Project Report on Fundamental Analysis of Food and Beverage Companies

Submitted To: Submitted By

Prof. Simmi Khurana Abhishek Kesarwani PG09004

Amit Singh PG09012

Farid Uddin PG09038

Jatin Ramani PG09084

Sohan Dhar PG09102

Acknowledgement

Acknowledgement
If you wish to plan for a year, sow seeds, if you wish to plan for ten years, trees, if you plan for
a life time, develop a man
With these we started our project. Any project can`t be completed without the guidance and
supervision of others. This project of ours would not have reached its fulfillment hadn`t been for
the guidance given to us by various people whom we came across while doing this project.
We are highly grate full to Prof. Simmin Khurana (Faculty Retail Management INMANTEC),
for giving us an opportunity to carry out this project and guiding us to complete our project by
extending his full support.
At least we would like to thanks our friends and class mates for their support and
encouragement.
Contents
Acknowledgement.......................................................................................................................................2
Nestle..........................................................................................................................................................4
Britannia Industries LTD...........................................................................................................................13
Cadbury.....................................................................................................................................................21
Dabur.........................................................................................................................................................32
VADILAL.................................................................................................................................................41
Conclusion.................................................................................................................................................54
Nestle
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 emphazised
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, advise 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. For more on Nestlé Agricultural Services.

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 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.

Nestlé India manufactures products of truly international quality under internationally famous
brand names such as NESCAFÉ, MAGGI, MILKYBAR, MILO, KIT KAT, BAR-ONE,
MILKMAID and NESTEA and in recent years the Company has also introduced products of
daily consumption and use such as NESTLÉ Milk, NESTLÉ SLIM Milk, NESTLÉ Fresh 'n'
Natural Dahi and NESTLÉ Jeera Raita.

Nestlé India is a responsible organization and facilitates initiatives that help to improve the
quality of life in the communities where it operates
Operating And Financial Leverage

1.24
Levearage Analysis
1.22
1.06
1.02

financial lev
2008 operating lev
2009
  In the leverage analysis we can find that the company has the effect of financial leverage
in the combined leverage of the corporation. The leverage of firm is almost the same in
two years. As if we see the capital structure of Nestle, then the company is majorly equity
financed and is using its reserves and surplus for its operations and taking only short term
loans. In conclusion, if a company has high operating leverage, then the operating income
(OI or EBIT) will become very sensitive to changes in sales volume. Just a small
percentage (%) chance in sales can yield (produce) a large percentage change in
Operating Income. A Company with low operating leverage the reverse is true.

Owner`s Fund

Owner`s fund is the amount of fund employed in company by the promoters or owners of the
company in company. In case of Nestle we can find from the graph that, though in year the
capital employed by owner was 99.31%, there were some short term debt elements and that were
further reduced in year 2008 that accounted to only 0.18% and in year 2010 it was 100%. So it
be concluded that the it is completely the owners capital which is employed in company.
Share Holding Pattern
The majority of shares are held by the parent company Nestle INC around 60%, around 20% of
shares are held by Institutional bodies and 16% and 2% are held by the general public and NRIs.

Sales

6000

5000

4000

3000

2000

1000

0
2007
2008
2009

The sales figure of company is continually rising it is because of launch of new products, heavy
advertising, the sales expenditure of company was around 517 crore in year 2009.

Turnover
 6000

5000

4000

3000

2000

1000

0
2007
2008
2009

With rising sales the turnover of the company is rising.

EPS and DPS

EPS is earning per share and DPS is dividend issued per share. The higher the EPS better is the
performance of the company and more the dividend it is issuing the more beneficial for the share
holders. From the graph we can conclude that the health of company is getting better day by day
as the EPS has increased by over 56% in years from 2007 to 2009. The company is also giving
its share holders a good dividend which has increased by 46% from year 2007 to year 2009.
Gross and Net Profit Analysis

Gross profit margin Net profit

11.73 12.24 12.67

17.37 17.2 17.58

2007 2008 2009

Gross Profit, the higher the better. A gross profit margin of 45% means that for every Rs. 1 of
sales, the firm makes 45 paise in gross profit. The company is making good gross profit it has
increase from 17.37 to 17.58 from the 2007 to 2009. The reasons can be increase in sales
proceeds without increase in purchase. The reason can also be that there is decrease in direct
expenses without corresponding decrease in sale price of goods.

Net profit, higher net profit is always preferred, as it indicates that portion of profit indirect
expenses. The net profit has increased because of the operating efficiency of the business.
Return on net worth and long term funds

The company`s return on net worth and long term funds had increased form the year 2007 to
2008, but it had decreased in year 2009, the reason can be it is because of recession.

Current, quick and inventory turnover ratio

Current ratio illustrates a measure of the short term safety of the firm. Current assets can be
turned into cash in a short period of time. From the graph we can see that the current ratio has
almost remained constant over the years and quick ratio tells about all the assets excluding
inventories and prepaid expenses. The quick ratio also of the company has almost remained
constant.

Inventory turnover ratio indicates the number of times inventory is replaced, it also tells a
relationship between cost of goods sold and the inventory level. The higher the turnover ratio the
better is the company. The inventory turnover ratio of the company is continually increasing. It
may be attributed to the increase in sales.
Britannia Industries LTD

Introduction-

The story of one of India's favourite brands reads almost like a fairy tale. Once upon a time, in
1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now
Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today.

The beginnings might have been humble-the dreams were anything but. By 1910, with the
advent of electricity, Britannia mechanised its operations, and in 1921, it became the first
company east of the Suez Canal to use imported gas ovens. Britannia's business was flourishing.
But, more importantly, Britannia was acquiring a reputation for quality and value. As a result,
during the tragic World War II, the Government reposed its trust in Britannia by contracting it to
supply large quantities of "service biscuits" to the armed forces.

