Live Project of Financial Management on Hindustan Unilever Limited

Submitted by : Priyanshi Agarwal

18BSP1851
Section : G
 Purpose

HINDUSTAN UNILEVER LIMITED HAS A CLEAR PURPOSE – TO MAKE SUSTAINABLE LIVING

COMMONPLACE. WE BELIEVE THIS IS THE BEST WAY TO DELIVER LONG-TERM
SUSTAINABLE GROWTH.

As the pace of change accelerates, we are creating a stronger, simpler and more agile business. However
volatile and uncertain the world becomes, we believe managing for the long-term is the best way for us to
grow. We are well placed to deliver long-term value through our strategy and the USLP. These are supported
by a transformational change agenda, which combines our own actions with a stakeholder approach to external
advocacy and public policy.

The USLP is a value driver in its own right. Our commitment to the USLP’s three big global goals of
improving health and well-being of more than 1 billion people globally by 2020, halving our environmental
footprint by 2030, and enhancing livelihoods for millions across the globe by 2020 has delivered growth for
the business. The success of our sustainable living brands is driven by the growing consumer demand for
brands that have purpose at their core.

The USLP also drives cost efficiency through reduced waste, energy and packaging. It lowers risks in our
supply chain by securing a sustainable flow of critical raw materials. It also increases trust in our business
particularly among consumers, employees, investors and regulators.

In India, to address the challenge of depleting water resources, in 2010 we created a not-for-profit
organisation, Hindustan Unilever Foundation, which along with its partners creates water conservation
potential and enhances water-dependent livelihoods.

We work in partnership with the Government and other organisations to drive transformational change across
society with initiatives to help realise the USLP goals, thus creating more opportunities for women and
enhancing livelihoods, promoting health and well-being, and championing sustainable agriculture. These are
opportunities to grow our business by addressing unmet challenges while alleviating major social and
environmental issues.

Soon after followed Lifebuoy in 1895 and other famous brands like Pears, Lux and Vim. Vanaspati was
launched in 1918 and the famous Dalda brand came to the market in 1937.
In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed
by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged
to form HUL in November 1956; HUL offered 10% of its equity to the Indian public, being the first among
the foreign subsidiaries to do so. Unilever now holds 67.25% equity in the company. The rest of the
shareholding is distributed among about three lakh individual shareholders and financial institutions.

The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903, the company had launched Red
Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the

Unilever fold in 1984 through an international acquisition. The erstwhile Lipton's links with India were forged
in 1898. Unilever acquired Lipton in 1972, and in 1977 Lipton Tea (India) Limited was incorporated.

Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an
international acquisition of Chesebrough Pond's USA in 1986.

Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth
process has been accompanied by judicious diversification, always in line with Indian opinions and
aspirations.

The liberalisation of the Indian economy, started in 1991, clearly marked an inflexion in HUL's and the
Group's growth curve. Removal of the regulatory framework allowed the company to explore every single
product and opportunity segment, without any constraints on production capacity.

Simultaneously, deregulation permitted alliances, acquisitions and mergers. In one of the most visible and
talked about events of India's corporate history, the erstwhile Tata Oil Mills Company (TOMCO) merged
with HUL, effective from April 1, 1993. In 1996, HUL and yet another Tata company, Lakme Limited, formed
a 50:50 joint venture, Lakme Unilever Limited, to market Lakme's market-leading cosmetics and other
appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL
and divested its 50% stake in the joint venture to the company.

HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in 1994, Kimberly-Clark
Lever Ltd, which markets Huggies Diapers and Kotex Sanitary Pads. HUL has also set up a subsidiary in
Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the
Himalayan kingdom. The UNL factory manufactures HUL's products like Soaps, Detergents and Personal
Products both for the domestic market and exports to India.

The 1990s also witnessed a string of crucial mergers, acquisitions and alliances on the Foods and Beverages
front. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in Instant
Coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Icecream business from
Cadbury India.
As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever,
were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to form Brooke
Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional Beverages
business. 1994 witnessed BBLIL launching the Wall's range of Frozen Desserts. By the end of the year, the
company entered into a strategic alliance with the Kwality Icecream Group families and in 1995 the Milkfood
100% Icecream marketing and distribution rights too were acquired.

Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in
the merger of Pond's (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in
Personal Products, Speciality Chemicals and Exports businesses, besides a common distribution system since
1993 for Personal Products. The two also had a common management pool and a technology base. The
amalgamation was done to ensure for the Group, benefits from scale economies both in domestic and export
markets and enable it to fund investments required for aggressively building new categories.

In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods to
HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to private
sector partners. HUL's entry into Bread is a strategic extension of the company's wheat business. In 2002,
HUL acquired the government's remaining stake in Modern Foods.

In 2003, HUL acquired the Cooked Shrimp and Pasteurised Crabmeat business of the Amalgam Group of
Companies, a leader in value added Marine Products exports.

In March, 2012 HUL’s state of the art Learning Centre was inaugurated at the Hindustan Unilever campus at
Andheri, Mumbai.

In April, 2012, the Customer Insight & Innovation Centre (CiiC) was inaugurated at the Hindustan Unilever
campus at Andheri, Mumbai

HUL completed 80 years of corporate existence in India on October 17th, 2013.

Products

Food

 Annapurna salt and Atta(formerly known as Kissan Annapurna)

 Bru coffee
 Brooke Bond (3 Roses, Taj Mahal, Taaza, Red Label) tea
 Kissan squashes, ketchups, juices and jams
 Lipton tea
 Knorr soups & meal makers and soupy noodles
 Kwality Wall's frozen dessert
 Modern Bread, ready to eat chapattis and other bakery items(now sold to Everstone Capital)
 Magnum (ice cream)[7]
Homecare Brands

 Active Wheel detergent

 Cif Cream Cleaner
 Comfort fabric softeners
 Domex disinfectant/toilet cleaner
 Rin detergents and bleach
 Sunlight detergent and colour care
 Surf Excel detergent and gentle wash
 Vim dishwash
 Magic – Water Save

Personal Care Brands

 Aviance Beauty Solutions

 Axe deodorant and aftershaving lotion and soap
 LEVER Ayush Therapy ayurvedic health care and personal care products
 Breeze beauty soap
 Brylcreem hair cream and hair gel
 Clear anti-dandruff hair products
 Clinic Plus shampoo and oil
 Close Up toothpaste
 Dove skin cleansing & hair care range: bar, lotions, creams and anti-perspirant deodorants
 Denim shaving products
 Fair & Lovely for girls
 Hamam
 Indulekha ayurvedic hair oil
 Lakmé beauty products and salons
 Lifebuoy soaps and handwash range
 Liril 2000 soap
 Lux soap, body wash and deodorant
 Pears soap, body wash
 Pepsodent toothpaste
 Pond's talcs and creams
 Rexona
 Sunsilk shampoo
 Sure anti-perspirant
 Vaseline petroleum jelly, skin care lotions
 TRESemmé
 TIGI
 Vaseline
Water Purifier Brand

 Pureit Water Purifier

FINANCIAL PERFORMANCE

STANDALONE (` crores)

Statement of Profit & Loss Account IND AS

2015-16 2016-17 2017-18
Sales (including excise duty) 32,929 33,895 34,619
Other Income 1,126 1,118 1,168
Interest (15) (22) (20)
Profit Before Taxation @ 5,977 6,155 7,347
Profit After Taxation @ 4,116 4,247 5,135
Earnings Per Share of ` 1 19.12 20.75 24.20
Dividend Per Share of ` 1 16.00 17.00 20.00
 Balance Sheet IND AS
2015-16 2016-17 2017-18
Property, Plant and Equipment and Intangible Assets 3,300 4,227 4,572
Investments 2,780 3,779 3,111
Cash and Other Bank Balances 2,759 1,671 3,373
Net Assets (Current and Non-current) (2,560) (3,187) (3,981)
6,279 6,490 7,075
Share Capital 216 216 216
Other Equity 6,063 6,274 6,859
6,279 6,490 7,075

Key Ratios and EVA IND AS

2015-16 2016-17 2017-18
EBITDA (% of Gross Sales) 17.5 17.8 21.0
Fixed Asset Turnover (No. of Turnover) 10.0 8.0 7.6
PAT @ / Gross Sales (%) 12.5 12.5 14.8
Return On Capital Employed (%) 105.8 105.9 118.9
Return On Net Worth (%) 72.8 76.6 84.5
Economic Value Added (EVA) (` crores) 3,438 3,498 4,258

Others IND AS
2015-16 2016-17 2017-18
HUL Share Price on BSE (` Per Share of ` 1)* 870 910 1,336
Market Capitalisation (`crores) 188,154 196,902 289,159
Contribution to Exchequer (` crores) 8,856 9,249 7,283
Category-Wise Turnover
(`crores)
For the Year ended For the Year ended
31st March, 31st March, 2017
2018
Sales Others* Sales Others*
Home Care 11,464 165 11,123 223
Personal Care 16,132 332 16,078 226
Foods 1,147 18 1,102 22
Refreshments 5,181 44 4,795 53
Others (including Exports, Infant and Feminine Care) 695 26 797 22
TOTAL 34,619 585 33,895 546
 SHARE HOLDING PATTERN (EQUITY SHARE CAPITAL BREAKUP AS
PERCENTAGE OF TOTAL EQUITY)

