Professional Documents
Culture Documents
Index: Sl. No. Page No
Index: Sl. No. Page No
Sl.
Contents Page No.
No.
1 Company Profile 2
2 History 2
3 Operations 3
4 Presence in India 4
7 Products of Nestle 5
8 Competitors Analysis 6
9 Financial Statements: 7
10 Balance Sheet 7
12 Sources of Funds 9
14 Cost of Capital 12
17 Capital Structure 13
20 References 15
NESTLE INDIA
BSE: 500790 I NSE: NESTLEIND I SECTOR: FOOD PROCESSING
COMPANY PROFILE
Nestlé India is a subsidiary of Nestle S.A. of Switzerland. With seven factories and a large
number of co-packers, Nestlé India is a vibrant Company that provides consumers in India
with products of global standards and is committed to long-term sustainable growth and
shareholder satisfaction.
The Company insists on honesty, integrity and fairness in all aspects of its business and
expects the same in its relationships. This has earned it the trust and respect of every strata of
society that it comes in contact with and is acknowledged amongst India's 'Most Respected
Companies' and amongst the 'Top Wealth Creators of India'.
HISTORY
Nestlé was founded in 1867 on the shores of Lake Geneva in Vevey, Switzerland and its first
product was “Farine Lactée Nestlé”, an infant cereal specially formulated by Henri Nestlé to
provide and improve infant nutrition. From its first historic merger with the Anglo-Swiss
Condensed Milk Company in 1905, Nestlé has grown to become the world’s largest and most
diversified food Company, and is about twice the size of its nearest competitor in the food
and beverages sector.
In 2004, Nestlé had around 247,000 employees worldwide, operated 500 factories in approx.
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100 countries and offered over 8,000 products to millions of consumers universally. The
Company’s transparent business practices, pioneering environment policy and respect for the
fundamental values of different cultures have earned it an enviable place in the countries it
operates in. Nestlé’s activities contribute to and nurture the sustainable economic
development of people, communities and nations.
Nestlé’s relationship with India dates back to 1912, when it began trading as The Nestlé
Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished
products in the Indian market.
After India’s independence in 1947, the economic policies of the Indian Government
emphasized the need for local production. Nestlé responded to India’s aspirations by forming
a company in India and set up its first factory in 1961 at Moga, Punjab, where the
Government wanted Nestlé to develop the milk economy. Progress in Moga required the
introduction of Nestlé’s Agricultural Services to educate, advice and help the farmer in a
variety of aspects. From increasing the milk yield of their cows through improved dairy
farming methods, to irrigation, scientific crop management practices and helping with the
procurement of bank loans. Nestlé set up milk collection centres that would not only ensure
prompt collection and pay fair prices, but also instil amongst the community, a confidence in
the dairy business. Progress involved the creation of prosperity on an on-going and
sustainable basis that has resulted in not just the transformation of Moga into a prosperous
and vibrant milk district today, but a thriving hub of industrial activity, as well.
OPERATIONS
Nestlé has been a partner in India's growth for over nine decades now and has built a very
special relationship of trust and commitment with the people of India. The Company's
activities in India have facilitated direct and indirect employment and provides livelihood to
about one million people including farmers, suppliers of packaging materials, services and
other goods.
The Company continuously focuses its efforts to better understand the changing lifestyles of
India and anticipate consumer needs in order to provide Taste, Nutrition, Health and
Wellness through its product offerings. The culture of innovation and renovation within the
Company and access to the Nestlé Group's proprietary technology/Brands expertise and the
extensive centralized Research and Development facilities gives it a distinct advantage in
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these efforts. It helps the Company to create value that can be sustained over the long term by
offering consumers a wide variety of high quality, safe food products at affordable prices.
PRESENCE IN INDIA
Beginning with its first investment in Moga in 1961, Nestlé’s regular and substantial
investments established that it was here to stay. In 1967, Nestlé set up its next factory at
Choladi (Tamil Nadu) as a pilot plant to process the tea grown in the area into soluble tea.
The Nanjangud factory (Karnataka), became operational in 1989, the Samalkha factory
(Haryana), in 1993 and in 1995 and 1997, Nestlé commissioned two factories in Goa at
Ponda and Bicholim respectively. Nestlé India has commissioned in 2006 its 7th factory at
Pant Nagar in Uttarakhand.
VISION
To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved
shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier
selling preferred products
MISSION
Nestlé is the world's leading nutrition, health and wellness company. Our mission of "Good
Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a
wide range of food and beverage categories and eating occasions, from morning to night.
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MANAGEMENT - NESTLE INDIA
Designation Name
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COMPETITORS OF NESTLE INDIA
Britannia Industries Ltd.
Ravalgon Sugar Farm Ltd.
