceived level of product differentiation
In case of Dabur since it is in major areas of FMCG and health care products so it need not fear threat of substitute products in the recent future. But it has to constantly reinvent its existing product lines in order to cope up with the innovations of its competitors.
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2010
2) The threat of the entry of new competitors: Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition). The existence of barriers to entry (patents, rights, etc.) Economies of product differences Brand equity Switching costs or sunk costs Capital requirements Access to distribution Absolute cost advantages Learning curve advantages Expected retaliation by incumbents Government policies
Dabur India is in business for more than 100 years. Dabur India Ltd. made its beginnings with a small pharmacy, but has continued to learn and grow to a commanding status in the industry. The Company has gone a long way in popularizing and making easily available a whole range of products based on the traditional science of Ayurveda. And it has set very high standards in developing products and processes that meet stringent quality norms. So, all the advantages of first mover, learning curve, brand loyalty, patents and economies of scale exist with Dabur India. The various product into which Dabur India is operating and giving edge over others are: Personal care through Ayurveda: Dabur introduced Indian consumers to personal care through Ayurveda, with the launch of Dabur Amla Hair Oil. So popular is the product that it becomes the largest selling hair oil brand in India. Launched Dabur Chyawanprash in tin pack: The ancient restorative Chyawanprash is launched in packaged form, and becomes the first branded Chyawanprash in India.
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2010
Entered Oral Care & Digestives segment: In rural markets, where homemade oral care is more popular than multinational brands, Dabur introduces Lal Dant Manjan. With this a conveniently packaged herbal toothpowder is made available at affordable costs to the masses. Dabur continues to make innovative products based on traditional formulations that can provide holistic care in our daily life. An Ayurvedic medicine used as a digestive aid is branded and launched as the popular Hajmola tablet. Care with fun: The Ayurvedic digestive formulation is converted into a children's fun product with the launch of Hajmola Candy. In an innovative move, a curative product is converted to a confectionary item for wider usage. Leadership in health care: Dabur establishes its leadership in health care as one of only two companies worldwide to launch the anti-cancer drug Intaxel (Paclitaxel). Dabur Research Foundation develops an eco-friendly process to extract the drug from its plant source. Real blitzkrieg: Dabur captures the imagination of young Indian consumers with the launch of Real Fruit Juices - a new concept in the Indian foods market. The first local brand of 100% pure natural fruit juices made to international standards, Real becomes the fastest growing and largest selling brand in the country. Super specialty drugs: With the setting up of Dabur Oncology's sterile cytotoxic facility, the Company gains entry into the highly specialized area of cancer therapy. The state-of- the-art plant and laboratory in the UK have approval from the MCA of UK. They follow FDA guidelines for production of drugs specifically for European and American markets. 3) The intensity of competitive rivalry: For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. Number of competitors Rate of industry growth Intermittent industry overcapacity Diversity of competitors
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2010
Informational complexity and asymmetry Fixed cost allocation per value added Level of advertising expense Economies of scale Sustainable competitive advantage through improvisation
Key players and competitors of Dabur India currently are Hindustan Unilever Ltd., Tata Tea, Nestle India Ltd., Britannia Industries Ltd., Colgate Palmolive Ltd., Marico Ltd., GlaxoSmithKline, Cadbury India ltd., ITC Ltd., and Procter & Gamble. Since the industry is growing at a very rapid pace and so is the no. of players. So Dabur India has to constantly relook at its strategy in order to increase its global dominance. 4) The bargaining power of customers: It is the ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. Buyer concentration to firm concentration ratio Degree of dependency upon existing channels of distribution Bargaining leverage, particularly in industries with high fixed costs Buyer volume Buyers Switching cost relative to firm switching costs Buyer information availability Availability of existing substitute products Buyer price sensitivity Differential advantage (uniqueness) of industry products RFM Analysis
Bargaining powers of buyers have increased dramatically with the advent of Globalization. With increased presence of other players in the market as mentioned previously, suppliers have got wide range of choices. So Dabur India has to formulate strategy in such a manner to keep abreast with the increasing competition by improving the quality and reducing the prices over the period.
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2010
5) The bargaining power of suppliers: (Also described as market of inputs). Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources. Supplier switching costs relative to firm switching costs Degree of differentiation of inputs Presence of substitute inputs Supplier concentration to firm concentration ratio Employee solidarity (e.g. labor unions) Threat of forward integration by suppliers relative to the threat of backward integration by firms Cost of inputs relative to selling price of the product.
Due to its over 100 years presence Dabur does have a very strong bond with the suppliers. Also Dabur does follow the policy of having good relations with all the peoples with which it deals. This helps in having a good relation with the suppliers. Also the policy of being accountable to stakeholders be it customers, without whom it will not be in business, shareholders, who have an important stake in Daburs business and the employees, suppliers who have a vested interest in making it all happen- are their stakeholders. 3.4 Fundamental Analysis Liquidity and Leverage Ratio
Mar 05 Current Ratio Quick Ratio Debt to equity ratio Interest Coverage Ratio
Table 1
Mar 06 0.89 0.32 0.05 38.50
Mar 07 0.89 0.36 0.05 65.16
Mar 08 1.07 0.49 0.03 34.46
Mar 09 1.06 0.38 0.19 30.55
0.76 0.24 0.14 36.41
Current Ratio of Dabur for last 5 year is near to 1 and for last 2 financial years it is more than 1 this indicates that the company is in good position as Current Ratio standard for FMCG
2010
industry is 1:1 which indicates that the current asset of Dabur consists of less amount of inventory. Value of sundry debtors is quite high. The liquidity ratios have increase from previous year which shows that Dabur has increased its liquidity further. Debt/Equity ratio means the ratio of finance coming from Debts compared to shareholders. A ratio exceeding 1 may be a cause for concern. As it can be seen that the Debt/Equity ratio is near to 0.03 & 0.05 for the last three year this means that company operate the business mainly through owner funds but this financial year Debt/Equity ratio has increased from 0.03 to 0.19 this indicate that company has taken loan from market to finance the business. With Debt/Equity ratio we can say that in this financial year 2009 company is investing Rs 1 from their pocket and 19 paisa from outside. As they have taken loan from market then there Interest coverage ratio has decreased. Interest Coverage Ratio show that how Leverage the company is the higher the ratio the less leverage
Management Efficiency Ratio
Mar05 Receivable turnover ratio Inventory Turnover Ratio Total Asset Turnover
Table 2
Mar06 35.31 9.03 3.15
Mar07 39.70 10.72 3.92
Mar08 25.94 9.52 4.33
Mar09 22.63 8.66 4.50
24.98 8.26 3.18
Inventory turnover ratio show that how many times in a year has the company converted its inventory into debtor. As the Inventory turnover ratio has decreased as compared to the previous 4 year this show how slow the goods are moving in the market and also indicate the production and sales efficiency of the company. Debtor turnover ratio show how that how many times company can convert debtors into cash in a year.DTR has decreased as compared to the previous 4 years which is good on behalf of the company because they are recovering money faster from debtor. Asset turnover ratio is net sales/net asset has ATR is increasing marginally for all the 4 year this show that company net sales is increasing year on year which is good from companys point of view.
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2010
Profitability Ratio
Mar05 14.08% 14.73% 15.29% 13.41% 11.62% 49.94% 43.90% 43.80% 43.80% 82.19% Mar06 18.22% 17.91% 18.13% 15.97% 13.78% 50.65% 51.61% 48.13% 48.13% 45.58% Mar07 16.19% 17.46% 18.17% 16.29% 14.15% 47.94% 64.79% 59.26% 59.26% 57.57% Mar08 18.48% 18.62% 19.48% 17.45% 14.89% 43.97% 77.78% 68.06% 68.06% 67.72% Mar09 16.83% 18.44% 19.66% 17.75% 15.34% 40.20% 62.17% 59.02% 59.02% 54.57%
Gross Profit Margin Operating Profit Margin EBITDA Margin EBT Margin Net profit Margin Contribution Margin Return on Asset Return on common equity Return on Total Equity Return on Total Capital
Table 3
EBIT as percentage of sales is good and there has been significant change in it during last 4 years from 13.41 in 2005 to 17.75 in 2009. There has been a significant change in operating Margin as compared to the last 4 years, in year 2009 it is 18.44% as compared to 2005 when it was 14.73%. The profit generating ability is not so good as visible from the fall in ROCE to 59.02% in year 2009 from 68.06% in 2008, perhaps because of the increased in debt (change in capital structure) and decreased in current liability (non interest bearing item).
Market Based Return
Mar05 Avg. P/E Ratio Avg. Market Cap (Rs. Crore) Price to Book Value EPS
Table 4
Mar06
Mar07 28.9 8154.2 17.7 3.3
Mar08 26.7 8899.4 14.7 3.9
Mar09 20.7 8131.8 10 4.5
PER ratio for Dabur is not so good with values over 25 in the year 2007 and 2008. But for this financial year it is 20.7 that mean it is decreasing the P/E ratio which is not a good symbol. Market capitalization of Dabur has decreased from 2008 which was 8899.4 to 8131.8 in 2009 therefore Management need to look forward to increase their market capitalization.
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2010
3.5 Share Price Analysis (20 DMA and 50 DMA)
From the above Moving Average Chart we can see that in the month of January to June Dabur price line has shown upward trend as the price was moving along with 20 days moving average. In the mid of march, 20 days moving average is suppose to cut 50 days moving average but it does not happen if suppose it has cut the 50 days moving average then the price should have fall. As from April the gap between 20 days moving average and 50 days moving average goes on increasing therefore from April to June price of Dabur stock has also gone up. But in the month of October 09, February 10 and April 10, we could see 20 days average and 50 days average line intersecting each other causing decrease in price in those periods. But the upward trend in the month of May 10 can forecast that the stock price of Dabur is going to raise further and it is seems that it will go further up recommending the buying of the stock of Dabur.
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2010
MERGER & ACQUISITION SIMULATION

