STUDY ON HDFC MUTUAL FUND IN MUMBAI REGION

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor of Accounting and Finance
Under the Faculty of Commerce

By
BUMBAK RITIK ROHATAS

Under the Guidance of

PROF. CHETAN PANCHAL
Shri Chinai College of Commerce and Economics
Andheri- East, Mumbai – 400 069

April, 2022

SHRI CHINAI COLLEGE OF COMMERCE AND ECONOMICS

Andheri- East, Mumbai – 400 069

1
 Certificate
This is to certify that MR. BUMBAK RITIK ROHATAS has worked and duly
completed her/his Project Work for the degree of Bachelor of Accounting and
Finance under the Faculty of Commerce in the subject of Financial Accounting
and her project is entitled, “STUDY ON HDFC MUTUAL FUND IN
MUMBAI REGION” under my supervision.
I further certify that the entire work has been done by learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma
of any University.
It is her own work and facts reported by her/his personal findings and
investigations.

PROF. CHETAN PANCHAL

Date:

2
 Declaration
I the undersigned MR. BUMBAK RITIK ROHATAS here by, declare that the work
embodied in this project work titled “STUDY ON HDFC MUTUAL FUND IN MUMBAI
REGION” Forms my own contribution to the research work carried out under the guidance
of Prof. CHETAN PANCHAL a result of my own research work and had not been
previously submitted to any other University for any other Degree / Diploma to this or any
other University.
Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.
BUMBAKRITIK ROHATAS
Certified by

PROF. CHETAN PANCHAL

___________________

3
 Acknowledgment
To list who all have helped me is difficult because they are so numerous and
depth is so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance
to do this project.
I would like to thank my incharge Principal Dr.B.B.KAMBLE, for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our Coordinator Prof. CHETAN PANCHAL
his moral support and guidance.
I would also like to express my sincere gratitude towards my project guide Prof.
CHETAN PANCHAL whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers
who responded me throughout my project.

4
STUDY ON HDFC
MUTUAL FUND IN
MUMBAI REGION

5
SR CHAPTER TOPIC PAGE NO
NO NO
1 1 INTRODUCTION
2
3
4
5
6
7
8

6
 CHAPTER NO. 1 INTRODUCTION

1.1 INTRODUCTION

1.2 HISTORY

1.3 BRANDS AND PRODUCTS

1.4 AIMS AND OBJECTIVE

7
 1.1 INTRODUCTION

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company with a
heritage of over 80 years in India. On any given day, nine out of ten Indian households use their products.
HUL works to create a better future every day and helps people feel good, look good and get more out of
life with brands and services that are good for them and good for others.
With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care,
toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the
Company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading
household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline,
Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality
Wall’s and Pureit.
The Company has about 18,000 employees and has a net sales of INR 33895 crores (financial year 2016-
17). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of Food, Home Care, Personal
Care and Refreshment products with sales in over 190 countries and an annual sales turnover of €52.7
billion in 2016. Unilever has over 67% shareholding in HUL.
Hindustan Unilever's corporate headquarters are located at Andheri (E), Mumbai. The campus is spread
over 12.5 acres of land and houses over 1,600 employees. Some of the facilities available for the
employees include a convenience store, a food court, an occupational health centre, a gym, a sports &
recreation centre and a day care centre. The Campus is designed by Mumbai based architecture firm
Kapadia Associates.
The campus received a certification from LEED (Leadership in Energy and Environmental Design) Gold
in 'New Construction' category, by Indian Green Building Council (IGBC), Hyderabad, under license from
the United States Green Building Council (USGBC).

8
Type Public

Traded as BSE: 500696
NSE: HINDUNILVR
BSE SENSEX Constituent

ISIN INE030A01027 

Industry Consumer goods

Predecessor Hindustan Vanaspati Manufacturing Company (1931–1956)

Lever Brothers India Limited (1933–1956)
United Traders Limited (1935–1956)
Hindustan Lever Limited (1956–2007)

Founded 1933; 87 years ago

Headquarters Mumbai, Maharashtra

India

Key people Sanjiv Mehta (CEO)[1]

Products Foods, cleaning agents personal care products and water purifiers.

Revenue ₹34,487 crore (US$4.8 billion) (2016-17)[2]

Operating ₹6,047 crore (US$850 million)(2016-17)

income

Net income ₹4,490 crore (US$630 million) (2016-17)

Parent Unilever

9
1.2 HISTORY

In the summer of 1888, Lever Brothers launched Sunlight soap bars. Soon after followed Lifebuoy in 1895
and other famous brands like Pears, Lux and Vim. Vanaspati was launched in 1918 and Dalda brand came
to the market in 1937.
In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company,
followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three
companies merged to form HUL in November 1956; HUL offered 10% of its equity to the Indian public,
being the first among the foreign subsidiaries to do so.
Unilever now holds 67.25% equity in the company. The rest of the shareholding is distributed among
about three lakh individual shareholders and financial institutions.
By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India
Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition.
The erstwhile Lipton's links with India were forged in 1898.
Unilever acquired Lipton in 1972, and in 1977 Lipton Tea (India) Limited was incorporated.

Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an
international acquisition of Chesebrough Pond's USA in 1986.
The erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In
1996, HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture, Lakme Unilever
Limited, to market Lakme's market-leading cosmetics and other appropriate products of both the
companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the
joint venture to the company.
HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in 1994, Kimberly-
Clark Lever Ltd, which markets Huggies Diapers and Kotex Sanitary Pads. In 1992, the erstwhile Brooke
Bond acquired Kothari General Foods, with significant interests in Instant Coffee. In 1993, it acquired the
Kissan business from the UB Group and the Dollops Icecream business from Cadbury India.
As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of
Unilever, were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to
form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the
traditional Beverages business. 1994 witnessed BBLIL launching the Wall's range of Frozen Desserts. By
the end of the year, the company entered into a strategic alliance with the Kwality Icecream Group
families and in 1995 the Milkfood 100% Icecream marketing and distribution rights too were acquired.
Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated

10
in the merger of Pond's (India) Limited (PIL) with HUL in 1998.
The two companies had significant overlaps in Personal Products, Speciality Chemicals and Exports
businesses, besides a common distribution system since 1993 for Personal Products. The two also had a
common management pool and a technology base. The amalgamation was done to ensure for the Group,
benefits from scale economies both in domestic and export markets and enable it to fund investments
required for aggressively building new categories.
In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods
to HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to
private sector partners. HUL's entry into Bread is a strategic extension of the company's wheat business. In
2002, HUL acquired the government's remaining stake in Modern Foods.
In 2003, HUL acquired the Cooked Shrimp and Pasteurised Crabmeat business of the Amalgam Group of
Companies, a leader in value added Marine Products exports.
HUL launched a slew of new business initiatives in the early part of 2000’s. Project Shakti was started in
2001. It is a rural initiative that targets small villages populated by less than 5000 individuals. It is a
unique win-win initiative that catalyses rural affluence even as it benefits business. Currently, there are
over 45,000 Shakti entrepreneurs covering over 100,000 villages across 15 states and reaching to over 3
million homes.
In 2002, HUL made its foray into Ayurvedic health & beauty centre category with the Ayush product
range and Ayush Therapy Centres. Hindustan Unilever Network, Direct to home business was launched in
2003 and this was followed by the launch of ‘Pureit’ water purifier in 2004.
In 2007, the Company name was formally changed to Hindustan Unilever Limited after receiving the
approval of share holders during the 74th AGM on 18 May 2007. Brooke Bond and Surf Excel breached
the the Rs 1,000 crore sales mark the same year followed by Wheel which crossed the Rs.2,000 crore sales
milestone in 2008.
On 17th October 2008 , HUL completed 75 years of corporate existence in India. In January 2010, the
HUL head office shifted from the landmark Lever House, at Backbay Reclamation, Mumbai to the new
campus in Andheri (E), Mumbai.
On 15th November, 2010, the Unilever Sustainable Living Plan was officially launched in India at New
Delhi.
In March, 2012 HUL’s state of the art Learning Centre was inaugurated at the Hindustan Unilever campus
at Andheri, Mumbai. In April, 2012, the Customer Insight & Innovation Centre (CiiC) was inaugurated at
the Hindustan Unilever campus at Andheri, Mumbai HUL completed 80 years of corporate existence in
India on October 17th, 2013.

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 1.3 BRANDS AND PRODUCTS

HUL is the market leader in Indian consumer products with presence in over 20
consumer categories such as soaps, tea, detergents and shampoos amongst others
with over 700 million Indian consumers using its products. Sixteen of HUL's
brands featured in the ACNielsen Brand Equity list of 100 Most Trusted Brands
Annual Survey (2014), carried out by Brand Equity, a supplement of The
Economic Times.

