A

SUMMER TRAINING REPORT

ON

INVESTMENT PATTERN OF BIRLA SUNLIFE IN

SELECTED COMPANIES OF FMCG SECTOR

Submitted in partial fulfillment for the award of

Degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted By;
Name-Aditya Garg
Roll no-.104

Submitted to;

University School Of Management

Kurukshetra University
Kurukshetra

1
 CONTENTS

Preface
Acknowledgement
Declaration
Organization certificate
Executive summary
S.No Chapter Name Page no
1 Industry Profile 7
2 Company profile 12
3 Research Methodology 22
3.1 Objective of the study 24
3.2 Nature of the study 24
3.3 Sampling procedure and design 24
3.4 Method of data collection 25
3.5 Techniques of data Analysis 26
3.6 Scope of the study 29
3.7 Significance of the study 29
3.8 Limitation of the study 29
4 Study of the topic 30
5 Analysis and interpretation 32
6 Finding 49
7 Suggestions 51
8 Bibliography 53
9 Appendix

PREFACE
2
Internship is the integral and basic requirement of all the business programs because it is the
practical implication of the theoretical knowledge which we have taught in are subjects to
gain further knowledge and experience about professional business activities. This is
basically designed to expose the students of in the real life situation of organization.

It equips us with the necessary knowledge, skill and value of business culture which are
basic requirement of the business professional and which also helps new graduate to perform
professionally as the get first step in there practical professional life. This helps the students
in developing the decision-making abilities. To develop healthy managerial and
administrative skills of potential managers.

ACKNOWLEDGEMENT

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I am using this opportunity to express my gratitude to everyone who supported me
throughout the course of ‘INVESTMENT PATTRENS OF BIRLA SUNLIFE IN
SELECTED COMPANIES OF FMCG SECTOR’ project. I am thankful for their aspiring
guidance, invaluably constructive criticism and advice during the project work. I am sincerely
grateful to them for sharing their truthful and illuminating views on a number of issues
related to the project.

I express my warm thanks to Mr. Ranchit Dhingra for his support and provided all the
facilities being required and conductive conditions and guidance at Birla Sunlife Insurance
Limited.

Aditya Garg

DECLARATION

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I here by declare that the Project report title “INVESTMENT PATTRENS OF BIRLA
SUNLIFE IN SELECTED FMCG COMPANIES” is my orignal work which has been
done by me during my summer training .This has been undertaken for the purpose of partial
fulfillment for the degree of MASTER OF BUSINESS ADMINISTRATION at
University School Of Management, Kurukshetra University ,Kurukshetra.

Aditya Garg

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6
 EXECUTIVE SUMMARY

As to prepare the report, it is the important part of the curriculum so we need to prepare the
report. This report provides me a great opportunity to analyse and gain the knowledge about
the FMCG sector in the depth.

This report provides an analysis of the current performance of the FMCG sector. We are
mainly concerned with the two companies and that are HINDUSTAN UNILEVER LIMITED
and the INDIAN TABACCO COMPANY.

We get an insight into sales, profitability, debt, equity, operating profit etc. All the important
ratios of the companies are compared to the industry’s performance and the inter comparison
of both the companies.

This report is mainly prepared to draw the attention of the investors towards the FMCG
sector that doing business in this sector is easy but sustaining in that industry is quite difficult
, we need to make a strong brand goodwill or image to make our-self sustain and grow in that
market.

The profitability of the companies varies so they just need to focus on the promotional factors
of the product and the differentiation of the product so that they can create loyalty and image
in the industry.

This report covers the FMCG sector and its segment, scope and its limitations. The main tool
is taken as ratio analysis which provides a clear picture about the company and the
corresponding sector. And accordingly conclusions and recommendations are given in this
report

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 Chapter 1

INDUSRTY PROFILE

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The Indian economy has its 4th largest sector which is commonly known as FMCG (fast
moving consumer goods) .FMCG sector has captured the total market share in Indian
economy of approximate US$30 billions in 2012 and now they have expected to grow to the
extent of US$ 74 billion in year 2018. Among all this, the leading segment is food market,
which constitutes for 43 per cent of the overall Indian market. Personal care is with 22 per
cent and fabric care is with 12 per cent, they come next to the food market in terms of market
share. The drivers of the key success growth of this market is growing awareness among the
people, easier access to the market, and changing lifestyles of the people.

What are FMCG goods?

FMCG stands for fast moving consumer goods. These are also known as consumer packaged
goods. All the items that are included in this sector are readily consumable goods or are
purchased in a very short span of time. The most common goods that are listed under this
sector are toilet soaps, detergents, perfumes, cosmetics, candies, toothpaste, shaving products,
packaged foodstuff, and household accessories, shaving products, shoe polish, fresh food,
frozen foods, cleaning products, electronic goods etc. These are consumed on daily basis as
these are used in routine and they generally provide a high rate of return. These are such kind
of goods which leaves their selves very quickly .These goods have high turnover as these
products can be deteriorate easily. The absolute profit made in the FMCG sector is relatively
low, as the generally sold in large quantities so that cumulative profits on these kinds of
products is substantial.

Rural – set to rise

In earlier days the rural areas are not much awarded about the FMCG products but in the later
years it is expected that rural areas will be the major driver for FMCG, as a tremendous
growth can be seen in these regions. Rural areas showed a growth of 16% in this sector and
urban areas have showed growth of 12% only. Many companies have tried to rush to
capitalize on this sector, as it needs only direct distribution and a better infrastructure to
provide these services. Companies are also trying to make specialized product only for the
rural market by considering their suggestions. The Government of India has also playing a
major role in supporting the rural population with schemes such as higher minimum support
prices (MSPs), loan waivers, disbursements through the National Rural Employment
Guarantee Act (NREGA) program. Through this step of government poverty has been
reduced to some extent and thus the rural areas will grow their demands regarding the FMCG
sector.

