Hindustan Unilever Limited

Hindustan Unilever Limited (HUL) is a

consumer goods company headquartered in
Mumbai, India. It is a subsidiary of the British
company Unilever. Foods, drinks, cleaning
supplies, toiletries, water purifiers, and other
fast moving consumer goods are its products.

Hindustan Vanaspati Manufacturing Co. was founded in 1931; in 1956, it merged with other
constituent organizations to become Hindustan Lever Limited. As of June 2007, the business
is now known as Hindustan Unilever Limited. Hindustan Unilever's portfolio included 50+
product brands across 14 categories as of 2019. The company employs 21,000 people and has
revenue of 34,619 crores in the fiscal year 2017–18. 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.

Traded as BSE: 500696

NSE: HINDUNILVR
Parent Unilever Plc
CEO Mr. Sanjiv Mehta
ISIN INE030A01027
Headquarters Mumbai, India
Website www.hul.co.in

Table 1: Information about HUL Ltd.

Source: Wikipedia

Capitalisation
Capitalization is the total amount of money raised from various long-term sources; it can be
made up of debt, equity, or a combination of both. A company's capitalization can be used to
assess whether it is fairly capitalised, undercapitalized. 
 Particulars 2022-2021 2021-2020 2020-2019
Equity Share Capital 235 235 216
Reserve and Surplus 48,525 47,199 7,815
Long Term Borrowings 0 0 0

Table 2: Capital Mix of HUL Ltd.

Source: Annual Report of HUL Ltd.

Note: HUL Ltd is a debt free company.

The debt-to-equity (D/E) ratio, which measures a company's financial leverage, is determined
by dividing its total liabilities by the value of its shareholders. The D/E ratio is a crucial
indicator in corporate finance. It measures how much debt a business is using to fund
operations as opposed to using cash on hand. A specific kind of gearing ratio is the debt-to-
equity ratio.

Year Debt to Equity Ratio (D/E)

2022-2021 0
2021-2020 0
2020-2019 0

Table 3: Debt to Equity Ratio of HUL Ltd.

Source: Screener

HUL Ltd is a debt free company, that is why their debt to equity ratio is 0.
Companies having low or zero debt stands a better chance of surviving than those with high
debt. As HUL has zero debt that means the company has strong cash flows and thus have
considerable flexibility in how they use cash in their business.
There are other competitors of HUL in the FMCG industry such as Emami Ltd and Tata
Consumer Ltd, have huge amount of debt and still running good as they are able to properly
manage their borrowings.
Capital Structure
Capital structure is the particular combination of debt and equity used by a company to
finance its overall operations and growth.

Equity capital arises from ownership shares in a company and claims to its future cash flows
and profits. Debt comes in the form of bond issues or loans, while equity may come in the
form of common stock, preferred stock, or retained earnings. Short-term debt is also
considered to be part of the capital structure.

Particulars 2022-2021 2021-2020 2020-2019

Equity
Equity Share Capital 235 235 216

Debt
Long Term Borrowings 0 0 0
Short Term Borrowing 0 0 0
Trade Payables 8,864 8,627 7,399

Net Worth
Profits 6,748 7,995 8,879
Reserves and Surplus 48,525 47,199 7,815
Non-Current Investment 612 312 252
Current Investment 3,510 2,683 1,248
Net Worth 49,061 47,674 8,229

Table 4: Capital Structure of HUL Ltd.

Source: Money Control, Groww, Annual Report

Leverages
 Table 5: Statement of Profit and Loss of HUL Ltd.
Source: Screener

1. Degree of Operating Leverage

Formula: Percentage Change in EBIT / Percentage Change in Sales
= 12.01 / 11.52 = 1.04

2. Degree of Financial Leverage

Formula: Percentage Change in EPS / Percentage Change in EBIT
= 11.04 / 12.01 = 0.91

Other Financial Ratios

Particulars Ratios
Price to Earnings Ratio 60.7
Dividend Yield 1.36
Dividend Pay out Ratio 90
Current Ratio 1.35

Table 6: Valuation Ratios of HUL Ltd.

Source: Screener

Cost of Capital
  The minimum rate of return or profit that a business must achieve before
generating wealth is known as the cost of capital. The accounting department
of a company evaluates it to assess financial risk and determine whether an
investment is appropriate.
 Company executives use cost of capital to determine how much revenue new
ventures must earn to cover start-ups costs and turn a profit. They also utilise
it to assess the risk associated with upcoming business decisions.
 Hindustan Unilever's weighted average cost of capital as of right now (2022-
11-13) is 7.59%. The ROIC% for Hindustan Unilever is 16.71%. (calculated
using TTM income statement data).
 Hindustan Unilever makes more money from investments than it spent to raise
the money for such investments. It is producing surplus returns. A company's
value will rise as expansion accelerates if it expects continuing to provide
positive surplus returns on new investments.

Dividend Policy
The amount of dividends paid by a corporation to its shareholders and how frequently they
are paid are determined by its dividend policy. A business must choose what to do with a
profit when it generates one. Either they can keep the profits within the business (seen as
retained earnings on the balance sheet) or they can pay dividends to shareholders.