Food

 Annapurna salt and spices

 Bru coffee

 Brooke Bond (3 Roses, Taj Mahal, Taaza, Red Label) tea

 Kissan squashes, ketchups, juices and jams

 Lipton tea

 Knorr soups & meal makers and soupy noodles

 Kwality Wall's frozen dessert

 Magnum
(ice cream)
Homecare Brands
 Active Wheel detergent

 Cif Cream Cleaner

 Comfort fabric softeners

 Domex disinfectant/toilet cleaner

 Rin detergents and bleach

 Sunlight detergent and colour care

12
 Surf Excel detergent and gentle wash

 Vim dishwash

 Magic – Water Saver

 Personal Care Brands

 Aviance Beauty Solutions

 Axe deodorant and aftershaving lotion and soap

 LEVER Ayush Therapy ayurvedic health care and personal care products

 Breeze beauty soap

 Brylcreem hair cream and hair gel

 Clear anti-dandruff hair products

 Clinic Plus shampoo and oil

 Close Up toothpaste

 Dove skin cleansing & hair care range: bar, lotions, creams and anti-perspirant
deodorants

 Denim shaving products

 Fair & Lovely skin-lightening products

 Hamam

 Indulekha ayurvedic hair oil

 Lakmé beauty products and salons

 Lifebuoy soaps and handwash range

 Liril 2000 soap

 Lux soap, body wash and deodorant

 Pears soap, body wash

 Pepsodent toothpaste

 Pond's talcs and creams

 Rexona

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 Sunsilk shampoo

 Sure anti-perspirant

 Vaseline petroleum jelly, skin care lotions

 TRESemmé

 TIGI

 Water Purifier Brand

 Pureit Water Purifier

14
 1.4 AIMS AND OBJECTIVE

1. TO Know About Profit and Loss of HINDUSTAN UNILEVER LIMITED

2. To Evaluate the Present and Future Profitability of Hindustan Unilever Limited

3. To Know About Liquid Position of Hindustan Unilever Limited.

4. To Know About Financial Performance of Hindustan Unilever Limited.

5. TO know about financial performance of HINDUSTAN UNILEVER LIMITE

15
 CHAPTER NO. 2 RESEARCH METHODOLOGY
2.1 PRIMARY DATA
2.2 SECONDARY DATA
2.3 METHODOLOGY
2.4 RESEARCH DESIGN
2.5 SOURCES AND COLLECTION OF DATA
2.6 SOURCE OF DATA
2.7 TOOLS

16
 2. RESEARCH METHODOLOGY

2.1 PRIMARY DATA :

Primary data means the raw data (data without fabrication or not tailored data) which has just been collected
from the source and has not gone any kind of statistical treatment like sorting and tabulation. The term
primary data may sometimes be used to refer to first hand information.

2.2 SECONDARY DATA :

Secondary data is research data that has previously been gathered and can be accessed by researchers. The
term contrasts with primary data, which is data collected directly from its source. Common sources of
existing secondary data include data collected by government public services departments, libraries, internet
searches and censuses.

2.3 METHODOLOGY :
In the project we have followed descriptive method of study.
Research instrument
Here project analysis is made by collecting secondary data from different website, journals, etc.
Secondary data’s are published and research data’s collected from different websites and different books ,
company annual report. These documents and data are very useful for the theoretical, conceptual and
organizational background analysis. Detailed analysis of data is made by plotting different graphs tables
which can be easily understandable.
Then by observing these graphs we have made our conclusion.

2.4 RESEARCH DESIGN :

The research is designed in such a way to mainly concentrate on data collected through
secondary mode.

17
2.5 SOURCES AND COLLECTION OF DATA :

For the purpose of this study only secondary data have been used to a large extent.

2.6 SOURCE OF DATA :

The main source of data of the study was the annual reports of HUL constructions, internet
sources, books and articles.

2.7 TOOLS :

1. Common size balance Sheet

2. Ratio analysis
3. Trend Analysis
4. Comparative balance sheet analysis

18
 CHAPTER NO. 3 PESTEL AND SWOT ANALYSIS
3.1 POLITICAL FACTORS THAT IMPACT HINDUSTAN UNILEVER
LIMITED
3.2 ECONOMIC FACTORS THAT IMPACT HINDUSTAN UNILEVER
LIMITED
3.3 SOCIAL FACTORS THAT IMPACT HINDUSTAN UNILEVER
LIMITED
3.4 TECHNOLOGY FACTORS THAT IMPACT HINDUSTAN UNILEVER
LIMITED
3.5 ENVIRONMENTAL FACTORS THAT IMPACT HINDUSTAN
UNILEVER LIMITED
3.6 LEGAL FACTORS THAT IMPACT HINDUSTAN UNILEVER
LIMITED
SWOT ANALYSIS OF HINDUSTAN UNILEVER LIMITED
3.7 STRENGTHS OF HINDUSTAN UNILEVER LIMITED

3.8 WEAKNESSES OF HINDUSTAN UNILEVER LIMITED

3.9 OPPORTUNITIES OF HINDUSTAN UNILEVER LIMITED

3.10 THREATS OF HINDUSTAN UNILEVER LIMITED

3.11 LIMITATION OF SWOT ANALYSIS OF HINDUSTAN UNILEVER

LIMITED

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 3. PESTEL AND SWOT ANALYSIS
The PESTEL analysis is a tool devised by Harvard professor Francis Aguilar to conduct a thorough external
analysis of the business environment of any industry for which data is available. This is an important step for
eventually devising a strategy that can effectively manoeuvre the competition to maximize a firm's chances
of sustainability and profitability. PESTEL is an amalgam of initials of various factors that not only affect
Hindustan Unilever Limited but the entire industry as a whole- these factors are namely Political, Economic,
Social, Technological, Environmental and Legal.
PESTEL analysis provides valuable insight into the operating challenges that any company in the industry
appears to face, and so the company in question may face as well. An understanding of the overall
competitive landscape will prevent investors and entrepreneurs from partaking in any risky ventures if the
risk arises out of, say, an unstable political regime or a sudden economic recession. This may be best
exemplified by the recent exit of the United Kingdom from the European Union. The sudden fallout was
political and caused many investors to pull out of new ventures and halt their expansions, as the future
became uncertain in the wake of this decision.

3.1 POLITICAL FACTORS THAT IMPACT HINDUSTAN UNILEVER LIMITED:

The political factors that may impact the profitability or chances of survival of the company are quite
diverse. The political risks vary from sudden changes in existing political regimes to civil unrest to major
decisions taken by the government. In cases of possible multinationals, one may also include political factors
that take place/ affect not only the host country but also all countries that contain business operations, or that
may engage in trade with Hindustan Unilever Limited
To properly appraise the extent of the overall systematic political risk that Hindustan Unilever Limited may
be exposed to, the following factors should be considered before taking part in any investments:
The level of political stability that the country has in recent years.
The integrity of the politicians and their likelihood to take part in acts of corruption, as the resulting
repercussions may lead to possible impeachments or resignations of high level government employees.
The laws that the country enforces, especially with regards to business, such as contract law, as they dictate
what Hindustan Unilever Limited is and is not allowed to do. Some countries, for example, prohibit alcohol
or have certain conditions that must be fulfilled, while some government systems have inefficient amounts of
red tape that discourage business.
Whether or not a company’s intellectual property (IP) is protected. For example, a country that has no
policies for IP protection would mean that entrepreneurs may find it too risky to invest in Hindustan Unilever
Limited
The trade barriers that the host country has would protect Hindustan Unilever Limited; however, trade
barriers that countries with potential trade partners would harm companies by preventing potential exports.

20
A high level of taxation would demotivate companies like Hindustan Unilever Limited from maximizing
their
profits.
The risk of military invasion by hostile countries may cause divestment from ventures.
A low minimum wage would mean higher profits and, thus, higher chances of survival for Hindustan
Unilever Limited

3.2 ECONOMIC FACTORS THAT IMPACT HINDUSTAN UNILEVER LIMITED:

Economic factors are all those that pertain to the economy of the country that Hindustan Unilever Limited,
such as changes in the inflation rate, the foreign exchange rate, the interest rate, the gross domestic product,
and the current stage of the economic cycle. These factors, and their resulting impact on aggregate demand,
aggregate investment and the business climate, in general, have the potential to make a company highly
profitable, or extremely likely to incur a loss. The economic factors in the PESTEL analysis are
macroeconomic.
The economic factors that Hindustan Unilever Limited may be sensitive to, and in turn should consider
before investing may include the following:
The economic system that is currently operational in the sector in question- whether it is a monopoly, an
oligopoly, or something similar to a perfect competition economic system.
The rate of GDP growth in the country will affect how fast Hindustan Unilever Limited is expected to grow
in the near future.
The interest rates in the country would affect how much individuals are willing to borrow and invest. Higher
rates would result in greater investments that would mean more growth for Hindustan Unilever Limited
However efficiently the financial markets operate also impact how well Hindustan Unilever Limited can
raise capital at a fair price, keeping in mind the demand and supply.
The exchange rate of the country Hindustan Unilever Limited operates in would impact the profitability of
Hindustan Unilever Limited, particularly if Hindustan Unilever Limited engages in international trade. The
stability of the currency is also important- an unstable currency discourages international investors.
A high level of unemployment in the country would mean there is a greater supply of jobs than demand,
meaning people would be willing to work for a lower wage, which would lower the costs of Hindustan
Unilever Limited

3.3 SOCIAL FACTORS THAT IMPACT HINDUSTAN UNILEVER LIMITED:

The social factors that impact Hindustan Unilever Limited are a direct reflection of the society that
Hindustan Unilever Limited operates in, and encompasses culture, belief, attitudes and values that the
majority of the population may hold as a community. The impact of social factors is not only important for
21
the operational aspect of Hindustan Unilever Limited, but also on the marketing aspect of the organization.