Category-wise Shareholding
No. of Shares held at the end of the year % Change
Category of Shareholders No. of Shares held at the beginning of the year
Demt Physical Total % of Dema Physical Total % of during the
Total t Total year
Share Share
s s
A. Promoters -
1. Indian - - - - - - - -
2. Foreign
- Bodies Corporates 1,45,44,12,858 - 1,45,44,12,858 67.20 1,45,44,12, - 1,45,44,12,8 67.19 -0.01
858 58
TOTAL PROMOTER SHAREHOLDING 1,45,44,12, - 1,45,44,12,8 67.20 1,45,44,12, - 1,45,44,12,8 67.19 -0.01
(A) 858 58 858 58
B. Public Shareholding
1. Institutions
- Mutual Funds 3,83,86,030 49,284 3,84,35,314 1.78 3,54,84,654 39,244 3,55,23,898 1.64 -0.14
- Alternate Investment - - - - 5,48,333 - 5,48,333 0.03 0.03
Funds
- Banks / Financial Institutions 69,90,335 1,28,710 71,19,045 0.33 1,59,47,050 1,28,190 1,60,75,240 0.74 0.41
- State Government - 20 20 - - 20 20 - -
- Insurance Companies 7,68,50,946 9,500 7,68,60,446 3.55 9,60,91,021 9,500 9,61,00,521 4.44 0.89
- Foreign Portfolio Investors 28,70,05,513 37,450 28,70,42,963 13.26 27,19,32,775 28,460 27,19,61,235 12.56 -0.70
Sub-total (B)(1) 40,92,32,824 2,24,964 40,94,57,788 18.92 42,00,03,83 2,05,414 42,02,09,24 19.41 0.49
3 7
2. Non-Institutions
- Bodies Corporates
i) Indian 2,73,12,657 4,36,164 2,77,48,821 1.28 2,52,30,800 3,42,730 2,55,73,530 1.18 -0.10
ii) Overseas 3,600 - 3,600 - 500 - 500 - -

i) Individual shareholders 25,30,19,858 11.69 20,16,67,65 3,96,20,319 24,12,87,970 11.15 -0.54

20,72,49,41 4,57,70,440 1
8 holding nominal share capital
up to ` 1 lakh
ii) Individual shareholders 40,29,793 7,10,350 47,40,143 0.22 39,95,74 7,10,350 47,06,093 0.22 -
3
holding nominal share
capital in excess of ` 1 lakh
- Others
i) Trust 47,41,677 - 47,41,677 0.22 51,98,117 - 51,98,117 0.24 0.02
ii) Non Resident Indians 79,47,612 4,14,170 83,61,782 0.38 84,74,763 3,84,640 88,59,403 0.41 0.03
iii) Foreign Nationals 23,689 3,120 26,809 - 35,669 120 35,789 - -
iv) Foreign Banks 7,720 - 7,720 - 6,220 - 6,220 - -
v) Directors & their Relatives 1,20,783 - 1,20,783 0.01 1,25,178 - 1,25,178 0.01 -
vi) Clearing Members 17,07,800 - 17,07,800 0.08 10,21,418 - 10,21,418 0.05 -0.03
vii) Qualified Foreign Investor - - - - 10,868 - 10,868 - -
viii)IEPF - - - - 30,81,586 - 30,81,586 0.14 0.14
Sub-total (B)(2):- 25,31,44,749 4,73,34,244 30,04,78,993 13.88 24,88,48,51 4,10,58,15 28,99,06,67 13.39 -0.48
3 9 2
TOTAL 66,23,77,57 4,75,59,20 70,99,36,78 32.80 66,88,52,34 4,12,63,57 71,01,15,91 32.81 0.01
PUBLICSHAREHOLDING 3 8 1 6 3 9
Shareholding Pattern of top ten Shareholders (other than Directors, Promoters and Holders of GDRs
and ADRs) as on 31st March, 2018:
Sr. Name of Shareholders Shareholding Cumulative Shareholding
No. during the year
No. of Shares % of total shares No. of Shares % of total shares
of the Company of the Company
1 Life Insurance Corporation of India
At the beginning of the year 3,58,90,707 1.66 3,58,90,707 1.66
Bought during the year 3,08,59,365 1.42 6,67,50,072 3.08
Sold during the year - - 6,67,50,072 3.08
At the end of the year 6,67,50,072 3.08 6,67,50,072 3.08
2 Life Insurance Corporation of India P&GS FUND
At the beginning of the year 43,19,378 0.20 43,19,378 0.20
Bought during the year 98,32,755 0.45 1,41,52,133 0.65
Sold during the year - 1,41,52,133 0.65
At the end of the year 1,41,52,133 0.65 1,41,52,133 0.65
3 Nomura India Investment Fund Mother Fund
At the beginning of the year 14,42,691 0.07 14,42,691 0.07
Bought during the year 1,12,49,774 0.52 1,26,92,465 0.59
Sold during the year - - 1,26,92,465 0.59
At the end of the year 1,26,92,465 0.59 1,26,92,465 0.59
4 Vanguard Emerging Markets Stock Index Fund A Series
At the beginning of the year 1,14,07,516 0.53 1,14,07,516 0.53
Bought during the year 10,24,471 0.05 1,24,31,987 0.58
Sold during the year 6,35,784 0.03 1,17,96,203 0.55
At the end of the year 1,17,96,203 0.55 1,17,96,203 0.55
5 The New India Assurance Company limited
At the beginning of the year 1,39,66,974 0.65 1,39,66,974 0.65
Bought during the year - - 1,39,66,974 0.65
Sold during the year 22,72,456 0.11 1,16,94,518 0.54
At the end of the year 1,16,94,518 0.54 1,16,94,518 0.54