Amrutanjan Healthcare Ltd. An Introduction Merger Rationale Valuations Valuation post merger Conclusion
P A R T
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2010
1. A
ARJN: IN LAST PRICE (INR)
(as on June 4, 2010)
MRUTANJAN HEALTHCARE LTD. An Introduction
Amrutanjan Healthcare Ltd. with revenue of Rs. Rs 96.07 Crore (FY09) started in the year 1893 by the social reformer, journalist and freedom fighter, Desodharaka" Sri.Nageswara Rao Pantulu Garu, and
SENSEX: IND
today it is one of the household names in South India.
Rs. 763
The Company's OTC (Over The Counter) segment's Gross Sales is higher by 12.5% at Rs. 88.06 crores
BSE Code NSE Code Bloomberg Code 590006 AMRUTANJAN ARJN IN
while Company's FGD (Fine Chemicals Division) segment's sales is higher by 8.6% at Rs.8.01 crores. Profit before extraordinary items is at Rs. 18.72 crores, which is higher by 88% when compared to the previous year. This achievement was possible on
FUNDAMENTALS
account of higher interest income earned on investment of surplus monies and better operational
3.03 2,330.4
Shares (Millions) Market Cap(Millions) Earnings Price/Earnings ROE Beta vs. Sensex
efficiency achieved during the year. While Amrutanjan Pain Balm (Yellow Balm) is the
290.5
flagship brand of the company with a rich heritage

2.65 154.8 0.648
of over 100 years. With a wide range of ayurvedic and allopathic products, Amrutanjan has helped millions of people relieve themselves from the pain and discomfort of headaches, colds, sprains, muscular pains, rheumatic pains and stands a real pain management specialist for its loyal customers.
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2010
2. M
ERGER RATIONALE
One plus one makes three: this equation is the special alchemy of a merger or an acquisition. A merger happens when two firms agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". The firms are often of about the same size. Both companies' stocks are surrendered and new company stock is issued in its place. For example, in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company, GlaxoSmithKline, was created. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A. This rationale is particularly alluring to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or to achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone. Working on the same lines, following are the key rationales behind Acquisition of Amrutanjan Healthcare Ltd. Synergy: After acquiring the firm, Dabur would have a greater value than the sum of its parts as a result of enhanced revenues and the cost base. Cost Reduction: Dabur would be able to reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.
2010
Entry to New Markets / Geographical Diversification: This would enable Dabur to expand regional presence as 55% of Amrutanjans revenue is from south. These would complement Dabur's regional saliency, as Dabur has a higher revenues share coming from the markets in the north and the east.
Cross Selling: Following the strategy of pushing new products to current customers based on their past purchases, it is designed to widen the customer's reliance on the company and decrease the likelihood of the customer switching to a competitor.
Increase Product Range: By acquiring Dabur would be able to have the technical knowhow of pain relieving ointments hence would be able to increase their product range and add another segment to their product portfolio.
The acquisition also marks Dabur's entry into niche segments of pain relieving product segment providing it completely new area of growth which could be capitalized on in the future.
Empire Building: A bigger company to manage and hence more power.
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2010
3. V
in Rs. Crores Revenue Growth (YoY) % 2007A 73.4
ALUATIONS
3.1 Financial Projections 3.1.1 Amrutanjan Healthcare Ltd.

2010 E 113.4 16.2% 2011 E 131.8 16.2%
2008A 75.0 2.2%
2009A 97.6 30.2%
2012 E 153.1 16.2%
2013 E 177.9 16.2%
2014 E 206.7 16.2%
2015 E 237.7 15.0%
2016 E 273.4 15.0%
2017 E 314.4 15.0%
2018 E 361.6 15.0%
2019 E 415.8 15.0%
Personnel Expenses Operating and Other Expenses EBITDA EBITDA margin (%) Depreciation EBIT EBIT margin (%) Transfer to Revaluation Reserve Financial Expenses Financial Expenses/ Revenue PBT Taxes Effective Tax Rate PAT Net Income margin (%)
9.0 48.0 16.4 22.4% 1.5 14.9
9.4 53.3 12.2 16.3% 1.5 10.7 14.3%
10.9 66.3 20.4 20.9% 1.5 18.9 19.3% 0.0 0.15 0.2% 18.7 6.5 34.9% 12.2 12.5%
12.7 77.0 22.5 19.8% 1.8 20.7 18.3% 0.0 0.7 0.6% 20.0 7.0 34.9% 13.0 11.5%
14.8 89.5 26.1 19.8% 1.9 24.3 18.4% 0.0 0.8 0.6% 23.5 8.3 35.4% 15.2 11.5%
17.2 104.0 30.4 19.8% 2.1 28.2 18.4% 0.0 0.7 0.5% 27.5 9.7 35.1% 17.9 11.7%
19.9 120.9 35.3 19.8% 2.3 33.0 18.5% 0.0 1.0 0.6% 32.0 11.2 35.1% 20.7 11.7%
23.2 140.4 41.0 19.8% 2.5 38.5 18.6% 0.0 1.1 0.5% 37.4 13.2 35.2% 24.2 11.7%
26.6 161.5 47.1 19.8% 2.6 44.5 18.7% 0.0 1.2 0.5% 43.3 15.2 35.1% 28.1 11.8%
30.6 185.7 54.2 19.8% 3.0 51.2 18.7% 0.0 1.5 0.5% 49.7 17.5 35.2% 32.2 11.8%
35.2 213.6 62.3 19.8% 3.2 59.2 18.8% 0.0 1.7 0.5% 57.5 20.2 35.2% 37.3 11.9%
40.5 245.6 71.7 19.8% 3.3 68.4 18.9% 0.0 1.9 0.5% 66.5 23.4 35.2% 43.1 11.9%
46.6 282.5 82.5 19.8% 3.8 78.6 18.9% 0.0 2.2 0.5% 76.4 26.9 35.2% 49.5 11.9%
0 0.54 0.7% 14.3 4.8 33.3% 9.6 13.0%
0.0 0.747 1.0% 10.0 3.7 36.5% 6.3 8.5%
Table 5
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2010
3.1.2 Dabur India Ltd.

in Rs. Crores Revenue Growth (YoY) % 2007A 2,069.0 2008A 2,395.1 15.8% 2009A 2,852.3 19.1% 2010 E 3,422.7 20.0% 2011 E 4,107.3 20.0% 2012 E 4,928.7 20.0% 2013 E 5,914.5 20.0% 2014 E 7,097.4 20.0% 2015 E 8,303.9 17.0% 2016 E 9,715.6 17.0% 2017 E 11,367.2 17.0% 2018 E 13,299.7 17.0% 2019 E 15,560.6 17.0%
Personnel Expenses Operating and Other Expenses EBITDA EBITDA margin (%) Depreciation EBIT EBIT margin (%) Transfer to Revaluation Reserve Financial Expenses Financial / Revenue PBT Taxes Effective Tax Rate PAT Net Income margin (%)
166.7
199.3
234.7
281.6
338.0
405.6
486.7
584.0
683.3
799.4
935.4
1,094.4
1,280.4
1,533.2 369.2 17.8% 34.3 334.9 16.2%
1,758.1 437.7 18.3% 36.4 401.3 16.8%
2,104.7 512.9 18.0% 44.9 468.1 16.4%
2,525.6 617.2 18.0% 54.3 562.9 16.4%
3,030.7 740.7 18.0% 62.8 677.9 16.5%
3,636.8 888.8 18.0% 72.1 816.7 16.6%
4,364.2 1,066.6 18.0% 82.0 984.6 16.6%
5,237.1 1,279.9 18.0% 103.6 1,176.3 16.6%
6,127.4 1,497.5 18.0% 114.8 1,382.7 16.7%
7,169.0 1,752.0 18.0% 126.4 1,625.6 16.7%
8,387.7 2,049.9 18.0% 138.5 1,911.3 16.8%
9,813.6 2,398.3 18.0% 162.2 2,236.2 16.8%
11,482.0 2,806.1 18.0% 189.7 2,616.3 16.8%
0.0 15.4 0.7% 319.5 37.3 11.7% 282.2
0.0 16.8 0.7% 384.5 50.6 13.2% 333.8
0.0 23.2 0.8% 444.8 54.0 12.1% 390.8
0.0 25.8 0.8% 537.1 66.2 12.3% 470.9
0.0 31.0 0.8% 646.8 81.2 12.6% 565.6
0.0 38.2 0.8% 778.5 96.1 12.3% 682.4
0.0 45.0 0.8% 939.5 116.6 12.4% 822.9
0.0 54.2 0.8% 1,122.0 139.5 12.4% 982.5
0.0 63.6 0.8% 1,319.0 163.5 12.4% 1,155.5
0.0 74.2 0.8% 1,551.4 192.6 12.4% 1,358.8
0.0 86.9 0.8% 1,824.4 226.5 12.4% 1,597.9
0.0 101.7 0.8% 2,134.4 264.9 12.4% 1,869.6
0.0 118.9 0.8% 2,497.4 310.0 12.4% 2,187.4
13.6%
13.9%
13.7%
13.8%
13.8%
13.8%
13.9%
13.8%
13.9%
14.0%
14.1%
14.1%
14.1%
Table 6
56
2010
3.2 Beta Calculation
Company HUL Marico Godrej Colgate GSK P&G Emami DABUR
Levered Beta 0.541 0.492 0.501 0.358 0.578 0.519 0.628 0.605
Debt 421.95 308.53 62.89 4.69 0 0 440.08 138.98
Equity 2,061.51 367.68 536.92 216.3 905.1 440.04 296.03 818.809
D/E Ratio 0.20 0.84 0.12 0.02 0.00 0.00 1.49 0.17
Unlevered Beta 0.46 0.29 0.46 0.35 0.58 0.52 0.29 0.53 0.44 0.62
Levered Beta
0.49
Sectoral Unlevered Beta Adjusted beta

