Marico Bangladesh Limited: Is It A Worthwhile

Investment?

Internship report submitted to the IBA Career Centre, Institute of Business

Administration to fulfill the degree of Bachelor of Business Administration

Submitted to:
A.T.M Jakaria Khan
Coordinator, IBA Career Centre

Submitted by:
Naziba Ali
Roll 93, Batch 27

Supervised by:
Dr. Shakila Yasmin
Professor

Institute of Business Administration, University of Dhaka

Submission date: 25th March, 2023
25th March, 2023

The Coordinator
IBA Career Centre
Institute of Business Administration
University of Dhaka

Subject: Submission of internship report titled “Marico Bangladesh Limited: Is it a

worthwhile investment?”  

Dear Sir, 
With all due respect, I would like to present my report titled “Marico Bangladesh
Limited: Is it a worthwhile investment?” as part of the internship requirements. Based
on rigorous research, examination of historical performance, and an outlook on the
future, the report seeks to determine the intrinsic value of Marico Bangladesh. 
I hope that the paper adheres to all of the parameters you specified and receives your
approval. Nonetheless, if any inadequacies appear, I will gladly respond to any
clarifications concerning this report.

Sincerely,
Naziba Ali
ID: 101-27-093
IBA BBA 27th
 Institute of Business Administration (IBA)
University of Dhaka
IBA Career Centre

INTERNSHIP (Session: Jan-Mar.)2022

Report Submission Form

I hereby declare that I have completed my internship report under my faculty

supervisor (Dr. Shakila Yasmin) wards the fulfillment of requirement for the
BBA/MBA degree following the prescribed guidelines of internship program of IBA,
University of Dhaka.

___________________________
Signature of the Intern
Date: 23rd March, 2023
Name: Naziba Ali
Batch: 27
Roll: 93

This internship report has been submitted with my approval as Academic Supervisor.
________________________________
Signature of the Faculty Supervisor
Date: 23rd March, 2023
Name: Dr. Shakila Yasmin
Designation: Professor
 Acknowledgement
First and foremost, I would like to express my gratitude to Dr. Shakila Yasmin
(Professor, IBA, University of Dhaka), my esteemed internship supervisor. My
heartfelt thanks go to my supervisor Tanay Kumar Roy, Head of Research at IDLC
Securities Limited who trusted me with a crucial project and generously shared his
vast knowledge of the overall economy as well as the capital market. Special thanks
to Shopnil Paul, Deputy Manager; Humayra Afroz, Research Analyst; and Md. Ifrat
Khan, Research Analyst at IDLC Securities for providing me with all the pertinent
data and insights that enabled me to accomplish my goal.
Finally, I would like to thank all the concerned personnel and respected teachers of
IBA for their cooperation throughout my BBA program.
 Table of Content
1.0 Introduction………………………………………….………...….……1
      1.1 Origin of the report…………….………………………….…………1
      1.2 Objective…….………………………………………………….
…...1
      1.3 Scope of the study……………………………………………………
2
      1.4 Methods………………………………….…………………….….…2
1.5 Limitations…………………………………………….….….….......2
      1.6 Report preview…………………………………………………....…2
2.0 Organizational
Overview……………………………………………....4
      2.1 Background…………………………………………………..............4
2.2 Product offerings……………………………………………….........4
      2.3 Business strategy….…………………………………………………5
      2.4 Key revenue drivers……………………………………………..
…...7
      2.5 Key Cost Drivers…………………………………………………….8
3.0 Fundamental Analysis…………………………………………….……9
      3.1 Economic analysis…………………………………………….……..9
      3.2 Industry analysis……………………………………………….…...11
            3.2.1 Industry overview……………………………………….……12
            3.2.2 PESTEL analysis………………………………………….….12
            3.2.3 Porter’s Five Forces..................................................................13
       3.3 Company analysis……………………………………………….…17
             3.3.1 SWOT analysis………..………………………..……………17
             3.3.2 Time series analysis……………………………….…………18
             3.3.3 Cross sectional analysis…………………………….………..19
4.0 Pro-forma financial
statements……………………………………....19
       4.1 Income Statement Assumptions…………………………………...19
       4.2 Balance Sheet assumptions……………………..……….…….
…...22
       4.3 Pro-forma Income Statement.………………………. ….…………
25
       4.4 Pro-forma Balance Sheet…………………………………….
…….26
5.0 Valuation…………………………………………………...…….……28
      5.1 Free Cash Flow to Equity Model………………….……………..…
28
      5.2 Dividend Discount Model……………………………………….....32
      5.2 Relative
Valuation………………………………………………….33
6.0 Recommendation & Conclusion………………………….….……….33
Reference………………………………………………………………….34
Appendix………………………………………………….……………….35
 List of Figures & Tables
Figure 1 Consumption Expenditure (% of GDP)………..…………………9
Figure 2 GNI Per Capita……………………………………………….....10
Figure 3 CPI Inflation…………………………………………………….10
Figure 4 Interbank Exchange Rate………………………………………..11
Figure 5 SWOT analysis……………………………………………….…18
Figure 6 Women employment…………………………………………….22
Figure 7 Copra price…………………………….……...………….
….......21