Vadilal Industries Ltd.
Heritage Foods (India) Ltd.
Hatsun Agro Products Ltd.
Vadilal Enterprises
ADF Foods Ltd.
Bambino Agro Industries Ltd.
Milkfood Ltd.
Kwality Dairy (India) Ltd.
COMPETITORS ANALYSIS
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FINANCIAL STATEMENTS
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PROFIT & LOSS STATEMENT
(In Crores)
Year 2016 2015 2014 2013 2012
INCOME :
Sales Turnover + 9,556.24 8,482.48 10,178.07 9,419.02 8,614.15
Excise Duty 332.44 307.17 323.23 317.97 279.62
Net Sales 9,223.80 8,175.31 9,854.84 9,101.05 8,334.53
Other Income + 170.61 110.09 94.32 96.9 31.03
Stock Adjustments + 10.78 -11.97 67.43 -105.32 92.02
Total Income 9,405.19 8,273.43 10,016.59 9,092.63 8,457.58
EXPENDITURE :
Raw Materials + 3,890.47 3,456.94 4,591.39 3,313.68 3,238.44
Power & Fuel Cost+ 232.79 221.99 384.33 385.38 370.89
Employee Cost + 1,073.36 912.75 837.05 741.5 663.38
Other Manufacturing Expenses + 187.64 170.61 197.11 895.68 815.2
Selling and Administration Expenses 1,866.24 1,636.02 1,688.99 1,528.64 1,374.62
Miscellaneous Expenses + 356.02 710.94 191.6 183.27 138.68
Less: Pre-operative Expenses Cap+ 0 0 0 0 0
Total Expenditure 7,606.52 7,109.25 7,890.47 7,048.15 6,601.21
Operating Profit 1,798.67 1,164.18 2,126.12 2,044.48 1,856.37
Interest + 3.51 3.29 14.23 36.51 26.6
Gross Profit 1,795.16 1,160.89 2,111.89 2,007.97 1,829.77
Depreciation+ 353.62 347.26 337.54 329.95 277.15
Profit Before Tax 1,441.54 813.63 1,774.35 1,678.02 1,552.62
Tax+ 533.71 289.89 582.41 507.5 372.83
Fringe Benefit tax+ 0 0 0 0 0
Deferred Tax+ -18.71 -39.53 7.25 53.39 111.86
Reported Net Profit 926.54 563.27 1,184.69 1,117.13 1,067.93
Extraordinary Items + -19.38 -322.39 -0.19 9.19 0
Adjusted Net Profit 945.92 885.66 1,184.88 1,107.94 1,067.93
Adjst. below Net Profit + 0 0 0 0 0
P & L Balance brought forward 1,882.54 1,882.52 1,532.88 1,074.55 656.89
Statutory Appropriations 0 0 0 0 0
Appropriations + 731.08 563.25 835.05 658.8 650.27
P & L Balance carried down 2,078.00 1,882.54 1,882.52 1,532.88 1,074.55
Dividend 607.42 467.62 607.42 467.62 467.62
Preference Dividend 0 0 0 0 0
Equity Dividend % 630 485 630 485 485
Dividend Per Share(Rs) 63 48.5 63 48.5 48.5
Earnings Per Share-Unit Curr 83.27 48.5 111.55 107.62 102.89
Earnings Per Share(Adj)-Unit Curr 83.27 48.5 111.55 107.62 102.89
Book Value-Unit Curr 312.56 292.25 294.26 245.67 186.52
Book Value(Adj)-Unit Curr 312.56 292.25 294.26 245.67 186.52
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SOURCES OF FUNDS (in Crores)
ANALYSIS
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Share Capital
4.00%
3.39% 3.38% 3.40%
3.50% 3.16%
3.00% 2.71%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
The above graph shows the total distribution of equity capital with respect to total capital in
percentage from FY 2012-16.
80.00%
63.86%
59.75%
60.00%
40.00%
20.00%
0.00%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
The above graph shows how the capital structure of Nestle India has changed from FY 2012-
16. The company increased its reserves and surplus capital to use as its major source of
capital rather than Equity and Debt funding.
From the above table it can be analyzed that Nestle India used approximately 61% of its total
finance from Reserves & Surplus from FY 2012 to FY 2013 as a source of capital. However
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after FY 2013, In FY 2014, the company boosted up its reserves and surplus to an average of
96% of the total capital of the firm. This is presently their major source of finance / capital.
30.00%
25.00%
20.00%
15.00%
10.00%
5.00% 1.09%
0.54% 0.59%
0.00%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
The above graph shows how the capital structure of Nestle India has changed from FY 2012-
16. The company decreased its long term borrowings (Unsecure Loans) after FY 2013, from
an average 35% to >1% of the total source of funding.