A thorough understanding of the customers, their lifestyle, level of education and beliefs in a society, or
segment of society, would help design both the products and marketing messages that would lead to a
venture becoming a success.
The social factors that affect Hindustan Unilever Limited and should be included in the social aspect of the
PESTEL analysis include the following:
The demographics of the population, meaning their respective ages and genders, vastly impact whether or
not a certain product may be marketed to them. Makeup is mostly catered to women, so targeting a majority
male population would be less population than targeting a population that is mostly female.
The class distribution among the population is of paramount importance: Hindustan Unilever Limited would
be unable to promote a premium product to the general public if the majority of the population was a lower
class; rather, they would have to rely on very niche marketing.
To some extent, the differences in educational background between the marketers and the target market may
make it difficult to relate to and draw in the target market effectively. Hindustan Unilever Limited should be
very careful not to lose the connection to the target market's interests and priorities.
Hindustan Unilever Limited needs to be fully aware of what level of health standards, reactions to
harassment claims and importance of environmental protection prevail in the industry as a whole, and thus
are expected from any company as they are seen as the norm.

3.4 TECHNOLOGY FACTORS THAT IMPACT HINDUSTAN UNILEVER

LIMITED:
Technology can rapidly dismantle the price structure and competitive landscape of an industry in a very short
amount of time. It thus becomes extremely important to constantly and consistently innovate, not only for the
sake of maximizing possible profits and becoming a market leader, but also to prevent obsolescence in the
near future. There are multiple instances of innovative products completely redesigning the norm for an
entire industry: Uber and Lyft dominate the taxi cab industry; smartphones have left other phones an
unviable option for most et cetera.
The technological factors that may influence Hindustan Unilever Limited may include the following:
The recent technological developments and breakthroughs made by competitors, as mentioned above. If
Hindustan Unilever Limited encounters a new technology that is gaining popularity in the industry in
question, it is important to monitor the level of popularity and how quickly it is growing and disrupting its
competitors’ revenues. This would translate to the level of urgency required to adequately respond to the
innovation, either by matching the technology or finding an innovative alternative.
How easy, and thus quickly, will the technology be diffused to other firms in the industry, leading to other
firms copying the technological processes/ features of Hindustan Unilever Limited
22
How much an improvement of technology would improve/ transform what the product initially offers. If this
improvement is drastic, then other firms in the industry suffer more heavily.
The impact of the technology on the costs that most companies in the industry are subject to have the
potential to increase or reduce the resulting profits greatly. If these profits are great in number, they may be
reinvested into the research and development department, where future technological innovations would
further raise the level of profits, and so on, ensuring sustainable profits over a long period of time.

3.5 ENVIRONMENTAL FACTORS THAT IMPACT HINDUSTAN UNILEVER

LIMITED:
Different industries hold different standards of environmental protection in their head as the norm. This norm
then dictates what every company should aim for, in the least, to prevent becoming the target of pressure
groups and boycotts due to a lack of environmental conscientiousness. A company in the textile industry, for
example, is not expected to incur the same level of pollution and environmental degradation as an oil
company. The new consumer, armed with the interest and the knowledge it carries, prefers to give its
business to companies it views as more ethical, particularly about the environment in the wake of global
warming.
The environmental factors that may significantly impact Hindustan Unilever Limited include:
The current weather conditions may significantly impact the ability of Hindustan Unilever Limited to
manage the transportation of both the resources and the finished product. This, in turn, would affect the
delivery dates of the final product in the case of, say, an unexpected monsoon.
Climate change would also render some products useless. For example, in the case of textiles, in countries
where the winter has become very mild due to Global Warming, warm winter clothes have much less of a
market.
Those companies that produce extremely large amounts of waste may be required by law to manage their
environmental habits. This may include pollution fines and quotas, which may place a financial strain on
Hindustan Unilever Limited
If Hindustan Unilever Limited should (knowingly or unknowingly) contribute to the further endangerment of
an already endangered species may face not only the consequences from the law but also face a backlash
from the general public who may then boycott Hindustan Unilever Limited in retaliation.
While relying, in any percentage, on renewable energy may be expensive, it often receives support not only
from the government but also from its customer base, who may be willing to pay a premium price for the
products that Hindustan Unilever Limited may produce

3.6 LEGAL FACTORS THAT IMPACT HINDUSTAN UNILEVER LIMITED:

23
The government institutions and frameworks in a country, while technically also political and thus subject to
whichever political party holds the majority in a government body, are also legal and thus should be
considered

in a PESTEL analysis. Often Hindustan Unilever Limited policies on their own are not enough to
efficiently protect Hindustan Unilever Limited and its workers, making Hindustan Unilever Limited appear
an undesirable place of employment that may repel skilled, talented workers.
The legal factors that deserve consideration include the following:
Intellectual property laws and other data protection laws are, as mentioned earlier, in place to protect the
ideas and patents of companies who are only profiting because of that information. If there is a likelihood
that the data is stolen, then Hindustan Unilever Limited will lose its competitive edge and have a high chance
of failure.
Discrimination laws are placed by the government to protect the employees and ensure that everyone in
Hindustan Unilever Limited is treated fairly and given the same opportunities, regardless of gender, age,
disability, ethnicity, religion or sexual orientation.
Health and safety laws were created after witnessing the horrible conditions that employees were forced to
work in during and directly after the industrial revolution. Implementing the proper regulations may be
expensive, but Hindustan Unilever Limited has to engage in it, not only due to the law but also out of
Hindustan Unilever Limited's personal feeling of ethical and social responsibility to other human beings.
Laws are also placed to ensure a certain level of quality or reasonable price for certain products to keep the
customer safe and prevent them for being provided. The industries this applies to find often their costs
elevated.

SWOT ANALYSIS OF HINDUSTAN UNILEVER LIMITED

3.7 STRENGTHS OF HINDUSTAN UNILEVER LIMITED:
Financial Position: Hindustan Unilever Limited has a strong financial position with consecutive profits in the
past 5 years, along with accumulated profit reserves that can be used to finance future capital expenditures.
Hindustan Unilever Limited has a large asset base, which provides it with better solvency.
Return on Capital Expenditure: Hindustan Unilever Limited has been successfully able to generate positive
returns on the capital expenditure it has incurred on various projects in the past.

3.8 WEAKNESSES OF HINDUSTAN UNILEVER LIMITED:

Rented Property: A significant proportion of the property that Hindustan Unilever Limited owns is rented
rather than purchased. It has to pay large amounts of rent on these adding to its costs.
Low current ratio: The current ratio that shows the company’s ability to meet its short term financial
obligations, is lower than the industry average. This could mean that the company could have liquidity
24
problems in the future.
The company has low levels of current assets compared to current liabilities, and this can create liquidity
problems for it in operations.
Cash flow problems: There is a lack of proper financial planning at Hindustan Unilever Limited regarding
cash flows, leading to certain circumstances where there isn’t enough cash flow as required leading to

unnecessary unplanned borrowing.

Integration: Hindustan Unilever Limited's current structure and culture have resulted in the failure of various
mergers aimed at vertical integration.

3.9 OPPORTUNITIES OF HINDUSTAN UNILEVER LIMITED:

E-commerce: There has been a new trend and a growth in sales of the e-commerce industry. This means that
a lot of people are now making purchases online. Hindustan Unilever Limited can earn revenue by opening
online stores and making sales through these.
Tax policy: the governments’ reduction in tax rate is beneficial for Hindustan Unilever Limited as a lower
amount would be expensed out as a tax.

3.10 THREATS OF HINDUSTAN UNILEVER LIMITED:

Exchange Rate: the exchange rate keeps fluctuating and this affects a company like Hindustan Unilever
Limited that has sales internationally, while its suppliers are local.
Political uncertainties in the country prove to be a barrier in business, hindering performance at times and
making the business incur unnecessary costs.
The fluctuating interest rates in the country do not provide a stable financial and economic environment.

3.11 LIMITATION OF SWOT ANALYSIS OF HINDUSTAN UNILEVER

LIMITED:
Even though the SWOT analysis is an effective tool, it has certain limitations as well.
Its major limitation is the fact that there can be an overlap of strengths and weakness, with a single factor
being both a strength and a weakness. For example, a large number of outlets can be a strength in a growing
economy or a weakness if the economy is going through a recession.
The matrix is not an end as it does not show how to achieve the objectives. It should be used as a starting
point to make strategic decisions.
The assessment done through a SWOT analysis is a static one and does not take into consideration the

25
changes that take place in the competitive environment.
The factors listed down in a SWOT analysis may be overemphasized by the company.
There are certain interrelationships between the internal and external factors that the SWOT Matrix
overlooks.

