“A comparative Financial Analysis Between Dabur India, Godrej Consumer

Products and the FMCG industry as a whole”

Research project submitted in Partial Fulfillment of the Requirement for the degree of B.com
Honors.

Department of Commerce
BHOPAL SCHOOL OF SOCIAL SCIENCES

April 2021

Submitted by Guided by
Mr. Saksham Baveja Dr. Vinod Advani
B.com Honors Assistant Professor
Department of Commerce
 CERTIFICATE

It is to certify that the work contained in the research project report entitled “A comparative
Financial Analysis Between Dabur India, Godrej Consumer Products and the FMCG industry as a
whole”, by Mr. Saksham Baveja from B.com Honors, Final year, has been carried out under my
supervision and that the work has not been submitted elsewhere for a degree.

Signature of the Supervisor ……………………

Name Dr. Vinod Advani

Department Commerce

Bhopal School of Social Sciences

April, 2021
DECLARATION

I hereby declare that this research project report entitled “A comparative Financial Analysis
Between Dabur India, Godrej Consumer Products and the FMCG industry as a whole” was carried
out by me for the degree of B.com Honors under the guidance and supervision of Dr. Vinod Advani,
Assistant Professor of the Department of Commerce, BSSS college. The interpretations put forth are
entirely based on my reading and understanding of the original texts and they are not published
anywhere in any form. The other books, articles and websites, which I have made use of are
acknowledged at the respective place in the text. The research report is not submitted for any other
degree or diploma in any other University.

Place: Bhopal

Name of the Student: Saksham Baveja

Chapter Number Chapter Title

1 Introduction of the topic

1.1 Rationale of the Study

1.2 Indian FMCG Industry

1.3 Introduction to Dabur India and Godrej Consumer Products pvt. Ltd.

Justification of the Study

1.4

2 Review of Literature

2.1 International Reviews

2.2 National Reviews

3 Research Methodology

3.1 Objectives of the Study

3.2 Research Hypothesis

3.3 Scope of the Data

3.4 Source of Data

3.5 Limitation of the Study

4 Data Analysis

4.1 Data Representation and Interpretation

4.2 Hypothesis Testing

5 Results and Discussion

5.1 Major Findings

5.2 Discussions and Suggestions

5.3 Conclusion

References
Chapter 1: Introduction of the Topic
1.1 Rationale of the Study
1.2 Introduction to the industry
1.3 Introduction to the company
1.4 Justification of the topic
1.1 Rationale of the Study
Over the course of time, a lot of emphasis is being given to the financial statements of the company.
Financial statements are a way of communicating a company's performance for a given period of time. The
healthier the financial statements, the better the prospects of raising capital. These statements are sought
after by the prospective investors to channelize their resources to make them productive. This means that
there are certain components in the financial statements which are used by management to communicate
its financial health and the same are used by the investors to compare it with other investment options.
These so-called components are nothing but the Financial Ratios.

The study provides an investors perspective of comparing the financial ratios of two giants in the FMCG
with and to ascertain the financial health of these companies and thereby making an informed decision
before investing their money. As mentioned earlier, these financial statements are much sought after by the
investors, this makes it imperative to study the relationship between some financial ratios of the company
and its impact on the return on capital employed.

1.2 Introduction to Indian FMCG Industry

The contribution of the Fast-Moving Consumer Goods (FMCG) sector to the economy is on the rise, as the
sector which is currently the 4th largest sector in India, continues to jump the ladder of rankings. The
growth of the FMCG sector can be traced back to the 1990's. The abolishment of “license raj'' and the other
economic reforms that took place in the very year resulted in a spurt of new companies and the entry of
foreign brands in India. The requirement of relatively lesser capital and technological know-how, prompted
domestic and global players to enter the sector. The most striking feature of this industry is the high
inventory turnover, i.e., the goods that are produced are converted into cash within a short span of time. In
other words, the operating cycle of this sector is comparatively shorter than that of other sectors. Detergent,
deodorants, mosquito repellent, cosmetics etc. are some products that are produced within the industry.
Since the sector incorporates a diversified portfolio of products, therefore different companies dominate
the market in various sub-sectors. It is among the few elite sectors, which is, to a large extent, insured
against the forces of recession. In Fact, with the population increasing exponentially, the demand for such
products also increases manifolds, as it caters to the needs of people of every age. The sector touches
millions of lives every day. It will be no surprise to see this sector growing exponentially in the coming
years.
Over the course of a decade, several companies have established a strong foot over this sector. Companies
like Hindustan Unilever limited (HUL), Indian tobacco company (ITC), Dabur, Nestle, Godrej etc. have
become common household names, not just in urban areas but also in the rural areas. Each company within
the sector is a dominant player in the market under different sub-sectors. Each company within the sector
is spending enormous amounts on their product building, product innovation, supply chains and so forth,
to gain competitive edge over its peers.
Companies can continue to maintain this competitive advantage as long as they have a sound financial
position. Broadly speaking, a company is said to be financially sound when it has resources, enough to
cover its short term and long-term debt obligations. In pursuit of finding the financial position of a company
in the market, we make use of its financial statements and compare it with that of its competitors.

Financial statements present a concise summary of the overall operations and performance of the company
for a given financial year. Analysis of these statements is imperative for the external and internal
stakeholders of the company, as it throws light on the short-term and long-term health of the company.
Analysis of financial statements also helps the decision-making authorities to base their decisions on the
future of the company in a coherent manner. The aim of this research project is to compare and analyses
the financial statements of two FMCG giants operating in the Indian market, namely - Godrej and Dabur,
for the last three financial years (FY17-FY20).

With the help of secondary data, the accounting ratios of two companies will be worked out. This will
provide a clear picture about the short-term and long-term liquidity, capital structures, risk component,
profitability, so on and so forth. Besides, the project aims to analyse the capital market trends of both the
companies to check which company’s performance is more stable and hence which company has easy
access to funds from the market.

1.3 Introduction of the Companies

Dabur India
Dabur is not just a pioneer in the FMCG sector, as we know it today, but rather it’s a story of a doctor’s
unshakeable commitment to treating his patients with ayurvedic medications which eventually gave birth
to a brand that was set to lead the market and set benchmarks with each of its endeavor. Founded in the
year 1884 by Dr. S.K. Burman and headquartered in the capital of British India - Dabur embarked on its
journey as a small clinic in one of the narrow lanes of the city.
The name Dabur is constituted by blending two terms, i.e., ‘Da’ and ‘Bur’. ‘Da’ was taken from Daktaar
which is the Bengali pronunciation for doctor, while ‘Bur’ was the initials of the last name of the founder
of the company - Dr. S.K Burman. What made dabur a brand that it is today is the effectiveness of its
ayurvedic component against life-threatening diseases like Dengue, Malaria, Cholera etc., coupled with
reasonable prices.