Table 1 Product offerings…………………………..……………….……...4

Table 2 Contribution of product categories……………………..……….....7
Table 3 PESTEL analysis………………………..…………………….….12
Table 4 Time-series analysis……………………………..………...……..18
Table 5 Cross-sectional analysis……………………………..…………...19
Table 6 Revenue forecast………………………………..………………..20
Table 7 Capex schedule……………………………..……………………23
Table 8 Cash Forecast……………………………..……………………...23
Table 9 Dividend forecast……………………………..………………….24
Table 10 Retained earnings forecast……………………….……..………25
Table 11 Pro-forma income statement………………………..……..……26
Table 12 Pro-forma balance sheet…………………………..….………....26
Table 13 WACC calculation………………………..…………………….30
Table 14 Dividend Discount Model…………………………..…….…….31
Table 15 Relative Valuation…………………..……………………….…32
 Executive Summary
When investors are unaware of a stock's true value, they struggle to determine the best
time to buy or sell shares. Making investment decisions based on a stock's market
price alone could cause investors to miss out on lucrative opportunities. This is
because supply and demand for shares affect the stock market constantly, causing the
price of a share to rise and fall. As such, it becomes imperative to find fundamentally
sound stocks that can withstand tough weather. The goal of this paper is to conduct an
equity valuation in order to determine if it is financially lucrative for investors to
purchase shares of Marico Bangladesh Limited.
With the motto of “Making A Difference,” Marico Bangladesh (MBL) started its
journey in Bangladesh in 1999 with its flagship brand, Parachute Coconut Oil. As of
today, the company offers 42 brands across 10 categories, such as - haircare, food,
hygiene, male grooming, skincare and babycare products. The Economic Times
awarded the corporation the "Best Brand" in 2021 because of its reputation as a brand
powerhouse that has a track record of releasing very successful product lines in a wide
range of segments.
A top-to-bottom analysis has been conducted before jumping into the valuation of
Marico Bangladesh Limited. The economic analysis phase involves looking at both
international and domestic macroeconomic concerns. Bangladesh possesses almost all
of the required features of an FMCG hotspot, including consistent GDP growth,
demographic dividend, and digitization. Unfortunately, due to rising food inflation,
customers tightened their belts and decreased their purchases in the home and
personal care markets where Marico operates. In addition, amid the depreciation of
Bangladeshi Taka and Russia-Ukraine war, cost of importing fuel and industrial
inputs went up which impacted the industry quite a bit. Nevertheless, as a result of a
more favorable supply chain picture and monetary tightening policies, energy and
commodities costs are returning to pre-war levels.
Speaking of industry analysis, Bangladesh's consumer products sector is worth $3.6
billion and it is expanding by 9% annually. Furthermore, FMCG firms operating in
the country are optimistic about the future owing to the country's rapidly growing
Middle and Affluent class with rising per capita income. As reported by FBCCI
(March 2023), the number of people in the middle and upper classes is expected to
reach 3.4 Cr by 2025. However, given the homogeneity and cheap cost of substitutes,
the threat of substitutes and the intensity of competitive rivalry were found to be