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Urban trends

As there was increase in the disposable income of the urban sector, people having medium
and high level income have shifted to the premium products from the essential products of
their purchasing trend. In response to that, firms have started reframing their premium
products portfolio. India has been leveraged as a strategic sourcing hub for the Indian and
multinational FMCG players for the cost competitive product development and
manufacturing and then cater that products to the international market.

Top Companies

As per the study conducted by AC Nielsen, out of top 100 brands, 62 are owned by MNCs,
and the rest are by Indian companies. Total of these brands, 62 brands are owned by only
fifteen companies out of which 27 brands are owned by Hindustan Unilever limited.

The top ten India FMCG companies are (by revenue and income)

1. ITC (Indian Tobacco Company)

2. Hindustan Unilever Ltd.

3. Britannia

4. Nestle India

5. Dabur India

6. Marico Industries

7. Patanjali Ayurved

8. Godrej consumer

9. Glaxosmith Kline

10. Colgate- Palmolive

Source-[economictimes]

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Some Factors that provide success to the FMCG Products

1. Brand Equity
Brand equity is the intangible asset. It is the reputation of the brand. The consumer is loyal
towards a particular brand due to his perception that the product has distinctively superior and
of consistent quality and it also satisfies their specific needs efficiently. Moreover it also
provides enhanced value of money to the company as compared to the competitors.

In FMCG products, brand equity plays a major role because these products are for personal
care and consumers can’t take risk in this, so they avoid unknown brands thus brand equity is
relatively stronger as compared to other ones. It is quite difficult to differentiate one product
from other on the basics of technical or fundamental grounds and therefore very less chances
of switching from a known brand to other

. A powerful brand always leads to generate more profits to the company and these profits
can be used by the owner in advertising the product and promoting it through which
superiority of the brands remains constant. The worth of a brand is shown in the willingness
of the consumer to pay a premium price for the preferred brand.

2. Distribution Network

Distribution plays a major role in making a business successful and the in the case of FMCG
products. The more the ability of the owner to build and develop the distribution channel, the
more chances of success. Availability of the product near to the consumer plays a vital role
for wider penetration as most of the products are frequently purchased.

Those who want to enter in this sector will have to face entry barriers because the products
are slow moving and they have lesser consumer demand as most of the area has been
captured by the previous reputed brands.

Therefore only few tries to allocate their resources and time in this sector. Reputes brands
use their strong network to restrict the new entrants. So the distribution factor plays a critical
role in making the success of the company and even also it drives the brand equity.

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3. Understanding Consumer Behavior

Producing according to the consumer wants and modifying it as per their needs also plays a
major role in making the success of the FMCG Industry as now a days there are several
competitors who are producing the same product. So to outshine in the whole industry,
analysing the Consumer behavior for a particular product has become very important.
Companies spend quite large amount on the research and development just to deliver the
best product to the customers and keep the growth for its products going.

The customers generally get fed up of the same products easily thus regular monitoring
should be done by the company so that they don’t lose their existing customers and to
capture new potential customers by producing customized goods or the goods as per their
requirement .

4. Importance of Super Markets in FMCG Industry

Grocery Stores, Super Markets are generally the places from where the customer buys his
essential products. In today’s era there is fast moving time thus customers don’t want to
spend their huge time moving from one shop to another to buy the basic items, thus super
markets are the best options for the customers where they get all the products under one roof
which not only saves the time but also provides variety of options at the same time. Some
reputed names in such super markets are: BIG BAZZAR, EASY DAY, RELIANCE
FRESH, FOOD-BAZZAR

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INVESTMENT PATTERNS

“To invest successfully over a lifetime one does not require a stratospheric IQ, unusual
business insights or seaside information. What’s needed is a sound intellectual framework for
making a decision and the ability to keep emotions from corroding that frame work” - Warren
Buffet. .

Investment is the employment of funds on assets with the aim of earning income or capital
appreciation. Investment means putting your money to work to earn more money or in other
words it is sacrificing of money today for future return. Investment is one of the most
successful ways to make financial provisions for the future, where most of the conditions are
uncertain and unpredictable. With well planned investment one can get the satisfaction of
safety and surety in life. All investments have some risk, whether in stock, capital market,
banking, financial sector, real estate, bullion, gold etc.

The degree of risk however varies on the basis of the features of the assets, investments
instrument, the mode of investment, time frame or the issuer of the security etc. Investment
benefits both economy and the society. In today's scenario there has been a major change i.e.
economic prosperity all over. The entire world is talking about the robust growth rates in this
part of the world. Higher income levels and booming stock markets have led to more and
more numbers of high net worth investors (HNIs). This means the availability of huge
investible surplus. The investors with higher risk appetite want to experiment and try new and
exotic products in the name of diversification.

A clear understanding of the different avenues of investments will help an investor to make a
wise decision based on his investment goal. The financial market offers a wide variety of
investments, which differ from one another with respect to the return, risk and the waiting
period. An investor has to be aware of the merits and limitations with respect to each
investment channel to decide a course of investment plan. When the financial literacy level
increases, the investors may take an informed decision about his investment portfolio, which
will benefit both the country as well as the individual investor.