Today the company has a portfolio of more than 250 ayurvedic products in oral health, skin care, health
care, hair care, and the food segment. Some of the company’s renowned offerings include hajmola, Dabur
Amla hair oil, chyawanprash and real fruit juice.
Godrej Consumer Products

Godrej, a company that was started by Ardeshir Godrej in 1897 found locks as their key business operation.
Early success in the venture and abstinence from self-complacency helped the company change its fortune.
the company started investments in almost all the product lines. You name the product in vogue and the
company comes out with its own version of that product. Soon the company, with its affordable pricing for
all sections and its superior quality became a common household name in India. The company's biggest
forte lies in offering innovative products at an attractive price point. The fact can be traced back to 1918
when the company launched World's first vegetable oil soap, named Chavi. The company started gaining
a huge market as there was no major rival in those early periods. The company threw its weight behind
India's freedom movement, as it donated Rs 3 lakh to Tilak Swaraj Fund making it the largest single
contribution back then. On 15th August 1952, the company launched Cinthol soaps, which subsequently
made the company the second largest player in the soap market in India. In the next two decades the
company aggressively put its hands into different products ranging from ballot boxes to lockers and safes.
Soon the company realized the potential of a huge market for consumer goods in India. It wasted no time
to divert its resources for the production of consumer goods. In 1974, the company introduced its first hair
color, a liquid hair dye, in India. In the subsequent year, the company launched a number of hair care
products. To ensure that these products are marketed and sold effectively, the company tied up the local
hairdressers of all the cities and villages. This marketing strategy worked out successfully and in the few
years after the launch of its hair care products, they became a part of households in every nook and corner
of the country. The company infamous for tapping the early opportunities once again did the same in 1994,
when it stormed into the market of mosquito repellent. It launched Goodknight and HIT and became the
number one player in household insecticides.

It was only in 2001, when Godrej soaps was subsided into Godrej chemicals and resulted into the birth of
a focused FMCG business - Godrej Consumers, as we all know it today. In the year 2008, Godrej liquid
and powder hair color were rebranded as Godrej Expert. in 2013, Godrej embarked on the journey of a new
product line, with its entry into the air care segment. In the same year, it launched goodknight fast card, a
paper-based solution available at just one rupee per card.

In the year 2020, when the world witnessed an unprecedented crisis, that is, the proliferation of Covid-19
virus, the company launched its new hygiene care range from sanitizers to handwashes among other things.

1.4 Justification of the Topic

The comparison between the financial performance of both the companies against each other and against
the industry as a whole, will tell us whether or not a company can be taken as a proxy to industry’s average
financial performance. Also, there is an urgent need to check to what extent is return on capital employed,
which is the dependent variable in our study, gets affected by the cumulative changes in the eight
independent variables of our study.
Chapter2: Review of Literature
2.1 International Reviews
2.2 National Reviews
2.1 International Reviews

1. In 2006, Medhat Tarawneh, faculty of business at Sohar University, Soha conducted a research
study with the purpose of classifying and ranking commercial banks of Oman, based on their
financial characteristics revealed by financial ratios. The study aims to compare the banks in the
aftermath of the 2008 financial crisis which shocked the global economy, using the Financial Ratio
Analysis (FRA). The company employed Multiple Linear Regression to find the impact of financial
ratios on Return on Assets (ROA) and Return on Equity (ROE). The study finds out that financial
ratios have a significant impact on the ROA and ROE of the banks.

2. William H. Beaver (1966), studied the impact of financial ratios on the failure of the firm and
attempted to chalk a predictable model of failure based on his study of financial ratios. He defined
failure as the inability of the firm to settle its financial obligations at the time of their maturity. To
conduct his study, he picked up financial statements of the firms which were declared bankrupt at
the time of his study. He relied on Moody’s list of failed firms and then extracted the latest financial
statements (prior to their failure) of those firms. Next, he picked out the financial data of a non-
failed firm, pertaining to the same industry. He found out that the size of the asset has a major
impact on the failure of a firm.

3. Aleksandar Grubor, Nikola Milicevic, Kristina Mijic (2013) did an empirical analysis of Inventory
Turnover ratio in the FMCG sector of Republic of Serbia. The study selected 35 Small and Medium
enterprises operating in the FMCG sector and gathered the financial data from their annual report.
Next, the study attempted to analyse the impact of inventory turnover ratio (ITR) on gross margin,
capital intensity and sales growth rate. For the same purpose, correlation testing is being done. The
results indicate a positive correlation between ITR and sales growth rate and gross margin.

4. Cheng-MinFeng, Rong-TsuWang (2000) made an attempt to compute what type of financial ratios
have an impact on the survival of the firm, which is an airplane company in this case. The paper
constructed a performance appraisal process for airlines by taking financial ratios into
 consideration. The paper concluded that performance of an airline can be predicted more accurately
when financial ratios are taken into consideration than the case otherwise.

5. Edward I. Altman (1968) made an attempt to reinvigorate the importance of financial ratios in
assessing the financial performance of the companies, during the time when other advanced and
more rigorous statistical techniques have become popular. The purpose of his study was to assess
the quality of financial ratios as an analysis technique. To illustrate the purpose of the study, he
made use of a bankruptcy case. He examined the impact of financial and economic ratios on
bankruptcy and further developed a bankruptcy prediction model using multiple discrimination
statistical methodology.

6. Joseph Faello (2015) made an attempt to detail the benefits and limitations of using financial ratios
from the perspective of financial statement users. Further he also advises the ways to mitigate the
limitations of using financial studies. The purpose of this study is to provide the hints and ways of
using and working with the financial ratios to its end users.

7. Hassan Mobeen Alam, Ali Raza, Muhammad Akram (2011) made use of financial ratios to study
and compare the financial performance of public and private sector banks in Pakistan. All the data
was collected from secondary sources and the study was stretched across a period of 4 years from
2006 to 2009. He found out that on the basis of bank size, private banks outperformed the public
ones. While on all the other parameters Public banks were superior to the private banks.

8. Anupam Mehta (2012) attempted to compare the financial performance of the UAE banking sector
prior and post to the global economic crisis, by making use of financial ratios. The paper studied
all the banks which are listed under the Abu Dhabi stock exchange. The ratios used to draw
inferences are leverage, liquidity and profitability ratios. Wilcox on test has been used by the author
to draw his interpretations. The research concluded that the global economic crisis had a major
impact on the profitability ratios of the banks. There had been a significant decline in all the
profitability ratios of all the banks.

9. Fatih Ecer, Adem Boyukaslan (2014), did research to measure the performance of different Football
clubs in Turkey using financial ratios. The study made use of the secondary data and analyzed the
data using grey relational analysis approach. Leverage, liquidity and profitability ratios are used in
 this study. The study finally organizes the clubs into a hierarchical order according to the outcomes
of different ratios.

10. Mustafa Hassan Mohammad Adam (2014) made an attempt to study and investigate the financial
performance of Erbil Bank for investment using financial ratios. Several financial parameters were
used in the study to find out the financial performance and also to find whether these parameters or
variables are significant enough to compute the financial performance of the firms or not. The
results indicate that indeed there is a strong correlation between the two.

2.2 National Reviews

1. Rohit Bansal (2014), made an attempt to study the financial ratios of four leading banks in the
banking sector, across a period of 2010-2014. He gathered all the financial statements of these
banks from their respective websites. The objectives of his study were to determine the key ratios
of the four banks under the study, to compare the ratios of these banks and rank them against their
ratio.

2. Dr Gagandeep Sharma and Dr Divya Sharma (2017), attempted to compare and analyse the
profitability of the top three Indian Private Sector Banks (HDFC, ICICI and AXIS banks). They
compared these banks on four different profitability parameters namely, Net Profit Margin, Cost to
Income, Return on Net Worth and Return on Assets. They employed an ANOVA test for the
purpose of comparison. They found out that HDFC bank perform consistently on cost to income
and return on net worth parameters. They also found that banks are statistically different on the
basis of two out of the four parameters.

3. Rohit Bansal (2014) did a comparative financial study of Indian retail companies. These companies
include Hindustan Unilever Limited (HUL), Vishal Retailers, Shoppers Stop and pantaloons
Fashion and Retail. The study is stretched across a period of 4 years from 2009-2013. The data
collected for the study is based on secondary sources, i.e., from the company’s annual reports. The
 study chalks out the graphical inferences to deduce the best investment company in the retail
industry.

4. Sri Ayan Chakraborty (2017) made an attempt to evaluate the performance of leading FMCG firms.
The study is stretched across a period of 6 years from 2011 to 2016. He used financial ratio as a
benchmark to evaluate the performance of these firms. He made use of the secondary data to
ascertain the financial ratios and used ANOVA test for data analysis. The study concluded that ITC
limited is better positioned than other FMCG firms compared in the study.

5. Pritpal Singh Bhullar (2017) researched the impact of operational efficiency on the valuation of the
firm for the FMCG and the Pharmaceutical sector in India. Financial ratios are used as a proxy of
operational efficiency. He made use of panel data regression analysis for the purpose of data
analysis. The results of the study indicates that Fixed Asset Turnover Ratio (FATO) is negatively
related to the Enterprise value in the pharmaceutical industry and Enterprise Value/sales and FATO
affirms negative relation with enterprise value for the FMCG industry.

6. Rajni Kant Rajhans; Kawalpreet Kaur (2013) did an exhaustive study from 2002 to 2011 to identify
the determinants of firm value creation. Data was collected from secondary sources and correlation
tools were applied for the identification of correlation between variables. The finding indicates that
capital structure has no influence on the value creation of a firm. The research is useful for policy
makers and internal management of the firms to make a rational decision after evaluating the impact
of each on increasing the value of the firm.

7. DR. BHASKAR BAGCHI*; DR. BASANTA KHAMRUI** (2012), attempted to examine the
financial performance of two leading FMCG companies, Dabur and Britannia for a period stretched
across 10 years (2000-01 to 2009-10). The study comprises secondary data, which is extracted from
the annual financial reports of the company. The study made use of financial ratios and statistical
tools like multiple correlation analysis and linear regression analysis. The results indicate that
Britannia Industries is going through tough times in terms of their profitability, while on the other
hand, Dabur India is having a good time, thanks to its enhanced performance and consistent growth
in the sector.
8. Ranjit Kumar Paswan (2016) examined the financial performance of two leading giants, ITC and
HUL, in the Fast-Moving Consumer Goods (FMCG) industry for a period of eleven years from
2000-01 to 2011-12. He compared the two giants on essentially two financial parameters namely,
profitability and liquidity. Both the parameters serve as the blood of the business. The study
concluded that the liquidity position of the ITC was better than that of HUL but the current ratio is
the cause of concern for ITC. It also suggests that ITC has not employed its capital optimally and
there is a scope for better utilization.

9. Prof. S. M. Imamul Haque, Mohd Atif Afzal (2017) studied not only the financial performance of
the FMCG companies using financial ratios but also used these ratios to study the relationship
between liquidity and sales as well as solvency and profitability. The study employed regression
analysis and correlation to test their hypothesis. All the data was gathered from secondary sources.
The study concluded that the average profitability of the selected FMCG is 25.36 indicating good
results for the shareholders of the company. The firm's debt to equity ratio indicates little or no use
of debt in its capital structure and hence no financial burden to pay the interest, which could also
be a factor of good profitability.

10. Ms. Pooja Sharma, Mr. Abhay Grover (2016) attempted to appraise the performance of selected
FMCG using position statements. The employed return on capital employed and net profits as a
proxy for measuring the performance. The study aims to analyse the impact of several variables
like operating profit ratio, creditors turnover ratio, net profit margin etc. on the return on investment
of the FMCG companies. For this purpose, the study employed the use of regression analysis. The
results of the study indicated that ITC is the leading performer in the industry and the financial
ratios have a significant impact on the return on investments.
Chapter3: Research Methodology
3.1 Objectives of the Study
3.2 Research Hypothesis
3.3 Scope of the Study
3.4 Source of data
3.5 Limitation of the Study
3.1 Objective of the Study
1. To compare the financial performance of the two giants in the FMCG sector against each other.

2. To compare the financial performance of Dabur India Pvt. Ltd. and Godrej Consumer Products with the
average performance of other companies in the same industry.

3. To study the relationship between the financial ratios and their impact on the return on capital employed

3.2 Research Hypothesis

1. There is no significant difference in the financial performance of Dabur India Pvt. Ltd. and Godrej
Consumer Product.

2. There is no significant difference in the financial performance of Dabur India and the industry as a whole.

3. There is no significant difference between the financial performance of Godrej Consumer Products and
the industry as a whole.

4. There exists a significant relationship between the financial ratios and return on capital employed.

3.3 Scope of the Study

The scope of the study is limited to the evaluation and the analysis of financial performance of the two
leading companies in the FMCG industry. Though there are advanced and more comprehensive models
available to measure the financial performance, our study focuses on evaluating the financial performance
using the conventional financial ratios. Moreover, the study also aims to find whether or not these financial
ratios are useful tools for the investors to invest their resources in the company, by studying the impact of
financial ratios on return on capital employed.

3.4 Source of data

The entire study is based on secondary data. All the data, which is required for the purpose of the study,
has been extracted from company’s Annual statements. Apart from the company’s annual statements, we
have used websites like money control, business-standards, wall street journals and financial express. All
the financial ratios which are used in our study are extracted from the above-mentioned websites. The study
period of the extracted data is stretched across a period of five years from FY 2015-16 to FY 2019-20. All
the relevant sources of data are listed in the reference part.

3.5 Limitations of the Study

● The study aims to find out the impact of financial ratios on the return on capital employed in order
to test its hypothesis. However, return on capital employed may be a function of some other
financial components also which may not be a part of our study.

● The study aspires to compare the financial performance of the two companies, Dabur and Godrej,
with the financial performance of the industry. To compute the industry, average the study has taken
10 leading FMCG companies. However, if all the companies belonging to the FMCG sector and
operating in India are taken into account to compute the average industry financial ratios, then the
figures may vary slightly.

● The study exclusively depends upon the financial statements of the companies and hence subjected
to all the inherent limitations and discrepancies, if any.
Chapter4: Data Representation and Analysis
4.1 Data Representation and Interpretation
4.2 Hypothesis Testing
4.1 Data Representation and Interpretation

1. Liquid ratio: Liquid ratio is used to compute the overall liquidity of the firms. It is the ratio of liquid
assets to the current liabilities of the firm. Liquid assets are the difference between the current assets and
the inventories of the firm. A higher liquid ratio represents greater ability of the firm to dispose of its current
liabilities. On the other hand, a lower liquid ratio does not augur well for the liquidity of the firm. In other
words, liquid ratio indicates the short-term solvency position of the firms, i.e., whether the firm is able to
cover its short-term obligations or not. Liquid ratios are further classified as Current ratio and Quick ratio

1.1 Current Ratio: It is a liquidity metric which indicates the company’s ability to settle its short-term
obligations within a time frame of one year. A current ratio that is in accordance with industry average or
slightly higher is considered acceptable. On the other hand, a current ratio that is lower than the industry
average is not a very good sign and indicates a higher risk of default. Current ratio has the word “current”
because it incorporates current assets and current liabilities. The formula for current ratio is

Current Ratio = Current Assets / Current Liabilities

Godrej Consumer
Current Ratio Dabur industry Average
Products

Mar 2020 1.98 1.06 1.83

Mar 2019 1.35 1.2 1.77

Mar 2018 1.41 1.24 1.77

Mar 2017 1.4 1.31 1.73

Mar 2016 1.43 1.29 1.60

mean(X) 1.514 1.220 1.740

 standard deviation 0.262 0.099 0.086

CV% 17.316 8.135 4.970

From the above table, we can deduce that the current ratio of both the companies are not satisfactory
because they are not at par with the industry average. Having said so, out of the two companies, Dabur and
Godrej, the current ratio of the former is better than the latter and is closer to the industry average. From
an investor’s perspective, this means that Dabur is in a much stealthier position to clear its short-term
obligation than its counterpart. However, there would be other companies in the industry whose current
ratio will be better than that of the Dabur and hence will attract the investor more. Coefficient of variation
of current ratio in case of industry is just 4.97, while on the other hand, it is 17.316 and 8.135 in case of
Dabur and Godrej respectively. On comparing the two company’s COV against that of the industry, we
find that there is greater variability in case of companies. Greater the variability, lesser will be the
consistency (Amalendu Bhunia). There is less consistency in the case of two companies which suggest
improper management of funds. (Sri Somnath Mukhuti).
On comparing the two companies against each other we find out that COV of Godrej is less than that of
Dabur. This means that there is greater variability in Dabur and hence it is less consistent. Subsequently,
we can infer that the management of funds is better in the case of Godrej.

Graph 1
This graph is a representation of the growth of current ratio on a year-on-year (y-o-y) basis.
From Graph 1, we can see that y-o-y growth patterns in the case of Dabur and industry as a whole are
somewhat similar, that is, both the curves have upward and downward motions before eventually shaping
upwards. However, in case of Godrej there has been a consistent downward movement in the curve before
eventually reaching its nadir. A consistent growth in augurs well for the company as it represents a robust
increase in liquidity position.

From Graph2 we found out that while the current ratio, on an average, of Dabur and other companies in
the industry grows per annum at a rate of 7.69% and 2.89% respectively, the current ratio of Godrej is
witnessing, on average, a negative growth rate of -3.57% annually. These are ominous signs for a company
as it could potentially discourage an investor who is looking for investing.

1.2 quick ratio: Quick ratio is a liquidity metric which indicates the short-term liquidity position of a firm.
Since it involves those currents which can readily be converted into cash, it is therefore also called acid-
test ratio.
The formula for computing quick ratio is

Quick ratio = Current Assets - Inventory / Current Liability

 Godrej Consumer
Dabur industry Average
Quick Ratio Products

1.420 0.680 1.327

Mar 2020

0.860 0.800 1.210

Mar 2019

0.900 0.860 1.221

Mar 2018

0.900 0.890 1.138

Mar 2017

0.940 0.810 1.046

Mar 2016

1.004 0.808 1.188

mean(X)

0.234 0.080 0.104

standard deviation

23.333 9.955 8.785

CV%

From table 2, we can see that the quick ratio (average figure) of both the companies, Dabur and Godrej, is
below the industry average. Thus, the quick ratio of both the companies are unsatisfactory. Since quick
ratio is a measure of absolute liquidity of a company, therefore some other companies which are a part of
the industry have a better liquidity position than Dabur and Godrej. However, between the two companies,
one can see that Dabur has a better quick ratio as compared to Godrej. Therefore, Dabur’s ability to pay
off its short-term obligations are stealthier than that of Godrej.

Comparing the coefficient of variance (COV) of the industry and the two companies, we found out that
while COV is 8.785% in case of industry it is 23.333% and 9.955% in case of Dabur and Godrej
respectively. Comparing the COV of two companies’ vis-a-vis industry, we can deduce that there is greater
variability and hence less consistency in case of the companies because their COV is above the COV of
industry. Greater variability in quick ratio implies improper or inefficient management of funds (Sri
Somnath Mukhuti).
On comparing the COV of Dabur and Godrej against each other, we find out that variability in case of
Dabur is more than 2 times than in case of Godrej. As mentioned earlier, greater the variability, lesser the
consistency and less effective is the management of funds. Therefore, among the two companies, Godrej
performs much better in managing its funds.

Graph 3 represents the growth in quick ratio on year-on-year (y-o-y) basis. In other words, growth is
measured by taking previous year as the base.
From the above graph, one can see that Dabur and Industry curve rises and falls alternately every year
before eventually rising upwards in 2020. However, Godrej’s curve follows an altogether different
trajectory. It is consistently falling down before touching its nadir in 2020. This indicates that there is
negative growth in the quick ratio of Godrej every year which in turn affects its short-term liquidity
strength. From an investor’s perspective, Dabur is a much safer option to invest their resources as compared
to its counterparts.
Graph 4 represents the average annual percentage increase in growth of Quick ratio. A positive growth
percentage augurs well for the liquidity of the company and is considered as a safe option for investment
while a negative growth percentage is ominous signs for a company and is generally considered a bit riskier
investment. In the case of Dabur and industry, both of which have a positive growth rate of 10.21% and
5.38% indicates that each year the short-term liquidity position is getting better. While, on the other hand,
Godrej witnesses a negative average growth of -3.21% each year which suggests that each year the short-
term liquidity position of the company is getting worse.

2. Debt to Equity ratio: Debt to Equity ratio shows the capital structure of a company. Every company
requires capital in order to expand its operations. This capital can be acquired by broadly two sources -
Debt and Equity. Raising capital from each source has its own set of pros and cons. The ratio indicates the
relative proportion of equity and debt used by the company to finance its expansion. A high debt-to-equity
ratio indicates that the company has been aggressive in sourcing its expansion from debt. This source of
finance puts the burden on the resources of the company as the company is obliged to pay interest on debt
irrespective of whether the company earns a profit or not. On the other hand, a lower debt-to-equity ratio
suggests that a company is more aggressive in financing its growth with equity than by debt. It also means
that the company is willing to dilute its stake in the overall management rather than burdening itself with
long-term interest payments.
The formula for debt-to-equity ratio is Total Debt/Equity

Total Debt/Equity(x) Dabur Godrej consumers Industry Average

2020 0.1 0.46 0.393

2019 0.14 0.51 0.418

2018 0.18 0.65 0.513

2017 0.2 0.72 0.553

2016 0.2 0.65 0.627

Mean 0.164 0.598 0.501

SD 0.043 0.108 0.097

COV 26.438 18.142 19.295

The above table provides us the summary of Debt/Equity ratio of the two companies, Dabur and Godrej
and the industry as a whole, for a period stretched across five years.

During the study period, the debt/equity ratio of Dabur stands at 0.164, which is very low as compared to
Godrej and other companies in the industry. From the investor’s perspective, it is a safe investment option
as the company does not have much over-the-head financial burden and indicates that the company has
enough resources to pay off its debts. But there is another school of thought which says that the company
fails to make use of its financial leverage as it is hesitant in raising funds from debt and as a result it has to
forego increased profits. Had the company made use of its financial leverage to raise funds from debt, its
financial statements would have looked more beautiful than is the case now. The debt/equity ratio of
Godrej and the industry is close to 0.6 and 0.5 respectively. From the above arguments, we can conclude
that though there would be some extra burden on the company for paying the interest on debt but overall,
the ratio is still healthy and these companies used their financial leverage in a better manner as compared
to Dabur.

Coefficient of variation (COV) of Dabur and Godrej is 26.44% and 18.14% respectively. Since COV of
Dabur is more than that of the industry, it means the company shows less consistency during the period of
study because its COV is greater than that of industry. On the other hand, Godrej Consumers ltd. shows
more consistency during the period as its COV is less than that of the industry. Lower variability or greater
consistency indicates proper management of debt-equity (Sri Gautam Roy).

The above graph represents the year-on-year growth in Debt/Equity ratio.

One can see that from year 2016 to 2020 the Debt/Equity ratio of Dabur, Godrej and Industry as a whole
has gone down. What this indicates is that over the years the companies have reduced its dependence on
Debt for financing its expansion or diversification. A reduced reliance on debt for financing growth is
always a good option as it does not put any additional interest burden on the company. Unlike the Godrej
and the Industry, which have reduced the growth of their debt/equity ratio gradually, Dabur has reduced
the growth of its debt/equity ratio drastically.
The above graph represents the pattern in which the companies have reduced its reliance on the debt over
the years.

One can clearly see that dabur has been aggressive in reducing its debt/equity ratio as it reduces its ratio
each year by 10%. On the other hand, Godrej reduces its reliance on debt by reducing the ratio each year
by 5.85% while the industry as a whole does the same at 7.48% every year.

3. Return on Capital Employed (ROCE): Return on Capital Employed is a profitability ratio which acts
as a metric for analyzing the profits against the capital employed to generate such profits. Every company
requires capital in order to commence or expand their business. This capital is invested for accomplishing
the primary objective of the business, i.e., earning profits. ROCE is computed by dividing Earnings Before
Interest and Taxes by capital employed. A higher ROCE ratio indicates that the company is earning more
and more profits for every additional unit of capital employed. On the other hand, a lower ROCE implies
that the company is earning lesser and lesser profits for every additional unit of capital employed.
ROCE is used by investors to compare between various companies in the industry. The company which
has a higher ROCE is favorable for the investors.

The formula for return on Capital Employed is

Return on Capital Employed = Earnings before Interest and Tax (EBIT) / Capital employed

Godrej Consumer
ROCE (%) Dabur industry Average
Products

Mar 2020 27.24 19.76 34.192

Mar 2019 32.18 20 35.562

Mar 2018 28.08 16.67 29.675

Mar 2017 23.18 13.45 28.353

Mar 2016 26.74 11.75 25.185

mean(X) 27.48 16.33 30.5934

standard deviation 3.22 3.70 4.264696625

CV% 11.73 22.63 13.93992372

The above table gives a bird’s eye view of the Return on Capital Employed of Dabur, Godrej and the
FMCG industry for a period stretched across 5 years from FY16 to FY20. On comparing the two companies
under study with the industry average, one can see that other companies which make up the industry
outperforms the companies which are under study. ROCE for the industry is higher than both the
companies, which means it is better to invest in other companies in the industries rather than investing in
Dabur or Godrej. For every Rs 100 invested in industry, an investor gets an average return of Rs 30.59
while for every Rs 100 invested in Dabur and Godrej an investor gets an average return of Rs 27.48 and
16.33 respectively. However, if we compare the two companies against each other, Dabur is a clear winner
because its average ROCE is more than 1.5 times than that of Godrej.

Coefficient of Variance (COV) in case of Dabur is 11.73% which shows more consistency during the study
period because COV of the industry as a whole is 13.94%. On the other hand, COV in case of Godrej is
22.63% which shows less consistency during the study period because COV of industry as a whole is
13.94%. A low consistency in ROCE suggests that returns are not uniform across the period of study, and
hence it becomes an unreliable parameter for the investors looking for short-term investments.

The above graphs represent the percentage change in growth of Return on capital employed (ROCE) on a
year-on-year (y-o-y) basis. In other words, it tells by how much percent has the ROCE grown as compared
to previous year.
On a careful observation, one can see that during the entire period from 2016-2020 the Godrej curve was
above the curves of both the Dabur and the industry as a whole. While all the three graphs’ dips negatively
by the end of March 2020, the dip in case of Dabur is much steeper as compared to Godrej and industry as
a whole. Also, from the shape of the curve, we can see that there are sharp and uneven ups and downs in
case of Dabur, but the upward and downward trajectory of the Godrej and industry curves are more even
and consistent.

The above graph depicts the average annual growth rate of Return on Capital Employed, computed for a
period of 5 years from 2015-16 to 2019-20. Clearly, Godrej’s growth rate is the best in the industry. Its
average growth rate is 13.63% which is approximately twice the average growth rate of the entire industry
(7.15%). On the other hand, Dabur grows at an abysmal average annual growth rate of 0.37%. So, although
the average ROCE for Dabur is much more than that of Godrej (refer Table.), in the coming years this will
change given the difference in the speed with which both the companies grow.

4. Asset Turnover Ratio: Asset turnover ratio measures the quality of assets of a company. It is used as a
yardstick to gauge the efficiency of a company’s assets in generating revenues. A higher Asset Turnover
Ratio means higher efficacy with which a company utilizes its assets to generate revenue. Conversely, a
lower Asset turnover Ratio throws light on the ineffectiveness of the company in employing its assets for
higher revenues. The ratio is computed by dividing total sales by average assets.

Asset turnover ratio = Net sales / Average Total Assets

Asset Turnover Ratio Godrej Consumer

Dabur industry Average
(%) Products
 Mar 2020 92.84 66.26 111.093

Mar 2019 100.92 72.78 120.047

Mar 2018 88.74 70.49 115.072

Mar 2017 98.46 71.09 121.822

Mar 2016 112.22 86.36 127.329

mean(X) 98.64 73.40 119.0726

standard deviation 8.96 7.63 6.252111907

CV% 9.09 10.40 5.250672201

Table Provides a brief summary of Asset Turnover Ratio (ATR) of Dabur, Godrej and industry as a whole
for the period under the study.

The average ATR for both the companies for the period under study is unsatisfactory because the average
ATR for the industry as a whole is much higher. This means that industry as a whole is more competent in
utilizing its assets to generate revenue than both these companies when compared for the period under the
study.

When the two companies are compared on the very parameter, Dabur outperforms its counterpart by a fair
margin. This implies that out of the two companies, Dabur is more competent in utilizing its assets in
generating revenues.
The coefficient of variation (COV) is 9.09% and 10.40% in the case of Dabur and Godrej respectively,
which shows less consistency during the period of study because COV of industry as a whole is 5.25%. A
low consistency means that ATR is not uniform across the period of study and hence it could be a
misleading parameter for an investor who is looking for short-term investments.