As time moved on, the biscuit market continued to grow… and Britannia grew along with it. In
1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry's who till
now distributed Britannia biscuits in India. In the subsequent public issue of 1978, Indian
shareholding crossed 60%, firmly establishing the Indianness of the firm. The following year,
Britannia Biscuit Company was re-christened Britannia Industries Limited (BIL). Four years
later in 1983, it crossed the Rs. 100 crores revenue mark.

On the operations front, the company was making equally dynamic strides. In 1992, it celebrated
its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat Healthy,
Think Better" - and made its first foray into the dairy products market. In 1999, the "Britannia
Khao, World Cup Jao" promotion further fortified the affinity consumers had with 'Brand
Britannia'.

Britannia strode into the 21st Century as one of India's biggest brands and the pre-eminent food
brand of the country. It was equally recognised for its innovative approach to products and
marketing: the Lagaan Match was voted India's most successful promotional activity of the year
2001 while the delicious Britannia 50-50 Maska-Chaska became India's most successful product
launch. In 2002, Britannia's New Business Division formed a joint venture with Fonterra, the
world's second largest Dairy Company, and Britannia New Zealand Foods Pvt. Ltd. was born. In
recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the
Top 200 Small Companies of the World', and The Economic Times pegged Britannia India's 2nd
Most Trusted Brand.

Today, more than a century after those tentative first steps, Britannia's fairy tale is not only going
strong but blazing new standards, and that miniscule initial investment has grown by leaps and
bounds to crores of rupees in wealth for Britannia's shareholders. The company's offerings are
spread across the spectrum with products ranging from the healthy and economical Tiger biscuits
to the more lifestyle-oriented Milkman Cheese. Having succeeded in garnering the trust of
almost one-third of India's one billion population and a strong management at the helm means
Britannia will continue to dream big on its path of innovation and quality. And millions of
consumers will savour the results, happily ever after.

Key People

NameDesignation

Mr.Nusli Neville Wadia Chairman

Ms. Vinita Bali Managing Director

Financial analysis

Ratio-

Current Ratio
1.4
1.27
1.2 1.22

1
0.94
0.8 Current Ratio

0.6

0.4

0.2

0
2007-08 2008-09 2009-10

The current ratio show company's ability to pay back its short-term liabilities
(debt and payables) with its short-term assets (cash, inventory, receivables).Current ratio was
good in 2007-08 and 2008-09 but in 2009-10 the ratio get decreased. In 2009-10 the company
liabilities are more than his asset. In this year the profit also get affected .
 Quick Ratio
0.8

0.7 0.68
0.65
0.6

0.5
Quick Ratio
0.43
0.4

0.3

0.2

0.1

0
2007-08 2008-09 2009-10

The quick ratio measures a company's ability to meet its short-term obligations with its most

liquid assets. The higher the quick ratio, the better the position of the company but above graph
indicate that company’s quick ratio is decreasing year by year so it means company do not good
position as a debtor in market and it is not in a good position to meet short-term obligations
with its less liquid assets.
 Debt-Equity Ratio
1.2
1.08
1

0.8
Debt-Equity Ratio
0.6

0.4

0.2
0.14

0 0.03
2007-08 2008-09 2009-10

The debt-equity ratio show that company have more equity in comparison to debt. The Britannia
co take less amt of debt. In 2007-08and 2008-09 company debt are less but in 2009-10 the
company debt ratio increased. This year company increased the debt amt ..

Return On Capital Employed

27

26.5
26.37
26

25.5
Return On Capital Employed
25.29
25
24.67
24.5

24

23.5
2007-08 2008-09 2009-10

Return on capital employed is also decreasing year by year. In 2010 company profit gets affected
by increasing cost of product etc. so by this return on capital gets decreased.
 Inventory Turnover Ratio
16
15.06
14.54
14

12

10 9.98
Inventory Turnover Ratio
8

0
2007-08 2008-09 2009-10

This ratio showsincreasein the inventory turnover ratio. It measures the relationship between cost
of goods sold and the inventory level.A firm should have neither too high nor too low inventory
turnover ratio. Too high a ratio may indicate very low level of inventory and a danger of being
out of stock and incurring high ‘stock out cost’. But here is good shine that ratio is decreasing
towards optimal level.
 Asset Turnover Ratio
6.4
6.3
6.27
6.2
6.14
6.1
6
Asset Turnover Ratio
5.9
5.8
5.73
5.7
5.6
5.5
5.4
2007-08 2008-09 2009-10

 The graph shows that greater sales over existing assets year by year.so the company is
optimal utilising the assets. There is increase in ratio of the utilisation of asset every year.

EBIT Analysis

EBIT
300

250 252.44 255.54

200
EBIT
159.87
150

100

50

0
2007-08 2008-09 2009-10
The year witnessed unprecedented commodity inflation, particularly insugar, wheat and milk
products, in the latter half of the year, coupledwith a fiercely competitive environment. This
restrainedCompanysability to correct selling prices and had a high adverse impact on
margins and profitability.