i
strong by Porter's Five Forces analysis. Consequently, consumers have much leverage
in market negotiations. On the flipside, suppliers have minimal bargaining strength
and the threat of new entrants is moderate.
In the following chapter, the firm's SWOT analysis has been carried out alongside
time series and cross-sectional ratio analysis. The company's liquidity has
strengthened and its profitability ratios have stayed consistent over the years. Given
the homogeneity and cheap cost of substitutes among FMCG products, the threat of
substitutes and the intensity of competitive rivalry were found to be strong by Porter's
Five Forces analysis. As a result, consumers have more leverage in market
negotiations. Suppliers have minimal bargaining strength and the threat of new
entrants is moderate.
Forecasting of key line items has been done in chapter four. Income statement and
balance sheet projections, along with the underlying assumptions, have been
portrayed in great detail. Pro-forma financial statements have been developed after all
the facts and assumptions were harmonized. The Free Cash Flow to Equity Model, the
Dividend Discount Model, and the Relative Valuation have been deployed to
calculate the value of MBL stock in Chapter 5. While FCFE and Relative Valuation
determined that the stock was undervalued, the Dividend Discount Model concluded
that it was slightly overvalued by 5.5%. The FCFE model predicts that MBL is worth
BDT 3206.4 right now, which is a 24.1% premium to its market price. So, it's
reasonable to advise investing in the stock by making a BUY recommendation. DDM,
on the other hand, places a value of BDT 2781.9 on MBL's shares (around 15%
upside), suggesting that the stock has the potential to appreciate in value. In any case
it doesn’t, a shareholder still stands to gain from the company's generous dividends.
Because of this, it would be prudent to take a long position i.e. buy MBL shares.

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1.0 Introduction
The FMCG market in Bangladesh is worth $3.5 billion and is growing at a rate of 9% per
year (The Daily Star, March 2023). As such, both domestic and foreign manufacturers are
optimistic about growth prospects in this sector. One such organization is Marico
Bangladesh Limited, which is regarded as a reliable health and beauty brand and is among
the top three FMCG multinationals in Bangladesh. With a wide variety of brands in a
variety of categories - hair nutrition, skincare, baby care and male grooming products, the
company has an impact on the lives of one out of every two residents of Bangladesh.
1.1 Origin of the report
This report has been prepared as part of the BBA program requirement at IBA, University
of Dhaka. I was fortunate enough to be selected for a two-month internship with the
Research team at IDLC Securities Limited, one of the country's largest stock brokerages,
from 9 January to 9 March 2023. Over this brief period, I successfully compiled a
thorough guide on Bangladeshi stock market analysis. I was also tasked with analyzing
corporate financial records to identify key value drivers, competitive advantages, etc., in
order to develop proven explanations for a stock's underlying worth. Moreover, I had the
opportunity to gain hands-on experience with fundamental analysis and valuation, which
encouraged me to choose the topic "Valuation of Marico Bangladesh Ltd" for my
internship report. This paper investigates Marico Bangladesh's financial health in order to
forecast its future earnings and, consequently, its intrinsic value for the purpose of guiding
investors.
1.2 Objective of the report
Broad objective: To recommend whether to purchase, sell, or hold the stock of Marico
Bangladesh Limited by determining its intrinsic value.
Specific objectives
 Analyzing the historical performance of Marico Bangladesh
 Forecasting the Income Statement and Balance sheet items of the company from
2023-2027
 Determining the worth of the stock with Free Cash Flow to Equity method
 Determine whether or not the stock price is overpriced by utilizing the Dividend
Discount Model
 Conducting relative valuation on Marico Bangladesh Limited

1
1.3 Scope of the study
This paper reviews the fundamentals of Marico Bangladesh Ltd. and projects the
company's financials for the next five years. This has been accomplished by taking into
consideration macroeconomic and FMCG industry dynamics. Industry and market data
used in the report has been obtained from market research, publicly available information
and industry publications. Thus, the study highlights the basis for the fair valuation of
Marico Bangladesh, analyzes the many aspects affecting the valuation, deploys three
valuation techniques and reaches a judgment on the stock's fair value.
1.4 Methods 
The research methods include the following:
Data Collection
Primary data
Due to the fact that Marico Bangladesh is expanding into numerous categories, forecasting
its growth rate was vital. In this context, Syeda Ramisa Anjum, Brand Manager, Baby
Care of Marico Bangladesh Limited has been interviewed. 
Secondary data
Secondary data have been collected from the following sources:
 Past financial information was gathered from Marico Bangladesh Ltd.'s annual reports.
 Statistics pertaining to macroeconomics and industry have been gathered from
reputable national dailies like The Daily Star, The Financial Express Bangladesh and
organizations including Bangladesh Bank and the International Monetary Fund
 Equity research reports and macroeconomic reports of IDLC Securities Limited, EBL
Securities and LankaBangla Securities have been consulted. Dhaka Stock Exchange &
Investing's website have been scraped for historical stock price and index movements.
Data analysis and interpretation
Free Cash Flow to Equity (FCFE), Dividend Discount model (DDM) & Comparable
Company Analysis (CCA) have been selected as the valuation tools. Microsoft Excel has
been used in this regard. 
1.5 Limitations
There are some differences in the industry statistics between different sites. Besides, since
the interviewers were prohibited by law from disclosing "proprietary" and "confidential"
information, the acquisition of primary data was somewhat hampered.
1.6 Report preview