CHAPTER NO.4 COMPANY ANALYSIS

4.1 MEANING OF COMAPNY ANALYSIS

4.2 FINANCIAL STATEMENT ANALYSIS

4.3 FINANCIAL STATEMENT

4.4 BALANCE SHEET

4.5 INCOME STATEMENT

4.6 CASH FLOW STATEMENT

4.7 W0RKING CAPITAL MANAGEMENT

4.8 FINANCIAL PERFORMANCE

4.8.1 SIGNIFICANCE OF FINANCIAL PERFORMANCE ANALYSIS

4.8.2 TYPES OF FINANCIAL PERFORMANCE ANALYSIS

4.9 COMPARATIVE STATEMENT

4.10 COMMON SIZE STATEMEMTS

4.11 TREND ANALYSIS

26
 4.COMAPNY ANALYSIS

4.1 MEANING OF COMAPNY ANALYSIS:

Company analysis refers to the process of evaluating a company’s profitability, profile and products or
services. It is also known as “fundamental analysis,” and it is generally used by investors. It incorporates
basic company information, such as the mission statement, goals and values.
This process involves reviewing the history of a company and the events that contributed to shaping the firm.
Moreover, it looks into the company’s goods and services. Company analysis studies the products
manufactured by the company and analyzes the quality and demand for these products. If the firm is in the
service sector, the investor reviews the services offered to the related market.
To evaluate a company, core elements, operations and functions are analyzed. The reports from the analysis
of various aspects of the firm put together the big picture of its corporate quality. Analysts use the SWOT
(strength, weakness, opportunity, threat) approach to determine a firm’s current and probable future position
in its respective industry.

4.2 FINANCIAL STATEMENT ANALYSIS:

Financial statement analysis is the process of analyzing a company's financial statements for decision-
making purposes. External stakeholders use it to understand the overall health of an organization as well as
to evaluate financial performance and business value. Internal constituents use it as a monitoring tool for
managing the finances.

4.3 FINANCIAL STATEMENT:

Financial statements are written records that convey the business activities and the financial performance of a
company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure
accuracy and for tax, financing, or investing purposes. As mentioned, there are three main financial
statements that every company creates and monitors: the balance sheet, income statement, and cash flow
statement. Companies use these financial statements to manage the operations of their business and also to
27
provide reporting transparency to their stakeholders. All three statements are interconnected and create
different views of a company’s activities and performance Financial statements include:

 Balance sheet
 Income statement
 Cash flow statement.

4.4 BALANCE SHEET:

The balance sheet is a report of a company's financial worth in terms of book value. It is broken into three
parts to include a company’s assets, liabilities, and shareholders' equity. Short-term assets such as cash and
accounts receivable can tell a lot about a company’s operational efficiency. Liabilities include its expense
arrangements and the debt capital it is paying off. Shareholder’s equity includes details on equity capital
investments and retained earnings from periodic net income. The balance sheet must balance with assets
minus liabilities equaling shareholder’s equity. The resulting shareholder’s equity is considered a company’s
book value. This value is an important performance metric that increases or decreases with the financial
activities of a company.

Particular 2019-18 2018-17 2017-16 2016-15

Total Share 216 216 216 216
Capital (in Rs. Cr.)

28
 Total Share Capital
250

200

150

100

50

0
2019-18 2018-17 2017-16 2016-15

Years

Total Assets

0
0
0 0

7659
7075
6279 6490

2016 2017 2018 2019

years

29
ANALYSIS:

From the above graph it can be observed that there is increasement in assets year by year. In the year 2016-
2017 it increased from 6279 to 6490. It again increased to 7075 in the year 2018. In the year 2019 it
increased to 7659.

Balance sheet of HINDUSTAN UNILEVER LIMITED as at 31st March , 2019

Investments
4000
0
3500
0
3000 0
0
2500

2000
3779
1500 3111 2949
2780
1000

500
30
0
2016 2017 2018 2019

Years
4.5 INCOME STATEMENT (i.e. PROFIT AND LOSS ACCOUNTS):
The income statement breaks down the revenue a company earns against the expenses involved in its
business to provide a bottom line, net income profit or loss. The income statement is broken into three parts
which help to analysis business efficiency at three different points. It begins with revenue and the direct costs
associated with revenue to identify gross profit. It then moves to operating profit which subtracts indirect
expenses such as marketing costs, general costs, and depreciation. Finally it ends with net profit which
deducts interest and taxes. Basic analysis of the income statement usually involves the calculation of gross
profit margin, operating profit margin, and net profit margin which each divide profit by revenue. Profit
margin helps to show where company costs are low or high at different points of the operations.

Income Statement Formula and Calculation: Net Income=(Revenue−Expenses)

1. Total all revenue or sales for the period.

2. Total all expenses and costs of operating the business.
3. Subtract total expenses from revenue to achieve net income or the profit for the period.

4.5.1 TYPES OF REVENUE:

Operating revenue is the revenue earned by selling a company's products or services. The operating revenue
for an auto manufacturer would be realized through the production and sale of autos. Operating revenue is
generated from the core business activities of a company.

Non-operating revenue is the income earned from non-core business activities. These revenues fall outside
the primary function of the business. Some non-operating revenue examples include:

 Interest earned on cash in the bank

 Rental income from a property
 Income from strategic partnerships like royalty payment receipts
 Income from an advertisement display located on the company's property

Other income is the revenue earned from other activities. Other income could include gains from the sale of
long-term assets such as land, vehicles, or a subsidiary.

4.5.2 TYPES OF EXPENSES:

Primary expenses are incurred during the process of earning revenue from the primary activity of the
business. Expenses include the cost of goods sold (COGS), selling, general and administrative expenses
(SG&A), depreciation or amortization, and research and development (R&D). Typical expenses include
employee wages, sales commissions, and utilities such as electricity and transportation.
31
Expenses that are linked to secondary activities include interest paid on loans or debt. Losses from the sale of
an asset are also recorded as expenses.

The main purpose of the income statement is to convey details of profitability and the financial results of
business activities. However, it can be very effective in showing whether sales or revenue is increasing when
compared over multiple periods. Investors can also see how well a company's management is controlling
expenses to determine whether a company's efforts in reducing the cost of sales might boost profits over
time.

Total Revenue (in Rs. Cr.)

Mar-19 Mar-18 Mar-17 Mar-16

0%

30%
37%

33%

Particular Mar 19 Mar 18 Mar 17 Mar 16

Total Revenue (in 38,888 35,094 32,416 31,625
Rs. Cr.)

ANALYSIS:

From the above pie chart it can be observed that there is revenues are increases year to year . In the year
2016 -2017 it increased from 31625 to 32416. It again increased to 35094 in the year 2018. In the year 2019
it increased to 38888 .

32
 Total Expenses (in Rs. cr.)

0%

Mar-19
31%
36% Mar-18
Mar-17
Mar-16

33%

ANALYSIS:

From the above pie chart it can be observed that there is expenses are increases year to year . In the year
2016 -2017 it increased from 25648 to 26261. It again increased to 27747in the year 2018. In the year 2019
it increased to 30139. The management should take remedial measures reduce the expenses.

33
Statement of Profit and Loss of HINDUSTAN UNILEVER LIMITED for the year

ended 31st March, 2019

34
35
4.6 CASH FLOW STATEMENT:
The cash flow statement provides an overview of the company's cash flows from operating activities,
investing activities, and financing activities. Net income is carried over to the cash flow statement where it is
included as the top line item for operating activities. Like its title, investing activities include cash flows
involved with firmwide investments. The financing activities section includes cash flow from both debt and
equity financing. The bottom line shows how much cash a company has available.

FREE CASH FLOW AND OTHER VALUATION STATEMENTS:

Companies and analysts also use free cash flow statements and other valuation statements to analyze the
value of a company. Free cash flow statements arrive at a net present value by discounting the free cash flow
a company is estimated to generate over time. Private companies may keep a valuation statement as they
progress toward potentially going public.

36
STATEMENT OF CASH FLOWS OF HINDUSTAN UNILEVER LIMITED

37
4.7 W0RKING CAPITAL MANAGEMENT :
A managerial accounting strategy focusing on maintaining efficient levels of both components of working
capital, current assets and current liabilities, in respect to each other. Working capital management ensures a
company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.
Working capital = current asset – current liabilities
There are three main components associated with working capital management: accounts receivable,
accounts payable and inventory.
The efficient management of working capital is essential for the profitability and overall financial health of
any company. Working capital is the cash that companies use to operate and conduct their businesses. The
components, or aspects, of working capital that investors and analysts assess to evaluate a company are the
key elements for a company's cash flow – money coming in, money going out and management of inventory

4.7.1 ACCOUNTS RECEIVABLE:

Accounts receivable are revenues due – what is owed to a company by its customers for sales
made. Timely, efficient collection of accounts receivable is essential to a company's smooth
financial operation. Accounts receivable are listed as assets on a company's balance sheet, but
they are not actually assets until they are collected. A common metric analysts use to assess a
company's handling of accounts receivable is days sales outstanding, which reveals the
average number of days a company takes to collect sales revenues.

