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ITC

ITC is a dominant player in the domestic cigarette market. Cigarette is the largest
segment contributing 64% to overall sales. The non-cigarette FMCG business has a
16% sales share. Agri and paper businesses make up 10% and 7% of overall
revenues whereas hotel business is the smallest segment with a 3% sales share.
Dabur
With over 125 years of existence, Dabur India is the fourth largest FMCG company in
India. The company has a distinct positioning on the traditional Ayurvedic
healthcare system having presence in personal care, health care and food.
Domestic consumer care is the largest segment having 56% share in consolidated
revenues. The company has chartered growth by expanding operations in the
international markets of Middle East, Africa and Asia. In FY11, Dabur acquired Hobi
Kozmetik Group and US-based Namaste Laboratories. Currently, overseas revenues
account for 30% of overall sales. The food segment, primarily consisting of
packaged fruit juice under Real and Activ brands, contributes 11% to overall sales.

Objective
In this report we are going to analyze the financial statements of the two
companies. After thorough analysis of the P&L statements and the balance sheets of
the two companies we have compared the two on key performance indicators.
Below, we have presented four tables with three comparison parameters –
i.
Equity share data
ii.
Income data
iii.
Balance sheet data
iv.
Cash flow data

) Rs 8.6 64.7 7.795.422.019 31.7 38.30% No.20% Dividend payout Avg Mkt Cap % Rs m 69 2. sales/employee Rs Th 15.1 173.759.00% Cash flow per share (Unadj.9 34.6 386.5 5.4 25.60 120.70% 115.8 329.Table 1: High Low Equity Share Data Unit ITC Rs 360 Rs 268 Dabur 317 231 ITC/Dabur 113.817 218. of employees `000 25.80% Dividends per share (Unadj.7 0.50% .90% Earnings per share (Unadj.40% 524.90% Total wages/salary Rs m 29.526.8 65.) Rs 13.) Rs 49 48.1 101.50% Shares outstanding (eoy) m 8.9 173.466 7.10 457.40% 66.70% Avg.21 1.30% P/CF ratio (eoy) x 22.50% Price / Sales ratio Avg P/E ratio x x 6.5 2.90% Price / Book Value ratio x 7.25 377.6 178.047.3 7.2 23.60% Book value per share (Unadj.4 11.90 12.) Rs 42.90% Sales per share (Unadj.) Rs 12.80% Dividend yield (eoy) % 2.6 6.5 112.948 370.6 481.

152.572 991.270 84. ITC is marginally ahead of Dabur in price/sales ratio as ITC has few products which are in the premium category whereas Dabur doesn’t have any premium product at all v.896. Thus. we can say that returns for shareholders of ITC is much higher (73%) than that of Dabur which is a result of the aggressive diversification strategy of the former iii. wages/employee Rs Th 1.40% Other income Rs m 15.00 95.Avg.192 706. Extremely efficient operations and a very strong distribution network ensures that ITC enjoys competitive advantage in terms of two very critical factorssales/employee and net profit/employee. However. wages/salary ratio for ITC is the highest in the industry vi.80% Profit before tax Rs m 154.332 15.203.733 472.540 466. which is the highest in the FMCG industry.00 204.198 990. Despite the huge investments in launching new categories almost every quarter ITC has a very healthy cash flow and here also it enjoys an edge of almost 74% over Dabur which goes on to show that ITC is a really cash rich company iv.60% Prior Period Items Rs m 82 0 - .60 1. Table 2: Income Data Unit ITC Dabur ITC/Dabur Net Sales Rs m 394.50% Interest Rs m 585 480 121. net profit/employee Rs Th 3.10% Minority Interest Rs m -1.564 15.758 86.50% Key takeaways: i.338 832.80% Avg.40% Total revenues Rs m 409.578 -27 5760.877.40% Gross profit Rs m 150.70% Depreciation Rs m 11.134 1.487 2.20 1. ITC has huge production facilities all over the country given its huge product portfolio which implies that there are many factory workers and labour. The companies have similar sales per share value but this should not be taken as a prominent indicator as the two companies have astoundingly different revenues and subscribed shares in the market ii.