The above graph represents the increase in growth of ATR for the two companies and industry as a whole
on a year-on-year basis, for a period stretched across 5 years. All the three curves start and converge at the
same points, with upheavals in between. The shape of industry is flatter than that of the two companies. A
flatter curve indicates lower deviations and higher consistency. Thus, it can be inferred by looking at the
shape of the curves that the year-on-year growth in ATR is more consistent in case of industry than in case
of the two companies.
The above graph depicts the average annual growth rate in ATR for the two companies and the industry as
a whole. In this parameter, all the companies perform poorly, as their average growth rate has been
negative. Notwithstanding, the industry as a whole still performs better than the two companies. Industry
grows at an average rate of -2.55% annual. On the other hand, Dabur and Godrej grow at a negative growth
rate of -3.45% and -4.65% respectively.

5. Earning Retention Ratio: Earning retention ratio (ERR), also known as retention ratio, is that part of a
company’s net income which it keeps aside as another future source of fund, commonly known as internal
sourcing. ERR is a metric which indicates the percentage of net profit that a company prefers to reinvest
into the company in some way, rather than distributing it to the shareholders in the name of dividends. In
other words, there exists an inverse relationship between the ERR and dividend payout (keeping the profits
constant). That is, higher the ERR, lower will be the dividend payouts and vice-versa. ERR is computed
by dividing the net income less dividends paid by net income.

Earning retention ratio = Net income - dividends / Net income

Dabur Godrej Industry average

 Mar 2020 47.22 30.69 32.031

Mar 2019 -26.31 30.12 42.314

Mar 2018 55.51 38.69 56.869

Mar 2017 60.3 76.91 54.597

Mar 2016 57.88 73.53 46.753

Mean 38.92 49.988 46.513

S. D 36.80 23.31 10.00

COV 94.54 46.64 21.50

The above table provides a brief summary of trends in earning retention ratio of the two companies, Dabur
and Godrej and the industry as a whole, for a period stretched across 5 years.

The average earning retention ratio of Dabur stands at 38.92% which is better than Industry’s 46.51 %.
This means that out of every Rs 100 that dabur earns, it retains Rs 38.92 and distributes the remaining to
its shareholders, while out of every Rs 100 that industry earns, it retains Rs 46.51 and distributes the
remaining amount. On the other hand, ERR of Godrej is approximately 50% which is higher as compared
to industry’s 46.51%. This means that out of every Rs 100 that Godrej earns, it retains Rs 50 and distributes
the remaining to its shareholders.
The data is not sufficient to conclude anything about dividend/share because it depends upon the number
of shares issued, which is not known to us.
The above graph represents the trends in y-o-y growth in ERR for the period under study.

The curves of Godrej and industry are much smoother and hence are more consistent over the years.
However, the trajectory followed by the curve of Dabur is not so smooth and hence not as consistent as its
counterparts.
The above graph represents the average annual growth change in ERR of the two companies and the
industry.

It is clear from the above graph, that Godrej has been more aggressive in reducing its ERR at an average
annual rate of 11.65% per year, during the period under study. On the other hand, Dabur and Industry as a
whole are reducing their ERR at an average rate of 3.68% and 6.30% respectively.
From the above trends, we can conclude, to some extent, that most of the companies in the FMCG industry
have resorted to decrease its ERR over the years. This means companies are focusing more on distributing
its profits to its shareholders rather than reinvesting it into the company.

6. Operating margin: operating margin measures the percentage of profit a company can make from every
rupee of sale it makes after paying for variable costs of production such as raw material and wages, but
before paying interest or tax. It represents the company's ability to generate profits through its core
operations. It is computed by dividing the operating income of the company by its net sales. Higher ratios
are generally favorable, depicting that company is efficient in its operations and is doing well in converting
its sales into profit.

Operating margin = (Operating profit / Net sales) *100

 Operating Margin Godrej Consumer
Dabur industry Average
(%) Products

Mar 2020 21.61 20.76 20.452

Mar 2019 21.83 19.93 20.191

Mar 2018 22.79 20.51 20.061

Mar 2017 21.86 19.76 19.44

Mar 2016 20.59 19.22 18.654

mean(X) 21.74 20.04 19.7596

standard deviation 0.78 0.61 0.7213

CV% 3.61 3.06 3.6502

The table above provides a concise summary of the operating margin figure of the two companies and the
industry as a whole for a period of five years.

In this case, the operating margin% of Dabur and Godrej is 21.74% and 20.04% respectively, while on the
other hand, it is 19.75%. This means that during the period under study, the two companies have performed
better than the industry as a whole on this parameter. Since operating margin is a measure of profit that a
company earns from every unit of sale it makes, we can deduce that, on average, Dabur and Godrej extracts
out more profit from every unit of sales than other companies which are a part of the same industry.

This is one such peculiar case where there is no significant difference in the coefficient of variance for the
two companies and the industry as a whole for the period under study. The COV for each of the three is
around 3.6 % which indicates lesser variation and greater consistency. Thus, we can deduce that the
operating margin% is evenly spread across the period under the study.

The above graph represents the growth in operating margin on a year-on-year basis. It shows whether the
operating margin has grown or not by comparing it with the previous year.
From the above graph one can see that before March 2018, growth of Dabur was more than the growth of
industry average, which in turn was more than that of Godrej. All the three curves converged with one
another in Mar 2018 (refer to graph.). For the most part after 2018, the industry grew (y-o-y basis) at a
higher rate than Godrej, while the growth of Dabur (y-o-y basis) remained the lowest.
Also, looking at the shapes of the curves for the period under study, one can see there is highest turbulence
in Dabur’s curve followed by Godrej, while the industry curve was much flatter and not so turbulent. Higher
the turbulence in the curves, lesser is the consistency in growth (y-o-y basis) and vice-versa. Hence, we
can imply that during the study period, the y-o-y growth of the industry was most consistent, followed by
Godrej and then Dabur.
The above graph represents the average annual growth in operating margin for the two companies and the
Industry as a whole.
In this parameter, performance of both the companies is unsound because the average annual growth rate
of the industry is higher than the two companies, for the period under study.
Comparing the two companies against each other, one can see that the average annual growth rate of Godrej
is higher than that of Dabur.

7. Net Profit Margin: It is a metric which measures the percentage of profit that a company generates
from its revenue. It is an important metric as profit is the key to every firm's expansion and diversification.
The higher the percentage, the better it is for the companies and the internal and external stakeholders of
the company. If the net profit margin of a company is equal to or above the average industry’s net profit
margin, then the company is performing very well in the industry. While a net profit margin which is below
the industry’s average puts questions on the performance of a company.
The formula to calculate net profit margin is
Net Profit Margin = Net profit / Total Revenue
 Godrej Consumer
Net Profit Margin (%) Dabur industry Average
Products

Mar 2020 16.67 15.09 14.586

Mar 2019 16.97 22.69 14.78

Mar 2018 17.57 16.59 13.9

Mar 2017 16.81 14.1 13.043

Mar 2016 16.11 9.85 11.406

mean(X) 16.83 15.66 13.543

standard deviation 0.53 4.66 1.374976

CV% 3.13 29.74 10.15266927

From the above table, it is clear that both the companies, Dabur and Godrej, are performing better than the
industry in this parameter. The average net profit margin of Dabur and Godrej is 16.83% and 15.66% while
it is just 13.543% in case of the industry. This means that if the revenue of all the companies is Rs 100,
then out of that revenue, the profits are 16.83, 15.66 and 13.543 for Dabur, Godrej and Industry
respectively.

