Introduction

Marico Limited is one of India's leading consumer products companies operating in the
beauty and wellness space. Empowered with freedom and opportunity, we work to make a
difference to the lives of all our stakeholders - members, associates, consumers, investors and
the society at large. Currently present in 25 countries across emerging markets of Asia and
Africa, Marico has nurtured multiple brands in the categories of hair care, skin care, edible
oils, health foods, male grooming, and fabric care. Marico's India business markets household
brands such as Parachute, Parachute Advansed, Saffola, Hair & Care, Nihar, Nihar Naturals,
Livon, Set Wet, Mediker and Revive among others that add value to the life of 1 in every 3
Indians. The International business offers unique brands such as Parachute, HairCode,
Fiancée, Caivil, Hercules, Black Chic, Isoplus, Code 10, Ingwe, X-Men and Thuan Phat that
are localized to fulfil the lifestyle needs of our international consumers. Charting an annual
turnover of INR 63 billion (Financial Year 2017 - 2018) across our portfolio, Marico's
sustainable growth story rests on an empowering work culture that encourages our members
to take complete ownership and make a difference to the entire business ecosystem.

Background:
Marico is a leading Indian company with business interests in manufacturing and retailing
personal consumer products as well as providing services in the beauty space.The company's
history can be traced back to 1948 when the Mumbai-based Mariwala family having a
presence in the trading business set up Bombay Oil Industries Ltd (BOIL). The
manufacturing facilities of BOIL comprised of a coconut oil extraction plant, vegetable oil
refinery and a chemical plant. Over the years, BOIL expanded and diversified into branded
consumer products.The promoter family then went on to incorporate a company called
Marico Foods Limited (subsequently called Marico Industries Limited and later Marico
Limited) in 1988 and transferred BOIL's consumer products division to this company.

In 1990 Marico entered into an agreement with BOIL for the use of its coconut oil brand
Parachute and vegetable oil brand Saffola. It also purchased a unit at Jalgaon, Maharashtra,
for using it as a manufacturing base.Thereafter, to add to its product portfolio, the company
made several acquisitions.The prominent amongst these is the acquisition of Procter &
Gamble's anti-lice treatment business branded under the name Mediker in 1999, followed by
acquisition of the facilities of Kanmoor Foods at Saswad, Maharashtra for manufacture of
jams, sauces and other fruit and vegetable products in the 2000. In 2001, Marico acquired the
Parachute and Saffola brands from BOIL.

Marico ventured into skin care products in 2003 through the acquisition of Sundari LLC in
the USA, a manufacturer of luxury ayurvedic products and having a turnover of
approximately US$ 1.1 million. This entry in the skin care products market represents
Marico's first acquisition in a developed country. In 2004, Marico commenced operations
under the banner of Kaya Skin Clinics; offering scientific, unisex dermatological procedures
as well as skin care products. In January 2006, Marico made a direct entry into the soap
market in India through the acquisition of the herbal bath soap brand Manjal from Kerala-
based Oriental Extractions. Manjal has an annual turnover of US$ 2 million through sales
primarily in Kerala.

Products of Marico:
Company analysis of past performance
In order to study the past performance of the company, five parameters are taken into
consideration:

1. Revenue
2. Net Profits
3. Return on Capital Employed
4. Debt equity ratio
5. Return on Equity

Revenue:

Period Revenue
Mar-15 5,791.87
Mar-16 6,110.65
Mar-17 6,015.10
Mar-18 6,406.81
Mar-19 7,437.00

Revenue of the company has increased/decreased over the period:

Increase in 2016 as compared to 2015 was 5.54%

Decrease in 2017 as compared to 2016 was -1.56%

Increase in 2018 as compared to 2017 was 6.51%

Increase in 2019 as compared to 2018 was 16%

Least growth in sales are recorded in 2015-16 i.e only 5.54% and in 2017 it gives an negative
sales because of which revenue is decreased by -1.56% but after that Marico had multiplies
its revenue to 6.51% from 2017 to 2018 and 16% from 2018 to 2019.

Thereafter they recorded high growth in their sales and Revenue and today now company is
standing at double digit growth in market.
Net Profit:
Period Net Profit
Mar-15 584.88
Mar-16 723.86
Mar-17 811.97
Mar-18 827.57
Mar-19 1136

Net Profits of the company has shown a mixed trend over the period. Following implications
can be drawn:

Increase in 2016 as compared to 2015 was 23.76%

Increase in 2017 as compared to 2016 was 12.17%

Increase in 2018 as compared to 2017 was 1.92%

Increase in 2019 as compared to 2018 was 37.26%

The Net Profits of Marico are increasing year on year but when we see the growth rate it had
decreased from 23.76% in 2016 to 12.17% and 1.92% in 2017 and 2018 respectively due to
the sluggish market and low sales because of slow down in Indian economy but in 2019 it
suddenly hikes to 37.26% which is a tremendous growth can be seen.

RETURN ON CAPITAL EMPLOYED, DEBT EQUITY RATIO AND RETURN ON

EQUITY:

Period D/E Ratio RONW/ROE ROCE

Mar-15 0.18 31.42 28.33
Mar-16 0.08 35.26 34.41
Mar-17 0.10 34.33 33.50
Mar-18 0.12 32.03 31.04
Mar-19 0.12 37.27 42.14

As per the analysis from the above table, MARICO is a company with a very less debt equity
ratio which is very good which means that company is generating good amount of cash for it
operations as well as to satisfy its debt obligations.

Taking other factor into consideration such as ROE, MARICO is maintaining its return on
equity ratio very well it is increasing year on year. In 2018 it fell down from 34.33 to 32.03
but in 2019 again increased to 37.27 which means company is generating good income from
its equity funds and is able to do good investments.
Now if we talk about ROCE, In 2016, the ROCE is increased to 34.41 from 28.33 which is a
good indication but from 2016 to 2018 it is continuously decreasing which means companies
efficiency is declining to use there capital effectively but in 2019 it takes tremendous jump to
42.14 from 31.04 which covers all the previous three years slowdown.

The above analysis states that the company is really capable of generating returns through its
equity capital and overall capital employed and stands at 4 in the list of top FMCG companies
much better than its peers like Colgate; P&G and Emami which are also a very well known
brands.

Assumptions and Forecasting DCF Model:

 It is shown that company sales are grow at 15% year on year basis. In the future it will
grow more due to the expansion of the market and planning to become the number 1
FMCG Company of the country.
 Tax rate is assumed at 25%.
 WACC is calculated on the basis of cost of equity and cost of debt. Where cost of debt is
5% and cost of equity is12%.
 Discount rate is taken as WACC of 12%
 Long term growth rate is 3%
 The assumption that must hold true is that the stocks we are comparing MARICO to are
fairly value by the market. MARICO’S P/E may be higher than its peer because its peers
are actually undervalued by investors.
DCF Analysis by using Excel Sheet: