PRINCIPLES OF FINANCIAL MANAGEMENT

CASE STUDY 3

1. Hindustan Unilever Limited (HUL) is India's leading Fast Moving

Consumer Goods (FMCG) company with a wide range of products
including personal care, household care, food and beverages. Below is a
critical view of HUL's financial situation and practices.
• Financial position:
HUL is in a favourable financial condition as reflected in its financial
statements. The company's revenue has grown steadily over the years
and stands at INR 43,067 in 2021, representing a 19% year-on-year
growth. HUL's net profit for the same period was INR 7,954, an increase
of 18% over the previous year. The company has low leverage and
exhibits a healthy balance sheet.  
• Effective working capital management:
HUL effectively manages its working capital, with a liquidity ratio of
1.9x in FY21, indicating sufficient cash flow. current ratio current assets.
Additionally, the company was able to maintain healthy inventory
turns. This is a testament to effective inventory management.
• High return on equity (ROE):
HUL's ROE has been consistently high over the years, suggesting that
the company is generating strong returns on its shareholders'
investments. ROE in FY2021 is 89.2%.
• Sustainability: HUL is committed to sustainability and has various
sustainability initiatives in place. For example, HUL has set a goal to
reduce its carbon footprint by 50% by 2030. In addition, the company
launches various eco-friendly products
.• Company management: HUL has a strong Board of Directors and a
strong corporate governance system with various committees such as
the Audit Committee and the Nomination and Compensation
Committee. The company also adheres to the Tata Code of Conduct,
widely recognized as one of the best corporate governance practices in
India.

HUL's financial position and business are solid, indicating a strong

company with a bright future. HUL has demonstrated a commitment to
sustainability and corporate governance that has enabled the company's
long-term success. 
2. Stock price analysis:
HUL's stock price has performed well over the years, reflecting the
company's strong financial performance and market position. The
company's stock has risen steadily at a CAGR of around 20% over the
past five years. As of 3 April 2023, HUL's share price was INR 3536.65.
Fiscal Policy Analysis maintains prudent financial policies that help
maintain a healthy balance sheet. The company has consistently
maintained low capital adequacy, indicating a low capital adequacy
ratio. His HUL capital adequacy ratio as of the end of March 2021 was
his 0.14. This indicates that the company is in good financial condition
and does not rely excessively on debt to fund its operations. HUL has
also maintained a stable pay-out ratio over the past five years, with an
average pay-out ratio of around 65%.
The company's dividend per share has steadily increased over the years
at a CAGR of around 16%. This shows that the company is committed to
rewarding shareholders and has a sustainable dividend policy. HUL
was also able to raise funds through various means such as issuing
corporate bonds and CP.
The company has issued debentures worth INR 2,000 at his 5.15%
coupon in 2021. Funds raised through these instruments were used for a
variety of purposes, including refinancing debt and working capital
needs. Overall, HUL's financial policies are conservative and the
company has a long history of sound financial management. This keeps
the company in a strong financial position and contributes to its long-
term success.