Table 7
3.3 WACC Calculation 3.3.1. Amrutanjan Healthcare Ltd.

Cost of Equity Risk free rate (Yield on 10 - yr Govt. of India bond) Equity Risk Premium for U.S. India - Country Risk Premium India - Equity Risk Premium Unlevered Beta Levered Beta Effective Cost of Debt Cost of Debt Tax Rate D/E Ratio (FY 2009) WACC
Table 8
12.7% 7.6% 4.5% 4.5% 9.0% 0.4 0.6 5.8% 7.3% 20.0% 0.36x 10.9%
57
2010

Table 9
12.5% 7.6% 4.5% 4.5% 9.0% 0.4 0.5 8.2% 10.2% 20.0% 0.32x 11.4%
58
2010
3.4 CAPEX and Net working capital Projection 3.4.1 Amrutanjan Healthcare Ltd.
in Rs. Crores Debt Cash and Cash Equivalents Current Assets Current Liabilities Net Working Capital Shareholders' Equity Net Working Capital Turnover Net Working Capital Days Table 10 a
2007A 9.8
2008A 12.5
2009A 34.2
2010 E
2011 E
2012 E
2013 E
2014 E
2015 E
2016 E
2017 E
2018 E
2019 E
7.8 25.8 8.2
2.7 25.2 9.5
67.5 92.4 13.8
19.6
25.4
45.3
52.7
61.2
71.1
82.6
96.0
110.4
127.0
146.0
168.0
193.1
23.2
25.5
93.8
3.7
2.9
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
97.5
123.7
169.5
169.5
169.5
169.5
169.5
169.5
169.5
169.5
169.5
169.5
169.5
in Rs. Crores Net PPE/revenue (%) Net PPE Depreciation /net PPE Depreciation CAPEX
Table 10 b
2007A
2008A
2009A
2010 E
2011 E
2012 E
2013 E
2014 E
2015 E
2016 E
2017 E
2018 E
2019 E
17.1% 12.6
25.7% 19.3
16.3% 15.9
16.3% 18.5
16.0% 21.1
15.0% 14.0% 23.0 24.9
13.0% 26.9
12.0% 28.5
12.0% 32.8
11.0% 10.0% 34.6 36.2
10.0 % 41.6
12.1% 1.5 14.1
7.6% 1.5 8.2
9.3% 1.5 -1.9
9.7% 1.8 4.4
8.8% 1.9 4.5
9.3% 2.1 4.0
9.3% 2.3 4.2
9.1% 2.5 4.4
9.2% 2.6 4.3
9.2% 3.0 7.3
9.2% 3.2 5.0
9.2% 3.3 4.9
9.2% 3.8 9.2
59
2010

in Rs. Crores 2007A 2008A 2009A 2010 E 2011 E 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E 2018 E 2019 E
Debt Cash and Cash Equivalents Current Assets Current Liabilities Net Working Capital Shareholders' Equity Net Working Capital Turnover Net Working Capital Days
185.8
126.4
258.1
60.7 640.5 451.8 313.8 479.6
76.6 773.9 732.1 91.7 617.6
148.4 950.8 807.6 252.8 818.8 303.4 364.0 436.8 524.2 629.0 736.0 861.1 1,007.5 1,178.7 1,379.1
6.6
26.1
11.3
11.3
11.3
11.3
11.3
11.3
11.3
11.3
11.3
11.3
11.3
55.4
14.0
32.3
32.3
32.3
32.3
32.3
32.3
32.3
32.3
32.3
32.3
32.3
Table 11 a
in Rs. Crores Net PPE/revenues Net PPE Depreciation/ net PPE Depreciation
2007A
2008A
2009A
2010 E
2011 E
2012 E
2013 E
2014 E
2015 E
2016 E
2017 E
2018 E
2019 E
18.3% 379.2
19.4% 465.3
19.6% 559.2
19.1% 654.4
19.0% 780.4
18.0% 887.2
17.0% 1,005.5
18.0% 1,277.5
17.0% 1,411.7
16.0% 1,554.5
15.0% 1,705.1
15.0% 1,994.9
15.0% 2,334.1
9.0% 34.3
7.8% 36.4
8.0% 44.9
8.3% 54.3
8.0% 62.8
8.1% 72.1
8.2% 82.0
8.1% 103.6
8.1% 114.8
8.1% 126.4
8.1% 138.5
8.1% 162.2
8.1% 189.7
Table 11 b
60
2010
3.5 DCF Valuation 3.5.1 Amrutanjan Healthcare Ltd.
in Rs. Crores EBIT Less: Taxes Add: Depreciation and Amortization Less: Increase in Net Working Capital Less: Capex FCF Discount Factor Discounted FCF Sum of Discounted FCF (1)
2007A 15 5 2 20 14 -22
2008A 11 4 1 6 8 -5
2009 A 19 7 1 20 -2 -4
2010 E 21 4 2 7 4 7 1.00 7 104
2011 E 24 5 2 9 4 8 0.90 7
2012 E 28 6 2 10 4 11 0.81 9
2013 E 33 7 2 12 4 13 0.73 9
2014 E 39 8 2 13 4 15 0.66 10
2015 E 45 9 3 14 4 20 0.60 12
2016 E 51 10 3 17 7 20 0.54 11
2017 E 59 12 3 19 5 27 0.49 13
2018 E 68 14 3 22 5 31 0.44 14
2019 E 79 16 4 25 9 32 0.40 13
Terminal Growth Rate Terminal Value Discounted Terminal Value (2)
5.0% 579 229
Valuation in Rs. Crores (1) + (2) Equity Value Terminal Value as a % of Overall Value
333 366.5 68.7%
Table 12
61
2010

2011 E 678 135 2012 E 817 163 2013 E 985 196 2014 E 1,176 235 2015 E 1,383 276 2016 E 1,626 324 2017 E 1,911 381 2018 E 2,236 446 2019 E 2,616 522
in Rs. Crores EBIT Less: Taxes Add: Depreciation and Amortization Less: Increase in Net Working Capital Less: Capex FCF Discount Factor Discounted FCF Sum of Discounted FCF (1)
2007A 335 37
2008A 401 51
2009A 468 54
2010 E 563 112
34
36
45
54
63
72
82
104
115
126
139
162
190
314 413 -395
-222 123 487
161 139 159
51 150 305 1.00 305 4,571
61 189 356 0.90 320
73 179 474 0.81 382
87 200 582 0.72 421
105 376 565 0.65 367
107 249 866 0.58 505
125 269 1,033 0.52 541
146 289 1,233 0.47 580
171 452 1,329 0.42 561
200 529 1,555 0.38 589
Terminal Growth Rate Terminal Value Discounted Terminal Value (2)
5.0% 25,569 9,689
Valuation in Rs. Crores (1) + (2) Equity Value Terminal Value as a % of Overall Value
14,259 14149.8
67.9%
Table 13
62
2010
4. V
in Rs. Crores Revenue (Acquirer) Revenue (Target) 2007A 2,069.0 73.4 2008A 2,395.1 75.0 Revenue Synergie 2,142.4 5.0% 107.1 Revenue synergie Cost (Acquirer) Cost (Target) 2,249.5 1,699.9 57.0 2,470.0 5.0% 123.5 2,593.5 1,957.4 62.8
ALUATION AFTER MERGER
4.1 Financial Projections

2009A 2,852.3 97.6 2010 E 3,349.2 113.4 2011 E 3,932.8 131.8 2012 E 4,618.0 153.1 2013 E 5,422.6 177.9 2014 E 6,367.4 206.7 2015 E 7,322.5 237.7 2016 E 8,420.9 273.4 2017 E 9,684.0 314.4 2018 E 11,136.7 361.6 2019 E 12,807.2 415.8
2,949.9 5.0% 147.5 3,097.4 2,339.4 77.3
3,462.6 5.0% 173.1 3,635.8 2,807.2 89.8
4,064.6 5.0% 203.2 4,267.8 3,368.7 104.3
4,771.1 5.0% 238.6 5,009.7 4,042.4 121.2
5,600.5 5.0% 280.0 5,880.6 4,850.9 140.8
6,574.1 5.0% 328.7 6,902.9 5,821.1 163.6
7,560.3 5.0% 378.0 7,938.3 6,810.6 188.2
8,694.3 5.0% 434.7 9,129.0 7,968.4 216.4
9,998.5 5.0% 499.9 10,498.4 9,323.1 248.8
11,498.2 5.0% 574.9 12,073.1 10,908.0 286.2
13,223.0 5.0% 661.1 13,884.1 12,762.4 329.1
Cost Synergie
1,756.9 10.0% 175.7
2,020.1 10.0% 202.0 1,818.1 775.4 29.9% 737.5 28.4% 16.8 0.7 17.5 0.7% 720.0 50.6 3.7 54.3 7.5% 665.7
2,416.6 10.0% 241.7 2,174.9 922.4 29.8% 876.1 28.3% 23.2 0.2 23.4 0.8% 852.7 54.0 6.5 60.6 7.1% 792.2
2,897.0 10.0% 289.7 2,607.3 1,083.3 29.8% 1,028.1 28.3%
3,473.0 10.0% 347.3 3,125.7 1,271.8 29.8% 1,209.8 28.3%
4,163.6 10.0% 416.4 3,747.2 1,492.9 29.8% 1,419.3 28.3%
4,991.7 10.0% 499.2 4,492.5 1,752.4 29.8% 1,670.5 28.4%
5,984.7 10.0% 598.5 5,386.2 2,057.1 29.8% 1,967.2 28.5%
6,998.8 10.0% 699.9 6,298.9 2,365.6 29.8% 2,268.4 28.6%
8,184.8 10.0% 818.5 7,366.3 2,720.5 29.8% 2,608.7 28.6%
9,571.9 10.0% 957.2 8,614.7 3,128.5 29.8% 3,000.1 28.6%
11,194.2 10.0% 1,119.4 10,074.7 3,597.8 29.8% 3,450.0 28.6%
13,091.4 10.0% 1,309.1 11,782.3 4,137.5 29.8% 3,978.9 28.7%
Cost Synergie EBITDA EBIDTA Margin % EBIT EBIT Margin % Financial Expense (Acquirer) Financial Expense (Target) Financial Expense Financial Expense / Revenue PBT Tax (Acquirer) Tax (Target) Tax Effective Tax Rate PAT
1,581.2 668.4 29.7% 632.6 28.1% 15.4 0.5 15.9 0.7% 616.6 37.3 4.8 42.1 6.8% 574.6
25.9 0.7% 1,002.2
30.5 0.7% 1,179.3
36.4 0.7% 1,382.9
42.2 0.7% 1,628.3
49.7 0.7% 1,917.5
57.3 0.7% 2,211.1
65.7 0.7% 2,543.0
75.6 0.7% 2,924.5
87.0 0.7% 3,363.0
100.0 0.7% 3,878.9
71.7 7.2% 930.5
85.7 7.3% 1,093.6
99.2 7.2% 1,283.7
117.2 7.2% 1,511.1
138.3 7.2% 1,779.2
159.1 7.2% 2,052.0
183.2 7.2% 2,359.8
210.7 7.2% 2,713.8
242.2 7.2% 3,120.9
279.4 7.2% 3,599.5
Table 14
63
2010
4.2 WACC Calculation

Table 15
12.4% 7.6% 4.5% 4.5% 9.0% 0.4 0.5 8.2% 10.2% 20.0% 0.32x 11.4%
64
2010
4.3 CAPEX and Net Working Capital Projection

2010 E
in Rs. Crores Debt(Acquirer) Debt(Target) Debt Cash and Cash Equivalents (Acquirer) Cash and Cash Equivalents (Target) Cash and Cash Equivalents Current Assets (Acquirer) Current Assets (Target) Current Assets Current Liabilities (Acquirer) Current Liabilities (Target) Current Liabilities Net Working Capital Net working capital turnover Net working capital days Shareholders' Equity (Acquirer) Shareholders' Equity (Target) Shareholders' Equity Shareholders' Equity / Revenue Fixed Asset (Acquirer) Fixed Asset (Target) Net Fixed Asset/ Revenue Total Fixed Asset Depreciation (Acquirer) Depreciation (Target) Depreciation / total fixed asset Total Depreciation CAPEX
2007A 185.8 9.8 195.6 60.7 7.8 68.5 640.5 25.8 666.3 451.8 8.2 460.0 333.4 6.7 54.1 479.6 23.2 502.8 22.3% 379.2 12.6 17.4% 391.7 34.3 1.5 9.1% 35.8
2008A 126.4 12.5 138.9 76.6 2.7 79.3 773.9 25.2 799.1 732.1 9.5 741.6 117.1 22.1 16.5 617.6 25.5 643.0 24.8% 465.3 19.3 18.7% 484.5 36.4 1.5 7.8% 37.9 130.7
2009A 258.1 34.2 292.3 148.4 67.5 215.9 950.8 92.4 1,043.2 807.6 13.8 821.4 298.1 10.4 35.1 818.8 93.8 912.6 29.5% 559.2 15.9 18.6% 575.1 44.9 1.5 8.1% 46.3 136.9
2011 E
2012 E
2013 E
2014 E
2015 E
2016 E
2017 E
2018 E
2019 E
351.0 10.4 35.2
338.5 12.6 29.0
454.4 11.0 33.1
522.5 11.3 32.4
595.7 11.6 31.5
703.5 11.3 32.3
802.6 11.4 32.1
919.8 11.4 32.0
1,063.0 11.4 32.1
1,219.9 11.4 32.1
928.4 25.5%
1,135.1 26.6%
1,362.6 27.2%
1,555.1 26.4%
1,846.3 26.7%
2,127.2 26.8%
2,434.1 26.7%
2,806.8 26.7%
3,227.4 26.7%
3,708.5 26.7%
18.2% 662.5 54.3 1.8 8.3% 55.2 142.6
18.0% 768.2 62.8 1.9 8.1% 62.0 167.7
18.0% 901.7 72.1 2.1 8.2% 73.5 207.1
17.0% 999.7 82.0 2.3 8.2% 81.9 179.8
16.0% 1,104.5 103.6 2.5 8.1% 89.9 194.7
15.0% 1,190.7 114.8 2.6 8.2% 97.2 183.5
15.0% 1,369.4 126.4 3.0 8.2% 111.8 290.4
15.0% 1,574.8 138.5 3.2 8.2% 128.4 333.8
15.0% 1,811.0 162.2 3.3 8.2% 147.8 384.0
14.0% 1,943.8 189.7 3.8 8.2% 158.6 291.4
Table 16
65
2010
4.4 DCF Valuation

2011 E 1,210 241 62 -12 168 875 0.90 786 2012 E 1,419 283 74 116 207 887 0.81 715 2013 E 1,671 333 82 68 180 1,171 0.72 848 2014 E 1,967 392 90 73 195 1,397 0.65 908 2015 E 2,268 453 97 108 183 1,622 0.58 946 2016 E 2,609 520 112 99 290 1,810 0.52 949 2017 E 3,000 599 128 117 334 2,079 0.47 978 2018 E 3,450 688 148 143 384 2,382 0.42 1,006 2019 E 3,979 794 159 157 291 2,895 0.38 1,098
in Rs. Crores EBIT Less: Taxes Add: Depreciation and Amortization Less: Increase in Net Working Capital Less: Capex FCF Discount Factor Discounted FCF Sum of Discounted FCF (1) Terminal Growth Rate Terminal Value Discounted Terminal Value (2) Deal Value Valuation in Rs. Crores (1) + (2) Equity Value Terminal Value as a % of Overall Value Table 17
2007A 633 42 36 333 0 293
2008A 738 54 38 -216 131 807
2009A 876 61 46 181 137 544
2010 E 1,028 205 55 53 143 683 1.00 683 8,917 5.0% 47,703 18,093 367 26,644 26567.4 67.9%
66
2010
5. C
ONCLUSION
There are many reasons of wishing to engage in Merger and Acquisition but creating value is the primary reason for it. In some cases, the company might be a good bargain with future potential gains. In other cases, one of the companies may be in financial trouble and the merger might be a way to fix their predicament. Even a company that is in financial disrepair maybe a good bargain once the problems are fixed. Sometimes the backing of a larger company is all that the smaller companies need to return to profitability. In the case of an acquisition, the purchaser is speculating that the company will be of greater value at some future point in time. There are many financially motivated reasons why a company may choose to merge or acquire another company. In the project I have taken a comparatively smaller company for acquisition but with a different product portfolio speculating various synergies as a rationale for M&A. The objective was to analyze whether the acquisitions would pronounce success with respect to increase in equity value. I have made an effort to judge the justifiability of merger on the ground of value creation. In this purpose I have used DCF approach of business valuation. As a result, the Equity Value of Dabur India Ltd. before acquiring Amrutanjan Healthcare Ltd. was Rs. 14149.8 crore with enterprise value Rs. 14259 crore and Equity value of Target was Rs. 366.5 crore with enterprise value Rs. 333 crore but post merger the equity value reached Rs. 26,567.4 crore and Enterprise Value Rs. 26,644 crore which is much greater than the combined equity value of both the companies hence, it is very likely that if Dabur plans for acquiring such company, it would definitely create value for the shareholders of both the companies.
67
A
2010
P P E
FINANCIALS
A.1 DABUR Balance Sheet
in Rs. Crore SOURCES OF FUNDS Shareholder's funds Share Capital Reserve and Surplus Minority Interest Loan Funds Secured Loans Unsecured Loans Deferred Tax Liability TOTAL APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in Progress Investments Deferred Tax Asset Inventories Sundry Debtors Cash & Bank Balances Interest Accrued Loans & Advances Current Liabilities Provisions Net Current Assets Miscellaneous Expense TOTAL 257.11 141.97 60.67 0 180.72 640.47 361.52 90.24 451.76 188.71 19.82 669.83 617.23 238.07 379.16 0 379.16 80.7 729.66 264.41 465.26 0 465.26 203.72 24.007 302.48 172.32 76.57 0 222.53 773.9 457.97 274.1 732.07 41.84 13.95 748.777 858.51 299.34 559.169 0 559.169 346.965 23.531 375.468 177.88 148.425 0 249.02 950.793 481.65 325.995 807.645 143.15 8.64 1081.455 120.38 39.51 25.9 669.83 97.56 1.6 27.28 748.769 95.651 131.938 30.485 1081.46 86.29 393.28 479.57 4.47 86.4 531.173 617.573 4.75 86.51 732.299 818.809 4.577 2007 2008 2009
N D I X
68
2010
A.2 DABUR P&L Account

