Project Report on

Colgate Palmolive
(India) Ltd.

Kalyani Swathika A
19FMUCHH010721 , Section-B
 COLGATE PALMOLIVE (INDIA) LIMITED
Introduction
Colgate-Palmolive (India) Limited is India's leading provider of scientifically proven oral
care products. The range includes toothpastes, toothpowder, toothbrushes and mouthwashes
under the 'Colgate' brand as well as a specialized range of dental therapies under the banner
of Colgate Oral Pharmaceuticals. The company also provides a range of personal care
products under the `Palmolive' brand name. Colgate-Palmolive Company U.S.A. is the
company's ultimate holding company.
Colgate-Palmolive (India) Ltd. was incorporated in the year 1937.It is a large cap company
operating in FMCG sector. Its today's share price is 1526.7. Its current market capitalisation
stands at Rs 41524.05 Cr. In the latest quarter, company has reported Gross Sales of Rs.
48684.65 Cr and Total Income of Rs.48715.69 Cr.
Over two centuries ago, soap and candles were the start of their story. Today, Colgate offers
an impressive variety of products providing care of many kinds—some related to soap, others
far from it—all carefully crafted to be safe, effective, and sustainably produced.

Product Portfolio
Colgate Palmolive has Tightly Focused on Four Core Categories of products:

1) Oral Care
The Company’s oral care category of products includes toothpastes, toothbrushes,
toothpowder, whitening products and mouthwash.
In the toothpaste category, the Company offers products, including Colgate Total Charcoal
Deep Clean Toothpaste, Colgate Active Salt Neem Toothpaste and Colgate Sensitive Pro-
Relief (CSPR) Enamel Repair Toothpaste.
In the toothbrush category, the Company offers the Colgate 360 degree Toothbrush range,
including 360 degree Charcoal Gold, 360 degree Whole Mouth Clean, 360 degree Visible
White and 360 degree Floss-Tip, and Colgate ZigZag Black Toothbrush.
Colgate is brand most recommended by the dental profession worldwide.

2) Personal Care
In the Personal Care category, the Company offers Palmolive’s Foaming Hand Wash range in
approximately two variants.
Liquid Hand Soap, Bar Soaps and Liquid Body Cleansing
3) Home Care
Dishwashing
Fabric Softeners
4) Pet Nutrition Supplies
Board and Management
The company's top management includes K Randhir Singh, Surender Sharma, MS Jacob, M
Chandrasekar, Gopika Pant, Sekhar Natarajan, Sukanya Kripalu, Shyamala Gopinath, Indu
Shahani, Vikram Singh Mehta, Ram Raghavan, Mukul Deoras .

Name Designation

Arvind Chintamani Vice President - Marketing

Balaji Sreenivasan Executive Vice President - HR

Edna Ambundo Vice President

Gopika Pant Ind. Non-Executive Director

Indu Shahani Ind. Non-Executive Director

K Randhir Singh Co. Secretary & Compl. Officer

M Chandrasekar Executive Vice President

M Chandrasekar Whole Time Director

M S Jacob WholeTime Director & CFO

Mukul Deoras Chairman

Ram Raghavan Managing Director

Sarala Menon Executive Vice President

Sekhar Natarajan Ind. Non-Executive Director

Shyamala Gopinath Ind. Non-Executive Director

Sukanya Kripalu Ind. Non-Executive Director

Surender Sharma Vice President - Legal

Surender Sharma Whole Time Director

V Ganesh Vice President

Vikram Singh Mehta Ind. Non-Executive Director

It is listed on the BSE with a BSE Code of 500830 , NSE with an NSE Symbol of COLPAL
and ISIN of INE259A01022. It's Registered office is at Colgate Research Centre,Main
Street,Hiranandani Gardens , PowaiMumbai-400076, Maharashtra.
Their Registrars are ACC Ltd.
It's auditors are Arthur Andersen & Associates, Ford, Rhodes, Parks & Co, Price Waterhouse,
SRBC & Co LLP.

