Professional Documents
Culture Documents
LIST OF CONTENTS
1 INTRODUCTION 1
1.1 Introduction to the Study 2
1.2 Industry Profile 3
1.3 Company Profile 14
1.4 Research Problem 26
1.5 Objectives of the Study 28
1.6 Research Methodology 30
1.7 Scope of the Study 35
1.8 Limitations of the Study 37
2 REVIEW OF LITERATURE 39
2.1 Fundamental Analysis 40
2.2 Authors Review 42
3 DATA ANALYSIS 45
3.1 Economy Analysis 46
3.2 Industry Analysis 49
3.3 Company Analysis 52
4 FINDINGS, SUGGESTIONS AND CONCLUSION 75
ANNEXURE 86
BIBLIOGRAPHY 93
LIST OF TABLES
1 Economy Analysis 47
2 Operating Profit Margin 53
3 Net Profit Margin 55
4 Earnings Per Share (Basic) 57
5 Earnings Per Share (Diluted) 59
6 Dividend Per Share 61
7 Dividend Payout Ratio 63
8 Return on Equity 65
9 Earning Yield Ratio 67
10 Price to Book value Ratio 69
11 Price to Earnings Ratio 71
12 Intrinsic Value 73
LIST OF CHARTS
CHAPTER I
INTRODUCTION
Motilal Oswal Financial Services Ltd. is a depository participant which is dealing with
share trading, commodity trading, mutual funds and portfolio management. It is one of
the leading stock broking firm in India which is providing online trading facilities to its
customers. The firm has a separate research wing which helps investors by giving
suggestions to buy or sell the scrip. The study cover fundamental analysis on selected
three companies from the Indian FMCG sector on the basis of share volume and market
capitalization. The study was carried on for a period of 21 days.
The stock market occupies a pivotal position in the financial system. It performs several
economic functions and renders valuable services to the economy as a whole. They may
be summarized as below:
The first organized stock exchange in India was started in 1875 at Bombay and it
is stated to be the oldest in Asia. In 1894 the Ahmedabad Stock Exchange was started
to facilitate dealings in the shares of textile mills there. The Calcutta stock exchange
was started in 1908 to provide a market for shares of plantations and jute mills. Then
the madras stock exchange was started in 1920. At present there are 24 stock exchanges
in the country, 21 of them being regional ones with allotted areas. Two others set up in
The Stock Exchanges are being administered by their governing boards and executive
chiefs. Policies relating to their regulation and control are laid down by the Ministry of
Finance. Government also Constituted Securities and Exchange Board of India (SEBI)
in April 1988 for orderly development and regulation of securities industry and stock
exchanges.
There are 23 stock exchanges in India. Among them two are national level stock
exchanges namely Bombay Stock Exchange (BSE) and National Stock Exchange of
India (NSE). The rest 21 are Regional Stock Exchange (RSE). Even though there are
23 stock exchanges in India, increase in turnover took place mostly in the large
exchanges at the expense of smaller ones.
On 31 August 1957, the BSE became the first stock exchange to be recognized by
the Indian Government under the Securities Contracts Regulation Act. In 1980, the
exchange moved to the Phiroze Jeejeebhoy Towers at Dalal Street, Fort area. In 1986,
it developed the BSE SENSEX index, giving the BSE a means to measure overall
performance of the exchange. In 2000, the BSE used this index to open its derivatives
market, trading SENSEX futures contracts. The development of SENSEX options along
with equity derivatives followed in 2001 and 2002, expanding the BSE's trading
platform.
Historically an open outcry floor trading exchange, the Bombay Stock Exchange
switched to an electronic trading system developed by CMC Ltd in 1995. It took the
exchange only fifty days to make this transition. This automated, screen-based
trading platform called BSE On-line trading (BOLT) had a capacity of 8 million orders
per day. The BSE has also introduced a centralized exchange-based internet trading
system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE
platform. The BSE is also a Partner Exchange of the United Nations Sustainable Stock
Exchange initiative, joining in
September 2012.
The National Stock Exchange of India Limited (NSE) is the leading stock exchange of
India, located in Mumbai. NSE was established in 1992 as the first demutualized
electronic exchange in the country. NSE was the first exchange in the country to provide
a modern, fully automated screen-based electronic trading system which offered easy
trading facility to the investors spread across the length and breadth of the country.
NSE has a market capitalization of more than US$1.65 trillion, making it the world’s
12th-largest stock exchange as of 23 January 2015. NSE's flagship index, the CNX
Nifty, the 50 stock index, is used extensively by investors in India and around the world
as a barometer of the Indian capital markets.
NSE was set up by a group of leading Indian financial institutions at the behest of the
Government of India to bring transparency to the Indian capital market. Based on the
recommendations laid out by the Govt. committee, NSE has been established with a
diversified shareholding comprising domestic and global investors. The key domestic
investors include Life Insurance Corporation of India, State Bank of India, IFCI
Limited IDFC Limited and Stock Holding Corporation of India Limited. And the key
global investors are Gagil FDI Limited, GS Strategic Investments Limited, SAIF II SE
Investments Mauritius Limited, Aranda Investments (Mauritius) Pte Limited and PI
Opportunities Fund I.
NSE offers trading, clearing and settlement services in equity, equity derivatives, debt
and currency derivatives segments. It is the first exchange in India to introduce
electronic trading facility thus connecting together the investor base of the entire
The exchange was incorporated in 1992 as a tax-paying company and was recognized
as a stock exchange in 1993 under the Securities Contracts (Regulation) Act, 1956,
when P. V. Narasimha Rao was the Prime Minister of India and Manmohan Singh was
the Finance Minister. NSE commenced operations in the Wholesale Debt Market
(WDM) segment in June 1994. The capital market (equities) segment of the NSE
commenced operations in November 1994, while operations in the derivatives segment
commenced in June 2000.
The Regional Stock Exchanges started clustering from the year 1894, when the first
RSE, the Ahmedabad Stock Exchange (ASE) was established. In the year 1908, the
second in the series, Culcutta Stock Exchange (CSE) came into existence.
During the early sixties, there were only few recognized RSE in India namely Culcutta,
Madras, Ahmedabad, Delhi, Hyderabad, and Indore. The number remained unchanged
for the next two decades. 1980s was the turning point and many RSEs were
incorporated. The latest is Coimbatore Stock Exchange and Meerut Stock Exchange.
The Fast Moving Consumer Goods (FMCG) Industry in India include segments like
cosmetics, toiletries, glassware, batteries, bulbs, pharmaceuticals, packaged food
products, white goods, house care products, plastic goods, consumer non-durables, etc.
The FMCG market is highly concentrated in the urban areas as the rise in the income
of the middle-income group is one of the major factors for the growth of the Indian
FMCG market.
The penetration in the rural areas in India is not high as yet and the opportunity of
growth in these areas is huge by means of enhanced penetration in to the rural market
and conducting awareness programs in these areas. The scopes for the growth of the
FMCG industry are high as the per capita consumption of the FMCG products in India
is low in comparison to the other developed countries. The manufacturing of the FMCG
The FMCG (Fast Moving Consumer Goods) companies have faced tough competition
among themselves over the years which is continuously increasing. This is due to the
increase in per capita income among individuals and also various developments in rural
economy. The FMCG sector has changed its strategies and has opted for a more well-
planned marketing of the products to penetrate both the rural and urban markets. To
execute these tasks, the FMCG companies are hiring more and more people which has
led to an increase in the job prospects in this sector. Thus, FMCG sector is creating
massive employment with good career prospects. Marketing, retail, sales, services and
supply are the key areas which generates maximum career scopes in FMCG Industry in
India.
FMCG sector in the Indian rural market is one of the most booming sectors in Indian
economy. The villages of India account for 12.2% of the world's population. The farm
sector has been one of the significant sectors which boosted the rural economy resulting
in the higher consumption of FMCG products. The consumers in both rural and urban
sectors can afford high-priced branded products nowadays with the high disposable
income. The FMCG sector in India has grown significantly in the year 2007 and this
gave rise to huge prospects in the sector. The rural and urban sectors fared equally well
in the processed food items in the year 2007. The rural market separately performed
well in the personal care, fabric care, and hot beverages while the urban market did well
in home care, personal care, bakery, dairy products, and the like.
India's huge population has always been a significant factor for the growth of FMCG
sector in the country. Between 1950 and 1980, the consumption of FMCG products
were relatively low due to the low per capita income. The post-liberalization era in India
has witnessed a massive growth in the selling of products in the domestic market. The
Indian market also imported loads of products from overseas markets which made
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increased the competition between the organized and the unorganized sector.
The easing of the trade barriers encouraged the MNCs to invest in the Indian market to
cater to the needs of the consumers. The living standards rose in the urban sector due to
high disposable income along with the rise in the purchasing power of the rural families
which increased the sales volume of various manufacturers of the FMCG products in
India. The large-scale companies such as HLL, Godrej Consumer, Marico, Henkel,
Reckitt Benckiser and Colgate have targeted the rural consumers and have also
expanded their retail chain in the mid-sized towns and villages. On the contrary to this,
Nestle has always targeted the market of urban India and focuses largely upon the value
added products for the elite class or upper middle class population.
MNCs in FMCG Sector in India are doing very good business. The major FMCG
companies in India are mostly Multi-National Companies (MNC), such as Nike,
Reebok, Puma, Pepsi Co, L'Oreal, etc. The experts believe that in the future the MNCs
would dominate the FMCG sector India. The FMCG market consists of products such
as personal care products, toiletries products, cosmetics products, house care products,
white goods, etc. The market is expected to witness the emergence of large players.
TOP 10 COMPANIES
According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned
by MNCs, and the balance by Indian companies. Fifteen companies own these 62
brands, and 27 of these are owned by Hindustan Unilever.
There is stiff Competition in the FMCG sector in India and the competition is expected
to increase in the coming years. FMCG sector in India is most likely to witness more
than 50% growth in the semi-urban and rural areas in India by the year 2010 according
to the reports of the Associated Chambers of Commerce and Industry of India
(Assocham) of July 2005. The sector is estimated to grow by 10% per year and reach a
market size of ` 100,000 crores by 2010 from 48,000 crores in 2005.
The people of both rural and urban regions in India are consuming high volume of fast
moving consumer goods these days due to the higher disposable income. This has led
to a surge in the setting up of a number of FMCG companies in India to meet the rising
demand of the consumers. The rural market has grown significantly over the years. The
FMCG companies which have grown significantly in India in the last few years are
Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola, and Pepsi.
RECENT DEVELOPMENTS
Finance Minister, Mr. P. Chidambaram declared several tax sops for the FMCG
sector in India along with putting due emphasis on the infrastructure developments
in the same.
The usual growth drivers such as penetration, per capita consumption, population,
and household income were quite strong in 2007 and also the consumption of the
FMCG products has been increased outstandingly in 2007.
Biscuits worth ₹ 50 per kilogram are fully exempted from excise duty, customs duty
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on food processing machineries were reduced from 7.5% to 5%, excise duties on
food mixes were reduced from 16% to 8%, and taxes were reduced on edible oils.
ITC, Dabur, HUL and Marico were directly benefited from these.
The consumption of health and personal care products in FMCG sector has increased
in the recent past with rise in disposable income especially among the youth group
in India.
GROUP STRUCTURE
MOTILAL OSWAL SECURITIES LTD. MOTILAL OSWAL INVESTMENT ADVISORS PVT. LTD.
Institutional Equities Broking & Distribution Investment Banking
MOPE INVESTMENT ADVISORS PVT LTD. MOTILAL OSWAL ASSET MANAGEMENT CO. LTD.
Private Equity Real Estate PMS Mutual Funds Offshore Funds
In March 2006, AQ Research, a firm that analyses the accuracy of a broker’s research
call, declared Motilal Oswal Securities the best research house for Indian stocks.
Research is the solid foundation on which Motilal Oswal Securities advice is based.
Motilal Oswal Securities Limited (MOST) has established itself as the Most
Independent Research - Local Brokerage (Asia Money Brokers’ Poll 2006). Its
Institutional Equities Division combines the efforts of our Research and Sales &
Trading departments to best serve clients' needs. It believes it is its unflinching
commitment to providing superior client service that makes us stand out. They have a
dedicated research team, which is engaged in analyzing the Indian economy and
corporate sectors to identify equity investment ideas. They staunchly practice the value-
investing philosophy and advise investors to take a long-term view of equity
investments. Consistent delivery of high quality advice on individual stocks, sector
trends and investment strategy has established us as a reliable research unit amongst
leading Indian as well as international investors. Our sales & trading team comprising
top equity professionals, translates the research findings into actionable advice for
clients, based on their specific needs. Each of our sales personnel has significant
experience in equity research. Sophisticated computerized tools are used to understand
client investment profile and objectives, which ensures proactive and timely service.
Integrity
A company honoring commitment with highest ethical and business practices.
Team Work
Attaining goals collectively and collaboratively.
Meritocracy
Performance gets differentiated, recognized and rewarded in an apolitical
environment.
Excellence in Execution
Time bound results within the framework of the company’s value system.
PRODUCT/SOURCE OF INCOME
Murli
_ Krishnan
Iyer
(Company
Secretary)
Vivek Raamdeo
Paranjpe Agarawal
(Non-
(Joint
Executive
Managing
Independent
Director)
Director)
Motilal Oswal
(Chairman & MD)
Praveen Navin
Tripathi Agarwal
(Non- (Non-Executive
Executive Non-
Independent Independent
Director) Director)
Sharda
Agarwal
(Non-
Executive
Independent
Director)
CORPORATE GOVERNANCE
o The Board currently consists of 7 Directors with more than 50% composition
of Independent Directors (4 Independent Directors and 3 Non Independent
INDEPENDENT DIRECTORS
o Mr Praveen Tripathi is the CEO of Magic9 Media & Consumer Knowledge Pvt
Ltd. He is the Chairman of the National Consumer Classification System
Committee and has also worked with Pidilite, Hansa Consulting, Zenithmedia,
Starcom/Leo Burnett etc.
Type : Public
Traded as : BSE: 500696 BSE SENSEX Constituent
Industry : Consumer goods
Founded : 1932
Headquarters : Mumbai, Maharashtra, India
Key people : Harish Manwani (Chairman), Sanjiv Mehta (CEO and MD)
Products : Foods, beverages, cleaning agents, personal care products
and Water purifiers.
Revenue : ₹ 30,170 crores (2014-15)
Net income : ₹ 4,315 crores (2014-15)
Number of employees : 18,000 (2014)
Parent : Unilever Plc (67%)
Website : www.hul.co.in
HUL was established in 1933 as Lever Brothers and, in 1956, became known as
Hindustan Lever Limited, as a result of a merger between Lever Brothers, Hindustan
Vanaspati Mfg. Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai, India
and employs over 16,000 workers, whilst also indirectly helping to facilitate the
employment of over 65,000 people. The company was renamed in June 2007 as
"Hindustan Unilever Limited”. Hindustan Unilever's distribution covers over 2 million
retail outlets across India directly and its products are available in over 6.4 million
outlets in the country. As per Nielsen market research data, two out of three Indians use
HUL products.
PRODUCTS
Food
MAJOR BRANDS
Type : Public
Traded as : BSE: 500875 NSE: ITC BSE
SENSEX Constituent CNX Nifty Constituent
Industry : Conglomerate
Predecessor : W.D. & H.O. Wills
Founded : August 24, 1910 (as Imperial Tobacco Company of India)
Headquarters : Kolkata, West Bengal, India
Key people : Y C Deveshwar, (Chairman)
Products : Tobacco, hotels, paperboards &specialtypapers,packaging,
agri- business, packaged foods &confectionery, IT, branded
a apparels, personal care, stationery, safety matches and other
F FMCG proudcts.
Revenue : ₹ 51,932 Crores (US$ 8.31 billion) (2013-14)
Operating income : ₹ 13,051.89 Crores (US$ 2.11 billion) (2013-14)
Net income : ₹ 8,990.62 Crores (US$ 1.45 billion) (2013-14)
Total assets : ₹ 39,929 Crores (US$ 6.47 billion) (Mar 2014)
Total equity : ₹ 26,262.02 Crores (US$ 4.27 billion) (Mar 2014)
Number of employees : 25,959 (Mar 2013)
Divisions : ITC Infotech, Surya Nepal Pvt. Ltd.
Website : www.itcportal.com
PRODUCTS
Cigarettes
Food
Lifestyle apparel
Personal care
Stationary
Safety matches and Agarbattis
Hotels
Paperboard
Packaging and Printing
Information Technology
MAJOR BRANDS
Ashirvad Yippee!
John Players Mint-o
Will Lifestyle Classmates
Vivel Superia
B natural Fiama Di Wills
Sufeast Bingo!
Gum-o Gold Flake Kings
Candyman Aim
Mangaldeep Engage
WelcomHotel Wills Navy Cut
COMPANY OVERVIEW
PRODUCTS
Edible Oils
Hair Oils
Skin Care
Fabric Care
MAJOR BRANDS
Secondary Objectives
1. To select the best performing company among the selected three companies.
2. To know about the FMCG sector in India.
3. To check whether fundamental analysis alone can evaluate investment
opportunities in the share.
4. To forecast the future performance of the selected companies.
5. To recognize the suitability of the shares for investment in long term.
The FMCG companies which satisfied the following criteria have been selected. The
criteria are:
o FMCG companies listed in security market.
o Availability of data for a period of three years.
o Accounting year must be from April to March.
The study is based on the secondary data. The audited financial statements of the
companies are the main source of data. The major data sources used in this study are:
o Annual Reports of Companies
o Websites
o Journals
o Magazines
o Reference Books
1. RATIOS
The operating profit margin indicates the profit of the company after depreciation, but
before interest and taxes are deducted from the earnings.
Operating profit margin = Operating profit / Revenue
= EBIT / Revenue x 100
Net profit margin measures the amount of profits available to shareholders after
depreciation, interest and taxes are deducted from the earnings.
Net profit margin = Net profit / Revenue x 100
This ratio indicates the profits available to equity share holders per share, this helps
to determine the market price of equity shares.
Earnings per Share = Profit after Tax / No. of equity shares.
The amount of profits distributed to shareholders per share is known as DPS and may
be calculated as follows:
Dividend per Share = Amount declared as dividend / No. of equity shares.
The DP ratio is the ratio between the DPS and EPS of the firm, i.e., it refers to the
proportion of the EPS which has been distributed by the company as dividends.
Dividend payout ratio may be calculated as follows:
The PE Ratio indicates the expectations of the equity investors about the earnings of the
firm. The PE ratio is one of the most widely used measures of financial analysis in
practice and is calculated as follows.
Price to Earnings ratio = Market Price per Share /Earnings per Share.
The RoE examines profitability from the perspective of the equity investors by relating
profits available for the equity share holders with the book value of the equity
investment.
Return on Equity = Net Income/Shareholder's fund
The yield is defined as the rate of return on the amount invested. With the reference to
equity shares, the yield may be defined as the rate of return on the market piece of equity
shares.
Earnings Yield Ratio = Earnings per share / Market price per share.
The book value of a share provides a floor below which the market price of a share is
not expected to fall. Shares which have lower PB Ratio may be considered as a ‘safer’
investment and vice versa.
Price to Book Ratio = Market price per share/Book value per share.
2. INTRINSIC VALUE
The actual value of a company or an asset based on an underlying perception of its true
value including all aspects of business in terms of both tangible and intangible factors.
The value may or may not be same as the current market value. The true economic
worth of the share is its intrinsic value. The fundamental analyst finds out intrinsic value
of a share by using the formula:
Intrinsic Value = Earnings per share x Price to Earnings ratio.
1. Bar diagram
2. Tabular presentation
o External factors may adversely affect the industry as well as its share price. E.g.
o The present study uses ratios as an important tool of analysis which itself has a
number of limitations on its applicability.
CHAPTER II
REVIEW OF LITERATURE
FUNDAMENTAL ANALAYSIS
ECONOMY COMPANAY
ANALYSYIS INDUSTRY ANALYSYIS
ANALYSYIS
Economic analysis deals with the analysis of operating in the overall economy. In
security analysis, the expected course of the economy must be inquired into because
overall economic conditions and economic activities affect corporate profits and
investors’ expectations and thereby affect the security prices in decisions. Investors
consider those variables of the economy, which affect the performance of the company
in which they tend to invest.
In this study the growth of consumer goods industry is analyzed by comparing sales
volume, expenditure, profit and income of the industry. A SWOT analysis of the FMCG
industry also done in this study.
The investor should identify the leading competitive companies in each industry since
this is where good investment values will be found. Company analysis attempts to study
the various factors affecting and indicating the performance of a company, such as,
competitive position of the company, quality of management, technology, product
analysis, brand image and market share, marketing strategy, etc.
Company financial analysis is the process of identifying the financial strengths and
weaknesses of a company by properly establishing the relationship between the items
of balance sheet, profit and loss account and other financial statements. The most
powerful tools of financial analysis is ratio analysis. This study used the different ratios
and intrinsic valuation model.
Fundamental Analysis of Korean Stock Returns” in their article examined about the
relation between stock return and fundamental variables in Korean firms annual stock
returns during the period of 1982-83. The study found that stock returns are positively
related to book-market ratio, sales-price ratio and debt-equity ratio. It is also found that
return is negatively related to firm size and not significantly related to earnings price
ratio. They suggested that book-market and sales-price ratios are more efficient
“Fundamental Analysis of Price on Chinese Steel Products” in his paper considered five
fundamental factors such as price index of steel product, Gross National Product,
exchange rates, interest rates, imports and exports are influencing over the price of steel
products. A hedonic function model was applied which reflects the relation between
prices of varieties of heterogeneous goods and empirical tests applied by using Chinese
annual data for the year 1978. Study found that the above said variables are influencing
at 62 per cent over the steel price. The price index and Gross Domestic Product have
positive significant relation which depicts that higher the price index and Gross
Domestic Product, higher the steel price. The exchange rate have negative impact over
the steel price, the interest rate does not have influence over the steel price and finally
it is found that import and export influence the steel price of the product.
“Fundamental Analysis, Future Earnings and Stock Prices”, in their study examined the
relationship between accounting based fundamental signals and future earnings of
security prices. They applied multiple regression analysis to analyze the data. The study
found that investors are not completely relying on the information given by the analyst.
They also found that the variables such as Gross Domestic Product, inflation, firm
CHAPTER III
DATA ANALYSIS
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INTERPRETATION
The Table 1 represents the major economic indicators of our country which helps to the
investors to make economic analysis towards investments. Gross Domestic Product
indicates the rate of growth of the economy. The GDP of India during the period of
2013 to 2015 is increasing, which means the economy is growing. The highest growth
rate of GDP is more favorable to the stock market.
Gross National Product represents the aggregate value of goods and a service produced
in a country which shows an increasing trend at the growth rate of 4.8% in 2013, 6.8%
in 2014 and 7.4% in 2015, it represents the economic condition of a country which is
going upward.
During the year 2010 inflation rate shows as 10.9 per cent which was increased due to
the shortfall of domestic production vis-à-vis demand and hardening of international
prices, prices of primary commodities, especially rise in prices of food products.
However, in 2015 the inflation rate is reduced to 6.4 per cent.
The Interest rate is increased which helps to encourage the saving habit of an individual.
Interest rates on deposits rate was highest in 2014 among the study period, it was 8 per
cent. Interest rate suddenly downed to 6.75 in 2015.
The exchange rate indicates the stability of economic growth of a country. The
exchange rate shows fluctuating trend from 61.83 to 66.16. It’s clearly shows that the
value of rupee is decreasing when comparing to the US dollar. Foreign exchange reserve
helps to preserve currency stability and reduce economic distresses. Foreign exchange
reserve shows high trend during the period of 2013-15.
The government expenditure exceeds over the receipts, the receipts and there is a small
difference in between these two; in future it can be controllable due to effective money
to develop our infrastructural activities economic policy. The government spent more
because; once the infrastructure is developed it leads to potential economic growth.
India’s FMCG sector reported steady sales Compound Annual Growth Rate of 11.2 per
cent over the financial year 2000-11 on the back of strong annual volume growth of 8.5
per cent. Growth is being driven by increasing consumption led by a rise in incomes,
changing lifestyles and favorable demographics. The industry is poised to grow at
Compound Annual Growth Rate between 10 to 12 per cent annually. The annual profit
of FMCG sector $14.74 billion. Total market size in excess of US $30 billion in the
year 2011. The market growth rate of FMCG industry in rural and urban areas is 40 per
cent and 25 per cent, respectively. Average Indian spending on groceries and personal
care is 48 per cent. (Groceries 40 per cent and personal care 8 per cent). According to
FICCI-Techno-park report, the implementation of the proposed GST and opening of
FDI is expected to fuel growth of industry size to $47 billion (₹2,25,000 Crore) by 2013
and $95 billion (₹4,56,000 Crore) by 201814. The growth of the FMCG sector is
presented in the Table 2 represents the total income, expenditure, sales and Profit earned
after tax. Sales and Profit indicate the growth of the sector. FMCG industry shows that
total income and sales has increased over the years except during the last year. The
profit after tax is also showing an increasing trend which represents the industry has
attained maximum profit during the study period. Hence, the FMCG sector has high
potential growth; the investors have also attained a high rate of return on their
investments.
Strengths
Weaknesses
1. Lower scope of investing in technology of small scale sectors.
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2. Low export levels.
3. Illegal duplicate labels of the established brands of FMCG product reduced the
scope in rural and semi-urban market.
Opportunities
Threats
Table 2
OPERATING PROFIT MARGIN (OPM) OF THREE COMPANIES
Chart 1
40 36.9
36.8
34.6
35
30
25
18.8 19.6
20 17.5
14.6 14.2
15
11.9
10
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
The profit of the Hindustan Unilever Ltd. after depreciation, but before the
deduction of interest and tax is keeping a steady position between the ratio of
15.0 and 20.0. It’s at the highest position in 2015. It shows that the company
have a tendency of profitability increment or to have the ability to keep a
balanced state.
ITC Ltd.
The above table and graphical presentation shows that the operating profit
margin of the ITC Ltd. is very higher when comparing with other two companies.
It is double than them in every year. In the period of study, company keeping its
operating profit ratio above 30.00. In 2013 it is 34.6, in following year it’s
increasing and reached at 36.9 in 2015.
Marico Ltd.
When analyzing the operating profit margin of the Marico Ltd. it shows that the
company reached at its highest operating profit in 2014. In 2015 it gained 14.2
of operating profit. It reveals that the company is on its way to achieve the
shareholders objectives.
Table 3
NET PROFIT MARGIN (NPM) OF THREE COMPANIES
Chart 2
30
25.58 25.25
25 24.05
20
14.37
15 13.5 13.73
10.23 9.9
10 8.54
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
The net profit margin of the Hindustan Unilever is remaining at constant position
in the given period. The company keeping a good net profit margin in the given
years. However it shows a slight decrease in 2014 from 14.37 to 13.5.
ITC Ltd.
As the operating profit margin, also the net profit margin of the ITC Ltd. is
highest among the studying companies. In 2013 it was 24.05. In the following
years it’s keeping a balanced state around 25.00. It shows that the management’s
profit earning efficiency is very higher.
Marico Ltd.
In the case of Marico Ltd. the net profit margin indicates a fluctuating trend. The
company has a sharp decline in the last year when compared to the previous year.
Table 4
EARNING PER SHARE - EPS (BASIC) OF THREE COMPANIES
Chart 3
25
19.95
20
17.56 17.88
15
12.05
11.09
9.45
10 8.89
7.53
6.18
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
ITC Ltd.
Basic earnings per share of the ITC Ltd. also increasing in year to year. If the
EPS of a company is higher the market value of the share will also be higher in
the stock market. The increasing trend of the EPS of ITC Ltd. is good to rise the
demand for the share in the stock market.
Marico Ltd.
When compared to the Earnings per share of the other companies it had a low
EPS in the period. However, Marico also shows the increasing trend in their
earning per share. It will be a hope to their shareholders.
Table 5
EARNING PER SHARE - EPS (DILUTED) OF THREE COMPANIES
Earnings per Share = Profit after Tax / No. of equity shares + Other
Convertible Instruments
Chart 4
25
19.94
20
17.55 17.87
15
11.93
10.96
9.33
10 8.89
7.53
6.17
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
When all convertible securities are exercised there is a slight change can be found
in the earnings per share of the Hindustan Unilever Ltd. It’s only the 0.01in each
year.
ITC Ltd.
Diluted Earnings per share of the ITC Ltd. showing that the company have more
convertible securities. There is a greater change when compared to other
companies. The greater fluctuations in the basic and diluted EPS hint that the
convertible securities will be more.
Marico Ltd.
There is no fluctuations in the basic earnings per share of the Marico Ltd. in the
recent two years. That’s means there was no convertible securities in the firm
during the years. In the first year Marico had a slight different in the basic and
diluted earnings per share of the company.
Table 6
DIVIDEND PER SHARE (DPS) OF THREE COMPANIES
Chart 5
20 18.5
18
16 15
14 13
12
10
8
6 6.25
6 5.25
4
4 2.5
2 1
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
The dividend paid to the equity shareholders of the Hindustan Unilever is very
high when compared to other companies. It was at peak in 2013. In the 2014 it
shows a tremendous decline in the dividend paid to the shareholders.
ITC Ltd.
The above table and graph shows that the dividend per share of the ITC Ltd. is
little increasing in all the years. When considering the all the three years we can
say that the company is keeping a stable rate. Which is beneficial to the investors
of the company.
Marico Ltd.
In 2013 DPS of the company was very low. In the following years it shows a
rapid increase in the dividend paid to the shareholders. But in the 2015 it again
fallen.
Table 7
DIVIDEND PAYOUT RATIO OF THREE COMPANIES
Chart 6
120
105.71
100
80 72.71 75.19
40
28.12
20 16.18
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
ITC Ltd.
ITC Ltd. was kept a stability in the distribution of dividend to its shareholders
during this period. A stable DPR is favorable to the short term investors.
Marico Ltd.
Table 8
RETURN ON EQUITY (RoE) OF THREE COMPANIES
Return on Equity = Net Income/Shareholders fund
Chart 7
1.6
1.43
1.4
1.18 1.16
1.2
0.8
0.6
0.36
0.4 0.33 0.33 0.31 0.31
0.2
0.2
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
ITC Ltd.
A stable RoE is good for the shareholders. The ITC Ltd. offer a stable return on
equity in these years. But it slightly declined in the last year.
Marico Ltd.
The return on equity of Marico was faced a rapid growth in the 2014. But it was
declined in the next year. This fluctuating RoE is not favorable to the
shareholders.
Table 9
EARNING YIELD RATIO OF THREE COMPANIES
Earnings Yield Ratio = Earnings per share / Market price per share.
Chart 8
0.035
0.0302
0.03 0.0284
0.0257 0.0256 0.0258
0.025 0.0227
0.0218
0.0207
0.0193
0.02
0.015
0.01
0.005
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
ITC Ltd.