EPS Analysis

EPS
90

80 79.95
75.51
70

60

50 EPS
48.77
40

30

20

10

0
2007-08 2008-09 2009-10

In retrospect, 2009-10 was a challenging year with the country going through an economic
slowdown in the first half, unprecedented inflationary pressures on the consumer food basket
and exceptional input commodity inflation for the food industry and the profitability of company
also get affected.so in 2009 10 the EPS is also affected
Leverage Analysis

0.65 0.11
1

0 -0.46

DOL
-1 DFL
2008-09
-2 2009-2010

-3
-5
-4

-5

operating leverage is the firm ability to use fixed operating cost to magnify the effect of change
in sales on its EBIT. if a firm have a high degree of OL in case it employ a large amount of fixed
cost and a small amount of variable cost. On the other hand a firm is said to have a low degree
of OL if it incur a large amount of variable cost and a small amount fixed cost. So in the
Britannia low degree of OL soit incur a large amount of variable cost and a small amount fixed
cost. Financial leverage is the ability of firm to utilize fixed financial charges in order to magnify
the effect of changes in EBIT on EPS of the company.
Cadbury 
Cadbury is a British confectionery company, the industry's second-largest globally after the
combined Mars-Wrigley Headquartered in Cadbury House in the Uxbridge Business Park
in Uxbridge, London Borough of Hillingdon, England and formerly listed on the London Stock
Exchange, Cadbury was acquired by Kraft Foods in February 2010. The company was an ever-
present constituent of the FTSE 100 from the index's 1984 inception until its 2010 takeover.

The firm was known as "Cadbury Schweppes plc" from 1969 until a May 2008 demerger, which
saw the separation of its global confectionery business from its U.S. beverage unit, which has
been renamed Dr Pepper Snapple Group Inc.

Type Subsidiary of Kraft Foods

Industry Confectionery

Founded 1824

HeadquartersCadbury House, United Kingdom

Revenue GB£5,384 million (2009)

Operating income GB£388 million (2009)

Net income GB£364 million (2009)

Employees 71,657 (2008)

Parent Kraft Foods

Website www.cadbury.com

FUNDAMENTAL ANALYSIS:

Cost of Capital: http://economictimes.indiatimes.com/balancesheet.cms?

companyid=12858&year=&noofyears=&currencyformat=crores

1)
 EBIT 1226cr 1820cr 2034.1cr
2007 2008 2009
Cost of 0.50422 0.80917 1.15419
capital 9 7 1

Cost of capital
1.4

1.2

0.8 Ko

0.6

0.4

0.2

0
2007 2008 2009

 We can say that Cadbury see a hugh in cost of capital due to recession period in 2008 and
2009

 In 2007 cadburyhad the attractive cost of capital for the company (weighted average) was the
highest. As we are also seeing that the Debt equity ratio were also the highest in that time we
can conclude a higher cost of equity in that year that attracted equity investment in that year

 As overall cost of capital is decreasing the investor has a lesser attraction in cadbury stake
than before
 2005 2006 2007 2008
2009

 Company had a low dividend payout ratio to reinvest the profit earned as we can see a hike
on reserve during the recession for prevention of value decreasing of the company

 Just before recession the company had a high growth in EBIT that had slowed down a bit
during the recession. As the present scenario says it has a high opportunity in the investment
field

Leverage Analysis:

2005 2006 2007 2008 2009

Operating leverage 1.506087 1.496317 1.486474 1.404712 1.436428

Financial leverage 2.539278 2.940156 3.142872 3.700939 2.815356
Composite ratio 3.824373 4.399406 4.671798 5.198754 4.044058
 6

3
Operating leverage
Financial leverage
2
Composite ratio

 In the leverage analysis we can find that the company has the effect of financial leverage
in the combined leverage of the corporation.

 Fixed cost percentage is going a bit down may be for the technology improvement.
Another possibility is the higher EBIT for reinvesting the profit largely than dividend
sharing

 Earnings per share is dependent on the debt equity mix and the interest rate of that debt
capital

 The above graph says the debt financing trend before the recession or the high interest rate
before the recession

 It can be concluded that interest rate are fallen a lot during the recession because people
were not willing to invest and hold the liquidity in hand because of marketing situation

 As the cost of capital were concern the investor can earn a better output by buying the
stakes as the value of the firm in increasing and they are going for equity financing
presently
 3.RatioAnnalysis:

31stdec 2009 31stdec 2008 31stdec 2007

Profitability Ratio
Net Profit Margin 11.4 10.4 9.2
Return on capital employed (%) 56.77 53.4 35.9

Management efficiency ratio

Asset turnover ratio 3.7 3.40 3.13

Profit and Loss a/c ratios

Other Income/Total income 1.22 0.56 .52

liquidity ratios
Current ratios 1.7 1.2 0.5
Quick ratios .9 .7 .1
Profitability ratio

60

50

40

30 net profit margin

return on capital employed

20

10

0
31/12/2007 31/12/2008 31/12/2009

 Shows the yield of the company

 As the sloped net profit margin concerns it shows the growth of net profit percentage
over the sales. It indicate efficiency of the internal management is good

 % of return in long term fund not fluctuated a lot. It was increasing a lot before the
recession but affected a little by the market downfall

 In the present scenario

 asset turn over ratio
3.8
3.7
3.6
3.5
3.4
asset turn ovr ration
3.3
3.2
3.1
3
2.9
2.8
31/11/2007 31/11/2008 31/11/2009

 It shows the greater sales over existing assets over the years. Shows efficient asset
management over the year. Utilization of the existing resource

 To some extent it shows a increase in the growth of the asset utilization in 2009
 Liquidity ratio/Leverage ratio

1.8

1.6

1.4

1.2

1
quick ratio
0.8 current ratio

0.6

0.4

0.2

0
31/12/2007 31/12/2008 31/12/2009

 Current ratio is showing a steady progress it is a good sign

 Liquid ratio fluctuation shows the upward movement in the allocation of the liabilities in
non-liquid fund like bank overdraft or decreasing of any type of fictitious asset portion in
the company.(we are assuming stock as a fixed portion of working capital)
 2) Capital Structure:

Capital Structure
Period Instrumen Authorized Issued -PAIDUP-
t Capital Capita
l
From To (Rs. cr) (Rs. cr) Shares Face Capital
(nos) Value
2008 2019 Equity 37.5 32.19 32183208 10 32.18
Share
2007 2008 Equity 37.5 33.21 33203508 10 33.2
Share
2006 2007 Equity 37.5 34.36 34356882 10 34.36
Share
2005 2006 Equity 37.5 34.36 34356882 10 34.36
Share
2004 2005 Equity 37.5 34.71 35709487 10 35.71
Share

Condition of the company:

One of the largest giant in food secto4

It posted total income and net profit of Rs. 2206.00crores and Rs. 1657.85 crores respectively for
the financial year ended March 312009 as against Rs. 19,62.9 crores and Rs. 1194 crores
respectively in 2008

Cadbury has had a consistent dividend policy that balances the dual objectives of appropriately
rewarding shareholders through dividends and retaining capital, in order to maintain a healthy
capital adequacy
ratio to support future growth. It has had a consistent track record of moderate but steady
increases in dividend declarations over its history with a consistent dividend payout ratio
Recent developments

Kraft buyout

On 7 September 2009 Kraft Foods made a £10.2 billion (US$16.2 billion) indicative takeover bid

for Cadbury. The offer was rejected, with Cadbury stating that it undervalued the company.Kraft
launched a formal, hostile bid for Cadbury valuing the firm at £9.8 billion on 9 November
2009.Business SecretaryPeter Mandelson warned Kraft not to try to "make a quick buck" from
the acquisition of Cadbury.[23] On 19 January 2010, it was announced that Cadbury and Kraft
Foods had reached a deal and that Kraft would purchase Cadbury for £8.40 per share, valuing
Cadbury at £11.5bn (US$18.9bn). Kraft, which issued a statement stating that the deal will create
a "global confectionery leader", had to borrow £7 billion (US$11.5bn) in order to finance the
takeover

The Hershey Company, based in Pennsylvania, manufactures and distributes Cadbury-branded

chocolate (but not its other confectionery) in the United States and has been reported to share
Cadbury's "ethos". Hershey had expressed an interest in buying Cadbury because it would
broaden its access to faster-growing international markets. But on 22 January 2010, Hershey
announced that it will not counter Kraft's final offer.

The acquisition of Cadbury faced widespread disapproval from the British public, as well as
groups and organizations including trade union Unite who fought against the acquisition of the
company which, On 2 February 2010, Kraft secured over 71% of Cadbury's shares thus
finalizing the deal.Kraft had needed to reach 75% of the shares in order to be able to delist
Cadbury from the stock market and fully integrate it as part of Kraft. This was achieved on 5
February 2010, and the company announced that Cadbury shares would be de-listed on 8 March
2010.

On 3 February 2010, the Chairman Roger Carr, chief executive Todd Stitzer and chief financial
officer Andrew Bonfield all announced their resignations. Stitzer had worked at the company for
27 years

On 9 February 2010, Kraft announced that they were planning to close the Somerdale
Factory, Keynsham, with the loss of 400 jobs.  The management explained that existing plans to
move production to Poland were too advanced to be realistically reversed, though assurances had
been given regarding sustaining the plant. Staff at Keynshamcriticised this move, suggesting that
they felt betrayed and as if they have been "sacked twice” On 22 April 2010, Phil Rumbol, the
man behind the famous Gorilla advertisement, is planning to leave the Cadbury company in July
following Kraft's takeover.

In June 2010 the Polish division, Cadbury-Wedel was sold to Lotte of JapanThe European

Commission made the sale a condition of the Kraft takeover. As part of the deal Kraft will keep
the Cadbury, Hall's and other brands along with two plants in Skarbimierz. Lotte will take over
the plant in Warsaw along with the E Wedelbran
Dabur

Daburderived from DaktarBurman is India's largest Ayurvedic medicine manufacturer.

Dabur'sAyurvedicSpecialities Division has over 260 medicines for treating a range of ailments
and body conditions-from common cold to chronic paralysis.

Dabur India Limited

Celebrate Life

Type Public (NSE, BSE)

Industry Health Care, Food

Founded 1884

Founder(s) Dr. S K Burman

Dabur Tower, Kaushambi,

Headquarters Sahibabad, Ghaziabad - 201010
(UP), India

Area served Worldwide

Key people Dr. AnandBurman

 Chairman
Mr. AmitBurman
Vice-Chairman
Mr. Sunil Duggal
CEO

DaburAmla, DaburChyawanprash,
Products
Vatika, Hajmola& Real

Net income (INR) 425 Crore (2008-09)

Total assets (INR) 559 crore (2008-09)

Employees 3000 (Approx.) [1]

Dabur Nepal Pvt Ltd (Nepal),

Dabur Egypt Ltd (Egypt),
Asian Consumer Care (Bangladesh),
Asian Consumer Care (Pakistan),
Divisions African Consumer Care (Nigeria),
Naturelle LLC (Ras Al Khaimah-
UAE),
Weikfield International (UAE), and
Jaquline Inc. (USA).

Dabur International,
Subsidiaries Fem Care Pharma,
newu

Website Dabur.com

FUNDAMENTAL ANALYSIS:

3) Cost of Capital:
 EBIT240.96cr 304.67cr 289.85cr 444.10cr
Year 2006 2007 2008 2009
Cost of capital0.13 0.16 0.19
0.24

COST OF CAPITAL
0.3

0.25

0.2
COST OF CAPITAL
0.15

0.1

0.05

0
2006 2007 2008 2009

 According to above trend chart, we can say that Cadbury had a high cost of capital due to
recession period in 2008 and 2009.

 In the year 2009, company had 138.98cr debt in compare to 16.69cr debt of 2008. So, it has
affected the cost of capital of company.