Date of Dividend Dividend (in Rupees)

03/05/19 13
09/10/19 11
30/04/20 14
13/07/20 9.5
07/10/20 14
29/04/21 17
04/10/21 15
27/04/22 19
07/10/22 17

Table 7: Dividends over last 3 years

 Source: Money Control

Figure 1 : Dividend Yield, Dividend Per Share and EPS of HUL Ltd pattern over ten years
Source: Simplywall.st

The dividend paid out by HUL Ltd are stable and has been increasing over the past years.
According to the above data, it has been forecasted that the dividend will continue to
increase.
Comparison

Particulars HUL Ltd. Dabar India Ltd. P&G India Ltd.

PE Ratio 60.7 54.7 87.6
EV/EBITDA 41.9 37.3 57.6
RoCE 24.3 27.2 110
RoE 18.4 22.5 79.5
Debt to Equity 0 0.12 0.01
Interest Coverage Ratio 106 47.5 61.8
Operating Profit Margin 23.8 19.7 19.1
3 Year Sales and Net Profit Growth 10.1 8.54 9.8
Inventory Turnover ratio 6.04 2.34 6.5
Cash Conversion Cycle -63.9 12.2 -110

Table 8: Comparison of Companies on the basis of Financial Ratios

Source: Screener
 PE Ratio: PE is basically how much an investor pays for each rupee of profit
earned. A company with lower PE Ratio is considered to be undervalued and
has a huge potential to unlock its value. Dabar India Ltd has the lowest PE
Ratio whereas, P&G India Ltd has the highest PE ratio.
 EV/EBITDA: This ratio assesses the overall financial performance of the firm.
EV/EBITDA of value below 10 is considered to be healthy. Dabar India Ltd
has the lowest EV/EBITDA amongst all the three companies and P&G India
Ltd has the highest.
 RoCE: It signifies that how the company is using its capital to generate a
return for the company and investors. The higher the RoCE, the better. P&G
India Ltd has the highest RoCE ratio beating both Dabar India Ltd and HUL
Ltd.
 RoE: It signifies how well the company generates the return on shareholders’
investment. Companies with higher RoE are considered good. P&G India Ltd
has the highest RoE than compared to Dabar India Ltd and HUL Ltd.
 Debt to Equity: It is a leverage ratio that measures the debt of a company
against its total shareholder’s equity. The lesser the debt the better it is for the
company. HUL Ltd is a debt free company and P&G India Ltd has very less
debt compared to Dabar India Ltd.
 Interest Coverage Ratio: It has direct relation with D/E ratio. This ratio gives
the ability of the company to pay interest from its operating profits. As HUL
Ltd is a zero debt company, it has a good interest coverage ratio.
 Operating Profit Margin: It represents how efficiently a company is able to
generate through its core operations. HUL Ltd has the highest operating
margin as it contributes the most among the three companies in the FMCG
sector.
 3 year sales and net profit growth: HUL Ltd has the highest three year sales
and profit after tax growth, whereas Dabar India Ltd is lacking behind from its
competitors.
 Inventory Turnover ratio: It is the cost of goods sold. It gives us an idea of
how the company is stocking up its inventory and how many times it has sold
 its list in a given period. HUL Ltd has the highest inventory turnover ratio as it
has a lot of products in the FMCG sector.
 Cash Conversion Cycle: It is a metric that expresses the time that it takes for a
company to convert its investments in inventory and other resources into cash
flows from sales. P&G India Ltd has the lowest cash conversion time which
is very good whereas, Dabur India Ltd the highest cash conversion time,
means it takes 12.2 days make cash.

Conclusion
We can conclude on the basis of the ratios considered above that HUL is outperforming
Dabur India Ltd and P&G India Ltd.
(Yet to be done)

Citations

 Private Limited, Mittal Analytics. “Dabur India Ltd Financial Results and Price Chart
- Screener.” Dabur India Ltd Financial Results and Price Chart - Screener,
www.screener.in/company/DABUR/consolidated. Accessed 14 Nov. 2022.
 Private Limited, Mittal Analytics. “Hindustan Unilever Ltd Financial Results and
Price Chart - Screener.” Hindustan Unilever Ltd Financial Results and Price Chart -
Screener, www.screener.in/company/HINDUNILVR/consolidated. Accessed 14 Nov.
2022.
 Private Limited, Mittal Analytics. “Procter and Gamble Hygiene and Health Care Ltd
Financial Results and Price Chart - Screener.” Procter & Gamble Hygiene and Health
Care Ltd Financial Results and Price Chart - Screener,
www.screener.in/company/PGHH. Accessed 14 Nov. 2022.
 “Hindustan Unilever (BSE:500696) - Share Price, News and Analysis - Simply Wall
St.” Simply Wall St, simplywall.st/stocks/in/household/bse-500696/hindustan-
unilever-shares#dividend. Accessed 14 Nov. 2022.
 Moneycontrol.com. “Hindustan Unilever | Dividends > Personal Care > Dividends
Declared by Hindustan Unilever - BSE: 500696, NSE: HINDUNILVR.” Hindustan
Unilever | Dividends > Personal Care > Dividends Declared by Hindustan Unilever -
BSE: 500696, NSE: HINDUNILVR,
www.moneycontrol.com/company-facts/hindustanunilever/dividends/HU. Accessed
14 Nov. 2022.