The coefficient of variation (COV) in case of Dabur is 3.13%, while it is 10.15% in case of the industry.
This means that dauber’s data has less variance and is more consistent across the study period than Industry.
While on the other hand, Godrej’s COV is 29.74% which is much above industry’s 10.15%. This means
Godrej’s data has more variance and therefore less consistent across the study period.

The above graph represents the year-on-year growth in the net profit margins of the two companies and the
entire industry.
The y-o-y growth in the net profit margin of Godrej is more than both the Dabur and the Industry. This
trend follows until 2019. This indicates that Godrej is increasingly extracting more profits from its revenue
than its counterparts. On the other hand, the y-o-y growth in net profit margin is almost the same in case
of industry and Dabur.
On average Godrej grows at more than 10% every year and hence performs much better than the industry,
which grows at an average annual rate of 5.75%. Dabur, on the other hand, grows at an abysmally low
average annual rate of 0.5%. There is a difference of more than 9.5 percentage points in the average growth
of both the companies during the period under study. If the same trend continues from hereby, then
investors may look at Godrej as a lucrative investment option if this parameter holds high significance in
their investment decision-making choices.

4.2 Hypothesis Testing

1. Our first hypothesis is that there is no significant difference between the financial performance of Godrej
Consumer products and the industry as a whole for the period under study.

In other words,
Ho: Financial performance of Godrej Consumer products = Financial performance of the industry as a
whole
To check the above hypothesis, we have employed t test on excel and the result is detailed below.
t-Test: Two-Sample Assuming
Unequal Variances

Godrej Industry

Mean 17.16584615 24.79223077

Variance 354.123667 930.474005

Observations 13 13

Hypothesized Mean Difference 0

df 19

t Stat -0.7671968566

P(T<=t) one-tail 0.2261966493

t Critical one-tail 1.729132793

P(T<=t) two-tail 0.4523932986

t Critical two-tail 2.093024022

● At 5% significance level.

From the above table the computed-out t value is -7672. The p value is 0.4524. Thus, from these two
parameters, we can make out that the result is not significant at p< .05.

In other words, null hypothesis H0 is not rejected. Hence, we can conclude that there is no significant
difference between the financial performance of Godrej Consumer Product ltd. and the industry as a whole.

2. The next hypothesis of our study is that there is no significant difference between the financial
performance of Dabur India and the industry as a whole for the period under study.

In other words,
Ho: Financial performance of Dabur India = Financial performance of the industry as a whole.
To check the hypothesis, we have performed t test on excel and the result is detailed below.
 t-Test: Two-Sample Assuming
Unequal Variances

Dabur Industry

Mean 19.30938462 24.79223077

Variance 666.8417803 930.474005

Observations 13 13

Hypothesized Mean Difference 0

df 23

t Stat -0.4946321536

P(T<=t) one-tail 0.3127757951

t Critical one-tail 1.71387148

P(T<=t) two-tail 0.6255515902

t Critical two-tail 2.068657599

● At 5% significance level.

From the above table, the t value is -0.49463. The P value is 0.62555. Thus, from these two parameters,
we can make out that the result is not significant at P<0.05.
In other words, the null hypothesis, Ho is not rejected. Hence, we can finally conclude that there is no
significant difference between the financial performance of Dabur India and the FMCG industry as a whole.

3. The next hypothesis of our study is that there exists no significant difference between the financial
performance of Dabur India and Godrej Consumer Products ltd, for the period under study.
In other words,
Ho: Financial performance of Dabur India = Financial performance of Godrej Consumer Product ltd.
To check this hypothesis, we have performance t test using excel and the result is detailed below.

t-Test: Two-Sample Assuming

Unequal Variances
 Dabur Godrej

Mean 19.30938462 17.16584615

Variance 666.8417803 354.123667

Observations 13 13

Hypothesized Mean Difference 0

df 21

t Stat 0.2418785934

P(T<=t) one-tail 0.4056102997

t Critical one-tail 1.720742872

P(T<=t) two-tail 0.8112205994

t Critical two-tail 2.079613837

● At 5% significance level.

From the above table, the computed-out t value is 0.24188. The P-value is 0.811220. From these two
parameters, we can make out that the result is not significant at p< .05.
In other words, the null hypothesis, Ho is not rejected. Hence, we can conclude that there is no significant
difference in the financial performance of Dabur India and Godrej Consumer Products ltd, during the period
under study.

4. The next hypothesis of our study is that there is a significant impact of all the major financial ratios taken
cumulatively on the Return on Capital Employed.
For testing this hypothesis, we have employed Multiple Regression Analysis test.

For the above test we have used eight independent variables to find their cumulative impact on the
dependent variable which is Return on Capital Employed. To get the best distribution of data, all the
variables - dependent and independent, are taken not for a single company but for the entire industry. For
this purpose, the variables under study of all major companies in the FMCG industry are clubbed together
and their mean is computed.
The independent variables used for this study are - Asset Turnover Ratio (ATR), Net Profit Margin, Basic
Earnings per share, Inventory Turnover Ratio (ITR), Dividend/share, Debt/Equity ratio, Current Ratio and
Return on Assets (ROA).
The equation for the multiple regression model is

ROCE = 55.5701 − 0.467⋅ATR − 3.8631⋅net profit margin − 0.8326⋅Basic eps + 1.2411⋅ITR +

0.2651⋅Dividend/share + 3.0627⋅Debt/equity + 5.4888⋅Current ratio + 4.8749 ⋅ROA

The results of the Multiple Regression Test are detailed below.

Standard
Predictor Coefficient Estimate tt-statistic pp-value
Error

Constant β0 55.5701 79.04 0.7031 0.6099

ATR β1 -0.467 0.5663 -0.8246 0.561

net profit
β2 -3.8631 2.4031 -1.6075 0.3543
margin

basic eps β3 -0.8326 0.9788 -0.8507 0.5513

ITR β4 1.2411 3.3781 0.3674 0.7759

Dividend/shar
β5 0.2651 1.7095 0.1551 0.9021
e

Debt/equity β6 3.0627 10.1051 0.3031 0.8127

current ratio β7 5.4888 21.0162 0.2612 0.8374

ROA β8 4.8749 2.7053 1.802 0.3225

Overall Summary Report

R-Squared: R2 =0.9579

Adjusted R-
R2 adjusted =0.6215
Squared:
Residual
Standard 2.2585 on 1 degree of freedom.
Error:

Overall FF-
2.8475 on 8 and 1 degrees of freedom.
statistic:

Overall p-
0.4302
value:

The above two tables prove the strength of the relationship between the dependent variable, ROCE and all
the independent variables taken cumulatively.

It was observed that for every one unit increase in ATR, the ROCE of the company decreases by 0.467
units which was statistically significant at 1%. For every 1 unit increase in net profit margin, the ROCE
decreases by 3.8631 units. Similarly, for every 1 unit increase in Basic EPS, the ROCE decreases by 0.8326
units. However, for every 1 unit increase in ITR, the ROCE increases by 1.12411 units. Again, for every
one unit increase in Dividend/share, the ROCE increases by 0.2651 units. For every 1 unit increase in
Debt/Equity, the ROCE increases by 3.0627 units. Further, for every 1 unit increase in current ratio, the
ROCE increases by 5.4888 units and for every 1 unit increase in ROA, the ROCE increases by 4.8749
units.

It was also very evident from the R2 that 95.79% of variation in ROCE is due to the joint variation in all
the independent variables.