4.7.2 ACCOUNTS PAYABLE :

Accounts payable, the money that a company is obligated to pay out over the short term, is
also a key component of working capital management. Companies seek to strike a balance
between maintaining maximum cash flow by delaying payments as long as is reasonably
possible and the need to maintain positive credit ratings and good relationships with suppliers
and creditors. Ideally, a company's average time to collect receivables is significantly shorter
than its average time to settle payables.
4.7.3 INVENTORY :
Inventory is a company's primary asset that it converts into sales revenues. The rate at which a company
sells and replenishes its inventory is an important measure of its success. Investors consider the inventory
turnover rate to be an indication of the strength of sales and as a measure of how efficient the company is in
its purchasing and manufacturing process. Inventory that is too low puts the company in danger of losing out
on sales, but excessively high inventory

38
4.8 FINANCIAL PERFORMANCE:
Financial statements are maintained by companies daily and used internally for business management. In
general both internal and external stakeholders use the same corporate finance methodologies for
maintaining business activities and evaluating overall financial performance.

When doing comprehensive financial statement analysis, analysts typically use multiple years of data to
facilitate horizontal analysis. Each financial statement is also analysis with vertical analysis to understand
how different categories of the statement are influencing results.

4.8.1 SIGNIFICANCE OF FINANCIAL PERFORMANCE ANALYSIS

39
Interest of various related groups is affected by the financial performance of a firm. Therefore,
these groups analyze the financial performance of the firm. The type of analysis varies
according to the specific interest of the party involved. The following are some of the parties
interested in financial performance analysis.

• Trade creditors: Trade creditors interested in the liquidity of the firm

(appraisal of firm’s liquidity)

• Bond holders: Bond holders interested in the cash-flow ability of the firm.

• Investors: Investors interested in present and expected future earnings as well as

stability of these earnings

• Management: Management interested in internal control, better financial condition

and better performance (appraisal of firm” s present financial condition, evaluation of
opportunities in relation to this current position, return on investment provided by
various assets of the company, etc.)

4.8.2 TYPES OF FINANCIAL PERFORMANCE ANALYSIS:

Financial performance analysis can be classified into different categories on the basis
of material used and modes operandi as under:

1. MATERIAL USED: the basis of material used financial performance can be

analyzed in following two ways:

A. EXTERNAL ANALYSIS: This analysis is undertaken by the outsiders of the

business namely investors, credit agencies, government agencies, and other creditors
who have no access to the internal records of the company. They mainly use published
financial statements for the analysis and as it serves limited purposes.

B. INTERNAL ANALYSIS: This analysis is undertaken by the persons namely

executives and employees of the organization or by the officers appointed by
government or court who have access to the books of account and other information
related to the business.

2. MODUS OPERANDI:

40
On the basis of modus operandi financial performance can be analyze in the following two
ways:

A. AHORIZONTAL ANALYSIS:

In this type of analysis financial statements for a number of years are reviewed and analyzed.
The current year’s figures are compared with the standard or base year and changes are shown
usually in the form of percentage. This analysis helps the management to have an insight into
levels and areas of strength and weaknesses. This analysis is also called Dynamic Analysis as
it based on data from various years.

B. VERTICAL ANALYSIS:

In this type of Analysis study is made of quantitative relationship of the various items of
financial statements on a particular date. This analysis is useful in comparing the performance
of several companies in the same group, or divisions or departments in the same company.
This analysis is not much helpful in proper analysis of firm‟s financial position because it
depends on the data for one period. This analysis is also called Static Analysis as it based on
data from one date or for one accounting period.

4.9 COMPARATIVE STATEMENT:

A comparative statement is a document used to compare a particular financial statement with prior period
statements. Previous financials are presented alongside the latest figures in side-by-side columns, enabling
investors to identify trends, track a company’s progress and compare it with industry rivals.

41
4.9.1 COMPARATIVE BALANCE SHEET:

A comparative balance sheet presents side-by-side information about an entity's assets, liabilities, and
shareholders' equity as of multiple points in time. For example, a comparative balance sheet could
present the balance sheet as of the end of each year for the past three years. Another variation is to
present the balance sheet as of the end of each month for the past 12 months on a rolling basis. In both
cases, the intent is to provide the reader with a series of snapshots of a company's financial position
over time, which is useful for developing trend line analyses (though this works better when the reader
has the entire set of financial statements to work with and not just the balance sheet).The comparative
balance sheet is not required under GAAP for a privately-held company or a nonprofit entity, but the
SEC does require it in numerous circumstances for the reports issued by publicly-held companies,
particularly the annual Form 10-K and the quarterly Form 10-Q. The usual SEC requirement is to report
a comparative balance sheet for the past two years (with additional requirements for quarterly
reporting).There is no standard format for a comparative balance sheet. It is somewhat more common to
report the balance sheet as of the least recent period furthest to the right, though the reverse is the case
when you are reporting balance sheets in a trailing twelve-months format

%
COMPARATIVE STATEMENT INCREASE INCREASE
MAR MAR /
BALANCE SHEET OF HINDUSTAN '19 '18 DECREAS /
UNILEVER (in Rs. Cr.) E DECREASE
SOURCES OF FUNDS    
Total Share Capital 216 216 0 0
42
 Equity Share Capital 216 216 0 0
Reserves 7,418.00 6,859.00 559.00 8.149876
NETWORTH 7,659.00 7,075.00 584.00 8.254417
Secured Loans 0 0 0.00 0
Unsecured Loans 0 0 0.00 0
TOTAL DEBT 0 0 0.00 0
TOTAL LIABILITIES 7,659.00 7,075.00 584.00 8.254417
Gross Block 5,912.00 5,234.00 678.00 12.95376
Less: Accum. Depreciation 1,569.00 1,092.00 477.00 43.68132
NET BLOCK 4,343.00 4,142.00 201.00 4.852728
Capital Work in Progress 373 430 -57.00 -13.2558
INVESTMENTS 2,949.00 3,111.00 -162.00 -5.20733
Inventories 2,422.00 2,359.00 63.00 2.670623
Sundry Debtors 1,673.00 1,147.00 526.00 45.85876
Cash and Bank Balance 3,688.00 3,373.00 315.00 9.338867
Total Current Assets 7,783.00 6,879.00 904.00 13.14144
Loans and Advances 2,417.00 2,587.00 -170.00 -6.57132
Total CA, Loans & Advances 10,200.0 9,466.00
0 734.00 7.754067
Current Liabilities 8,656.00 8,651.00 5.00 0.057797
Provisions 1,550.00 1,423.00 127.00 8.924807
Total CL & Provisions 10,206.0 10,074.0
0 0 132.00 1.310304
NET CURRENT ASSETS -6 -608 602.00 -99.0132
TOTAL ASSETS 7,659.00 7,075.00 584.00 8.254417
Contingent Liabilities 2,009.00 1,699.00 310.00 18.24603
Book Value (Rs) 35.27 32.69 2.58 7.892322

Comparative Statement of HINDUSTAN UNILEVER LIMITED for the year 2018-19

4.9.2 COMPARATIVE INCOME STATEMENT:

A Comparative Income Statement shows the operating results for a number of accounting periods and helps
the reader of such statement to compare the results over the different periods for better understanding and
also for detailed analysis of variation of line wise items of Income Statement.
43
  Comparative Income Statement format combines several Income Statements as
 columns in a Single Statement which helps the reader in analyzing trends and measure the
performance over different reporting periods.
 It can also be used to compare two different companies operating metrics as well. Such Analysis
helps in comparing the performance with another business which can be used to analyze how
companies react to market conditions affecting the companies belonging to the same Industry.
 Thus Comparative Income Statement is an important tool through which the result of operations of a
business (or say operation of the business of different companies) over multiple accounting periods
can be analyzed to understand the various factors contributing to the change over the period for better
interpretation and analysis.
 It helps various stakeholders of business and also Analyst community to analyze the impact of
business decisions over the company’s top line and bottom line and helps in identifying various
trends over the period which otherwise would have been difficult and time-consuming.
 Comparative Income Statement shows absolute figures, changes in absolute figures, absolute data in
terms of percentages and also as an increase (or decrease) in terms of percentages over the different
periods. With the help of a Comparative Income Statement format in one snapshot, the performance
of a company over different periods can be compared and changes in expense items and Sales can be
easily ascertained.

ADVANTAGES:

 It makes analyses simple and fast as past figures can easily be compared with the current figures
without the need for referring to separate past Income Statements.
 It makes comparison across different companies also easy and helps in analyzing the efficiency both
at Gross Profit Level and Net Profit Level.
 It shows percentage changes in all line items of the Income Statement which makes analysis and
Interpretation of Top Line (Sales) and Bottom Line (Net Profit) easy and more information

DISADVANTAGES:

44
  Financial Data reported in Comparative Income Statement is useful only if same accounting
principles are followed in the preparation of such statements. In the case where deviation is observed
such Comparative Income Statement will not serve the intended purpose.
 Comparative Income Statement is not of much use in cases where the company has diversified into
new business lines which have impacted the Sales and Profitability drastically.