 Since the year 2007, company has been going for more debt capital in compare to equity
capital.

(2) Value of the firm:

 Value of Firm
1200

1000

800
Value of Firm
600

400

200

0
2006 2007 2008 2009

 In the year 2008, company had less debt capital and equity capital both. So, it has affected
the overall value of the firm.

 Company had a low dividend payout ratio to reinvest the profit earned as we can see a hike
on reserve during the recession for prevention of value decreasing of the company

 Just before recession the company had a high growth in EBIT that had slowed down a bit
during the recession. As the present scenario says it has a high opportunity in the investment
field.

(3) Leverage Analysis:

2006 2007 2008 2009

Operating leverage 1.1292 1.0484 1.0804 0.9744
Financial leverage 1.1214 1.0719 1.0668 1.0387
Composite ratio 1.2663 1.1238 1.1526 1.0121

1.4

1.2

0.8
Operating leverage
Financial leverage
0.6 Composite ratio

0.4

0.2

0
2006 2007 2008 2009

 In the leverage analysis we can find that the company has the effect of financial leverage
in the combined leverage of the corporation.

 According to above graph there was high debt financing before the recession because of
financial leverage came down after 2007.

 Fixed cost percentage is going a bit down may be for the technology improvement.
Another possibility is the higher EBIT for reinvesting the profit largely than dividend
sharing.

 In conclusion, if a company has high operating leverage, then the operating income (OI
or EBIT) will become very sensitive to changes in sales volume. Just a small percentage
(%) chance in sales can yield (produce) a large percentage change in Operating Income.
A Company with low operating leverage the reverse is true.
(4) Ratio Analysis:

2007 2008 2009

2006
Profitability Ratio :
Net Profit Margin 14. 15.44
14.04 41 15.06
Return on capital employed (%) 66.07 67.51 47.98
46.69

Management efficiency ratio :

Asset turnover ratio 4.50 4.67 4.84
4.24

Liquidity And Solvency Ratios :

Current ratios 0. 0.
0.82 77 71 1.19
Quick ratios
0.52 0.63 0.58 0.99

Profitability ratio:

Net profit margin

1200

1000

800
Net profit margin
600

400

200

0
2006 2007 2008 2009

 The profit margin tells you how much profit a company makes for every 1 Rs it generates
in revenue or sales. So it shows the yield of the company.
  According to above graph we can say that company’s net profit increasing out of its total
revenue.

 According to above graph we can say that since company’s net profit increasing that’s
why the firm has been efficient in controlling its expenses.

Asset turnover ratio:

Asset Turnover Ratio

4.9
4.8
4.7
4.6
4.5
4.4 Asset Turnover Ratio
4.3
4.2
4.1
4
3.9
2006 2007 2008 2009

 It shows the greater sales over existing assets over the years. Shows efficient asset
management over the year. Utilization of the existing resource

 To some extent it shows a increase in the growth of the asset utilization in 2009
 Companies with low profit margins tend to have high asset turnover, those with high
profit margins have low asset turnover - it indicates pricing strategy.
 This ratio is more useful for growth companies to check if in fact they are growing
revenue in proportion to sales.

Liquidity and solvency ratio:

 1.4

1.2

0.8
current ratios
0.6 quick ratios

0.4

0.2

0
2006 2007 2008 2009

 Till 2008 company’s current ratio was showing a down progress. It is not a good sign but
after recession period company’s current ration suddenly increase. It is really a better sign
for the company.

 Liquid ratio fluctuation shows the upward movement in the allocation of the liabilities in
non-liquid fund like bank overdraft or decreasing of any type of fictitious asset portion in
the company.(we are assuming stock as a fixed portion of working capital)

 Current ratio determines the company ability to pay off its short term liabilities via
available current assets. In theory, higher the current of the company better will be the
liquidity position.

(5) Capital Structure:

Period Instrument Authorized Issued Capital - P A I D U P -

 Capital
From To (Rs. cr) (Rs. cr) Shares (nos) Face Value capital
2009 2010 Equity Share 145 86.76 867585830 1 86.76
2008 2009 Equity Share 145 86.51 865076249 1 86.51
2007 2008 Equity Share 145 86.4 864022973 1 86.40
2006 2007 Equity Share 125 86.29 862883808 1 86.29
2005 2006 Equity Share 125 57.33 573302784 1 57.33

(6) Condition of the company:

The company reported a growth in standalone net profit for the quarter ended December 2008.
During the quarter, the profit of the company rose marginally 18.81% to Rs 1047.20 million
from Rs 881.40 million in the same quarter last year. Net Sales for the quarter rose marginally
30.43% to Rs 6736.00 million, while total income for the quarter rose marginally 30.49% to Rs
6794.5 million, when compared with the prior year period. It posted earnings of Rs 1.21 a share
during the quarter, registering 18.63% growth over previous year period.

(7) Recent developments:

09-JAN-09
The Company joined hands with Disney Consumer Products (DCP) in a character
licensing deal to jointly promote its Dabur Honey squeeze packs.

21-NOV-08
The company acquired 72.15% of Fem Care Pharma (FCPL), a leading player in the
women`s skin care products market, amounting Rs 2.03 bn in an all-cash deal.

21-APR-08
The Burman family promoted Dabur Group decided to divest its entire stake in
DaburPharma to Fresenius Kabi, a business segment of Fresenius SE, a Euro 11.4 Billion
German multinational with business interests across the global healthcare space at a price
of Rs 76.50 a share.

10-MAR-08
FMCG major Dabur India has sponsored Essel group-backed Indian Cricket League`s
(ICL`s) Mumbai Team.