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 Chapter 2

COMPANY PROFILE

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BIRLA SUNLIFE INSURANCE LIMITED

Birla sunlife insurance limited is the joint venture between the two companies. First one is
Aditya Birla Group which is a well known brand and trusted globally among all the Indian
conglomerates and the second one is the Sunlife Inc, a well known financial service
organization from Canada. The knowledge of Aditya birla group and the domain expertise of
Sunlife provides a formidable protection for their customers. It ranked in top 7 private
insurance companies of the India and has provided a great and development to the Indian
economy

Some values of the Birla Sunlife Insuranc company are

 Speed
 Passion
 Commitment
 Integrity
 Seamlessness

Vision of the company is “to be a leader and role model in a broad based and integrated
financial service business”

Here we need to analyse the company which is performing best in the industry. So, we have
taken the FMCG (fast moving consumer goods) sector. Two companies have been chosen to
analyse and then their performance is compared to the industry. Thus two companies are
Hindustan Unilever Limited and Indian Tobacco Company.

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HINDUSTAN UNILEVER LIMITED

Hindustan Unilever was formed in year 1933 with the name of lever brother India limited.
And started working from the year 1956 as Hindustan lever limited with the merger of lever
brothers and Hindustan Vanaspati manufacturing company and united traders limited. Their
headquarter is situated in Mumbai and approximate 15000 employees are working for the
Hindustan Unilever limited directly and approximately 52000 employees are working for the
HUL indirectly. In June 2007, its name is reframed to Hindustan Unilever limited. Its
distribution covers across 1 million retailers across India and has approximate 80% of the
retail outlets in India (6.3 million). It consists of 39 factories in the country and the largest
consumer reach as out of every 3 products 2 are of Hindustan Unilever Limited. It was one of
the company eight Indian companies to be featured in the forbes list of the world most
reputed companies in 2007.

Hindustan Unilever Limited (HUL) is the largest Fast Moving Consumer Goods Company in
India which is existing from last 80 years in India. In Indian houses, out of ten items nine
items are to feel good, good looking and get more out of the life – providing us opportunity to
build a brighter future.

“GOLDEN SUPER STAR TRADING HOUSE” the other name to the Hindustan Unilever
limited when it was recognized as the best export company by the government of India.
“ADD VITALITY OF LIFE” is the mission that inspires Hindustan Unilever limited every

16
time. HUL is focusing on health & hygienic of the customers, education of children, women
empowerment, water management within India.

With 35 brands consisting of 20 distinct categories such as soaps, detergents, electronic

items, shampoos, skin care, toothpastes, deodorants, shaving products, cosmetics, tea, coffee,
packaged foods, candies, ice cream, and water purifiers, the Company is dealing with the part
of the everyday life of approximate all of consumers across India. Its portfolio includes
leading household brands such as Lux, breeze , Elle 18 , Lifebuoy, Surf Excel, Wheel, Fair &
Lovely, Bru,, Pond’s, Liril , Vaseline, Lakmé, Dove, Aviance , Clinic Plus, Kissan , Sunsilk,
Pepsodent, Rin , Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, sure, Kwality Wall’s and
Pure it.

The Company has approximate 18,000 employees. It has a net sales of INR 33895 cr. in the
financial year 2016-17 . It is supplying in over 190 countries and has an annual sales turnover
of €52.7 billion in 2016.Unilever is the part of Hindustan Unilever limited and Unilever has
over 67% shareholding in HUL.

VISION
Unilever is a unique company, having a proud history and a bright future ahead. Moreover
we are having ambitious plans for sustainable growth and a strong sense of social purpose.

MISSION

We will add vitality to life. We are going to meet everyday needs of the customers for
nutrition, hygiene, and personal care with brands that help them to feel good, look good and
get more out of the life.

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SWOT ANALYSIS
Here is the SWOT analysis

STRENGTHS

1. HUL being a part of the Unilever group therefore strong brand equity

2. It has approximate 18000 employees working with it.

3. Hindustan Unilever has a connection with 6.4 million retail outlets which provide direct
reach to across 1.5 million retail outlets in India.

4. R&D centers are in Bangalore and Mumbai.

5. It has presence in more than 20 consumer categories and more than 700 million Indian are
using this product.

6. From the CSR point of view, HUL has taken initiatives of project SHAKTI, water
management, Plastic recycling, Education, women empowerment etc.

7. All the legal compliances had been followed since 1934.

WEAKNESS

1. Tough competition from competitors thus limited market share.

2. Have faced many controversies related to skin lightening creams.

OPPURTUNITIES

1. Have the opportunity to reach the rural market and makes penetration in the urban areas.

2. To strengthen the brand image we can go for merger and acquisitions.

3. Increasing demand due to the increase in the purchasing power.

THREATS

1. More competitions from the competitors.

2. Foreign direct investment and thus more foreign brands.

3. Local products can hurt the market of Hindustan Unilever limited

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ITC (INDIAN TABACOO COMPANY)

Indian Tobacco Company is one of

the best private sector company with
the capital of US 16 billion and the sales are
US $ 3.5 billion. In Indian private sector
corporations, Indian Tobacco company is
third in pre- tax profits. It has been given
recognition of ‘FABULAUS 50’ by
“business today magazine”. This
company not only deals in FMCG sector but
has its presence in greeting cards,
paper boards and other speciality paper,
agri- business, cigarettes etc. The
main successful strategy behind the
success of the company is the diversification of the company products which is present in the
portfolio of the company due to which has an impressive growth in last decade other main
factor of its success is the debt free that means it has no burden of interest on it.

ITC has been originated on 24 August 1910 by the name of ‘IMERIAL TABACCO
COMPANY’. It has faced a humble beginning. It’s all working was based on leasing but on
its 16th anniversary it purchased a piece of land and thus started its new beginning. Its name
was changed in 1974 as I.T.C limited. In earlier day its main focus on the cigarettes and leaf
tobacco then further it started the business of packing and printing, hotels business,
paperboards business, agri-business division and many more.