Fundamental Analysis
a) EIC Analysis of a Company

1. Economic Analysis:
Every common stock is susceptible to the market risk. This feature of almost all types of
common stock indicates their combined movement with the fluctuations in the economic
conditions towards the improvement or deterioration. Stock prices react favourably to the low
inflation, earnings growth, a better balance of trade, increasing gross national product and
other positive macroeconomic news. Indications that unemployment is rising, inflation is
picking up or earnings estimates are being revised downward will negatively affect the stock
prices. The stock market will forecast an economic boom or recession properly from the signs
in front of average citizen. The implications of market risk should be clear to the investor.
When there is recession in the economy, the prices of stocks moves downward. All the
companies suffer the effects of recession despite of the fact that these are high performing
companies or low performing ones. Similarly the stock prices are positively affected by the
boom period of the economy.
Indian Economy
Over the years, India has emerged as one of the fastest growing economies in the world and
an attractive investment destination driven by economic reforms and a large consumption
base. India’s gross domestic product (GDP) at current prices stood at Rs. 51.23 lakh crore
(US$ 694.93 billion) in the first quarter of FY22, as per the provisional estimates of gross
domestic product for the first quarter of 2021-22.
As per the data published in a Department of Economic Affairs report, in the first quarter of
FY22, India’s real gross value added (GVA) also recorded an 18.8% YoY increase in the first
quarter of FY22, posting a recovery of >92% of its corresponding pre-pandemic level (in the
first quarter of FY20). India’s output recorded a 20.1% YoY growth, recovering >90% of the
pre-pandemic output in the first quarter of FY20. Also, in FY21, India recorded a current
account surplus at 0.9% of the GDP.
The country is on a fast-paced growth and is expected to become a US$ 5 trillion economy by
2022. Going by the estimates of Government of India, the country will need investment of
US$ 4.5 trillion to build sustainable infrastructure by 2040. The Union Budget 2021-22
highlights a 34.5% increase in capital expenditure—Rs. 142,151 crore (US$ 19.58 billion)—
compared with BE 2020-21 to boost economic growth through infrastructure development.
Increased government investment is expected to attract private investments, coupled with the
government's key Production-linked Incentive Scheme providing significant support.
Further, as per a Deloitte report published in September 2021, India remains an attractive
market for international investors both in terms of short-term and long-term prospects.

2. Industry Analysis:
Fast moving consumer goods (FMCG) is the fourth-largest sector in the Indian economy.
There are three main segments in the sector food and beverages, which accounts for 19% of
the sector; healthcare, which accounts for 31% of the share; and household and personal care,
which accounts for the remaining 50% share. The urban segment contributes to about 55% of
the revenue share, while the rural segment accounts for 45%. Rise in rural consumption will
drive the FMCG market.
According to Nielsen, the Indian FMCG industry grew 9.4% in the January -March quarter of
2021, supported by consumption-led growth and value expansion from higher product prices,
particularly for staples. Final consumption expenditure increased at a CAGR of 5.2% during
2015-20.
The FMCG sector's revenue growth will double from 5-6% in FY21 to 10-12% in FY22,
according to CRISIL Ratings. Price increases across product categories will offset the impact
of rising raw material prices, along with volume growth and resurgence in demand for
discretionary items, are driving growth.
The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220
billion by 2025, from US$ 110 billion in 2020. The Indian processed food market is projected
to expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20.
Investment in this sector attract investors as FMCG products have demand throughout the
year.
This sector witnessed healthy FDI inflow of US$18.19 billion from April 2020 to March
2021.
3. Company Analysis:
In company analysis Colgate Palmolive (India) limited is chosen and evaluated from the
FMCG industry. Company analysis is also referred to as security analysis in which stock
picking activity is done. Different analysts have different approaches of conducting company
analysis like 1. Value Approach to Investing 2. Growth Approach to Investing Additionally
in company analysis, the financial ratios of the companies are analyzed in order to ascertain
the category of stock as value stock or growth stock. These ratios include price to book ratio
and price-earnings ratio. Other ratios like return on equity etc. can also be analyzed to
ascertain the potential company for making investment.
b) Discounted cash flow (DCF)

It is a valuation method used to estimate the value of an investment based on its expected future
cash flows. DCF analysis attempts to figure out the value of an investment today, based on
projections of how much money it will generate in the future. The following step by step
procedure is followed.

1. Determining the Revenue Growth Rates

2. Forecasting the Financial Statements
3. Deriving the FCFF and FCFE
4. Calculating the Terminal Value
5. Calculating the Discount Rate
6. Discounting the Cashflows
7. Arriving at the Intrinsic Value of the Shares

Step 1: Determining the Revenue Growth Rates

We arrive at the below table by using the past and expected future performance of both the
company and the economy. This along with adjustments to changes in the management
expectations, extraordinary events and other macro factors give the revenue growth rates for
Colgate Palmolive Valuation.

Step 2: Forecasting the Financial Statements

The financial statements are forecasted for a period of 5 years using the annual report data of
the company. The assumptions used for forecasting are tabulated below. The Excel model is
completely editable and can be adjusted for specific changes which may happen over a period
of time.