(8) Future Plans:

1) Dabur plans to set up a major manufacturing facility in Pakistan by March 2008. The
company expects revenues of Rs 750 million in the first year of operations in Pakistan. The
project is aimed at tapping the high potential Pakistan and Afghanistan markets for cosmetic,
ayurvedic medicines and health food.

2) Dabur India plans to set up a chain of 300-400 retail outlets, based on the health and beauty
platform, across the country over the next few years. Dabur India is estimated to earmark an
investment of Rs 2 billion for its retail foray. It is expected that the company would roll out the
first few stores by the end of the calendar year.

VADILAL
Company History - Vadilal Industries

YEAR EVENTS

1961 - Vadilal ice-cream Pvt. Ltd. was Incorporated on 12th June, to carry on the business of
manufacture of ice cream candy.

1982 - The Company was incorporated in the name of Vadilal Oxygen Pvt.Ltd, on 28th A
pril to carry on the business of purificationAnd refilling of oxygen gas and selling the same. The
Company'sobjects in Processing of frozen fruits and vegetables andmanufacture of ice cream.

1985 - The Company was amalgamated with Vadilal Oxygen Pvt. Ltd.effective 1st July.
- The company issued 3, 00,000 - 14% secured redeemableConvertible debentures of Rs.130
each as follows.
- (i) 30,000 Debentures to UTI,
- (ii) 15,000 debentures to Employees.
- Balance 2,25,000 Debentures along with 1,15,550 debentures nottaken up under preferential
quota was issued to the public.Additional 45,125 debentures were allotted to retain
oversubscription.
- Part A of Rs.100 of each debenture was to be converted into 4 equity shares of Rs.10 each at a
premium of Rs.15 per shareon the date of allotment of debentures. Accordingly 13, 80,500
shares were allotted.
- Part B of Rs.30 of each debenture was to be redeemed on three fullinstallments of Rs.10 each
at the end of 7th, 8th and 9th year respectively from the date of allotment of debentures.

1989 - Name of the Company was subsequently changed to Vadilal Industries Pvt. Ltd. and it
became a Public Ltd., company from 4th August. It was promoted by Ram Chandra R. Gandhi
and Laxmanbhai R. Gandhi.

1991 - The processed foods and frozen vegetable division commenced activities in May.
- The products such as canned/frozen tropical fruit juices andpulp canned/frozen vegetables are
mainly exported. The commodities division comprises HPS groundnuts, soya bean extraction,
sesameseeds, non-basmati rice etc.

1993 - The ice-cream division had introduced 300 flavours in 600 different packs. The company
entered into a marketing arrangement with a leading Company in U.P. to manufacture andsell the
products under the brand name and as per the qualitystipulated. Similar arrangements are to be
entered into with Companies in Tamil Nadu, Punjab, M.P., and Bengal.

- In future, it was proposed to include extruded products, frozen desserts, low priced varieties
like milk, lilies, mini milk fingers, fruit based ice creams etc.

- The Company proposed to manufacture concentrated fruitjuices pulps aseptically packed with
an annual capacity of 16,200TPA.Also frozen dessert an item containing vegetable fat and
inlowcholesterol was to be manufactured in novelty shapes and bulk packs in various flavours.

- 2,46,500 No. of equity shares of Rs.10 each, issued, subscribedand paid up. 15,53,000 bonus
equity shares issued in prop.3107:493 shares held on 25th November 1989. 13,80,500
sharesallotted in part conversion of 14% second redeemable partlyconvertible debentures.

1994 - Exports of agricultural commodities such as HPS, soybeans natural and hulled sesame
seeds and also vegetable and fruit pulpsrose by 61% to Rs.18.46 crores when compared on an
annualized basis and the overall working was reported to be satisfactory.
 - The company launched low fat calorie ice-cream `Vadilal Lite' in different flavors
manufactured at Ahmedabad, Gujarat.

- The Company undertook to install new machineries for IQF project(for manufacturing
frozen vegetables and fruits) at Dharampur,Dist. Valsad, Gujarat.

- The Company launched mango pulp, mixed fruit and pineapple jam, tomato ketchup sauce,
sweet corn soup (cream style) and bakedbeans.

- The Company installed wind farm unit with total capacity of 1.28MW consisting of 4 Wind
Turbine Generators (WTG) of 320 KW eachand 400 KVA transformer at village Lamba, Dist.
Jamnagar, Gujarat.

- During July, the company issued 15,00,000 No. of equity shares of Rs.10 each at a prem. of
Rs.42.50 per share to promoter group of companies.

- On 23rd July, the company allotted 20,00,000 No. of equity shares of Rs.10 each at a
premium of Rs.37.50 per share to promoters onprivate placement basis.

1995 - The Company was on the lookout for a foreign collaboration.

- Additional WTGs of 320 KW each was installed at villageBhogat,Dist. Jamnagar, Gujarat.

- The company received necessary permission for developing commercial building project name
`Mahalay' off C.G. Road, Navrangpura, Ahmedabad at a cost of Rs.9 crores.

1996 - The company has installed IQF facilities at Dharampur plant at total cost of Rs.6 crores
by using fluidized bed-belt type continuous freezing technology imported from U.K. with
acapacityof process 2 MT of fruits and vegetables per hour.

- The Company has launched Manga/Pulp/Ral, frozen green peas intodomestic market.

Company Background -Vadilal Industries

Industry Name Food Processing - Dairy
House Name Vadilal Group
Joint Sector Name N.A.
Year of Incorporation 1982
Year of Commercial Production N.A.