One of the major CSR activities of HUL are as follows

1. Greening Barrens (Water Conservation & Harvesting)

It has 2 main objectives:

a) To reduce water consumption in its own operations and generate sub-soil water tables at its own sites
through the principles of 5R – Reduce, Reuse, Recycle, Recover & Renew.
b) Help adjacent villages to implement appropriate models of watershed development.

2. Shakti – Changing Lives in Rural India

Shakti is HUL’s rural initiative, which targets small villages with population of less than 2000. It seeks to
empower under privileged rural women by providing income-generating opportunities, health & hygiene
education through Shakti Vani program and creating access to relevant information through the Shakti
Community Portal.

3. Health & Hygiene Education

Lifebuoy Swastya Chetna is a rural health and hygiene initiative, started in 2002, was initiated in media dark
villages in UP, MP. Bihar, WB, Maharashtra aand Orissa for spreading awareness about washing hands with
Lifebuoy soap.

4. Economic Empowerment of Women

The Fair & Lovely Foundation is HUL’s initiative which aims at economic empowerment of women across
India. It aims to achieve this through providing information, resources, inputs and support in the areas of
education, career and enterprise.

5. Special Education & Rehabilitation

Under the Happy Home initiative, HUL supports special education and rehabilitation of children with
challenges.
a) Asha Daan: Initiated in 1976, HUL supported Mother Teresa and Missionaries in Charity to set up a home
in Mumbai for abandoned, challenged children and the destitute.

b) Ankur: In 1993, HUL’s Doom Dooma Plantation Division set up Ankur for special education of challenged
children aged between 5 and 15 years. Ankur provides educational. Vocational and recreational activities to
over 35 children with range of challenges like hearing or sight impairment, polio, cerebral palsy and several
learning difficulties.

c) Kappagam: Encouraged by Ankur’s success Kappagam (Shelter), the second center for special education
of challenged children, was set up in 1998 on HUL Plantations in South India. It has 17 children.. The focus
is same as that of Ankur.

d) Anbagam: This is another day care center (Center of Love), which was started in 2003 in south India
plantations. It takes care of 11 children. Besides medical care and meals, they too are being taught skills such
that they can become self-reliant and pursue elementary studies.

