FINANCIAL MANAGEMENT

FMCG Industry

Group Members:
Nandini Gajapathy
Nandini Baweja
Rachita Bhatia
TusharVarshney
Manya Ghambir
Srijan shetty
 FINANCIAL MANAGEMENT INDUSTRY REPORT
Industry Selected: FMCG Industry
Top Players Selected: Hindustan Unilever Limited, Neslte.

HINDUSTAN UNILIVER
 1. Capital Structure: debt, equity, composition of each:

Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

Total Current
8,353.00 8,636.00 7,202.00 6,652.00 8,782.82
Liabilities

Total Non-Current
1,853.00 1,438.00 1,059.00 989 1,126.46
Liabilities

Total Liabilities 10,206.00 10,074.00 8,261.00 7,641.00 9,909.28

Total Equity 7,659.00 7,075.00 6,490.00 6,279.00 3,724.78

DEBT/EQUITY
(Ratio) 1.33255 1.423887 1.272881 1.216914 2.660367

Debt Composition:

Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

Other Long Term
804 666 574 395 170.11
Liabilities

Long Term Provisions 1,049.00 772 485 594 956.35

Total Non-Current
1,853.00 1,438.00 1,059.00 989 1,126.46
Liabilities

Equity Composition:

Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

Equity Share Capital 216 216 216 216 216.35

Total Share Capital 216 216 216 216 216.35

Reserves and Surplus 7,418.00 6,859.00 6,274.00 6,063.00 3,507.76

Total Reserves and

7,418.00 6,859.00 6,274.00 6,063.00 3,508.43
Surplus

Total Shareholders
7,659.00 7,075.00 6,490.00 6,279.00 3,724.78
Funds
Observation:

i) Debt:
 Short Term – INR 8,636.00 Million In 2018 v/s INR 7,202.00 Million In 2017 (Increase)
 Long Term – INR 1,438.00 Million In 2018 v/s INR 1,059.00Million In 2017 (Increase)
 Total Debt: INR 10,074.00 Million In 2018 v/s INR 8,261.00 Million In 2017 (Increase)
ii) Equity INR (7,075.00) million v/s INR (6,490.00) million in 2017. (Increase)

“MORE EQUITY FUNDING FOR HUL & BOTH EQUITY AND LIABILITY INCREASED OVER THE
LAST TO YEARS”

2. Fund raising strategy: time wise history for at least last 5 years, and methods, markets,
instruments used to raise funds.

2019:
The Company has not taken any loans or borrowings from any financial institution, bank or
Government nor has it issued any debentures. No funds were raised through preferential allotment
or Qualified Institutional Placement as per the Regulation 32(7A) of Listing Regulations.

2018:
The Company has not taken any loans or borrowings from any financial institution, bank or
Government nor has it issued any debentures. The Company has not raised any moneys by way of
initial public offer, further public offer (including debt instruments) or term loans during the year.

2017:
The Company has not raised any money by way of initial public offer, further public offer
(including debt instruments) and term loans during the year.

2016:
The Company has not raised any money by way of initial public offer, further public offer
(including debt instruments) and term loans during the year.

2015:
The Company has not raised any money by way of initial public offer, further public offer
(including debt instruments) and term loans during the year.

3. Cost of capital: if you are unable to get accurate data, take close approximates like interest
expense/ debt value for cost of debt; RoE (PAT/ BV of equity) or 1/PE ratio or any other as
cost of equity.
HUL:
Year 2019
P/E 45.63
ke 0.01
0.06
kd
t 0.04
we 0.80
wd 0.19
WACC=(Ke*We)+(Kd*(1-t)*wd)
0.0289
WACC 2.89

NCL 1853
CL 8353
Equity 7659
Total Equity and
Liability 17865

WACC: [ Kd * Wd (1-t) ] + [ Ke * We]

Kd = Fiance cost / Total debt

Ke = 1/PE

Wd = Total debt / (Debt + Equity)

We = Total equity / (Debt + Equity)

Analysis:
As we can see from the above table, the cost of capital is minimum in HUL. The reason for the
least Coast of Capital is the high P/E ratio of 45.63 as compared to the average P/E ratio of the
FMCG industry at 21.7. A high P/E suggests that investors are expecting higher earnings growth
in the future compared to companies with a lower P/E.
Since the market price per share of HUL increasing day by day, therefore, the investors expect
higher earnings growth as well. This results in higher P/E ratio, and hence lower cost of equity.

4. Share price history (monthly closing) on any index where the shares of company are listed….
use graphs to depict and explain trends.