Mar-19 Mar-18
 PROFIT & LOSS
ACCOUNT 
      INCREASE % INCREASE
INCOME     / DECREASE /DECREASE
REVENUE FROM 37,660.00 34,619.00
OPERATIONS [GROSS] 3,041.00 8.784194
Less: Excise/Services 0 693
Tax/Other Levies -693.00 -100
REVENUE FROM 37,660.00 33,926.00
OPERATIONS [NET] 3,734.00 11.00631
TOTAL OPERATING 38,224.00 34,525.00
REVENUES 3,699.00 10.71398
Other Income 664 569 95.00 16.69596
TOTAL REVENUE 38,888.00 35,094.00 3,794.00 10.81096
EXPENSES     0.00 0
Cost Of Materials Consumed 13,240.00 12,491.00
749.00 5.996317
Operating And Direct Expenses 0 0
0.00 0
Changes In Inventories Of 12 -71
FG,WIP And Stock-In Trade
83.00 -116.901
Employee Benefit Expenses 1,747.00 1,745.00
2.00 0.114613
Finance Costs 28 20 8.00 40
Depreciation And Amortisation 524 478
Expenses 46.00 9.623431
Other Expenses 9,880.00 9,272.00 608.00 6.557377
TOTAL EXPENSES 30,139.00 27,747.00 2,392.00 8.620752
PROFIT/LOSS BEFORE 8,749.00 7,347.00
EXCEPTIONAL,
EXTRAORDINARY ITEMS
AND TAX 1,402.00 19.08262
Exceptional Items -227 -62 -165.00 266.129
PROFIT/LOSS BEFORE 8,522.00 7,285.00
TAX 1,237.00 16.9801
TAX EXPENSES-    
CONTINUED
OPERATIONS 0.00 0
Current Tax 2,565.00 2,148.00 417.00 19.41341
45
 Less: MAT Credit Entitlement 0 0
0.00 0
Deferred Tax -79 -100 21.00 -21
Tax For Earlier Years 0 0 0.00 0
TOTAL TAX EXPENSES 2,486.00 2,048.00 438.00 21.38672
PROFIT/LOSS AFTER TAX 6,036.00 5,237.00
AND BEFORE
EXTRAORDINARY ITEMS 799.00 15.25683
PROFIT/LOSS FROM 6,036.00 5,237.00
CONTINUING
OPERATIONS 799.00 15.25683
PROFIT/LOSS FOR THE 6,036.00 5,237.00
PERIOD 799.00 15.25683
OTHER ADDITIONAL    
INFORMATION 0.00 0
EARNINGS PER SHARE     0.00 0
Basic EPS (Rs.) 27.89 24.2 3.69 15.24793
Diluted EPS (Rs.) 27.88 24.19 3.69 15.25424
VALUE OF IMPORTED    
AND INDIGENIOUS RAW
MATERIALS STORES,
SPARES AND LOOSE
TOOLS 0.00 0
Imported Raw Materials 0 0 0.00 0
Indigenous Raw Materials 0 0 0.00 0
STORES, SPARES AND    
LOOSE TOOLS 0.00 0
Imported Stores And Spares 0 0
0.00 0
Indigenous Stores And Spares 0 0
0.00 0
DIVIDEND AND DIVIDEND    
PERCENTAGE
0.00 0
Equity Share Dividend 4,546.00 3,896.00 650.00 16.68378
Tax On Dividend 913 755 158.00 20.92715
Equity Dividend Rate (%) 2,200.00 2,000.00 200.00 10

4.10 COMMON SIZE STATEMEMTS:

Common Size of financial statements is a technique used to identify where a company has applied its
resources and in what proportions those resources are distributed among the various balance sheet and
income statement accounts. The analysis determines the relative weight of each account and its share in asset
resources or revenue generation.

46
In the common size, each element of financial statements (Both Income Statement and Balance sheet) are
shown as a percentage of another item.  The assets, liabilities and share capital is represented as a percentage
of total assets. In the case of Income Statement, each element of income and expenditure is defined as a
percentage of the total sales.
There are two types of Common Size Statements – a) Balance Sheet & b) Income Statement

ADVANTAGES:

 Profit statements and other financial reports of different companies can be easily compared even
though they are of different sizes. For example Balance sheet of Apple Inc and Samsung can be
easily comparable after converting both into percentage terms.
 Within one company, annual or quarterly changes in the elements can be easily compared. For
example Income statement of Apple Inc of different years can be comparable if the same is converted
into a percentage. This gives a perfect indication of how much sales revenue improved or declined.
How much each and every expense moved. How much depreciation expense increased or decreased.

4.11 TREND ANALYSIS:

It is used by both – Accounting analysis and technical analysis. Sales and cost information of the
organization’s profit and loss statement can be arranged on a horizontal line for multiple time periods and
examined the trends and data inconsistencies. For instance, take the example of a sudden spike in the
expenses in a particular quarter followed by a sharp decline in the next period, is an indicator of expenses
was booked twice in the first quarter. Thus the trend analysis in accounting is important for examining the
financial statements for inaccuracies, to see whether the adjustment of the certain heads should be done
before the conclusion is drawn from the financial statements.
Trend Analysis in accounting compares the overall growth of key financial statement line item over the years
from the base case.

TREND
%
PROFIT & LOSS Mar-19 Mar-18 Mar-17
ACCOUNT  2017 2018 2019
INCOME      
REVENUE FROM 37,660.00 34,619.00 33,895.00
OPERATIONS
[GROSS] 100 102.136 111.1078
Less: Excise/Service 0 693 2,597.00
Tax/Other Levies 100 26.68464 0
REVENUE FROM 37,660.00 33,926.00 31,298.00 100 108.3967 120.3272
47
OPERATIONS [NET]
TOTAL OPERATING 38,224.00 34,525.00 31,890.00
REVENUES 100 108.2628 119.862
Other Income 664 569 526 100 108.1749 126.2357
TOTAL REVENUE 38,888.00 35,094.00 32,416.00 100 108.2614 119.9654
EXPENSES       0 0 0
Cost Of Materials 13,240.00 12,491.00 11,363.00
Consumed 100 109.927 116.5185
Operating And Direct 0 0 0
Expenses 100 0 0
Changes In Inventories 12 -71 156
Of FG,WIP And Stock-In
Trade 100 -45.5128 7.692308
Employee Benefit 1,747.00 1,745.00 1,620.00
Expenses 100 107.716 107.8395
Finance Costs 28 20 22 100 90.90909 127.2727
Depreciation And 524 478 396
Amortisation Expenses 100 120.7071 132.3232
Other Expenses 9,880.00 9,272.00 8,538.00 100 108.5969 115.718
TOTAL EXPENSES 30,139.00 27,747.00 26,261.00 100 105.6586 114.7671
PROFIT/LOSS 8,749.00 7,347.00 6,155.00
BEFORE
EXCEPTIONAL,
EXTRAORDINARY
ITEMS AND TAX 100 119.3664 142.1446
Exceptional Items -227 -62 241 100 -25.7261 -94.1909
PROFIT/LOSS 8,522.00 7,285.00 6,396.00
BEFORE TAX 100 113.8993 133.2395
TAX EXPENSES-      
CONTINUED
OPERATIONS 0 0 0
Current Tax 2,565.00 2,148.00 1,865.00 100 115.1743 137.5335
Less: MAT Credit 0 0 0
Entitlement 0 0 0
Deferred Tax -79 -100 41 100 -243.902 -192.683
Tax For Earlier Years 0 0 0 0 0 0
TOTAL TAX 2,486.00 2,048.00 1,906.00
EXPENSES 100 107.4502 130.4302
PROFIT/LOSS AFTER 6,036.00 5,237.00 4,490.00
TAX AND BEFORE
EXTRAORDINARY
ITEMS 100 116.637 134.4321
PROFIT/LOSS FROM 6,036.00 5,237.00 4,490.00
CONTINUING
OPERATIONS 100 116.637 134.4321
PROFIT/LOSS FOR 6,036.00 5,237.00 4,490.00
THE PERIOD 100 116.637 134.4321
OTHER ADDITIONAL      
INFORMATION 0 0 0
EARNINGS PER      
SHARE 0 0 0
Basic EPS (Rs.) 27.89 24.2 20.75 100 116.6265 134.4096
48
Diluted EPS (Rs.) 27.88 24.19 20.74 100 116.6345 134.4262
VALUE OF      
IMPORTED AND
INDIGENIOUS RAW
MATERIALS
STORES, SPARES
AND LOOSE TOOLS 0 0 0
Imported Raw Materials 0 0 0 0 0 0
Indigenous Raw 0 0 0
Materials 0 0 0
STORES, SPARES      
AND LOOSE TOOLS 0 0 0
Imported Stores And 0 0 0
Spares 0 0 0
Indigenous Stores And 0 0 0
Spares 0 0 0
DIVIDEND AND      
DIVIDEND
PERCENTAGE 0 0 0
Equity Share Dividend 4,546.00 3,896.00 3,571.00 100 109.1011 127.3033
Tax On Dividend 913 755 693 100 108.9466 131.746
Equity Dividend Rate 2,200.00 2,000.00 1,700.00
(%) 100 117.6471 129.4118