This company has four segments and these are as followings

1. FMCG;

2. Hotels;

3. Paperboards, Paper and Packaging,

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4. Agribusiness.

Under the FMCG sector it includes Cigarettes, branded packaged foods businesses, Apparel;
Education and greeting, gifting, Stationery Products; Personal Care Products; Safety
Matches, and agarbattis.

The hotels segment includes super deluxe, five star hotels, heritage places, haveli, resorts etc

The paperboards and paper sector includes white lined chipboards, liquid pacakaging boards,
paperboards, paper, specialty paper, and packaging etc

The agribusiness sector includes commodities, such as soya, peenut, edible nuts, food grains,
spices, coffee and leaf tobacco.

Its brands include mint–o, Aashirvaad, Sunfeast Dark Fantasy, Bingo!, candyman, Yumitos,
YiPPee!, Classmate, Fiama Di Wills, Vivel, Superia, Engage, Wills Lifestyle, John Players,
Mangaldeep and Aim, among others. ITC has gained recognition due to the operating profits,
cash profits and the sustain value creation.

ITC has also done contribution in making ‘MAKE IN INDIA global, for example they have
launched their cigarettes in the USS and the middle-east. Their all the products related to
kitchen are exported to many parts of the countries like US, Canada, Switzerland etc. They
supply tobacco in almost 37 countries. Their paper related materials are exported to
Singapore, Malaysia, Bangladesh, Iran, Arabia, Italy etc. ITC has provided a contribution
towards exports in last decade by US$2 billions. It is a great exporter of agri-business
products and also of supply chain management patner. It is the largest exporter of coated
boards and the cigarettes tobacco. Besides all these business ITC has also its presence in
information technology sector by the name of INFOTECH INDIA LIMITED.

VISION

Sustain ITC's position as one of India's most valuable corporations through world class
performance, creating growing value for the Indian economy and the Company's stakeholders

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MISSION

To enhance the wealth generating capability, delivering superior and sustainable stakeholder
value of the enterprise in a global environment

SWOT ANALYSIS.

Here is the SWOT analysis of ITC

STRENGTHS

1. Experienced and strong management

2. Strong brand equity, best advertising methods

3. Products are diversified in nature which means it not only includes FMCG but also
agricultural products and hotels products.

4. Approximate 4000 E-CHOPPALS which constitutes the part of CSR

5. ITC limited has employees more than 25,000 people

6. Fantastic R&D facilities

WEAKNESS

1. For revenue they are still dependent on the tobacco sector while competitors are providing
tough competition to them in this industry.

2. Failures in generating profit from the hotel sector.

OPPURTUNITIES

1. Can focus on the rural areas to increase the demand.

2. To enhance the brand image, merger and acquisition can be the best option.

21
3. Due to the increase in the purchasing power of the consumers, there are chances of
increasing in the demand.

4. By publicizing the hotels more revenue can be generated.

THREATS

1. Strict regulations of the government in case of cigarettes.

2. The obvious threat is from competition, both domestic and international. The laws of
economics dictate that if competitors see that there is a solid profit to be made in an
emerging consumer society that ultimately new products and services will be made
available.
3. ITC’s opportunities are likely to be opportunities for other companies as well.
Therefore the dynamic of competition will alter in the medium-term. Then ITC will
need to decide whether being a diversified conglomerate is the most competitive
strategic formation for a secure future.

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 Chapter- 3

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

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Research methodology is a method to solve the research problem systematically. It may also
be defined as a method of understanding the science of research problem that how it will be
done scientifically.

It generally provides the description of the problem then explanation of the problem and
justification of various methods to conduct the research. Under the research methodology we
generally study the various methods or steps undertaken by the researcher to solve the
particular problem and studying the various logics behind that method adopted.

Aditya Birla Financial Services Group (ABFSG) is an umbrella brand for all the financial
service businesses of the Aditya Birla Group. They have a significant presence across life
insurance, asset management, NBFC, infrastructure project and structured finance, private
equity, broking, wealth management and distribution, online money management, and
general insurance advisory services.

Birla Sunlife basically works for insurance business with the help of marketing tools and
techniques they sell their policies in the market and also they manage the portfolio of big
business mans because these type of people had no time to analyse the different sectorsof
stock market and invest money in it. But they want to maximize their gains so they give
their money to the birla sunlife for generating more retuns

So the money received is now allocated to the different sectors of market by the financial
personnels of birla they study the stock market on daily basis and by analising the best
companies in profit making sectors they invest money to generates maximum returns.

In this way they channelize the whole money received from different operations.

3.1 OBJECTIVES OF THE STUDY

1. To study the investment patterns of Birla Sunlife.

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 2. To study the financial performance of ITC & HUL
3. To compare the financial performance of ITC & HUL

3.2 NATURE OF STUDY

The study was descriptive in nature

3.3 SAMPLING PROCEDURE AND DESIGN

The FMCG companies which satisfied the following criteria have been selected. The
criteria is:

 Companies that are listed on national stock exchange.

 Data of the company must be available for three years.
 April to March must be their accounting period

There are many companies that satisfy the above conditions but only top companies have
been chosen and these are

 Hindustan Unilever Limited

 ITC Limited

1. It provides an overview of Indian FMCG industries.

2. It also focuses on some of the major player in Indian FMCG industries.

3. With the help of analysis of various stocks of FMCG sector by calculating ratios which

would help us to know which stock is outperforming and which is under the performing.