The above data shows that the Earning yield ratio of the ITC is very high in the
period. In every year it’s increasing.
Marico Ltd.
Earning yield ratio of the Marico is showing a declining trend. In 2013 Marico
was highest among companies. But it was started falling in the following years.
Table 10
Chart 9
60 55.17 54.09
50
40
30
21.11
20 15.13
13.09 11.81 10.83 10.37
10 7.74
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
The PB Ratio of the Hindustan Unilever is very high in the first two years. But
it was suddenly fallen in the last year. This decline is favorable to the
shareholders of the company. Because, shares which have lower PB Ratio may
be considered as a ‘safer’ investment and vice versa.
ITC Ltd.
When comparatively looking, ITC Ltd. kept a stable Price to book value ratio.
However above table shows slight declines in the ratio year to year. This decline
is good for the shareholders.
Marico Ltd.
The above table and graph shows that PB Ratio of Marico Ltd. is increasing in
every year. It was 7.74 in 2013 to 15.13 in 2015.
Table 11
Chart 10
60
51.07
50 48.3
45.83
44
38.87 39.07 38.67
40 35.17
33.02
30
20
10
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
The above table and graph shows that PE Ratio of the Hindustan Unilever Ltd.
is increasing in the period. It indicates that the investors expecting an increased
earnings from the firm.
ITC Ltd.
Data showing a decreasing trend towards the price to earnings ratio of ITC Ltd.
This trend is not favorable to the investors of the company. They expecting a
higher PE ratio.
Marico Ltd.
Marico shows a high performance in the PE Ratio. They were in last position
among others in the first year. But in the last year Marico is at the first position.
This trend is a good for the investors.
Table 12
INTRINSIC VALUE OF THREE COMPANIES
Intrinsic Value = Earnings per share x Price to Earnings ratio.
Chart 11
1200
1000 963.59
819.44
800
682.56
600
459.61
390.03 397.9
369.21
400 331.32
238.98
200
0
2013 2014 2015
INTERPRETATION
HUL Ltd.
When considering all factors such as tangible and intangible factors, the value of
the share of Hindustan Unilever is showing an increasing trend in the period.
However the data shows that there is no large variations in the market price and
intrinsic value of shares of HUL Ltd. However, the there is a slight increment in
2013 and 2015.
ITC Ltd.
There is a slight change in the intrinsic value when comparing to the market price
of the share of ITC Ltd. in 2015. The above table and chart shows a stable
intrinsic value towards the share of the ITC Ltd. There was no effective growth
in this period.
Marico Ltd.
The intrinsic value of share of Marico Ltd. is lower than the market price of share
in 2013. There is no difference between market price and intrinsic value in the
following years.
CHAPTER IV
FINDINGS, SUGGESTIONS
AND CONCLUSION
4.1. FINDINGS
ECONOMY ANALYSIS
o The India’s FMCG sector reported a high growth during the study period.
o The SWOT analysis discloses that the strength of FMCG sector in India
is the low operating cost when compared to other countries.
o The major threats are tax and regulatory structure of our country.
o ITC LTD.
4.2. SUGGESTIONS
o The Government could regulate inflation rate which creates the path to the
economic development. Once the inflation rate is controlled the people have
sufficient money and they have a chance to invest their money in the securities
market.
o The exchange rate of Rupee could control to increase the total export from the
country. It will enrich the economy.
o The Government should simplify the tax and regulations related with the FMCG
sector.
o The FMCG sector could improve the R&D department and implement new
technology which helps to meet domestic as well as foreign competition. The
government could provide tax concession for rural marketers.
o Companies could try to increase the generation of profit for providing a better return
to its shareholders.
o DPS ratio of the companies shows that the dividend declared by the companies are
decreasing in the recent years. So the companies could declare more dividends in
their interim dividend declaration to attract more investors.
o Picking stocks with market prices below their intrinsic value can help in saving
o The intrinsic value of HUL Ltd. is slightly higher than its market price in 2013 and
2015. So this project recommends a buy strategy. If the investor already has the
shares they are advised to hold it and sell it in the future to earn profit.
o The intrinsic value of ITC Ltd. is showing a slight increment in 2015, Further the
company also shows a steady growth rate. So the share is recommended for
investment.
o The intrinsic value of Marico Ltd. is slightly lower than the market price of share in
a year, hence the Profitability ratios, DPS and PB ratio of the company is low in the
study period there is no hope to increase the intrinsic value in the future. So the
investor can either hold it for a shorter period and or sell it in the next market if he
holds the share, if not it is not recommended for a buy.
4.3. CONCLUSION
This study focuses on fundamental analysis using various tools which help in trading
strategies for risk reduction and maximization of return. The objective of the study is to
conduct Fundamental analysis listed FMCG companies and the SWOT analysis for the
FMCG industry. The study revealed that through economic analysis the Gross Domestic
Product, Gross National Product, Interest rate, Foreign exchange reserves, Government
Receipts and Expenditure has a positive growth rate during the study period. Hence,
investors may consider these factors before going to make investment.
From the industry analysis found that the India’s FMCG sector reported a high growth
rate and its profit and sales also shows increasing trend during the study period. The
SWOT analysis discloses that the strength of FMCG sector in India is the low operating
cost, huge population is the opportunity, Lower scope of investing in technology
especially of small scale sectors is the major weakness and major threats are tax and
regulatory structure of our country.