From the above table it can be analyzed that Nestle India used approximately 35% of its total
finance from long term borrowings (Unsecure Loans) from FY 2012 to FY 2013 as a source
of capital. However after FY 2013, In FY 2014, the company decreased its long term
borrowings (Unsecure Loans) to an average of <1% of the total capital of the firm.
Nestle India restructured its Sources of Finance after FY 2013, they reduced funding from
Long term borrowings & increased funding from Reserves & Surplus Capital.
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COST OF CAPITAL
ANALYSIS
When we compare the weighted average cost of capital of Nestle India with Britannia. We
can clearly see that the cost of capital is less over the years upto 2015 as compared with the
cost of capital of Britannia. When we compare with year to year basis, we can see that in
2012 the weighted average cost of capital is less in a Nestle India when compared with the
Britannia. This shows that the company is able to manage their cost very well. And in 2013
there is a bit increase in the cost of capital in Nestle India when compared with the previous
year i.e 2012 but there is good record in cost when we comparison with Britannia. There is an
increasing trend in cost over the years but when compared with competitor the Nestle cost is
very low. This trend continued upto 2015. But in 2016 the weighted average cost of capital
values are totally different that means the cost of capital of Nestle India is more than the
Britannia i.e. the cost of capital is 152.99 of Nestle India and the cost of capital of Britannia
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is 45.48. We can see that there is huge in the values of cost in the year 2016 between Nestle
and Britannia. This says that the cost reduction technique is not followed by the company or
it failed in maintaining the cost. But when we analyse the overall cost of capital of capital of
company, it is quite satisfactory.
CAPITAL STRUCTURE
The capital structure of the Nestle India is fully with equity shares. There is no debentures or
loans from the financial institutions in the capital structure. Since there will be no much risk
to the company but the company should incur more cost due to the equity capital in the
company’s capital structure.
The authorised capital of the company is 100 crores. The issued and paid up capital is
96.42crores. The total shares of the company is 96415716 with a face value of Rs.10 each
that makes the total paid up capital of 96.42 crores.
Here the capital consists of only equity shares since there is no obligation of repayment of
shares, while in other way we can say as there is no debt part in the capital structure of the
company, there is no obligation to pay the periodic interests. This reduces the risk of the
company but cost of the company will be very high. This type of capital structure is followed
by Nestle India since from the year 1999. The earnings per share will be less in this type of
capital structures.
Shares Face
From To (Rs. Cr) (Rs. cr) Capital
(nos) Value
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2011 2011 Equity 100 96.42 96415716 10 96.42
Share
2010 2010 100 96.42 96415716 10 96.42
Equity
2009 2009 Share 100 96.42 96415716 10 96.42
When you use equity capital, you have no obligation to make interest payments or to repay
equity investors’ initial investment. Debt capital, on the other hand, requires periodic interest
payments and repayment of the borrowed principal. Although you might distribute some of
your profits as dividends to equity holders, you can skip these payments if necessary. This
advantage helps your small business keep more of its profits and allows more spending
flexibility.
LOWER RISK
In general, a business that uses more equity than debt has a lower risk of bankruptcy. If a
business suffers a setback and fails to make its interest payments, its creditors can force it
into bankruptcy. Equity investors have no such rights. They must wait out any potential
downturns to be able to benefit when a business prospers. For example, assume you finance
your small business with all equity and have a bad year. Investors might be disappointed, but
their only option is to hope for improvement.
OWNERSHIP DILUTION
With every share of stock you sell to investors, you dilute, or reduce, your ownership stake in
your small business. Because equity investors typically have the right to vote on important
company decisions, you can potentially lose control of your business if you sell too much
stock. For example, assume you sell a majority of your company’s outstanding stock to raise
money. If investors disapprove of the company’s progress, they might vote you out of a
leadership position and bring in new management.
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HIGHER COST
Although equity does not require interest payments, it typically has a greater overall cost than
debt capital. Stockholders shoulder more risk from their perspective compared to creditors
because they are last in line to get paid if the company goes bankrupt. Consequently, equity
investors demand a higher rate of return on their investment. You typically must give up
more stock for a lower price when you raise equity to compensate investors for this risk.
It is better to have a mix of both equity and debt in the company because the cost of capital
will be less, risk will be moderate and the earning per share will be good.
REFERENCES
http://www.moneycontrol.com/financials/nestleindia/capital-structure/NI
http://www.moneycontrol.com/financials/nestleindia/balance-sheetVI/NI#NI
http://money.rediff.com/companies/Nestle-India-Ltd
https://www.dynamiclevels.com/en/nestle-india-share-price-history
https://en.wikipedia.org/wiki/Nestl%C3%A9
https://www.nestle.in/info
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