4. Apart from this the price help us to know that by how much share whould rise or fall in
the future

3.4 METHODS OF DATA COLLECTION

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The whole study is based on the secondary data. The financial statements of the company had
played a vital role in this research. The other major data sources used for this study are:

 Annual Reports of Companies

 Official Websites
 Journal

3.5 TECHNIQUE OF DATA ANALYSIS

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1. RATIOS

a) Operating Profit Margin (OPM)

The operating profit margin (OPM) shows the profit after depreciation and before tax and
interest of the company .It generally tells the efficiency ratio and the pricing strategy of the
company. The formula of calculating the ratio is Operating profit / Revenue OR EBIT /
Revenue x 100

b) Net Profit Margin (NPM)

Net profit margin measures the profitability of the company. It shows how much the net
revenue of the company is kept as net sales. It is calculated by dividing net revenue by net
sales.

Net profit margin = Net profit / Revenue x 100

c) Earnings per Share (EPS)

This ratio indicates how much a equity share holders is earning on per share, this also helps in
determining the market price of shares. It determines the portion of the profits of the
company that is distributed the shareholders.

Earning per share is calculated as Profit after Tax / No. of equity shares.

d) Dividend per Share (DPS)

it is the amount of profits that is distributed to the outstanding shareholders is known as
DPS .It shows the total number of divident declared and paid to the shareholder and it is
calculated as

Dividend per Share = Amount declared as dividend / No. of equity shares.

e) Dividend Payout Ratio (DP Ratio)

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It shows the ratio of the DPS and EPS of the firm. It refers to the part of the net income that is
paid to the shareholders as dividends. Dividend payout ratio is calculated as DPS / EPS *100

f) Return on Equity (ROE)

This ratio helps to measure the profitability of the business in relation to the book value of the
shareholder equity. It is calculated as Net Income divided by Shareholder's fund.

g) Price to Book Value Ratio

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.

H) Earning Yield Ratio

Earnings yield are the earnings per share . The earnings yield (which is the inverse of the P/E
ratio) shows the percentage of each money invested in the stock that was earned by the
company The earnings yield is a way to measure returns, and it helps investors evaluate
whether those returns commensurate with an investment's risk

Earning yield ratio=Earning per share /Stock price

I )Earning retention ratio

The retention ratio is the proportion of earnings kept back in the business as retained
earnings. The retention ratio refers to the percentage of net income that is retained to grow
the business, rather than being paid out as dividends. It is the opposite of the payout ratio,
which measures the percentage of earnings paid out to shareholders as dividends.

J) Price to earning ratio

28
Price Earnings ratio is the ratio of company’s current share price to its earnings per share. It
gives us an idea of what the market is willing to pay for company’s earnings. It also indicates
how the stock is valued in the market.

K) Proprietary ratio
The proprietary ratio (also known as the equity ratio) is the proportion of shareholders'
equity to total assets, and as such provides a rough estimate of the amount of
capitalization currently used to support a business. If the ratio is high, this indicates that
a company has a sufficient amount of equity to support the functions of the business ,

L) DEBT Equity ratio

 Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated

by dividing a company’s total liabilities by its stockholders' equity. The D/E ratio indicates
how much debt a company is using to finance its assets relative to the amount of value
represented in shareholders’ equity.

TOOLS USED FOR PRESENTATION

1. Bar diagram

2. Tabular presentation

INDUSTRY RATIOS
29
Industry ratios for this analysis is calculated by taking all the companies that are listed on the
National Stock Exchange .companies that are listed on the national stock exchange are

 Hindustan Unilever limited

 Indian tobacco company
 Tata global bev.
 Jubilant food
 Emami
 Godrej ind
 United spirits
 P&G
 Godrej consumer
 Britannia
 United Brewerie
 Dabur india
 Glaxo-smith con
 Colgate
 Marico

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3.6 SCOPE OF THE STUDY

The study was mainly limited to the analysis ITC and HUL with the help of
appropriate tools and risk and relationship involved in the share price of those
companies mentioned above were tested .Further this has covered three year
time period in general the study is helping to identify volatility of selected
FMCG companies.

3.7 SIGNIFICANCE OF STUDY

The FMCG sector is the fourth largest sector in the India economy with the help
of fundamental analysis one can take the advantage of earninig more profits by
the way of analysis of financial performances of a company and by the help of
measuring there growth rate.

3.8LIMITATIONS OF THE STUDY

 The study is limited only to the listed FMCG companies.

 Only the performance of two companies are studied
 There are also other toole and techniques that can aslo be used along with ratios
 Companies can use window dessing to improve their financial statements
 It has coverd a period of only 3 years

31
 Chapter 4

STUDY OF TOPIC

32
Financial analysis is also known as “researching the fundamentals”. It is the holistic approach
for the study of business. It is the examination of the underlying element that affects the
particular entity of the economy, industry groups and companies.

It is the method of evaluating the securities by investigating the fundamental value of the
business that issued the security.

 Sales revenue growth

 Quality of management
 Competitive advantage
 Earning growth
 Market share
 Financial reserves

are reflected in the financial statements , that all together are known as “fundamental
information”. It is the true indicator of the earning potential and the future value of the
securities.

The financial analysis focuses on calculating a security’s fair value and compares it to the
value of the market to check whether the price of the security is undervalued or overvalued.
The biggest part of the financial analysis deals with the financial statement and this involves
looking into the revenue, asset, liabilities, and all other financial aspects of the company.
Financial analyst has to look at the information to gain the insight of the company’s future
performan

33
 Chapter 5

ANALYSIS AND INTEPRETATION

34
 1. OPERATING PROFIT MARGIN RATIO (%)

[Table -1]

Name of the 2014-2015 2015-2016 2016-2017

company
HUL 16.90 17.91 18.96
ITC 36.36 38.65 36.90
INDUSTRY 18.78 17.93 17.60

[In Figure- 1]
45

40

35

30

25 INDUSTRY
20 HUL
ITC
15

10

0
2014 2015 2016

INTERPRETATIONS

According to figure 1
The profits of the company after depreciation but before interest and tax are ranging between
16% -19%. But it is showing that it is continuously increasing in all the years thus it is
highest in last year and approximate to the industry ratio also. Thus we can also predict that
this increasing trend will continue in further years also.