MAR '19 MAR '18 MAR

BALANCE SHEET '17 2017 2018 2019
SOURCES OF FUNDS      
Total Share Capital 216 216 216 100 100 100
Equity Share Capital 216 216 216 100 100 100
Reserves 7,418.00 6,859.00 6,274.00 100 109.3242 118.234
NETWORTH 7,659.00 7,075.00 6,490.00 100 109.0139 118.0123
Secured Loans 0 0 0 0 0 0
Unsecured Loans 0 0 0 0 0 0
TOTAL DEBT 0 0 0 0 0 0

49
TOTAL LIABILITIES 7,659.00 7,075.00 6,490.00 100 0 118.0123
Gross Block 5,912.00 5,234.00 4,689.00 100 111.6229 126.0823
Less: Accum. Depreciation 1,569.00 1,092.00 665 100 164.2105 235.9398
NET BLOCK 4,343.00 4,142.00 4,024.00 100 102.9324 107.9274
Capital Work in Progress 373 430 203 100 211.8227 183.7438
INVESTMENTS 2,949.00 3,111.00 3,779.00 100 82.32337 78.03652
Inventories 2,422.00 2,359.00 2,362.00 100 99.87299 102.5402
Sundry Debtors 1,673.00 1,147.00 928 100 123.5991 180.2802
Cash and Bank Balance 3,688.00 3,373.00 1,671.00 100 201.8552 220.7062
Total Current Assets 7,783.00 6,879.00 4,961.00 100 138.6616 156.8837
Loans and Advances 2,417.00 2,587.00 1,784.00 100 145.0112 135.4821
Total CA, Loans & Advances 10,200.00 9,466.00 6,745.00 100 140.341 151.2231
Current Liabilities 8,656.00 8,651.00 7,389.00 100 117.0794 117.1471
Provisions 1,550.00 1,423.00 872 100 163.1881 177.7523
Total CL & Provisions 10,206.00 10,074.00 8,261.00 100 121.9465 123.5444
NET CURRENT ASSETS -6 -608 - 100
1,516.00 40.10554 0.395778
TOTAL ASSETS 7,659.00 7,075.00 6,490.00 100 109.0139 118.0123
Contingent Liabilities 2,009.00 1,699.00 1,241.00 100 136.9057 161.8856
Book Value (Rs) 35.27 32.69 29.99 100 109.003 117.6059

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 CHAPTER NO. 5 ANALYSIS OF FINANCIAL RATIO
5.1 FINANCIAL RATIO
5.2 PROFITABILITY RATIOS
5.3 LIQUIDITY RATIOS
5.4 MANAGEMENT EFFICIENCY RATIOS
5.5 LEVERAGE RATIOS
5.6 VALUATION AND GROWTH RATIOS

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 5.ANALYSIS OF FINANCIAL RATIO
5.1 FINANCIAL RATIO:
Financial ratio analysis is performed by comparing two items in the financial statements. The resulting ratio
can be interpreted in a way that is more insightful than looking at the items separately.
Financial ratios can be classified into ratios that measure: (1) profitability, (2) liquidity, (3) management
efficiency, (4) leverage, and (5) valuation & growth

LIST OF FINANCIAL RATIOS

Here is a list of various financial ratios. Take note that most of the ratios can also be expressed in percentage
by multiplying the decimal number by 100%. Each ratio is briefly described.

5.2 PROFITABILITY RATIOS:

1. GROSS PROFIT RATE = GROSS PROFIT ÷ NET SALES

Evaluates how much gross profit is generated from sales. Gross profit is equal to net sales (sales minus
sales returns, discounts, and allowances) minus cost of sales.

2. RETURN ON SALES = NET INCOME ÷ NET SALES

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Also known as "net profit margin" or "net profit rate", it measures the percentage of income derived from
dollar sales. Generally, the higher the ROS the better.

3. RETURN ON ASSETS = NET INCOME ÷ AVERAGE TOTALASSETS

In financial analysis, it is the measure of the return on investment. ROA is used in evaluating
management's efficiency in using assets to generate income.

4. RETURN ON STOCKHOLDERS' EQUITY = NET INCOME ÷ AVERAGE STOCKHOLDERS'

EQUITY
Measures the percentage of income derived for every dollar of owners' equity.

5.3 LIQUIDITY RATIOS:

1. CURRENT RATIO = CURRENT ASSETS ÷ CURRENT LIABILITIES

Evaluates the ability of a company to pay short-term obligations using current assets (cash, marketable
securities, current receivables, inventory, and prepayments).

Years Current Assets Current Liabilities Current Ratio

2016 9,530 6,652 1.432651834

2017 9,365 7,202 1.3003332408

2018 11,139 8636 1.2898332561

2019 11,374 8353 1.3616664671

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 Current ratio
1.45

1.4

1.35

1.3

1.25

1.2
2016 2017 2018 2019

Years

Interpretation:

From the above graph it can be observed that there is fluctuating trend during the study period. In the year
2016-2017 it decreased from 1.43 to 1.30. It again decreased to 1.28 in the year 2018. In the year 2019 it
increased to 1.36. The management should take remedial measures to improve the present position.

2. ACID TEST RATIO= QUICK ASSETS ÷ CURRENT LIABILITIES

Also known as "quick ratio", it measures the ability of a company to pay short-term obligations using the
more liquid types of current assets or "quick assets" (cash, marketable securities, and current receivables)

Acid Rati o
Years

1.05 1.02 1.07

0.97

0 0 0 0
2016 2017 2018 2019

54
Interpretation:

From the above graph it can be observed that there is fluctuating trend during the study period. In the year
2016-2017 it decreased from 1.05 to 0.97. It increased to 1.02 in the year 2018. In the year 2019 it again
increased to 1.07. The management should take remedial measures to improve the present position

.
3. CASH RATIO = (CASH + MARKETABLE SECURITIES) ÷ CURRENT LIABILITIES
Measures the ability of a company to pay its current liabilities using cash and marketable securities.
Marketable securities are short-term debt instruments that are as good as cash.

4. NET WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

Determines if a company can meet its current obligations with its current assets; and how much excess or
deficiency there is.

5.4 MANAGEMENT EFFICIENCY RATIOS:

1. RECEIVABLE TURNOVER = NET CREDIT SALES ÷ AVERAGE ACCOUNTS RECEIVABLE

Measures the efficiency of extending credit and collecting the same. It indicates the average number of
times in a year a company collects its open accounts. A high ratio implies efficient credit and collection
process.

2. DAYS SALES OUTSTANDING = 360 DAYS ÷ RECEIVABLE TURNOVER

Also known as "receivable turnover in days", "collection period". It measures the average number of days
it takes a company to collect a receivable. The shorter the DSO, the better. Take note that some use 365
days instead of 360.

3. INVENTORY TURNOVER = COST OF SALES÷ AVERAGE INVENTORY

Represents the number of times inventory is sold and replaced. Take note that some authors use Sales in
lieu of Cost of Sales in the above formula. A high ratio indicates that the company is efficient in
managing its inventories.

4. DAYS INVENTORY OUTSTANDING = 360 DAYS ÷ INVENTORY TURNOVER

Also known as "inventory turnover in days". It represents the number of days inventory sits in the
warehouse. In other words, it measures the number of days from purchase of inventory to the sale of the
same. Like DSO, the shorter the DIO the better.

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5. ACCOUNTS PAYABLE TURNOVER = NET CREDIT PURCHASES ÷ AVE. ACCOUNTS
PAYABLE
Represents the number of times a company pays its accounts payable during a period. A low ratio is
favored because it is better to delay payments as much as possible so that the money can be used for more
productive purposes.

6. DAYS PAYABLE OUTSTANDING = 360 DAYS ÷ ACCOUNTS PAYABLE TURNOVER

Also known as "accounts payable turnover in days", "payment period". It measures the average number of
days spent before paying obligations to suppliers. Unlike DSO and DIO, the longer the DPO the better (as
explained above).

7. OPERATING CYCLE = DAYS INVENTORY OUTSTANDING + DAYS SALES

OUTSTANDING
Measures the number of days a company makes 1 complete operating cycle, i.e. purchase merchandise,
sell them, and collect the amount due. A shorter operating cycle means that the company generates sales
and collects cash faster.

8. CASH CONVERSION CYCLE = OPERATING CYCLE - DAYS PAYABLE OUTSTANDING

CCC measures how fast a company converts cash into more cash. It represents the number of days a
company pays for purchases, sells them, and collects the amount due. Generally, like operating cycle, the
shorter the CCC the better.

9. TOTAL ASSET TURNOVER = NET SALES ÷ AVERAGE TOTAL ASSET

Measures overall efficiency of a company in generating sales using its assets. The formula is similar to
ROA, except that net sales is used instead of net income.

5.5 LEVERAGE RATIOS:

1. DEBT RATIO = TOTAL LIABILITIES ÷ TOTAL ASSETS

Measures the portion of company assets that is financed by debt (obligations to third parties). Debt ratio
can also be computed using the formula: 1 minus Equity Ratio.