DABUR
Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Manufacturing Expenses Employee Cost Financial Expense Selling and Admin Expenses Miscellaneous Expenses Depreciation Total Expenses Net Operating PBT Provision for Taxation - Current Provision for Taxation - Deferred Provision for Taxation - Fringe Benefit Net PAT and before Extraordinary Items Credit Balance from merged entity Net PAT and Extraordinary Items Minority Interest Net Profit after Minority Interest Balance Brought Forward Provision for taxation for earlier year written back Provision for taxation for earlier year Profit Available for appropriation Appropriation / Allocation Interim Dividend Proposed Dividend - Final Corporate Tax on Interim Dividend Corporate Tax on Proposed Dividend Transferred to Capital Reserve Transferred to Legal Reserve Transferred to General Reserve Balance Carried over to Balance Sheet Earnings Per Share (Rs) Basic Diluted No. of Shares Basic Diluted
2007
2,080.24 37.11 2,043.13 25.91 0 2,069.04 971.08 74.26 166.67 15.37 481.38 6.49 34.29 1,749.54 319.50 34.94 -1.36 3.74 282.18 0 282.18 -0.87 283.05 215.86 0.22 -1.55 497.58 122.12 0 17.12 0 3.34 0.19 30 324.81 3.27 3.24 860884512 869534762
2008
2,396.29 35.22 2,361.07 34.01 0 2,395.08 1,115.39 85.767 199.306 16.798 551.26 5.66 36.43 2,010.61 384.46 42.77 0.75 7.12 333.82 0.185 334.01 -0.13 334.14 322.7 0.68 -1.66 655.86 64.8 64.8 11.01 11.01 0.4 0.003 70 433.84 3.86 3.83 863826759 868807461
2009
2,834.11 28.68 2,805.43 46.84 0 2,852.27 1,376.18 99.179 234.699 23.208 624.916 4.38 44.85 2,407.41 444.86 49.938 -2.55 6.65 390.82 0 390.82 -0.407 391.23 433.77 0.00011 0.71 825.71 64.88 86.51 11.02 14.7 0.00095 0 90 558.60 4.53 4.51 864907642 869156529
69
2010
A.3 Hindustan Unilever Ltd. Balance Sheet

Balance Sheet ------------------- in Rs. Cr. ------------------Dec '04 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) Dec '05 12 mths Dec '06 12 mths Dec '07 12 mths Mar '09 15 mths
220.12 220.12 0 0 1,871.92 0.67 2,092.71 1,453.06 18.06 1,471.12 3,563.83
220.12 220.12 0 0 2,084.84 0.67 2,305.63 24.5 32.44 56.94 2,362.57
220.68 220.68 0 0 2,502.14 0.67 2,723.49 37.13 35.47 72.6 2,796.09
217.75 217.75 0 0 1,220.82 0.67 1,439.24 25.52 63.01 88.53 1,527.77
217.99 217.99 0 0 1,842.85 0.67 2,061.51 144.65 277.3 421.95 2,483.46
2,314.22 891.08 1,423.14 94.42 2,229.56 1,470.44 489.27 102.98 2,062.69 1,013.04 595.07 3,670.80 0 2,730.64 1,123.46 3,854.10 -183.3 0 3,563.82 476.41 9.5
2,375.11 989.61 1,385.50 98.03 2,148.72 1,321.77 522.83 103.77 1,948.37 902.04 251.26 3,101.67 0 3,077.97 1,293.39 4,371.36 1,269.69 0 2,362.56 468.33 10.47
2,462.69 1,061.94 1,400.75 110.26 2,522.22 1,547.71 440.37 170.8 2,158.88 1,150.06 246.15 3,555.09 0 3,362.52 1,429.71 4,792.23 1,237.14 0 2,796.09 476.4 12.34
2,669.08 1,146.57 1,522.51 185.64 1,440.81 1,953.60 443.37 200.11 2,597.08 1,083.28 0.75 3,681.11 0 4,028.41 1,273.90 5,302.31 1,621.20 0 1,527.76 494.46 6.61
2,881.73 1,274.95 1,606.78 472.07 332.62 2,528.86 536.89 190.59 3,256.34 1,196.95 1,586.76 6,040.05 0 4,440.08 1,527.98 5,968.06 71.99 0 2,483.46 417.26 9.45
70
2010
A.4 Hindustan Unilever Ltd. P&L Account

Profit & Loss account ------------------- in Rs. Cr. ------------------Dec '04 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 5,413.77 164.77 574.84 193.84 1,713.73 377.93 0 8,438.88 1,541.54 1,712.66 129.98 1,582.68 120.9 0 1,461.78 56.29 1,518.07 320.74 1,197.34 3,025.11 0 1,100.62 145.53 22,012.44 5.44 500 9.5 6,170.98 168.74 591.32 191.82 2,010.10 429.09 0 9,562.05 1,583.71 1,801.72 19.19 1,782.53 124.45 0 1,658.08 44.04 1,702.12 294 1,408.10 3,391.08 0 1,100.62 159.62 22,012.44 6.4 500 10.47 6,687.30 180.79 642.81 187.37 2,328.51 541.52 0 10,568.30 1,805.69 2,318.29 10.73 2,307.56 130.16 0 2,177.40 -0.21 2,177.19 321.8 1,855.37 3,881.00 0 1,325.48 185.9 22,067.76 8.41 600 12.34 7,542.78 198.89 767.81 204.1 2,561.12 691.49 0 11,966.19 2,076.43 2,504.80 25.5 2,479.30 138.36 0 2,340.94 1.67 2,342.61 417.14 1,769.06 4,423.41 0 1,976.12 355.5 21,774.63 8.12 900 6.61 11,380.05 301.37 1,152.12 297.34 3,857.48 985.31 0 17,973.67 2,964.94 3,241.48 25.32 3,216.16 195.3 0 3,020.86 48.53 3,069.39 572.94 2,500.71 6,593.62 0 1,634.51 277.79 21,798.76 11.47 750 9.45 Dec '05 12 mths Dec '06 12 mths Dec '07 12 mths Mar '09 15 mths
10,996.72 939.61 10,057.11 171.12 -76.69 10,151.54
12,108.86 914.98 11,193.88 218.01 -48.12 11,363.77
13,189.70 945.68 12,244.02 512.6 129.97 12,886.59
14,937.88 1,057.32 13,880.56 428.37 162.06 14,470.99
21,927.23 1,422.95 20,504.28 276.54 434.33 21,215.15
71
2010
A.5 Godrej Consumer Product Ltd. Balance Sheet

Balance Sheet ------------------- in Rs. Cr. ------------------Mar '05 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) Mar '06 12 mths Mar '07 12 mths Mar '08 12 mths Mar '09 12 mths
22.64 22.64 0 0 27.21 0 49.85 4.13 2 6.13 55.98
22.58 22.58 0 0 53.57 0 76.15 4.87 0 4.87 81.02
22.58 22.58 0 0 88.32 0 110.9 47.86 65 112.86 223.76
22.58 22.58 0 0 127.91 0 150.49 40.59 94 134.59 285.08
25.7 25.7 0 0 511.22 0 536.92 14.89 48 62.89 599.81
179.88 79.12 100.76 0.66 0 73.81 5.18 8.97 87.96 16.17 0 104.13 0 141.93 7.61 149.54 -45.41 0 56.01 12.33 8.81
159.21 86.39 72.82 7.06 50.01 87.89 6.52 13.49 107.9 14.18 0.24 122.32 0 163.47 7.72 171.19 -48.87 0 81.02 55.64 13.49
243.65 95.52 148.13 39.81 71.79 117.23 9.8 21.06 148.09 46.93 0.67 195.69 0 223.43 8.21 231.64 -35.95 0 223.78 67.99 4.91
265.56 110.98 154.58 71.58 77.61 164.91 12.2 18.69 195.8 66.78 1.15 263.73 0 254.75 30.53 285.28 -21.55 2.87 285.09 48.93 6.66
266.54 96.75 169.79 2.5 97.89 126.67 9.86 23.67 160.2 126.14 320.89 607.23 0 244.67 32.94 277.61 329.62 0 599.8 45.42 20.9
72
2010
A.6 Godrej Consumer Products Ltd. P&L Account