Regd. Office Address Vadilal House, Shrimali Society,

District Ahmedabad
State Gujarat
Pin Code 380009
Tel. No. 079-26564018
Fax No. 079-26564027
Website: www.vadilalgroup.com
Listing Information
Face Value of Equity Shares 10
Market Lot of Equity Shares 1
BSE Code 519156

FUNDAMENTAL ANALYSIS:

4) Cost of Capital:

EBIT 10.01cr 10.23cr 11.27cr

2009 2008 2007
Cost of Capital0.2807 0.2855 0.3441

Cost of capital
0.4

0.35

0.3

0.25
Ko
0.2

0.15

0.1

0.05

0
2007 2008 2009

 We can say that Vadilal had a high cost of capital before recession, and during the recession
period in 2008 and 2009 Ko is declining.

 The debt increased from 26.56 cr. to 44.89 cr. in the year 2008 and again in the year 2009 it
increased to 54.25 cr.
 In 2009 Vadilal had the attractive cost of capital for the company (weighted average) was the
highest. As we are also seeing that the Debt equity ratio were also the highest at that time we
can conclude a higher cost of equity in that year that attracted equity investment in that year.

Value of the Firm (In Cr.)

40

35

30

25

20

15

10

0
2005 2006 2007 2008 2009

 The value of the firm has increased from year 2005 to year 2008 but it had declined in
year 2009.
 The equity share capital of the company had remained constant over the period of years.
 The fall in value of the firm can be because of rise in expenditure, and increase in interest
rates.

5) Leverage Analysis:
2009 2008 2007

Operating Profit 12.94 cr. 11.42 cr. 12.26 cr.

Sales 147.38 cr. 132.04 cr. 119.11 cr.

2009-2008 2008-2007

Operating Leverage 0.099 -0.084

EBIT 10.01 cr. 10.23 cr. 11.27 cr.

EBT 1.67 cr. 5.04 cr. 1.48 cr.

Financial Leverage 5.99 2.02 1.48

Operating Leverage

Operating Leverage

0.1

Operating Leverage

0
2007-... 2008-...

Financial Leverage
 Financial Leverage
7

4 Financial Leverage

0
2007 2008 2009

 Earlier In the year 2007-2008 operating leverage is lowest that means low proportion of
fixed operating costs in relation to variable operating costs.
 In the year 2008-2009 operating leverage is higher that means a high proportion of fixed
operating costs in relation (proportion) to variable operating costs. From the P&L a/c it is
clearly shown that part of fixed operating cost (Manufacturing Expenses) increased from
16.72 cr. to 20.32 cr. in the year 2009.
 We see that graph of financial leverage constantly increasing over a period of time that
means extent of debt (liability) in capital structure is increasing. From the balance sheet it
is clearly shown that secured loans as well as unsecured loan (debt) are increasing from
34.43 cr. in the year 2007 to 65.83 cr. in the year 2009 on the other hand equity share
capital is same through the year only reserves & surplus are changing.

6) Ratio Analysis:

2009 2008 2007

Profitability Ratio

Net Profit Margin (%) 0.72 2.81 4.61

Return On Long Term Funds (%) 14.63 17.27 24.38
 30

25

20

15 Net Profit Margin (%)

Return on Long Term Funds (%)

10

0
2007 2008 2009

Profitability Ratios - These ratios measure the operating efficiency of the firm and its ability to
ensure adequate returns to its shareholders. The profitability of a firm can be measured by its
profitability ratios.

Net Profit Margin:-A ratio of profitability calculated as net income divided by revenues, or net

profits divided by sales. It measures how much out of every Rupee of sales a company actually
keeps in earnings.Profit margin is very useful when comparing companies in similar industries.
A higher profit margin indicates a more profitable company that has better control over its costs
compared to its competitors.

So we can interpret from the above graph that net profit margin is decreasing year after year, so
we can say that companies sale is increasing but the manufacturing expenses and personnel
expenses proportionally increases more (from 15.49cr. to 20.32 cr.in 2009 and 6.29 cr. to 8.39
cr.in 2009 respectively).

Return on long Term Funds:-This ratio that indicates the efficiency and profitability of a
company's long term funds. The ratio has decreased because they raise funds through secured
loans in previous years during the time of recession and the figure is increased in 2009 by this
amount 56 cr. to 54.44 cr., It shows that company does not uses it long term funds in a better
way.

Fixed Assets Turnover Ratio

 Fixed Assets turnover ratio
2.5

1.5
Fixed Assets turnover ratio

0.5

0
2007 2008 2009

An indicator of how profitable a company is relative to its total assets. Itgives an idea as to how
efficient management is at using its assets to generate earnings. In this graph we can see that the
Ratio was at low rate, it means that company cannot utilizing its resource effectively or they are
not able utilizing the assets in a better manner.
Owners Fund as % of Total Source

Owners Fund as % of total Source

50
45
40
35
30
Owners Fund as % of total Source
25
20
15
10
5
0
2007 2008 2009

Vadilal raising funds through secured loans as well as unsecured loans which lead to decrease in
owners fund in the year 2007 total loan amount is 34.43cr. and in the year 2009 it is increased to
65.83 cr..
LIQUIDITY RATIO

Current Ratio

Current Ratio
2.2

2.15

2.1

2.05

2 Current Ratio

1.95

1.9

1.85

1.8

1.75
2007 2008 2009

Also known as "liquidity ratio", "cash asset ratio" and "cash ratio. The ratio is mainly used to
give an idea of the company's ability to pay back its short-term liabilities
(debt and payables) with its short-term assets (cash, inventory, receivables). The higher the
current ratio, the more capable the company is of paying its obligations The ratio has
continuously increased from 2007-2009 which means that the company meets its current
liabilities in time but however, such a high ratio also indicates that the funds are lying
idle. In the year 2009 inventories increased to 37.00 cr. from 24.38 cr. and debtors were also
increased from 21.92 cr. to 29.59 cr.
Quick Ratio