2
In Chapter 2, a detailed overview of Marico Bangladesh has been provided followed by
fundamental analysis in Chapter 3. Fundamental analysis includes industry analysis,
economic analysis and company analysis. Within the next chapter, the pro-forma
statements that are supported by reasonable assumptions have been drafted. In Chapter 5,
three different approaches to valuation have been used to determine the fair value per
share of Marico Bangladesh. In the last chapter, recommendation has been made backed
by facts pertaining to the economy and the firm.

2.0 Organizational Overview

With the motto of “Making A Difference,” Marico Bangladesh (MBL) started its journey
in Bangladesh in 1999 with its flagship brand, Parachute Coconut Oil. It is a subsidiary of
the emerging markets FMCG giant Marico Ltd, which is present across 26 Asian and
African nations. In 2007, MBL set up its 1st factory in Gazipur and currently has two in-
house factories, two contract manufacturers and five distribution centers.
2.1 Background
In 2009, the company raised BDT 13.5 Crore through its dual listing on the DSE and CSE
at an offer price of BDT 90. As of today, the company offers 42 brands across 10
categories, such as - haircare, food, hygiene, male grooming, skincare and babycare
products. For the period FY19-22, the firm has recorded a revenue CAGR of 14.2% and a
Net Profit CAGR of 20%. The Economic Times awarded the corporation the "Best Brand"
3
in 2021 because of its reputation as a brand powerhouse that has a track record of
releasing very successful product lines in a wide range of segments.
 Vision: Making a difference in the lives of all those we touch
 Mission: Transforming the lives of people in a sustainable manner by  empowering
them to realize their full potential and creating long-lasting economic value 
 Values: Consumer-centrism; Transparency; Innovation; Global outlook

2.2 Product offerings

In FY22, the Company’s household penetration stood at around 88.5%.
Table 1: Product Offerings

Category Brands Highlights

Branded Parachute Coconut Oil (PCNO) -Highest revenue

Coconut contribution (61.6% in
Oil  FY22)

Value- i. Advansed Hair Oil ii. Advansed Beliphool -Second highest

Added Hair iii. Advansed Extra Care revenue driver (29.1%
Oil iv. Advansed Aloe Vera v. Nihar Naturals in FY22)
Shanti Badam Amla vi. Nihar Naturals Joba -However, growth
Amla vii. Nihar Naturals 5 Seeds from VAHO is sort of
viii. Red King Men’s Cooling Oil slowing down (10%)

Hair i) Parachute Natural Shampoo  -Launched launched in

Cleaning ii) Parachute Natural Conditioner FY21
-3 varieties of
shampoo

Hair color i) Egypt Herbal Powder Invested BDT 1 Cr for

ii) Egypt Mehedi Color capacity creation
(FY22)

Skin care i) SkinPure Body Lotion -One of the first brands

ii) Beauty Olive Oil in the country to
iii) SkinPure Aloe Vera Gel launch goat milk
iv) Parachute SkinPure Petroleum Jelly facewash
v) Skinpure facewash -Revenue contribution
v) Coco Olive Soap of beauty and health
(3.2% in FY22)

Babycare i. Just for Baby Shampoo ii. Just for Baby -Revenue contribution
Lotion iii.  Just for Baby Oil iv. Just for Baby reached 1.7% in FY22
Powder v. Just for Baby Face Cream vi. Just from 1.5% in FY21
for Baby Wash vii. Just for Baby Toothpaste -Launched first creamy
viii. Just for Baby Rash Cream ix. Just for shampoo for babies in