Profit & Loss account ------------------- in Rs. Cr. ------------------Mar '05 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 297.6 16.43 32.9 7.32 108.93 11.1 0 474.28 103.19 105.79 1.36 104.43 10.66 0 93.77 3.53 97.3 7.69 89.59 176.69 0 67.93 9.12 566.04 15.83 300 8.81 320.17 20.99 43.15 9.61 119.74 16.03 0 529.69 138.38 146.5 4.44 142.06 10.78 0 131.28 0.5 131.78 10.57 121.2 209.52 0 79.05 11.09 564.61 21.47 350 13.49 396.35 23.94 40.5 13.53 140.67 17.83 0 632.82 152.25 164.6 7.59 157.01 12.49 0 144.52 4.81 149.33 17.18 122.03 236.46 0 84.69 12.72 2,258.44 5.4 375 4.91 436.8 24.53 54.6 16.05 162.18 13.11 0 707.27 198.64 195.3 10.38 184.92 15.7 0 169.22 0 169.22 21.12 148.12 270.47 0 92.76 15.76 2,258.44 6.56 400 6.66 606.74 35.49 58.44 18.26 173.08 12.55 0 904.56 170.4 209.11 8.82 200.29 14.37 0 185.92 0.64 186.56 25.01 161.55 297.81 0 102.98 17.5 2,569.54 6.29 400 20.9 Mar '06 12 mths Mar '07 12 mths Mar '08 12 mths Mar '09 12 mths
603.46 40.79 562.67 2.6 14.8 580.07
691.92 36.3 655.62 8.12 12.45 676.19
799.41 38.56 760.85 12.35 24.22 797.42
922.78 30.86 891.92 -3.34 13.99 902.57
1,135.37 39.5 1,095.87 38.71 -20.91 1,113.67
73
2010
A.7 Marico Balance Sheet

Balance Sheet ------------------- in Rs. Cr. ------------------Mar '05 Mar '06 Mar '07 Mar '08 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 12 mths 12 mths 12 mths
Mar '09 12 mths
58 58 0 0 160.54 0 218.54 3.25 49.14 52.39 270.93
58 58 0 0 219.36 0 277.36 203.25 20.26 223.51 500.87
60.9 60.9 0 0 122.59 0 183.49 50.48 116.77 167.25 350.74
60.9 60.9 0 0 219.33 0 280.23 121.23 184.36 305.59 585.82
60.9 60.9 0 0 306.78 0 367.68 107.51 201.02 308.53 676.21
170.41 81.3 89.11 11.65 29.09 112.47 35.36 13.67 161.5 99.57 4.13 265.2 0 109.06 15.06 124.12 141.08 0 270.93 15.96 37.68
402.11 112.56 289.55 18.97 36.39 119.59 49.53 25.93 195.05 132.15 2.15 329.35 0 153.87 19.52 173.39 155.96 0 500.87 16.78 47.82
213.87 118.81 95.06 8.97 80.91 196.21 41.29 22.28 259.78 231.88 2.52 494.18 0 315.61 12.77 328.38 165.8 0 350.74 16.18 3.01
228.89 131.9 96.99 49.1 106.52 218.59 41.68 7.75 268.02 292.04 22.18 582.24 0 206.4 42.63 249.03 333.21 0 585.82 21.04 4.6
262.16 146.25 115.91 45.61 112.58 273.69 61.05 13.37 348.11 275.8 11.59 635.5 0 202.52 30.87 233.39 402.11 0 676.21 26.32 6.04
74
2010
A.8 Marico P & L Account

Profit & Loss account ------------------- in Rs. Cr. ------------------Mar '05 Mar '06 Mar '07 Mar '08 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs)
75
Mar '09
12 mths
12 mths
12 mths
12 mths
953.23 1,046.47 1,375.60 5.21 1.31 2.33 948.02 1,045.16 1,373.27 8.04 7.87 2.79 0.99 5.82 41.14 957.05 1,058.85 1,417.20 602.95 3.97 42.14 35.81 159.48 22.76 0 867.11 81.9 89.94 3.03 86.91 11.6 0 75.31 4.33 79.64 5.85 73.79 264.16 0 31.03 4.15 580 12.72 53.5 37.68 579.88 790.72 4.13 4.97 62.16 66.83 41.71 56.11 214.36 293.16 13.89 13.46 0 0 916.13 1,225.25 134.85 142.72 5.02 137.7 33.23 0 104.47 2.22 106.69 7.83 98.88 336.25 0 35.96 5.04 189.16 191.95 20.01 171.94 35.19 0 136.75 7.84 144.59 28.43 116.16 434.53 1.65 39.06 5.71
1,578.10 2.11 1,575.99 2.89 25.24 1,604.12 918.13 5.38 77.18 63.36 316.56 11.56 0 1,392.17 209.06 211.95 19.75 192.2 18.93 0 173.27 0 173.27 29.86 143.41 474.04 0 39.89 6.78
1,923.92 2.07 1,921.85 -47.3 27.79 1,902.34 1,184.82 5.53 84.18 73.27 326.42 6.02 0 1,680.24 269.4 222.1 28.92 193.18 17.03 0 176.15 18.32 194.47 52.37 142.1 495.42 0 39.89 6.78
580 6,090.00 6,090.00 6,090.00 17.05 1.88 2.35 2.33 62 65.5 65.5 65.5 47.82 3.01 4.6 6.04
2010
A.9 Emami Balance Sheet

Mar '09 12 mths
12.23 12.23 0 0 66.02 238.59 316.84 33.76 0.22 33.98 350.82
12.23 12.23 0 0 84.4 238.59 335.22 31.24 0.22 31.46 366.68
12.23 12.23 0.2 0 216.99 0 229.42 22.81 0.36 23.17 252.59
12.43 12.43 0 0 276.57 0 289 35.19 0 35.19 324.19
12.43 12.43 0.7 0 282.9 0 296.03 373.06 67.02 440.08 736.11
320.21 105.63 214.58 4.05 53.91 36.75 35.25 0.31 72.31 26.76 0.03 99.1 0 13.86 6.97 20.83 78.27 0 350.81 7.73 12.8
321.96 128.79 193.17 9.28 87.1 36.62 36.68 0.8 74.1 46.79 0.02 120.91 0 25.18 18.61 43.79 77.12 0 366.67 23.14 15.8
68.59 21.79 46.8 34.49 78.18 41.2 45.77 3.38 90.35 56.01 15.04 161.4 0 50.63 17.63 68.26 93.14 0 252.61 29.23 37.49
105.73 27.91 77.82 13.47 102.97 40.1 34.03 2.77 76.9 156.01 0.04 232.95 0 56.21 46.8 103.01 129.94 0 324.2 26.45 46.5
706.44 93.87 612.57 36.7 39.89 73.2 50.75 10.71 134.66 79.94 0.06 214.66 0 115.7 52.02 167.72 46.94 0 736.1 117.49 47.52
76
2010
A.10 Emami P&L Account

Profit & Loss account ------------------- in Rs. Cr. ------------------Mar '05 Mar '06 Mar '07 Mar '08 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 12 mths 12 mths 12 mths
Mar '09 12 mths
225.62 6.77 218.85 1.68 3.48 224.01 129.81 1.03 11.89 0.64 35.56 8.69 0 187.62 34.71 36.39 2 34.39 2.97 0 31.42 0.16 31.58 2.09 29.44 57.81 0 6.12 0.86 611.5 4.81 50 12.8
307.37 6.5 300.87 5.65 -1.85 304.67 173.85 1.21 14.47 0.73 46.77 9.32 0 246.35 52.67 58.32 1.41 56.91 6.69 0 50.22 0.07 50.29 0.95 49.36 72.49 0 12.23 1.72 611.5 8.07 100 15.8
519.22 3.43 515.79 13.91 -0.65 529.05 225.56 1.15 21.95 0.99 178.49 20.7 0 448.84 66.3 80.21 1.08 79.13 4.65 0 74.48 0.01 74.49 8.57 65.92 223.28 0 24.86 3.67 611.5 10.78 200 37.49
585.9 2.19 583.71 21.62 -0.52 604.81 248.14 1.29 31.18 1.26 194.22 11.09 0 487.18 96.01 117.63 5.43 112.2 7.28 0 104.92 0 104.92 12.18 92.75 239.04 0 27.97 4.75 621.45 14.92 225 46.5
739.6 17.25 722.35 5.86 11.58 739.79 321.17 3.42 44.69 1.75 214.17 13.02 0 598.22 135.71 141.57 31.57 110 17.89 0 92.11 0.26 92.37 14.5 87.52 277.05 0 34.05 5.79 621.45 14.08 225 47.52
77
2010
A.11 Colgate Palmolive Balance Sheet