644 41.112 32.10% % 27.00% Profit after tax Rs m 99.50% Sales to assets ratio x 0.70% Key takeaway: As mentioned earlier that the two companies have huge differences in the scale of operations.40% Long term debt Rs m 428 3.4 18.4 792.720 3.403 840.70% Share capital Rs m 8.1 14.50% Total assets Rs m 512.527 791.116 12.50% "Free" reserves Rs m 322.4 179.047 1.50% Net working cap to sales Current ratio Return on assets .30% Current liabilities Rs m 149.60% Debt to equity ratio x 0 0.20% Gross profit margin % 38.80% Net fixed assets Rs m 182. However.857 38.205 719. one must notice that ITC enjoys astoundingly high profit margins as compared to Dabur.854 19.40% Effective tax rate % 34.018 1780.2 64. revenues earned which is why comparison on these parameters is not justified.638 71.3 129.3 106.1 1.908 784.699 605.60% Inventory Days Days 85 47 179.415 12.601 816.90% Interest coverage x 265 33. This is mainly due to the revenues that they earn from cigarettes without investing almost anything in promotion and only piggybacking the strong distribution muscle spread out across the entire country.451 24.759 457. Table 3: Balance Sheet Data Unit ITC Dabur ITC/Dabur Current assets Rs m 258.60% Net profit margin % 25.8 19.7 283. ITC’s net profit margin is almost 70% higher than that of Dabur.8 1.8 169.947 916.70% Net worth Rs m 339.6 9.80% % 19.10% Debtors Days Days 18 35 50.Extraordinary Inc (Exp) Rs m 0 0 - Tax Rs m 53.2 18 212.80% x 1.7 1.

Return on equity % 29.70% Key takeaway: .2 30.782 10.1 96.70% Exports to sales % 7.353 1. ITC has a very efficient distribution management which ensures timely payments from distributors and stockists and so they have a very impressive debtor days-almost half of Dabur iii.90% Exports (fob) Rs m 30.10% Fx outflow Rs m 31.882 1936. ITC exports a lot and rightly so.882 1624.8% which again shows the strong reserves of ITC.933 1. Having huge production facilities means that ITC is asset heavy and so it as a lower sales to asset ratio as compared to Dabur but it still enjoys better returns on assets than not just Dabur but many other FMCG players because of the state of the art operations and efficient distribution v. Ne foreign exchange cash flow of ITC is next only to HUL among Indian FMCGs Table 4: CASH FLOW Unit ITC Dabur ITC/Dabur From Operations Rs m 98.530 2087.80% Imports (cif) Rs m 15.30% From Financial Activity Rs m -57.00% Net Cashflow Rs m 1. But Dabur’s working capital is on the lower side compared to other FMCG majors ii.90% Fx inflow Rs m 36.579 1.183 641.50% From Investments Rs m -39.437 1. papers iv.9 1. ITC’s ne working capital to sales ratio is higher than that of Dabur by 183.826 912.40% Imports to sales % 3. It is extremely cash rich like HUL. Colgate Palmolive and Marico. ITC earns huge chunks of foreign exchange which is a major contributor to its reserves. given its diverse portfolio but so does Dabur and again it would be unfair to compare the two on this parameter because of the difference in offerings.505 352 1280.8 2.00% Net fx Rs m 4.484 1034.90% Return on capital % 45.1 35.8 221.20% Key takeaways: i.2 348.949 1461.657 -6. some of ehich are not very fast moving like apparels.434 694 206. Inventory cycle of ITC is 79% higher than that of Dabur but this is primarily due to the fact that ITC is present in too many categories.6 126.692 -3.

23 crore(2. with Patanjali going really strong it is also a given that Dabur will also make judiciously high investments in A & P. we see that Dabur’s expenditure in A & P is very high as compared to that of ITC.38 crore (15. packaging.ITC is investing big. Thus. agri-business. 1000 crore by 2020 which means that the investments in advertising and promotion will also rise significantly. It signifies the brand pull and distribution that ITC enjoys.57 per cent of TR) in FY-2013. .28 per cent of Total Revenue or TR) as compared to the Rs 834. The gestation periods for them are getting reduced because of the established systems and channels over the last century.01 crore (16. They invest a lot in BTL activities such as ayurveda clinics in rural India. paperboards and specialty papers.81 crore (2.5 per cent of Consolidated Net Sales or Total Income from Operations or TIO) as compared to Rs 319. investments and regular financial activities. current quarter) at Rs 350.42 crore (13. hotels. However. in subsequent years. and information technology company ITC Limited (ITC) advertisement and sales promotion spend (ASP) in FY-2014 was 1 per cent lower at Rs 825.3 per cent of TIO) ITC Indian fast moving consumer goods (FMCG). especially in the categories of honey and other flagship brands which are under direct threat. being committed to their diversification strategy and they are also reaping benefits pretty early. ITC’s strength has always been its distribution muscle whereas Dabur has had to invest in channel marketing along with the ATL campaigns. in a way is forced to invest less due to the restrictions in marketing of cigarettes. This also goes on to show that ITC. with the focus slowly shifting to food and other categories and given the aggressive product launches. 2015 (Q3-2016. They are enjoying phenomenal cash flows from operations. It is also worth mentioning here that it was Y.7 per cent more quarter-on quarter (QoQ) than the Rs 278. Advertising and Publicity Expenses Dabur Dabur India Limited spent 9.C Deveshwar’s vision to make grow ITC’s non cigarette FMCG portfolio into Rs.6 per cent more year on year (YoY) towards advertising and publicity expenses (ASP) in the quarter ended 31 December.4 per cent of TIO) and 25. ITC’s marketing expenditure is surely going to grow by leaps and bounds. the category which contributes to 64% of their revenues. On the other hand.