35
ITC is showing more operating profits as compared to the other company which means that
the profit after depreciation and before tax and interest are more than the others. Although
they are showing consistency over the years so investors will be more interested in investing
in this company.

Overall industry also showing a downward trends in 2014-15 & in 2015-16 it is more than the
HUL but less then the ITC thus it goes inverse in relation to HUL so we can say that HUL is
performing well as whole industry operating ratio is decreasing but HUL ratio is increasing.

2. NET PROFIT MARGIN

[Table- 2]

Name of the 2014-2015 2015-2016 2016-2017

company
INDUSTRY 11.31 13.50 10.50
HUL 14.00 12.76 14.00
ITC 26.31 26.72 25.44

[In Figure-2]
30

25

20

INDUSTRY
15
HUL
ITC
10

0
2014 2015 2016

36
INTERPRETATION 

According to figure 2;

The net profit ratio of the HUL is ranging between 12% -14% only but not showing a
continuous increment as it is fluctuating. But if we compare it with the industry ratio then it is
high which shows its performance is still satisfactory.

If we compare the net profit ratio of ITC with other companies and with the industry it is
highest among all, which means it is generating the best profits among all, which attracts the
investor’s investment in this company. As there is continuous increment in net profit ratio of
ITC and it is almost double of the industry ratio so the performance of this company is the
best.

Overall industry has a low rate of net profit margins when it is compared with ITC& HUL
and there is a vast difference between the ratios of industry as as whole when compared with
ITC therefore it attracts investors towards itself

3. EARNING PER SHARE

[ Table- 3] [IN RS.]

NAME OF THE 2014-2015 2015-20166 2016-2017

COMPANY
INDUSTRY 33.60 37.08 20.64
HUL 20.74 18.86 19.94
ITC 8.38 12.20 11.93

37
[In Figure-3]
40

35

30

25
INDUSTRY
20
HUL
15 ITC

10

0
2014 2015 2016

INTERPRETATION

According to figure 3,
The earning per share of the HUL is fluctuating between the 1%- 1.5% every year. In year
2014 there is vast difference the industry EPS and HUL’s EPS but in the last year the
difference is very small which means both the industry and the HUL are providing the same
EPS to its shareholders. But when compared to ITC its EPS is more than that of this by
approximate 10% in last year.

The basic EPS of the ITC company ranges between the 8% to 12%. It is providing less EPS
as compared to HUL and there is vast difference between the two, but the fluctuations in EPS
of ITC is generally low. The EPS of industry is high than the EPS of ITC

EPS of industry is highest from HUL & ITC thus people who are investing in this sector are
earning good profits

38
 4. DIVIDENT PER SHARE

[Tabular- 4]

Name of the 2014-2015 2015-2016 2016-2017

company
INDUSTRY 13.86 13.51 12.51
HUL 15.00 16.00 17.00
ITC 6.25 8.50 4.75

[In Figure-4]

18

16

14

12

10 INDUSTRY
8 HUL
ITC
6

0
2014 2015 2016

INTERPRETATION

According to figure- 4,

39
The dividend per share of the HUL is highest among all and it is increasing in every year
which shows that the shareholders are getting more dividend every year and thus they will
more interested in investing in this company as compared to ITC.

The dividend per share of the company is low as compared to the industry and HUL and
moreover it is fluctuating in the years and thus only risky investors will try to invest in this
company.

Industry has a quit stable dividend per share the fluctuations in the last 3 years are less than
the ITC and industry is in between the both companies so HUL is performing well as it is
above the industry

5.DIVIDENT PAYOUT RATIO

[Table-5]

Name of the 2014-2015 2015-2016 2016-2017

company
INDUSTRY 45.07 41.27 38.25
HUL 75.20 84.80 79.53
ITC 52.14 69.48 67.05

[Figure-5]
90

80

70

60

50 INDUSTRY
40 HUL
ITC
30

20

10

0
2014 2015 2016

INTERPRETATION
40
According to figure-5;
The dividend payout ratio of HUL is very high as compared to the industry and ITC it means
that they believe that more portion of the earning of the company shoukd be transferred to
the shareholders as they are real owners of the company. The dividend payout ratio is ranging
between 75%- 85%.

The divident payout ratio of this company is very low as compared to HUL and it is more
than the industry payout ratio .It means that they are providing more divident as compared to
industry which shows that they are retaining less to themselves as retained earning for their
future use.

Industry also has a low dividend payout ratio it shows that the industry is providing less
dividend to its shareholders further it is low in comparion to HUL & ITC thus these
companies are giving more dividend to their shareholders

6.RETURN ON EQUITY RATIO

[Table-6]

NAME OF THE 2014-2015 2015-2016 2016-2017

COMPANY
INDUSTRY 27.84 24.58 31.12
HUL 124.81 83.43 70.73
ITC 33.77 26.23 24.23

41
 140

120
[Figure 6]

100

80
INDUSTRY
HUL
60
ITC

40

20

0
2014 2015 2016

INTERPRETATION 

According to figure-6,
As compared to ITC and industry analysis ,HUL have return on equity which is mostly
preferred by the shareholders but it’s return in decreasing at a very fast pace that is from
124.81 to 83.43 in the year 2015 and in the next year from 83.43% to 70.13%. It directly
shows that management is not able to employ the shareholders equity efficiently.