Quick Ratio
1.15
1.14
1.13
1.12
1.11
Quick Ratio
1.1
1.09
1.08
1.07
1.06
1.05
2007 2008 2009

An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to

meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better
the position of the company. Also known as the "acid-test ratio" or the "quick assets ratio. From
the above graph we can observe that company’s quick ratio is growing year by year so it means
company has good image as a debtor in market and it can meet its short-term obligations with its
most liquid assets. And in the analysis of current ratio it is clearly mention that debtors of the
company increasing day by day.
Inventory Turnover Ratio

Inventory Turnover Ratio

7

4 Inventory Turnover Ratio

0
2007 2008 2009

This ratio indicates decrease in the number of times inventory is replaced during the year. It
measures the relationship between cost of goods sold and the inventory level.A firm should have
neither too high nor too low inventory turnover ratio. Too high a ratio may indicate very low
level of inventory and a danger of being out of stock and incurring high ‘stock out cost’. But
here is good shine that ratio is decreasing towards optimal level.
Conclusion
Current ratio

2.5

2.16

2 1.891.94
1.7

1.5
1.221.27 1.19 1.2
2007-08
2008-09
0.94 2009-10
1
0.77
0.66 0.71
0.6 0.6
0.5
0.5

0
Nestle Vadilal Brittania Dabur Cadboury

By looking at the graph of all the five companies we can observe that the current ratio of Nestle
is almost constant. Vadilal`s current ratio is the maximum among all the companies in all the
three years and was 2.16 in the year 2009-10. Current ratio of Brittania increased marginally
from year 2008-09 in comparison to 2007-08 whereas it has declined in year 2009-10 to 0.94.
For Dabur the ratio has decreased in year 2008-09 in comparison to 2007-08 and it increased in
year 2009-10. For Cadboury the ratio has shown continuous and steep growth, in year 2007-08 it
was 0.5 it increased to 1.2 in year 2008-09 and it was 1.7 in year 2009-10.

So in terms of current ratio Vadilal is having the highest ratio but Cadboury is showing the
maximum growth.
Quick ratio

1.2
1.14
1.08 1.09
1 0.99
0.9
0.8

0.68 0.7 vadilal

0.63 0.65 Brittania
0.6 0.58 Nestle
Dabur
0.43 Cadboury
0.4

0.28
0.23 0.23
0.2
0.1
0
2007-08 2008-09 2009-10

For the quick ratio we can draw the inference that again Vadilal is having the highest quick ratio
of 1.08 which increased to 1.09 and in year 2009-10 it was 1.14. If we see the trend for Brittania
then it was 0.68 in year 2007-08 it declined marginally to 0.65 and it fell sharply to 0.43 in year
2009-10. The quick ratio of Nestle has been almost constant. For Dabur, it declined from year
2007-08 to 2008-09 marginally but it again soared up by almost 70% in year 2009-10. Again as
in current ratio as Cadboury has shown tremendous growth so is in quick ratio it was at the
bottom in year 2007-08 it went up to 0.7 registering a growth of 600%, and in 2009-10 it was 0.9

So again it can be concluded that Vadilal is having the highest quick ratio and Cadboury is
showing good and constant progress.
Operating leverage Analysis
2
1.48 1.4 1.43
1 1.05 1.08 0.97
0.65
0 0.1
-0.08
2007-08 2008-09 2009-10
-1
Vadilal
Brittania
-2
nestle
Dabur
-3 Cadboury

-4

-5 -5

-6

The higher the operating leverage the higher is the risk associated. The higher the degree of
operating leverage, the greater the potential danger from forecasting risk. That is, if a relatively
small error is made in forecasting sales, it can be magnified into large errors in cash flow
projections. The opposite is true for businesses that are less leveraged. A business that sells
millions of products a year, with each contributing slightly to paying for fixed costs, is not as
dependent on each individual sale.

Cadboury is having the highest operating leverage and it is more or less constant over the years.
Operating leverage of Dabur and Nestle is almost the same and it declined 1.05 in year 2007-08
to 0.97 in year 2009-10.

In Brittania we can see that the operating leverage has gone in negative, the reason can be that
there is a fall in operating income.
Financial leverage

6 5.99

4
3.7 Vadilal
Brittania
3 3.14 nestle
2.81
Dabur
2 2.02 Cadboury
1.48
1.24 1.22
1 1.07 1.07 1.04

0 0.11
-0.46
2007-08 2008-09 2009-10
-1

Financial leverage is the extent to which debt (liability) is used in the Capital Structure
(financing) of the firm. Capital Structure refers to the relationship between assets, debt (liability)
and equity. The more debt a firm has relative to equity the greater the financial leverage (these
firms have a higher Debt to Asset ratios). Cadboury is having the highest average financial
leverage though it declined from 3.7 in year 2008-09 to 2.81 for year 2009-10. Vadilal`s
financial leverage was 1.48 in year 2007-08 and it had increased to 5.99 for year 2009-10, but the
capital structure shows that the company is equity financed so the debts are of short term.
Financial leverage of Nestle has almost remained constant as like that of Dabur. Brittania was
having a negative financial leverage in year 2008-09 but had 0.11 in year 2009-10.

As in levered firm there is more risk in comparison to unlevered firm so investment in Vadilal
and Cadboury is more risky.
EPS

2007-08 2008-09 2009-10

79.95 79.48
75.51

64.97

51.51 50.67
45.06

35.43

20.03

7.77
5.29
1.51
Vadilal Brittania Cadboury Nestle

Though Vadilal is having high current and quick ratio. But due to high leverage the EPS of
company is very low. Brittania is having poor ratios and Nestle is also having the same.
Cadboury is showing good ratios and growth and is also having high EPS. So of all the five
Cadboury is the best one to invest in.