Years Total Liabilities Total Assets Debt Ratio

2016 13,920 13,920 1.00
2017 14,751 14,751 1.00
2018 17,149 17,149 1.00
2019 17,865 17,865 1.00

56
 Debt Ratio
1.2

0.8

0.6

0.4

0.2

0
2016 2017 2018 2019

Years

2. EQUITY RATIO = TOTAL EQUITY ÷ TOTAL ASSETS

Determines the portion of total assets provided by equity (i.e. owners' contributions and the company's
accumulated profits). Equity ratio can also be computed using the formula: 1 minus Debt Ratio.

The reciprocal of equity ratio is known as equity multiplier, which is equal to total assets divided by total
equity.

3. DEBT- EQUITY RATIO = TOTAL LIABILITIES ÷ TOTAL EQUITY

Evaluates the capital structure of a company. A D/E ratio of more than 1 implies that the company is a
leveraged firm; less than 1 implies that it is a conservative one.

4. TIMES INTEREST EARNED = EBIT ÷ INTEREST EXPENSE

Measures the number of times interest expense is converted to income, and if the company can pay its
interest expense using the profits generated. EBIT is earnings before interest and taxes.

5.6 VALUATION AND GROWTH RATIOS:

1. EARNINGS PER SHARE = (NET INCOME - PREFERRED DIVIDENDS) ÷ AVERAGE

COMMON SHARES OUTSTANDINGS
EPS shows the rate of earnings per share of common stock. Preferred dividends is deducted from net
income to get the earnings available to common stockholders.

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2. PRICE - EARNINGS RATIO = MARKET PRICE PER SHARE ÷ EARNINGS PER SHARE
Used to evaluate if a stock is over- or under-priced. A relatively low P/E ratio could indicate that the
company is under-priced. Conversely, investors expect high growth rate from companies with high P/E
ratio.

3. DIVIDEND PAY-OUT RATIO = DIVIDEND PER SHARE ÷ EARNINGS PER SHARE

Determines the portion of net income that is distributed to owners. Not all income is distributed since a
significant portion is retained for the next year's operations.

4. DIVIDEND YIELD RATIO = DIVIDEND PER SHARE ÷ MARKET PRICE PER SHARE
Measures the percentage of return through dividends when compared to the price paid for the stock. A
high yield is attractive to investors who are after dividends rather than long-term capital appreciation.

5. BOOK VALUE PER SHARE = COMMON SHE ÷AVERAGE COMMON SHARES

Indicates the value of stock based on historical cost. The value of common shareholders' equity in the
books of the company is divided by the average common shares outstanding.

Some Tips :
When computing for a ratio that involves an income statement item and a balance sheet item, we usually use
the average for the balance sheet item. This is because the income statement item pertains to a whole period's
activity. The balance sheet item should reflect the whole period as well; that's why we average the beginning
and ending balances.

There are other financial ratios in addition those listed above. The ones listed here are the most common
ratios used in evaluating a business. In interpreting the ratios, it is better to have a basis for comparison, such
as past performance and industry standards.

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 RATIOS

Mar-19 Mar-18 Mar-17 Mar-16 Mar-15

 
PER SHARE RATIOS          

Basic EPS (Rs.) 27.89 24.2 20.75 19.12 19.95

Diluted EPS (Rs.) 27.88 24.19 20.74 19.11 19.94
Cash EPS (Rs.) 30.37 26.46 22.62 20.64 21.27
Book Value 35.46 32.75 30.05 29.07 17.21
[ExclRevalReserve]/Share
(Rs.)
Book Value 35.46 32.75 30.05 29.07 17.22
[InclRevalReserve]/Share
(Rs.)
Dividend / Share(Rs.) 22 20 17 16 15
Revenue from 176.96 159.84 147.64 143.8 142.39
Operations/Share (Rs.)

PBDIT/Share (Rs.) 43.06 36.32 30.43 29.23 26.93

PBIT/Share (Rs.) 40.63 34.11 28.6 27.74 25.61
PBT/Share (Rs.) 39.45 33.73 29.61 27.53 28.6
Net Profit/Share (Rs.) 27.94 24.25 20.79 19.15 19.95

PROFITABILITY          
RATIOS
PBDIT Margin (%) 24.33 22.72 20.61 20.32 18.91
PBIT Margin (%) 22.96 21.33 19.36 19.29 17.98
PBT Margin (%) 22.29 21.1 20.05 19.14 20.08
Net Profit Margin (%) 15.79 15.16 14.07 13.31 14
Return on Networth / 78.8 74.02 69.18 65.88 115.87
Equity (%)
Return on Capital 92.27 86.53 81.82 56.92 88.95
Employed (%)

Return on Assets (%) 33.78 30.53 30.43 29.71 31.65

59
Total Debt/Equity (X) 0 0 0 0 0

Asset Turnover Ratio (%) 213.96 201.32 216.18 223.13 225.94

LIQUIDITY RATIOS          
Current Ratio (X) 1.36 1.29 1.3 1.43 1.05
Quick Ratio (X) 1.07 1.02 0.97 1.05 0.76
Inventory Turnover Ratio 15.78 14.64 13.5 12.29 11.84
(X)
Dividend Payout Ratio 75.31 74.39 79.53 81.07 75.2
(NP) (%)

Dividend Payout Ratio 69.29 68.17 73.08 75.23 70.52

(CP) (%)

Earnings Retention Ratio 24.69 25.61 20.47 18.93 24.8

(%)
Cash Earnings Retention 30.71 31.83 26.92 24.77 29.48
Ratio (%)

VALUATION RATIOS          
Enterprise Value (Cr.) 3,65,196.80 2,85,181.40 1,94,835.00 1,85,053.00 1,86,314.36
EV/Net Operating 9.55 8.26 6.11 5.96 6.05
Revenue (X)
EV/EBITDA (X) 39.26 36.35 29.64 29.31 31.98
MarketCap/Net Operating 9.65 8.36 6.16 6.05 6.13
Revenue (X)

Retention Ratios (%) 24.68 25.6 20.46 18.92 24.79

Price/BV (X) 48.16 40.79 30.28 29.91 50.71
Price/Net Operating 9.65 8.36 6.16 6.05 6.13
Revenue
Earnings Yield 0.02 0.02 0.02 0.02 0.02

60
 SUGGESTIONS

• After the analysis of financial statements, it is clear that the company‟s status is not good, because
the net working capital of the company has decreased from last year‟s position.

• Company‟s Profits are huge in the current year, it‟s better to declare dividend to shareholders.

• The Company is utilizing its fixed assets, which majorly help in the growth of the organization. The
Company should maintain that perfectly.

• The company‟s Investments are raised from the inception, it gives the other income i.e., interest on
investments.

• Steps have to be taken to increase the current assets position of the firm so as to improve the
liquidity position of the company.

• Percentage of Debt to equity can be reduced so as to reduce the financial risk.

• Percentage of debt in capital can be reduced so as to reduce the financial risk.

• Steps can be taken to reduce the current liability of the firm so as to have a stable financial position.

• Steps can be taken to increase the net profit so as to increase the overall financial performance.

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 CONCLUSION

Analysis of financial statements refers to the treatment of information contained in the financial statement in
a way so as to afford a full diagnosis of the profitability and financial position of the firm concerned. The
process of analysing financial statements involves the rearranging, comparing and measuring the
significance of financial and operating data. Such a step helps to reveal the relative significance and effect of
items of the data in relation to the time period and/or between two organizations.
Balance sheet is the main document to access the financial sound ability of the concern.
The asset details in the balance sheet shall help the investor to decide the investment ideas. The ratio
analysis is the necessary tools to the investors to necessarily select and built an effective portfolio. The
data helps the investor in developing the strategy for effective investment management

Balance sheet is the main document to access the financial sound, ability of the concern. The assets
details in the balance sheet shall help the investor to decide the investment ideas. The ratio analysis is
the necessary tools to the investors. The data helps the investors in developing the strategies for
effective investment management.

62
 BIBILOGRAPHY
BOOKS
TYBAF SEM VI – SAPM – AUTHER NAME ( ABHISHEK SOOD & DR. SANDIP
SOOD)

SYBAF SEM IV – MANAGEMENT ACCOUNTING – AINAPURE

WEBSITES
www.hul.co.in/
www.moneycontrol.com
https://www.ibef.org/industry/fmcg.aspx
https://en.wikipedia.org/wiki/Hindustan_Unilever
http://www.careratings.com/upload/NewsFiles/SplAnalysis/FMCG_July
%202017.pdf https://www.ibef.org/download/FMCG-July-2017.pdf
https://www.ibef.org/archives/detail/cHJlc2VudGF0aW9ucyYzNjM4MCY
0NDQ= https://www.ibef.org/industry/fmcg.aspx
http://info.shine.com/industry/fmcg/6.html
http://ideasmakemarket.com/2013/09/aug-entry9-analysis-of-fmcg-
sector.html https://www.ibef.org/download/FMCG-February-
2017.pdf http://bcgmatrixanalysis.com/bcg-matrix-of-hul/

63