Date open High Low Close Adj close Volume

7/29/2019 0 1,739.80 1,700.00 1,713.30 1,713.30 685427
 7/1/2019 1,798.90 1,816.00 1,659.05 1,730.65 1,730.65 21916988
6/1/2019 1,794.00 1,864.95 1,745.00 1,787.60 1,774.77 18431418
5/1/2019 1,757.70 1,804.90 1,656.00 1,788.50 1,775.67 30766512
4/1/2019 1,710.00 1,762.60 1,650.00 1,757.70 1,745.09 24965883
3/1/2019 1,735.00 1,755.50 1,660.00 1,706.80 1,694.55 33060494
2/1/2019 1,763.25 1,847.00 1,722.00 1,732.65 1,720.22 27476928
1/1/2019 1,824.80 1,824.80 1,726.10 1,763.25 1,750.60 34787768
12/1/2018 1,769.50 1,869.50 1,741.25 1,819.65 1,806.59 36351903
11/1/2018 1,624.50 1,798.30 1,583.55 1,754.00 1,741.41 23176003
10/1/2018 1,606.50 1,652.40 1,477.20 1,621.70 1,600.93 33033309
9/1/2018 1,791.50 1,791.50 1,564.10 1,608.40 1,587.80 35179141
8/1/2018 1,732.95 1,808.65 1,715.05 1,780.10 1,757.30 21918525

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open High Low Close

Trends for HUL:

 It has an 8.9 percent rise in quarterly profit driven by higher revenue from its beauty and personal
care segment.
 Prabhudas Lilladher recommended accumulate rating on Hindustan Unilever with a target price
of Rs 1816.

 Sales rose 12.4 percent while revenue from its beauty and personal care segment, which includes
brands such as Dove and Sunsilk, gained nearly 11 percent to 45.39 billion rupees.
 5. Projects undertaken/ capex/ long term investments made, how were they financed and
returns obtained (NPV/ IRR on them): some information is available in Chairman’s report
or MDA report in annual reports.

NON-CURRENT INVESTMENT:
Rupees in millions 2017 2018
Non-Current Investments 256 256
Total Income 31,298.00 3,926.00
Total Comprehensive Income for the year 629.03 150.53

NPV: HUL have invested in its subsidiaries which are business unit themselves working on the
ongoing principles. Cash flow from the entities are not being disclosed in the annual report.

6. Working capital composition and strategy: show WC ratios, cycle.

CURRENT LIABILITIES
Trade Payables 7,070.00 7,013.00 6,006.00 5,498.00 5,288.90
Other Current Liabilities 782 972 809 864 908.05
Short Term Provisions 501 651 387 290 2,585.87

Total Current Liabilities 8,353.00 8,636.00 7,202.00 6,652.00 8,782.82

CURRENT ASSETS

Current Investments 2,693.00 2,855.00 3,519.00 2,461.00 2,623.82

Inventories 2,422.00 2,359.00 2,362.00 2,528.00 2,602.68

Trade Receivables 1,673.00 1,147.00 928 1,064.00 782.94

Cash And Cash Equivalents 3,688.00 3,373.00 1,671.00 2,759.00 2,537.56

Short Term Loans And Advances 0 0 0 0 657.27
OtherCurrentAssets 898 1,405.00 885 740 59.28

Total Current Assets 11,374.00 11,139.00 9,365.00 9,530.00 9,263.55

Formula for Working Capital

To calculate the working capital, compare a company's current assets to its current liabilities. Current
assets listed on a company's balance sheet include cash, accounts receivable, inventory and other assets
that are expected to be liquidated or turned into cash in less than one year. Current liabilities include
accounts payable, wages, taxes payable, and the current portion of long-term debt. Current assets are
available within 12 months. Current liabilities are due within 12 months.

Changes in Working Capital Affect a Company's Cash Flow

Most major new projects, such as an expansion in production or into new markets, require an investment
in working capital. That reduces cash flow. But cash will also fall if money is collected too slowly, or if
sales volumes are decreasing – which will lead to a fall in accounts receivable. Companies that are using
working capital inefficiently can boost cash flow by squeezing suppliers and customers.

Things to Remember while calculation WC:

1. A company has negative working capital. If the ratio of current assets to liabilities is less
than one.
2. High working capital isn't always a good thing. It might indicate that the business has too
much inventory or is not investing its excess cash.

HUL: 2019

Working Capital = Total Current Assets – Total Current Liabilities

=11,374.00- 8,353.00

= 3,021.00

Current Ratio = Total Current Assets / Total Current Liabilities

= 1.36

HUL: 2018

Working Capital = Total Current Assets – Total Current Liabilities

= 11,139.00 - 8,636.00

= 2,503.00

Current Ratio = Total Current Assets / Total Current Liabilities

= 1.28

HUL: 2017

Working Capital = Total Current Assets – Total Current Liabilities

= 9,365.00 - 7,202.00

= 2,163.00

Current Ratio = Total Current Assets / Total Current Liabilities

 = 1.30

Liquidity Ratios

Current Ratio (X)

1.36 1.29 1.30

Quick Ratio (X)

1.07 1.02 0.97

Inventory Turnover
Ratio (X) 15.78 14.64 13.50

HUL Analysis:
 Cash equivalent is increasing from 2017 – 2018 – 2019 (Expansion in business, Also Trade receivable
is increasing as the result in increase in Cash flow)
 Inventory is increasing from 2017 – 2018 -2019
 Working Capital is increasing which means cash is been invested and Inventory is been used for more
productions.
 Opportunity cost is maintained.