Adjusted R2 is used to find the goodness-of-the-fit. In other words, it is a parameter which indicates how
impeccable is your regression model. In our study, the Adjusted R2 is 62.15%. Thus, we can conclude that
our hypothesis is true. This means, there is a significant relationship between the financial ratios and the
Return on Capital Employed.
Chapter5: Results and Discussions

5.1 Major Findings

5.2 Discussions & Suggestions
5.3 Conclusion
5.1 Major Findings
The major finding of the research is detailed below
● There is no significant difference between the financial performance of Dabur and Godrej, during
the period of study.
● The study found that in the FMCG industry the financial performance of a few companies can be
taken as a proxy to the financial performance of the Industry. This is because, in case of both the
companies Dabur and Godrej, we found no significant differences between their individual financial
performance and the financial performance of the industry as a whole.
● The study found out that there exists a significant relationship between the financial variables and
the return on capital employed. This is important because every investor looks for various financial
variables which represent a company’s performance before investing.

5.2 Discussions and Suggestions

● The research has made use of eight different financial variables to compute the cumulative impact
on the ROCE. However, there might be other variables which have a significant impact over the
same. This opens a possibility for a further research to substantiate the regression model.
● Also, different investors have different goals and they look for different variables before investing.
This makes it essential to identify the common parameter which serves the majority of investors
and then find the cumulative impact of independent financial variables on that common dependent
variable.

5.3 Conclusion

From this exhaustive and comprehensive research project done to analyse and compare the financial
performance of the two giant FMCG companies and the FMCG industry on different financial parameters,
we can conclude that in a majority of parameters Dabur has outperformed Godrej. But the performance of
both the companies when compared to the industry fades out. Thus, we can conclude that individually there
are some companies which are operating at a larger scale than the two companies under the study. However,
when the performance of Dabur, Godrej and industry are compared by taking the mean of all the financial
parameters, we found out that during the period of our study, there is no significant difference in the
financial performance of Dabur, Godrej and all the other companies in the industry. We also conclude that
financial performance of either of the company, Dabur and Godrej can be taken as the proxy to the average
financial performance of the entire Industry.

Moreover, we attempted to find out whether financial statements or rather financial ratios are worth giving
a consideration before investing in the company or not. Using the Multiple regression analysis, we found
out that certainly, there is a very strong relationship that exists between the financial ratios and the return
of the company. Thus, it is safe to say that even though there are more advance tools to judge the future
performance of the company, the importance of financial ratios cannot be made redundant.

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Annexure

Balance Sheet of dabur India (in Rs. MARCH20 MARCH 19 MARCH

Cr.) 18

EQUITIES AND LIABILITIES

SHAREHOLDERS FUNDS

Equity share capital 176.71 176.63 176.15

TOTAL SHARE CAPITAL 176.71 176.63 176.15

Reserves and surplus 4304.25 3717.20 4050.71

TOTAL RESERVES AND SURPLUS 4304.25 3717.20 4050.71

TOTAL SHAREHOLDERS FUND 4574.23 3968.82 4226.86

NON-CURRENT LIABILITIES

Long term borrowings 24.68 26.05 201.04

Deferred tax liabilities (net) 0.00 8.32 96.03

Other long-term liabilities 4.66 4.56 4.25

Long-term provisions 54.69 52.76 50.04

TOTAL NON-CURRENT 84.03 91.69 351.36

LIABILITIES

CURRENT LIABILITIES

Short term Borrowings 89.28 108.72 85.49

Trade payable 1032.45 998.32 960.62

Other current liabilities 197.32 330.14 123.98

Short term provisions 122.80 81.09 64.39

TOTAL CURRENT LIABILITIES 1441.85 1518.27 1234.48

TOTAL CAPITAL AND 6100.11 5578.78 5812.70

LIABILITIES

ASSETS

NON-CURRENT ASSETS

Tangible assets 1060.75 971.88 971.34

Intangible assets 25.15 15.37 8.78

Capital work-in-progress 105.83 21.69 26.82

Others Assets 48.38 49.37 50.36

FIXED ASSETS 1240.11 1058.31 1057.30

Non-current investments 1084.16 2236.74 2719.69

Deferred Tax Assets [Net] 21.62 0.00 0.00

Long Term Loans and Advances 16.78 13.14 9.61

Other Non-Current Assets 472.25 146.24 67.26

TOTAL NON-CURRENT ASSETS

CURRENT ASSETS

Current Investments 1382.67 725.40 713.39

Inventories 809.14 732.90 704.79

Trade Receivables 379.63 431.46 321.34

Cash and Cash Equivalents 525.60 124.71 87.02

Short Term Loans and Advances 1.22 4.56 1.41

Other Current Assets 166.93 105.32 130.89

TOTAL CURRENT ASSETS 3265.19 2124.35 1958.84

TOTAL ASSETS 6100.11 5578.78 5812.70

BALANCE SHEET OF GODREJ MARCH 20 MARCH 19 MARCH

CONSUMER PRODUCTS (in Rs. Cr.) 18

EQUITIES AND LIABILITIES

SHAREHOLDERS FUNDS

Equity share capital 102.23 102.22 68.13

TOTAL SHARE CAPITAL 102.23 102.22 68.13

Reserves and surplus 5025.39 4823.94 4573.46

TOTAL RESERVES AND SURPLUS 5025.39 4823.94 4573.46

TOTAL SHAREHOLDER’S FUNDS 5127.62 4926.16 4641.59

NON-CURRENT LIABILITY

Long Term Borrowings 0.00 0.00 0.00

Deferred Tax Liabilities [Net] 0.00 0.00 228.46

Other Long-Term Liabilities 26.85 28.09 17.75

Long Term Provisions 61.86 56.32 51.66

TOTAL NON-CURRENT 88.71 84.41 297.87

LIABILITIES

CURRENT LIABILITIES

Short Term Borrowings 317.33 0.00 0.00

Trade Payables 1243.14 1457.61 1452.92

Other Current Liabilities 117.45 157.45 194.77

Short Term Provisions 46.34 38.92 36.93

TOTAL CURRENT LIABILITIES 1724.26 1653.98 1684.62

TOTAL CAPITAL AND 6940.59 6664.55 6624.08

LIABILITIES
ASSETS

NON-CURRENT ASSETS

Tangible Assets 556.80 526.20 489.68

Intangible Assets 808.47 817.31 824.38

Capital Work-In-Progress 35.33 30.84 50.58

Other Assets 0.00 0.00 0.00

FIXED ASSETS

Non-Current Investments 2957.78 2947.46 3054.81

Deferred Tax Assets [Net] 404.08 374.23 0.00

Long Term Loans and Advances 19.09 16.99 16.32

Other Non-Current Assets 96.31 106.01 69.94

TOTAL NON-CURRENT ASSETS 4879.23 4820.20 4507.51

CURRENT ASSETS

Current Investments 635.40 477.34 847.65

Inventories 657.72 615.12 576.25

Trade Receivables 305.52 353.18 248.58

Cash and Cash Equivalents 85.68 97.24 98.11

Short Term Loans and Advances 0.05 0.14 0.25

Other Current Assets 376.99 301.33 345.73

TOTAL CURRENT ASSETS 2061.36 1844.35 2116.57

TOTAL ASSETS 6940.59 6664.55 6624.08