Assumption Control Sheet

Income Statement

Average COGS of Revenue 42.33%

Research and Development as percentage of Revenue 0.00%
Sales, general and administrative expenses as percentage of revenue 13.63%
Other operating expenses as percentage of Revenue 22.46%
Other Income (expense) as percentage of revenue 0.77%

Balance Sheet
Short term debt as percentage of total assets 0.24%
Long tern debt as percentage of total assets 0.00%
Cash and cash equivalents as percentage of revenue 5.90%
Short term equivalents as percentage of revenue 0.18%
Accounts receivables as percentage of revenue 3.48%
Inventory as percentage of revenue 6.41%
Prepaid expenses as percentage of revenue 2.22%
Other current assets as percentage of revenue 3.42%
Gross property, plant and equipment as percentage of revenue. 37.62%
Intangible assets as percentage of revenue 0.00%
Other long-term assets a percentage of revenue 4.22%
 Accounts payable as percentage of revenue 14.16%
Corporate Tax rate 22.00%
Other current liabilities as percentage of revenue 7.56%
Retained earnings as percentage of net income -9.76%
Accumulated other comprehensive income as percentage of revenue 9.66%

Cash flow Statement

Other Working Capital as percentage of revenue -0.66%

Step 3: Deriving the FCFF and FCFE

Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available
for distribution after accounting for depreciation expenses, taxes, working capital, and
investments. FCFF is a measurement of a company’s profitability after all expenses and
reinvestments. It is given as follows.

Free cash flow to equity (FCFE) is a measure of how much cash is available to the equity
shareholders of a company after all expenses, reinvestment, and debt are paid. FCFE is a
measure of equity capital usage.

F/S Items (in Millions) Mar-20 Mar-21 Mar-22 Mar-23 Mar-24

Free Cash Flow to firm (FCFF) 12729 10062 10253 10848 11757

Free Cash Flow to Equity (FCFE) 12732 10064 10256 10853 11763

Step 4: Calculating the Terminal Value

Terminal value (TV) is the value of a business or project beyond the forecast period when
future cash flows can be estimated. It assumes that a business will grow at a set growth rate
forever after the forecast period. Terminal value often comprises a large percentage of the total
assessed value.

Terminal Value calculation Units in millions

Free Cashflow to Firm 11756.52

Growth Rate 6.00%

Cost of Capital 9.68%

Terminal Value 338961.62

Step 5: Calculating the Discount Rate
DCF analysis helps assess the viability of a project or investment by calculating the present
value of expected future cash flows using a discount rate. Here we use the Weighted average
cost of capital (WACC) to discount the cash flow. The below table from the excel model shows
the calculation of WACC for Colgate Palmolive Valuation.

Cost of equity Calculation using CAPM

Risk free rate 5.18%

Stock beta 0.5%
Beta unlevered B / (1+ D(1-t)/E) 0.5%
Beta Relevered B*(1+ D(1-t)/E) 0.5%
Market Return (Rm) 14.25
Cost of equity 9.73%

Cost of debt
Cost of debt (Interest expense/Total debt) 3.00%

Cost of Capital
Cost of Equity 9.73%
Weight of Equity in Target Capital Structure 99.20%
Cost of debt 3.00%
Weight of Debt in capital structure 0.80%
WACC 9.68%

Step 6: Discounting the Cash flows

The WACC and the Cost of Equity for the company calculated in the above step are then used
to discount the FCFF, FCFE and Terminal Value calculated in Step 3 and 4. In our case, we’ll
only consider the FCFF based Intrinsic price of the shares as it represents the cash flow to all
the suppliers of capital and not only to the equity shareholders. Thus we arrive at Present value
of future FCFF for Colgate Palmolive Valuation. (Units are INR Millions)

FCFF Calculation FV Discounted

Mar-20 12729.33 11606.25

Mar-21 10062.36 8365.13
Mar-22 10252.89 7771.52
Mar-23 10848.08 7497.19
Mar-24 11756.52 7408.17
Terminal value 338961.62 213590.87
Present Value (PV) 256239.12
 FCFE Calculation FV Discounted

Mar-20 12732.06 11603.06

Mar-21 10063.83 8358.17
Mar-22 10256.23 7762.63
Mar-23 10852.97 7485.90
Mar-24 11763.32 7394.33
Terminal Value 338961.62 213068.58
Present Value (PV) 255672.66

Step 7: Arriving at the Intrinsic Value of the Shares

Dividing the PV of the FCFF and Terminal Value (the Value of the entire firm) by the
number of outstanding shares we get the per share intrinsic value. We can compare this price
with the current market price of the stock to get the Discount or Premium to its intrinsic price.