The company analysis done with the help of ratio analysis and intrinsic value method
indicates that Hindustan Unilever Ltd. and ITC Ltd. are financially in satisfactory
position during the study period. When analyzing profitability ratios of both companies
ITC is earning more profits. However, HUL Ltd. offering more return on investment to
their shareholders.
ANNEXURE
EXPENSES
Cost of materials consumed 11867.31 11159.81 10284.66
Purchase of stock-in-trade 3697.96 3350.19 3235.31
Changes in inventories of finished goods s 58.28 (166.38) (31.13)
c (including stock-in-trade) and work-in-
progress
Employee benefits expenses 1578.89 1435.95 1318.34
Finance costs 16.82 36.03 25.15
Depreciation and amortization expenses 286.69 260.55 236.02
Other expenses 8394.94 7764.30 6999.28
TOTAL EXPENSES 25900.89 23840.45 22067.63
Gross Revenue from sale of products & services 49964.82 46712.62 41809.82
Less: Excise duty 13881.61 13830.06 12204.24
Net Revenue from sale of products & services 36083.21 32882.56 29605.58
Other operating revenue 424.19 356.04 295.69
Revenue from operations 36507.40 33238.60 29901.70
Other income 1543.13 1107.14 938.70
TOTAL REVENUE 38050.53 34345.74 30839.97
EXPENSES
Cost of materials consumed 10987.83 10263.28 8936.21
Purchase of stock-in-trade 3898.66 3021.47 3375.92
Changes in inventories of finished goods, work- (214.53) (128.41) (246.35)
in-v progress, stock-in-trade and intermediates
Employee benefits expenses 1780.04 1608.37 1387.01
Finance costs 57.42 2.95 86.47
Depreciation and amortization expenses 961.74 899.92 795.56
Other expenses 6581.85 6019.05 5820.97
TOTAL EXPENSES 24053.01 21686.63 20155.79
MARICO LIMITED 0
Consolidated Profit and Loss Statement
(All amounts in ₹ Cr. unless otherwise stated)
Particulars 2015 2014 2013
Revenue From Operation (Gross) 5741.23 4693.21 4598.98
Less: Excise duty 8.25 6.69 2.80
Revenue from operations (net) 5732.98 4686.52 4596.18
Other income 58.89 58.20 37.53
TOTAL REVENUE 5791.87 4744.72 4633.71
EXPENSES
Cost of materials consumed 3118.88 2242.48 2220.79
Purchase of stock-in-trade 109.69 111.47 116.60
Changes in inventories of finished goods, (109.53) 45.21 (127.46)
work-in- progress, stock-in-trade and
intermediates
Employee benefits expenses 325.14 285.01 370.29
Finance costs 22.95 34.45 58.02
Depreciation and amortization expenses 84.34 76.86 86.62
Other expenses 1418.75 1254.66 1390.18
TOTAL EXPENSES 4970.22 4050.14 4115.04
ITC LIMITED
Consolidated Balance Sheet
(All amounts in ₹ Cr., unless otherwise stated)
MARICO LIMITED
Consolidated Balance Sheet
(All amounts in ₹ Cr., unless otherwise stated)
Particulars March 2015 March 2014 March 2013
EQUITY AND LIABILITIES
Shareholder’s Fund
Share Capital 64.50 64.49 64.48
Reserves and Surplus 1760.28 1296.14 1917.02
1824.78 1360.63 1981.50
Minority Interest 13.65 35.79 35.14
Non-Current Liabilities
Long-term borrowings 168.74 251.54 432.63
Differed tax liabilities(net) 7.88 9.62 5.79
Other long-term liabilities - 0.01 0.98
Long-term provisions 8.65 3.31 10.47
185.27 264.48 449.87
Current Liabilities
Short-term borrowings 165.43 274.35 358.08
Trade payables 564.32 502.52 478.74
Other current liabilities 276.53 444.81 293.63
Short-term provisions 95.30 82.37 110.54
1101.58 1304.05 1240.72
TOTAL 3125.28 2964.95 3707.23
ASSETS
Non-Current Assets
Fixed assets
Tangible assets 556.67 594.90 461.18
Intangible assets 30.10 38.46 813.58
Capital work-in-progress 3.04 4.39 147.68
589.81 637.75 1422.44
Goodwill on consolidation 489.15 254.25 395.52
Non-current investments 45.75 49.86 38.03
Long-term loans and advances 50.63 60.93 119.39
Other non-current assets 120.77 155.03 142.62
1296.11 1157.82 2118.00
Current Assets
Current investments 238.05 260.67 113.60
Inventories 994.71 796.24 862.69
Trade receivables 176.75 223.19 196.55
Cash and bank balances 204.94 406.40 266.75
Short-term loans and advances 179.13 86.47 136.08
Other current assets 35.59 34.16 13.56
1829.17 1807.13 1589.23
TOTAL 3125.28 2964.95 3707.23
BIBLIOGRAPHY
WEBLIOGRAPHY
http://motilaloswal.com http://statisticstimes.com
http://data.worldbank.org http://www.global-rates.com
https://www.rbi.org.in http://www.nseindia.com
http://www.investopedia.com http://www.bseindia.com
http://money.rediff.com http://www.wikipedia.com
http://www.moneycontrol.com http://info.shine.com
http://finmin.nic.in