Key Financial Ratios of Hindustan

Unilever

Mar
Mar '17 Mar '16 Mar '15 Mar '14
'18

Investment Valuation Ratios

Face Value 1.00 1.00 1.00 1.00 1.00

Dividend Per Share 20.00 17.00 16.00 15.00 13.00

Operating Profit Per Share (Rs) 33.61 27.94 26.57 24.07 20.69

Net Operating Profit Per Share (Rs) 159.50 147.34 143.54 142.39 129.56

Free Reserves Per Share (Rs) -- -- -- -- --

Bonus in Equity Capital 60.96 60.96 60.96 60.86 60.89

Profitability Ratios

Operating Profit Margin(%) 21.07 18.96 18.50 16.90 15.97

Profit Before Interest And Tax Margin(%) 19.37 17.43 17.16 15.66 14.71

Gross Profit Margin(%) 19.69 17.72 17.47 15.97 15.04

Cash Profit Margin(%) 16.46 14.32 14.19 12.53 13.61

Adjusted Cash Margin(%) 16.46 14.32 14.19 12.53 13.61

Net Profit Margin(%) 15.16 14.07 13.31 14.00 13.80

Adjusted Net Profit Margin(%) 14.92 13.85 13.08 13.73 13.50

Return On Capital Employed(%) 104.12 95.17 95.42 148.75 147.59

Return On Net Worth(%) 74.02 69.18 65.88 115.87 118.04

Adjusted Return on Net Worth(%) 74.89 65.46 66.37 98.03 111.06

Return on Assets Excluding Revaluations 32.69 29.99 29.02 17.21 15.15

Return on Assets Including Revaluations 32.69 29.99 29.02 17.22 15.15

Return on Long Term Funds(%) 104.12 95.17 95.42 148.75 147.59

Liquidity And Solvency Ratios

Current Ratio 0.94 0.82 1.03 0.75 0.74

Quick Ratio 0.68 0.51 0.67 0.47 0.44

Debt Equity Ratio -- -- -- -- --

Long Term Debt Equity Ratio -- -- -- -- --

Debt Coverage Ratios

Interest Cover 368.35 280.77 399.47 329.37 134.21

Total Debt to Owners Fund -- -- -- -- --

Financial Charges Coverage Ratio 392.25 298.77 420.87 346.41 141.45

Financial Charges Coverage Ratio Post Tax 286.75 223.09 298.20 274.60 115.57

Management Efficiency Ratios

Inventory Turnover Ratio 14.93 14.60 13.25 12.57 10.76

Debtors Turnover Ratio 33.28 32.02 33.64 38.52 33.96

Investments Turnover Ratio 14.93 14.60 13.25 12.57 10.76

Fixed Assets Turnover Ratio 7.09 7.38 9.72 6.99 6.77

Total Assets Turnover Ratio 5.15 5.21 4.96 8.32 8.62

Asset Turnover Ratio 5.09 4.99 6.21 8.80 9.42

Average Raw Material Holding -- -- -- -- --

Average Finished Goods Held -- -- -- -- --

Number of Days In Working Capital -29.49 -33.73 -13.25 -32.52 -36.35

Profit & Loss Account Ratios

Material Cost Composition 47.22 48.69 48.99 50.93 52.18

Imported Composition of Raw Materials Consumed -- -- -- 9.28 8.07

Selling Distribution Cost Composition 11.88 10.88 11.59 -- --

Expenses as Composition of Total Sales 1.12 1.69 1.79 1.86 1.95

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 74.39 79.53 81.07 75.20 72.69

Dividend Payout Ratio Cash Profit 68.17 73.08 75.23 70.52 68.10

Earning Retention Ratio 26.48 15.96 19.53 11.12 22.74

Cash Earning Retention Ratio 32.57 23.13 25.29 17.59 27.91

AdjustedCash Flow Times -- -- -- -- --

Competitors

Name Last Price Market Cap. Sales Net Profit Total Assets
(Rs. cr.) Turnover

HUL 1,784.75 386,333.02 34,525.00 5,237.00 7,075.00

Godrej Consumer 1,345.85 91,712.15 5,261.02 999.87 4,641.59

Dabur India 456.20 80,576.98 5,609.06 1,072.05 4,513.39

Marico 371.15 47,910.43 5,170.41 718.23 3,163.57

P and G 10,463.25 33,964.48 2,320.40 432.73 526.12

Colgate 1,142.70 31,079.80 4,187.97 673.37 1,524.63

Emami 574.30 26,069.50 2,353.99 309.52 2,250.61

Gillette India 6,552.25 21,350.65 1,733.60 253.08 500.61

Godrej Ind 610.30 20,529.33 1,958.33 241.40 3,888.80

Jyothy Labs 219.60 7,984.40 1,699.73 160.53 960.25

Bajaj Corp 416.70 6,146.33 831.21 216.27 518.86

Sanwaria Consum 14.05 1,034.22 5,069.27 100.44 1,584.97

JHS Svendgaard 34.75 154.78 138.38 28.05 177.71

GKB Ophthalmics 84.05 34.91 36.92 -2.58 36.83

5 year closing data for HUL
Comparison of HUL with Nestle
Comparison of HUL with Dabur
 Summary
 The company whose stock would generate the maximum return for 5 years is Dabur as
the expected return for a given rate is the highest i.e. 8.281. The company whose stock
would be exposed to the maximum risk for 5 years would be Dabur as the higher the
standard deviation the higher is the risk associated with any security/stock of a company.
 The security with beta greater than 1 is an aggressive security and with beta smaller than
1 is a defensive security, therefore, security for Nestle and Dabur is defensive security
whereas for HUL, the security is an aggressive security with beta more than 1.