Mar '09 12 mths
135.99 135.99 0 0 113.78 0 249.77 0 3.98 3.98 253.75
135.99 135.99 0 0 135.08 0 271.07 0 4.36 4.36 275.43
135.99 135.99 0 0 144.53 0 280.52 0 4.28 4.28 284.8
13.6 13.6 0 0 148.61 0 162.21 0 4.69 4.69 166.9
13.6 13.6 0 0 202.7 0 216.3 0 4.69 4.69 220.99
324.45 244.7 79.75 67.46 160.78 74.47 17.35 16.53 108.35 114.32 39.61 262.28 0 222.97 97.11 320.08 -57.8 3.56 253.75 69.06 18.37
403.54 243.51 160.03 9.09 148.34 74.36 7.4 57.76 139.52 149.7 30.21 319.43 0 292.72 68.74 361.46 -42.03 0 275.43 42.89 19.93
411.46 243.78 167.68 24.34 133.34 80.33 9.33 60.61 150.27 194.94 51.11 396.32 0 329.95 106.93 436.88 -40.56 0 284.8 102.37 20.63
449.59 258.19 191.4 7.59 72.59 75.64 9.19 41.67 126.5 215.76 102.6 444.86 0 362.27 187.27 549.54 -104.68 0 166.9 46.67 11.93
425.26 251.33 173.93 4.67 38.33 82.42 11.13 43.69 137.24 232.48 207.45 577.17 0 411.93 161.19 573.12 4.05 0 220.98 46.46 15.9
78
2010
A.12 Colgate Palmolive P&L Account

Profit & Loss account of Colgate Palmolive (India) ------------------- in Rs. Cr. ------------------Mar '05 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) Mar '06 12 mths Mar '07 12 mths Mar '08 12 mths Mar '09 12 mths
1,072.53 1,237.99 1,421.18 1,597.30 1,810.65 111.05 89.96 89.19 78.42 59.89 961.48 1,148.03 1,331.99 1,518.88 1,750.76 24.56 17.09 -28.32 23.91 35.07 13.13 -7.54 4.51 0.76 1.04 999.17 1,157.58 1,308.18 1,543.55 1,786.87 496.71 3.75 68.35 14.6 168.71 44.52 0 796.64 177.97 202.53 4.54 197.99 22.37 0 175.62 2.5 178.12 64.85 113.29 299.92 0 95.19 12.64 1,359.93 8.33 70 18.37 533.72 586.04 6.68 7.63 86.45 111.91 31.41 41.47 245.65 279.46 30.11 59.63 0 0 934.02 1,086.14 206.47 223.56 4.24 219.32 31.43 0 187.89 0 187.89 50.28 137.6 400.3 0 101.99 14.3 250.36 222.04 5.17 216.87 15.26 0 201.61 0 201.61 41.44 160.17 500.1 0 129.19 18.93 639.13 7.74 117.28 52.37 337.29 91.02 0 1,244.83 274.81 298.72 1.44 297.28 19.84 0 277.44 14.62 292.06 60.34 231.71 605.7 0 176.79 50.85 1,359.93 17.04 1,300.00 11.93 750.79 11.1 138.54 69.15 357.04 96.21 0 1,422.83 328.97 364.04 1.1 362.94 22.95 0 339.99 5.3 345.29 55.09 290.22 672.04 0 203.99 34.14 1,359.93 21.34 1,500.00 15.9
1,359.93 1,359.93 10.12 11.78 75 95 19.93 20.63
79
2010
A.13 GlaxoSmithKline Balance Sheet

Balance Sheet ------------------- in Rs. Cr. ------------------Dec '05 Dec '06 Dec '07 Dec '08 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 12 mths 12 mths 12 mths
Dec '09 12 mths
42.06 42.06 0 0 433.06 0 475.12 0 0 0 475.12
42.06 42.06 0 0 500.66 0 542.72 0 0 0 542.72
42.06 42.06 0 0 604.29 0 646.35 0 0 0 646.35
42.06 42.06 0 0 718.82 0 760.88 0 0 0 760.88
42.06 42.06 0 0 863.04 0 905.1 0 0 0 905.1
506.91 233.95 272.96 10.83 0 131.04 24.12 32.27 187.43 66.13 153.52 407.08 0 209.48 6.28 215.76 191.32 0 475.11 29.31 112.97
521.69 270.32 251.37 6.53 219.68 145.57 28.09 36.42 210.08 80.77 11.5 302.35 0 216.88 20.32 237.2 65.15 0 542.73 3.86 129.05
523.68 297.65 226.03 17.31 297.84 194.82 27.36 32.17 254.35 62.15 61.5 378 0 243.65 29.17 272.82 105.18 0 646.36 7.03 153.69
539.47 329.24 210.23 16.33 0 277.17 43.25 20.48 340.9 73.61 450.5 865.01 0 268.24 62.45 330.69 534.32 0 760.88 72.85 180.92
558.48 364 194.48 37.79 0 266.03 31.36 36.6 333.99 620.15 783.2 1,737.34 0 393.79 670.71 1,064.50 672.84 0 905.11 59.92 215.21
80
2010
A.14 GlaxoSmithKline P&L Account

Profit & Loss account ------------------- in Rs. Cr. ------------------Dec '05 Dec '06 Dec '07 Dec '08 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 12 mths 12 mths 12 mths
Dec '09 12 mths
1,095.24 1,240.62 1,429.97 1,742.84 2,077.22 124.43 101.34 122.09 158.51 100.25 970.81 1,139.28 1,307.88 1,584.33 1,976.97 16.47 24.55 31.67 47.79 34.96 38.09 1.45 27.34 45.87 13.83 1,025.37 1,165.28 1,366.89 1,677.99 2,025.76 352.69 27.34 121.45 87.58 202.09 24.55 0 815.7 193.2 209.67 4.22 205.45 41.85 0 163.6 3.48 167.08 58.75 107.15 463.02 0 33.64 4.72 420.56 25.48 80 112.97 387.58 471.61 633.48 729.61 29.93 30.44 44.24 39.64 136.38 154.94 171.95 200.7 102.47 113.41 131.64 152.35 247.48 270.5 323.56 457.79 23.92 32.03 37.34 43.53 0 0 0 0 927.76 1,072.93 1,342.21 1,623.62 212.97 237.52 3.53 233.99 42.71 0 191.28 0.03 191.31 63.66 126.93 540.17 0 42.06 5.9 420.56 30.18 100 129.05 262.29 293.96 4.61 289.35 43.49 0 245.86 0.02 245.88 82.46 162.68 601.32 0 50.47 8.58 420.56 38.68 120 153.69 287.99 335.78 6.97 328.81 41.95 0 286.86 0 286.86 95.75 188.33 708.73 0 63.08 10.72 420.56 44.78 150 180.92 367.18 402.14 4.27 397.87 42.02 0 355.85 2.61 358.46 123.69 232.78 894.01 0 75.7 12.87 420.56 55.35 180 215.21
81
2010
A.15 P&G Balance Sheet

Balance Sheet ------------------- in Rs. Cr. ------------------Jun '05 Jun '06 Jun '07 Jun '08 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 12 mths 12 mths 12 mths
Jun '09 12 mths
32.46 32.46 0 0 193.22 0 225.68 0 0 0 225.68
32.46 32.46 0 0 240.2 0 272.66 0 0 0 272.66
32.46 32.46 0 0 258.72 0 291.18 0 0 0 291.18
32.46 32.46 0 0 314.18 0 346.64 0 0 0 346.64
32.46 32.46 0 0 407.58 0 440.04 0 0 0 440.04
178.76 99.69 79.07 9.96 0.01 54.9 43.48 47.73 146.11 83.38 178.26 407.75 0 120.72 150.38 271.1 136.65 0 225.69 51.87 69.52
127.01 61.64 65.37 29.18 0 28.31 8.77 54.49 91.57 70.75 191.27 353.59 0 79.93 95.56 175.49 178.1 0 272.65 136.22 84
163.62 69.61 94.01 33.47 0 31.36 14.64 4.35 50.35 260.73 24.89 335.97 0 93.14 79.13 172.27 163.7 0 291.18 98.56 89.7
203.09 80.01 123.08 12.88 0 46.52 13.34 6.67 66.53 208.95 159.81 435.29 0 142.58 82.03 224.61 210.68 0 346.64 25.55 106.79
221.82 89.54 132.28 24.51 0 53.98 22.51 88.03 164.52 330.29 0 494.81 0 121.08 90.5 211.58 283.23 0 440.02 55.06 135.56
82
2010
A.16 P&G P&L Account