4
 Baby Soap  Q3 of 2022
-Sales increased by
  79% and 37% year
over year in FY21 and
FY22, respectively.

Oil & Foods I. Saffola Honey ii. Saffola Active

Hygiene i. Soap ii. Hand Sanitizer iii. Hand Wash iv. -Launched in 2020
(Mediker) Vegetable Cleanser

Male I. Hair Gel ii. Brightening cream iii. Face -Launched Studio X
grooming Wash iv. Styling Shampoo v. No Gas range of men's
(Studio X) Perfume Spray vi. Soap  Products in 2020
In Bangladesh, the revenue proportion of the non-Coconut Oil portfolio increased from
less than 20% in FY17 to nearly 40% in FY21.
2.2 Business Strategy
Creating world-class quality products for Bangladeshi consumers, building brands and a
strong distribution network are the key strategic pillars underlying MBL’s business
growth. It is also expanding into historically red-ocean markets in order to grow and
flourish.
 Differentiation: On a day-to-day basis, the FMCG space witnesses new launches
forming a cutting-edge competition in the sector. The success of MBL can be
attributed to the foundation of constant innovation and a culture that promotes the
generation of new ideas. The brand differentiated itself in highly cluttered categories,
thanks to its added functional benefits and packaging innovation. 
In February 2022, Parachute Coconut Oil was launched with bi-color cap. Following that,
the bottle of Parachute Advansed Extra Care was brought out with an applicator that
allows consumers to directly apply the oil to the tips of hair. Parachute SkinPure - a
product range that uses natural components to promote healthy skin was introduced in
2022 with the USP "Beauty through the goodness of nature." Marico's entry into the skin
care market with SkinPure benefited greatly from this solid groundwork. Also, MBL is
one of the first companies in the country to introduce goat milk face wash and creamy
baby shampoo.
 Portfolio diversification: From 2013 to 2017, the firm promoted its Value-added Hair
Oils and its youth range (deos) to enrich its Non-coconut Oil segment. Presently, the
corporation asserts that investments in high-margin product categories, such as Studio
X, Parachute Naturale and Parachute Skinpure, have been key diversification drivers.

5
  Premiumisation: The term "premiumization" is the process of making a product more
accessible to a wider audience by adding features and qualities typically associated
with higher-end goods. It is also increasing the product's attractiveness to a younger
demographic that is willing to pay a premium. Marico saw this as a promising
prospect, and has been working to develop cutting-edge, high-margin new goods. 
The premiumization of MBL's Parachute Advansed and Skincare Skinpure Lotion series
has also been a source of top-line growth. Although hair nutrition remains a fundamental
requirement, the most promising opportunities lie in novel forms and convenience
measures that may be communicated through packaging creativity and other means.
 Consumer-led innovations: MBL constantly monitors social intelligence signals to
identify emerging consumer trends so that it can swiftly respond to them with creative
products that ensure highest functional benefits.  Based on real consumer insights,
MBL has developed a collection of shampoos and hair oils with added value for the
Bangladesh market. By including consumers in the design process, new packaging
methods were developed too. For example, to represent purity and modernism,
Parachute Advansed Body Oil was packaged in a tinted yet transparent bottle.
 Strong distribution: By increasing its distribution reach in recent years, MBL has
become a paradigm of distribution excellence. Effective resource management has
allowed the company to drastically restructure its Go-To-Market plan.  In fiscal year
2022, the brand adopted a channel-exclusive distribution model.
 Leveraging technology: MBL has established a world-class IT architecture in 2022 in
order to gather sufficient insight of sales success and KPI tracking.  As a matter of
fact, the company has been focusing heavily on selling high-end haircare, personal
care, and food products via e-commerce sites in order to accelerate expansion.
2.3 Key Revenue Drivers
In FY22, PCNO, VAHO, Baby Care and Beauty & Health divisions drove revenue
increase. Over the years, the company has made substantial changes to the portfolio in
order to reduce its reliance on the branded coconut oil market. Here’s a breakdown of
Marico’s revenue over the years:
Table 2: Contribution of product categories

Contributi FY'16 FY'17 FY'18 FY'19 FY'20 FY'21 FY'22

on (as %
of

6
revenue) 