The return on equity of ITC is also decreasing in all the years moreover it’s return is also low
as compared to HUL but somehow more than industry. It’s low return shows that company
can’t manage its resources efficiently.

Return on equity of industry is quit fluctuating in 2014-15 it is 27.84 after that it decline and
now in year 2016-17 it was 31.12 which is highest among all the 3 years

7. PRICE TO BOOK VALUE RATIO

42
[table-7 ]

Name of the 2014-2015 2015-2016 2016-2017

company
INDUSTRY 14.56 14.56 19.30
HUL 51.30 30.12 30.42
ITC 8.50 6.53 7.79
Table 7

[In Figure-7]
60

50

40

INDUSTRY
30
HUL
ITC
20

10

0
2014 2015 2016

INTERPRETATION 

According to figure 7
The price to book value indicates the value of shares in market as compared to book , so in
the first year it has overvalued its stock and it declined in the later years .long term investors
preferred to invest in that company whose price to book value is low as when the company
will wind up they will get more value of the shares they are not interested in market value of
thee share, so it is beneficial for the investors

The price to book value ratio of the ITC is quite low as compared to industry and HUL and it
is quite stable in all the years. This all shows that value of the shares are undervalued and
thus investors will be interested in investing in this company.

43
Industry has a stable price to book value ratio in the year 2014-15 and in 2015-16 but after
that in year 2016-17 it increased to 19.30 it also shows the value of shares are undervalued in
the industry but HUL is somehow differentiated with respect to industry

8. EARING YIELD RATIO

[Table-8 ]

NAME OF THE 2014-2015 2015-2016 2016-2017

COMPANY
INDUSTRY 0.08 0.18 0.07
HUL 0.02 0.02 0.02
ITC 0.03 0.04 0.04
Table 8

[In figure-8]
0.2
0.18
0.16
0.14
0.12
INDUSRTY
0.1
HUL
0.08 ITC
0.06
0.04
0.02
0
2014 2015 2016

INTERPRETATIONS

According to figure-8,

44
The earning yield ratio of the company is constant in all the years and also low which means
that the stock is overvalued as compared to the bonds. It is also low as compared to the ITC
and the industry which means that they have highly overvalued stock.

The earning yield ratio of the company is greater than that of HUL but low when compared to
industry which shows that their stock is overvalued due to their brand image as compared to
HUL but industry shows the less overvalued stock. Investors do not prefer to invest in the
company whose stock is more overvalued..

Here industry is showing less overvalued stock as compare to ITC & HUL

9. EARNING RETENTION RATIO

[ Table -9 ]

Name of the 2014-2015 2015-2016 2016-2017

company
INDUSTRY 62.94 73.30 65.28
HUL 24.79 15.19 20.46
ITC 47.85 30.51 32.94

[Figure-9]

45
 80

70

60

50
INDUSTRY
40
HUL
30 ITC

20

10

0
2014 2015 2016

INTERPRETATIONS

According to figure 9
The earning retention ratio of the company is ranging between 15%- 25%. It shows that it is
retaining to itself and keeps on investing that amount in the other activities. But on the other
side investors may not feel safe as company is not having any reserves for the future.
Although it is also less than the industry’s retention ratio

The earning retention ratio of the company is ranging between 30%-48%. as it is more than
earning retention ratio of the HUL, thus they keep more money to themselves as compared to
HUL. Although it is less than the industry ratio, so risky investors are more likely to invest in
this.

The retention ratio of the industry is very high as compared to ITC & HUL it shows that the
other companies in the industry are retaining more profits and declaring less dividend thus the
companies may be able to see the future opportunities of business

46
 10. PRICE TO EARNING RATIO

[Table-10 ]

Name of the 2014-2015 2015-2016 2016-2017

company
INDUSTRY 46.49 70.03 46.02
HUL 43.76 45.70 43.77
ITC 27.15 18.87 27.15

[Figure-10]
80

70

60

50
INDUSTRY
40
HUL
30 ITC

20

10

0
2014 2015 2016

INTERPRETATIONS

According to figure-10,
Price to earning ratio of the company is greater than the of ITC company but less than that of
the industry ratio .As here this ratio is between 43% to 46% , which means they thave tried to
maintain themselves there thus investors will be interested in investing in the company.

47
Price to earning ratio of this company is less than among all of them. Although it is too less
to gain the investors interest in themselves. It is too much fluctuating which is between 18%
to 33%

Industry has a highest price earning ratio thus it is a good indicator for the new investors who
are going to invest in FMCG sector

11. PROPRIETARY RATIO

[Table-11]
Name of the 2014-2015 2015-2016 2016-2017
company
INDUSTRY 0.79 0.797 0.816
HUL 0.76 0.86 0.85
ITC 0.84 0.73 0.72

[Figure-11]
0.9

0.85

0.8
INDUSTRY
HUL
0.75 ITC

0.7

0.65
2014 2015 2016

INTERPRETATIONS

According to figure- 11,

As this ratio is used to evaluate the soundness of the capital structure of the companies . This
ratio is approximate stable in this company and high as compared to industry ratio and the
ratio of ITC Company thus it shows a greater strong financial position of the company as
compared to others

48
As the proprietary ratio of this company is lower than the ratio of HUL company but greater
than the industry ratio thus it also shows a strong financial company as compared to the other
companies of the industry.