Profit & Loss account ------------------- in Rs. Cr. ------------------Jun '05 Jun '06 Jun '07 Jun '08 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalized Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualized) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 12 mths 12 mths 12 mths
Jun '09 12 mths
738.1 56.1 682 25.86 11.65 719.51 332.36 6.85 37.37 60.34 84.62 38.28 0 559.82 133.83 159.69 0.05 159.64 12.4 0 147.24 25.79 173.03 48.42 124.61 227.47 0 129.84 18.21 324.61 38.39 400 69.52
596.75 30.98 565.77 28.01 -13.08 580.7 182.86 5.52 33.99 69.01 90.92 41.4 0 423.7 128.99 157 0.11 156.89 7.92 0 148.97 44.36 193.33 53.83 139.51 240.84 0 81.15 11.38 324.61 42.98 250 84
552.95 15.37 537.58 15.99 1.8 555.37 152.54 5.66 37.72 58.83 103.61 42.53 0 400.89 138.49 154.48 0.01 154.47 8.98 0 145.49 -10.72 134.77 44.96 89.82 248.34 0 64.92 11.03 324.61 27.67 200 89.7
652.65 8.7 643.95 13.53 13.18 670.66 190.78 8.26 54.65 64.07 131.29 29.38 0 478.43 178.7 192.23 0.02 192.21 12.12 0 180.09 0.48 180.57 49.15 131.42 287.65 0 64.92 11.03 324.61 40.48 200 106.79
773.03 0.22 772.81 38.73 4.1 815.64 239.68 7.84 34.64 15.65 0 271.79 0 569.6 207.31 246.04 0 246.04 14.37 0 231.67 0 231.67 52.81 178.85 329.92 0 73.04 12.41 324.61 55.1 225 135.56
83
2010
A.17 AMRUTANJAN Balance Sheet

in Rs. Crore SOURCES OF FUNDS Shareholder's funds Share Capital Reserve and Surplus 2007 2008 2009
3.2 19.99 23.19
3.2 22.25 25.45
3.1 90.72 93.82
Minority Interest Loan Funds Secured Loans Unsecured Loans Deferred Tax Liability TOTAL APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Capital Work in Progress
7.69 7.69 2.1 32.99
6.46 2 8.46 4 37.92
2.06 0 2.06 32.16 97.24
Investments Deferred Tax Asset Current Assets, Loans and Advances Inventories 8.86 Sundry Debtors 4.96 Cash & Bank Balances 7.82 Interest Accrued 0.07 Loans & Advances 4.1 25.83 Less Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets Miscellaneous Expense TOTAL 7.24 0.97 8.21 17.61 0 32.98
25.43 12.88 12.56 2.71 15.26 0.11
33.52 14.25 19.28 2.59 21.86 0.43
24.71 8.81 15.9 2.29 18.19 0.43
9.4 7.59 2.69 0.02 5.44 25.16
5.31 12.94 67.51 0.79 5.83 92.39
8.07 1.45 9.52 15.63 0 37.92
8.31 5.44 13.76 78.63 0 97.25
84
2010
A.18 AMRUTANJAN P&L Account

INCOME Sales Other Income EXPENDITURE Cost of Materials Consumed Employee's Renumeration and Benefits Interest Other Expenses Depreciation Profit before extraordinary items Loss on destruction of assets Prior Year Adjustments (net) Profit for the year before tax Provision for Taxation
Income Tax Fringe Benefit Tax Deferred Tax
2007
72.38 0.989 73.37 26.77 8.97 0.54 21.23 1.52 59.04 14.33 -0.07 0.02 14.27 -4.8 -0.14 0.17 -0.24 9.27 -0.13 -3.22 5.91 1.28 7.199
2008
74.55 0.39 74.95 29.33 9.41 0.747 24.01 1.46 64.97 9.97 -0.03 9.94 -1.45 -0.25 -1.95 -0.035 6.26 -1.27
2009
90.66 6.95 97.61 36.95 10.94 0.15 29.36 1.48 78.89 18.72 -0.04 18.68 -7 -0.3 0.78 -0.057 12.11 80.75
Short Provision of I.T. of eaarlier years Profit after tax before exceptional items Exceptional Items Provision for advances Provision for diminution in value of investments Profit after Tax after exceptional items Surplus from previous year brought forward Profits for Appropriation APPROPRIATION General Reserve Special one time interim dividend - Paid Tax on special one time interim dividend Interim Dividend - Paid Tax on Interim Dividend Final Dividend - Proposed Tax on Proposed Dividend Balance Profit carried to Balance Sheet Basic and Diluted Earnings per share Before exceptional items (Rs) After exceptional items (Rs.)
4.98 2.99 7.98
92.85 3.36 96.21
1.28 0.179 0.64 0.11 4.21 2.99 7.19 28.97 18.48
2 0 0 1.28 0.217 0.96 0.16 4.62 3.36 7.98 19.57 15.59
50 12.8 2.18 1.57 0.267 3.63 0.61 71.07 25.14 96.22 38.07 291.98
85
A
2010
P P
FORMULAS USED Working Capital Days = 365 / working capital turnover

Working capital turnover = Revenue / net working capital Net Working Capital = (Current Assets Cash) (Current Liabilities debt)
E N D I X
Cost of Equity = Risk free rate + Levered Beta * (India Equity risk premium)
India Equity Risk Premium = India - Country Risk Premium + Equity Risk Premium US
Cost of Debt = Interest / Loan funds WACC = cost of equity*Shareholders equity + cost of debt*debt Levered Beta = Unlevered Beta * [1 + (1 - Tax Rate) * Debt / Equity ] Adjusted Beta = (Unlevered Beta * 2/3)+(1/3) Discount Factor = 1/(1+WACC)T FCF = EBIT + Depreciation + Amortization Taxes Capex Increase in Net working capital
CAPEX = Change in Fixed Asset + Depreciation Terminal Value = Projected FCF*(1+terminal growth rate)/(WACC terminal growth rate)
Enterprise Value = Market Cap + Debt Cash
86
A
2010
P P E N D I X
ABBREVIATIONS 1. NSE National Stock Exchange 2. BSE Bombay Stock Exchange 3. WACC Weighted Average Cost of Capital 4. FMCG Fast Moving Consumer Goods 5. COGS Cost of Goods Sold 6. CAPEX Capital Expenditure 7. EV Enterprise Value 8. MARKET CAP Market Capitalization 9. EBITDA Earnings Before Interest Tax Depreciation and Amortization 10. EBIT Earnings Before Interest and Tax 11. PBT Profit Before Tax 12. DMA Days Moving Average 13. DCF Discounted Cash Flow 14. D/E Debt to Equity 15. BCG Boston Consulting Group 16. PP&E Property, plant and equipment 17. P&L A/c Profit and Loss Account
87
R
2010
E F E R E N C E S
PRINT MEDIA
India Equity Research - FMCG by AVENDUS dated March 08, 2010 Changing Gears The emerging states for FMCG in India by Nielsen dated November 4, 2009 Constant Change by Nielsen dated November 6, 2009 FMCG Sector A road ahead by FICCI and Technopak, July August 2009 Market Outlook - India Research by Angel Securities Institutional Investment Services, May 6, 2010 Rural India by IIFL a report of 1Q 2010. Dabur India Ltd. Annual Report FY09 Dabur India Ltd. Investor Presentation 3QFY10 and 4QFY10 VALUATION: Measuring and Managing the Value of Companies - Fourth Edition by McKinsey & Company Financial Management by Prasanna Chandra
88
2010
ELECTRONIC MEDIA
http://www.hul.co.in http://www.dabur.com http://www.pg-india.com/hp/index.htm http://www.colgate.com http://www.gsk.com http://www.godrejindia.com http://www.marico.com http://www.itcportal.com http://www.nestle.in http://www.bloomberg.com http://www.indiainfoline.com http://www.money.rediff.com http://www.bseindia.com http://www.nse-india.com http://www.equitymaster.com http://www.info.shine.com/Industry-Information/FMCG/780.aspx http://www.moneycontrol.com http://www.incademy.com/courses/Technical-analysis-II/Moving-averages/2/1032/10002 http://www.tradingeconomics.com/Economics/Government-Bond-Yield.aspx?Symbol=INR http://www.pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html http://www.fmcg-marketing.blogspot.com/2007/11/pest-analysis.html http://www.fmcgmarketers.blogspot.com/2008/07/fmcg-growth-drivers-and-category-trends.html http://www.stockmarketsreview.com/pricetargets/fast_moving_consumer_goods_fmcg_sector_review_analysis _and_recommendations_20090902/
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2010
DISCLAIMER
This report has been prepared on the basis of information, obtained from publicly available accessible resources. I have not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied is made as to accuracy, completeness or fairness of the information and opinion contained in this report. The information given in this report is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. There is no representation that all information relating to the context has been taken care off in the report and neither I undertake any obligation as to the regular updating of the information as a result of new information, future events or otherwise. I will accept no liability whatsoever for any loss arising directly or indirectly from the use of, reliance of any information contained in this document or for any omission of the information. It is advised that prior to acting upon this report independent consultation / advise may be obtained and necessary due diligence, investigation etc may be done at your end. You may also contact me directly for any questions or clarifications at my end. This report contain certain statements of future expectations and other forward-looking statements, including those relating to companys business plans and strategy, their future financial condition and growth prospects. In addition to statements which are forward looking by reason of context, the words may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential or continue and similar expressions identify forward looking statements. Actual results, performances or events may differ materially from these forwardlooking statements including the plans, objectives, expectations, estimates and intentions expressed in forward looking statements. It is cautioned that the foregoing list is not exhaustive. This report should not be used as a basis for any investment decision.
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