Colgate Palmolive Valuation Units (in Millions)

PV in Million 256239

No: of Shares Outstanding 272

Intrinsic Value 942.06

Current Market price of Share 1625.00

Current discount premium 72%

c) Relative Valuation Approach
PRICE CHG MKT CAP SALES PROFIT EPS P/E
COMPANY
(In Rs) (%) (Rs Cr) (Rs Cr) (Rs Cr) (Rs) (x)

Hind. Unilever 2417.45 0.42 568004.07 13046.00 2185.00 35.55 68.00

Nestle India 18773.80 -0.97 181016.98 3882.57 617.37 232.48 80.75

Dabur India 598.30 0.05 105773.45 2611.54 438.30 8.17 73.23

Godrej Consumer 960.75 -1.46 98246.30 2894.45 413.66 12.50 76.86

Britannia Inds. 3683.90 0.16 88745.15 3403.46 387.01 70.99 51.89

Marico 565.95 -1.54 73115.08 2419.00 316.00 8.91 63.52

P & G Hygiene 14301.90 -0.91 46423.97 1058.30 218.29 201.21 71.08

Colgate-Palmoliv 1526.70 -0.13 41526.24 1352.42 269.17 39.17 38.98

Varun Beverages 917.40 -0.39 39726.17 2398.16 257.90 10.56 86.88

Hatsun Agro 1385.55 -0.88 29872.46 282.82 5.18 12.29 112.74

Emami 557.40 1.98 24776.43 788.84 185.25 12.79 43.58

Gillette India 5810.30 1.46 18935.77 435.98 27.53 95.06 61.12

Zydus Wellness 1999.05 -1.52 12719.96 383.65 21.47 0.00 -

Galaxy Surfact. 3055.75 -1.27 10832.63 826.38 76.82 51.28 59.59

KRBL 284.25 -0.12 6691.25 1015.91 140.76 24.45 11.63

Jyothy Labs 157.50 1.25 5783.40 525.40 40.20 4.91 32.08

Tasty Bite Eat. 16396.35 2.06 4213.86 111.46 7.17 175.73 93.30
 Technical Analysis
Technical Analysis calculations in excel can be found from the below link.

https://1drv.ms/x/s!AgtfbbEJIrPqkk00ns2JjPjF8BEk
Moving Average (EMA, SMA)
A moving average (MA) is a stock indicator that is commonly used in technical analysis.
The reason for calculating the moving average of a stock is to help smooth out the price data
over a specified period of time by creating a constantly updated average price.
A simple moving average (SMA) is a calculation that takes the arithmetic mean of a given set
of prices over the specific number of days in the past; for example, over the previous 15, 30,
100, or 200 days.
Exponential moving averages (EMA) is a weighted average that gives greater importance to
the price of a stock in more recent days, making it an indicator that is more responsive to new
information.

EMA and SMA

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Close 20 days SMA 20 days EMA

Analysis

Price Trending Down , Moving Average Trending Down and a Strong Downtrend, Strong
Sell

RSI
The relative strength index (RSI) is a popular momentum oscillator developed in 1978.
The RSI provides technical traders with signals about bullish and bearish price momentum,
and it is often plotted beneath the graph of an asset’s price.
An asset is usually considered overbought when the RSI is above 70% and oversold when it
is below 30%.
 RSI
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RSI is mid-range
RSI 36.92 RSI is 36.92, RSI below 30 is considered
oversold and above 70 overbought.

Moving Average Convergence Divergence (MACD)

Moving average convergence divergence (MACD) is calculated by subtracting the 26 -period
exponential moving average (EMA) from the 12-period EMA.
MACD triggers technical signals when it crosses above (to buy) or below (to sell) its signal
line.
The speed of crossovers is also taken as a signal of a market is overbought or oversold.
MACD helps investors understand whether the bullish or bearish movement in the price is
strengthening or weakening.

MACD
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MACD Signal Histogram

MACD(12, 26, 9) -35.22 MACD below Signal and Center

MACD is below the signal and Center line,this

MACD Signal -19.52
is a strong bearish indicator.
BOLLINGER BANDS
Bollinger Bands are a technical analysis tool developed by John Bollinger for generating
oversold or overbought signals.
There are three lines that compose Bollinger Bands: A simple moving average (middle band)
and an upper and lower band.
The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple
moving average, but can be modified.

Bollinger bands
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Close SMA Upper Bollinger Band Lower Bollinger Band

From the above graph it is clear that the prices are moving closer to lower bollinger b and, the
closer the prices move to the lower band, the more oversold the market.