Proprietary ratio of industry is stable in the starting 2 years and it shows a increase in current
year thus industry has a strong financial position they using there shareholders funds in
appropriate manner to increase the efficiency

12. DEBT EQUITY RATIO

[Table-12] [In times]

Name of the 2014-2015 2015-2016 2016-2017

company
INDUSTRY 0.39 0.36 0.33
HUL 0.14 0.14 0.19
ITC 0.03 0.02 0.01

INTERPRETATIONS

According to table 12
As this ratio is approximate constant in all the years except in the last year, it has increased
somehow there which means company has taken loan from outsiders, so this company have
the interest burden of debt , thus investors will hasitate to invest as it is more than the debt
equity ratio of ITC company .

As this company is having debt equity ratio almost nil as compared to the other companies of
the industry thus they are debt free and also investors are relaxed about their investment.
They are secured that all the profit will be distributed in all the owners only not as the
interest.

Debt equity ratio of the industry is high from ITC & HUL which shows that the companies in
this sector is using more debt except these two companies it therefore results in more burden
of industry. But ITC is performing well as compared with industry

49
50
 Chapter 6

CONCLUSIONS

The above analysis shows that each company have their own pros and cons . Each ratio have
their own analysis
According to the operating profit ratio, HINDUSTAN UNILVER LIMITED is more
beneficial for the investors as ratio is increasing continuously[16.90 to 17.91 to 18.96].
According to net profit margin ratio, INDIAN TABACOO COMPANY is more beneficial for
investors because the company has highest ratio 26.72%.

51
 According to earning per share HINDUSTAN UNILEVER LIMITED[18.86-20.74] is more
better than the ITC Company[8.38-12.20]. According to the divident per share also HUL is
more better for the save play investors with a highest ratio of 17.

According to dividend per share , dividend payout ratio[84.80] , return on equity , price to
book value[30.42] , earning yield ratio[0.02] and price earning ratio[43%-46%] also
HINDUSTAN UNILEVER LIMITED will be the best choice for the investors to invest in the
fast moving consumer goods and services.

Also the ratios analysis of any company is not sufficient to analyse whether the company is
profitable or not or investors should invest in the company or not. It is because ratio analysis
alone is not sufficient to analyse this , there are other too many effects that they may impact
the performance of the company and these are

 Latest news regarding the company

 Performance in the share market
 Government interventions
 Market conditions

In last we can conclude that the HINDUSTAN UNILIEVER LIMITED has strong
financial position than INDIAN TOBACCO COMPANY

52
 Chapter 7

SUGGESTIONS

As each ratio has their advantages and disadvantages, also when they are compared with the
industry and other companies of this sector one company is best in one comparison and other
company is best in another comparison. So from the whole analysis we can say that both the
companies are performing well but HINDUSTAN UNILEVER LIMITED is showing better
performance when compared to the other company and the industry

. This company has more command over the divident payout ratio, dividend per share,
earning retention ratio, price to book value and many more. It is showing upward trend in
almost all the ratios and thus more chances of growth in the firm.

53
 INDIAN TOBACCO COMPANY is also performing well in the industry as their net profit
margin is best in all the industry and also the less levered firm as compared to others. But the
performance and growth aspects of the HINDUSTAN UNILEVER LIMITED COMPANY
is better than that company.

ITC can also provide more EPS to their shareholders as the company is earning hudge
amount of profits but it still lacks behind the industry and HUL in terms of EPS ratio.

Dividend per share of ITC is also low and fluctuating so the senior managers or top
executives should opt for the policy of distributing more profits as a dividend so that they
can attract new investors to invest in the company.

Earning retention ratio of the ITC is very high and is more than HUL it means they are
keeping more money with themselves as a result of it company is only

So, in last we can say that according to this study HINDUSTAN UNILVER LIMITED is
better and have strong fundamentals thus investors will be more interested in investing in this
company.

Chapter 8
BIBLOGRAPHY

54
WEBSITES;

 www.capitalinedatabasecom
 m.moneycontrol.control
 www.hul.co.in
 www.itcportal.com
 www.adityabirla.com
 www.opm.gov
 www.lifeinscouncil.com
 www.insurance.birlasunlife.com

BOOKS;

1. Agarwal, Krishna Kumar (2007) “Capital Market in India”, Anmol Publications Pvt. Ltd.,
New Delhi, I Edition. Gopalswamy, N. (2005)

2. “Capital Market: The Indian Financial Scene”, MacMillan India Ltd., I Edition, p.243,
268-276. Kania, M.H. (2005) “Expert Committee Report Submitted to SEBI”, Government of
India.

3. Mayya, M.R. (2006) “Investor Protection”, Bharat Law House Pvt. Ltd., New Delhi, I
Edition, p.1.

4. Neelamegam R. and Srinivasan R. (1996) “Investors’ Protection: A Study on Legal

Aspects”, Raj Publications, Delhi, Edition I.

5. Sakriya, D. (2000) “SEBI and Securities Market in India”, Anmol Publications Pvt. Ltd.,
New Delhi, I Edition.

6. Saroja, S. (2001) “Emerging Trends in the Capital Market in India”, Global Business
Press, New Delhi, I Edition, p.131.

7. Shaji, Vikraman (2001) “Separate Law Proposed to Protect Small Investors”, The Business
Line – Investment World, February 23.

8. Vashisht, A.K. and Gupta, R.K. (2005) “Investment Management and Stock Market:
Strategies for Successful Investing”

9. Deep & Deep Publications Pvt. Ltd., New Delhi, I Edition, p.5, 10 Investments –ZVI
bodie,Alex Kane, Alan J Marcus and PitabasMohantry.

12. Investment concepts and application, Tim Brails ford, Richard Hearney and Chris Bilson.

55
1 3. V.K Balla, ‘Investment Management; Security Analysis and Portfolio Management, S.
Chand publication

56
Chapter 9

APPENDIX

57
58