Parachute
coconut
oil  79.68 77.29 74.33 69.04 64.96 61.81 61.66

Value
added hair
oil/VAHO 13.36 15.59 19.15 23.89 26.78 28.46 29.07

Color 1.15 0.98 0.62 0.63 0.60 0.53 0.35

Health,
Beauty - - - - 1.47 3.5 3.23

Baby
Segment - - - - 0.95 1.5 1.75

Others* 4.67 5.2 4.7 4.64 5.25 4.2 4

Total 100 100 100 100 100 100 100

 Parachute Coconut Oil (PCNO): As evident from the table, the share of PCNO to
revenue came down to 61% in FY22 from around 80% in FY16.
 Value Added Hair Oil (VAHO): The VAHO expansion has been primarily led by
Parachute Extra Care and Beliphool and was additionally bolstered by two new product
offerings: Nihar Naturals Lovely and Men's Cooling Oil. During the period FY 16-22, the
segment has experienced a CAGR of around 22%. 
 Beauty and Health: Just over a span of 3 years, this segment witnessed a CAGR of 43%
(appx.). For FY22, YoY growth stood at around 7%. 
 Baby Care: MBL intends to be a one-stop solution for Babycare needs. With the
introduction of Baby Shampoo, Face Cream during FY 21-22, the firm continued to grow
its baby care segment. In FY22, this category grew 36.53% as compared to the previous
fiscal year. 

7
2.4 Key Cost Driver
MBL's reliance on imports for its raw materials exposes it to severe risks posed by swings
in international raw material costs and exchange rate fluctuations. Copra is the key raw
material for 60% of the portfolio. As a result of temporary supply restrictions, copra prices
increased during FY21, while prices of edible oils and crude-related inputs grew in tandem
with the rise in worldwide commodity prices. Fortunately, during Q3 of FY23, copra
prices have come down to 18% YoY. In addition, energy and commodity prices returned
to pre-war levels as a result of an improved supply chain scenario coupled with monetary
tightening policies. 

3.0 Fundamental analysis

3.1 Economic analysis
8
According to Renaud and Teufel (2010), the macroeconomic factors affecting the
consumer discretionary sector are income, inflation, economic growth, consumer
spending, interest rates, currency and taxes. 
-Gross Domestic Product (GDP)
The link between GDP and consumption expenditure has garnered significant interest
from economists and policymakers. The GDP account comprises consumption
expenditure, investment, government expenditures, and export. 

Figure 1: Consumption Expenditure (% of GDP)

Source: The World Bank
According to the most recent data, Bangladesh's GDP grew 7.1% year-over-year in June
2022, while its GDP per capita reached $2,687.0 (The Business Standard, February’23).
This growth in GDP is followed by increases in income and consumption, which is
favorable for the FMCG business. Taking into account the impacts of the Russia-Ukraine
war, the World Bank decreased Bangladesh's economic growth forecast for FY '23 to
6.7%. A rise in disposable income and consumer product purchases, however, are
forecasted following the Padma bridge's completion and enhanced connectivity across the
country.
In addition, Bangladesh has all the essential features of an investment hotspot - steady
economic growth, demographic dividend and digitalization. BBS reports that the ratio of
investment to GDP has risen from 31.02% to 31.68% in FY’22. Simply put, the popularity
of aspirational personal care products, improved logistics, growth in rural consumption,
and low labor cost may make Bangladesh a favorable investment destination for new
FMCG entrants or may witness increased investment by existing firms.

-Per capita income

9
In 2021–2022, Bangladesh recorded a gross per capita income of $2,793, which was
expected to be $2824. Theis rise per capita usually has been in line with the increasing
GDP. The Business Standard (February 2023) reports that despite Bangladesh's sustained
GDP growth over the years, the per capita FMCG consumption isn't quite satisfactory.
When compared to our neighboring nation, a Bangladeshi consumer only spends $24 on
FMCG products per year, which is 45% less than the $44 spent in India. 
Since the nation aspires to become a developed nation by 2041, it is required to boost its
GDP per capita by more than $12,700 (The Financial Express, September 2022).

Figure 2: GNI per capita

-Inflation
The Bangladesh Bureau of Statistics (BBS) reports that in June'22, food inflation reached
10.32% before reaching its highest level of the year at 15.31% in August'22. On a similar
note, non-food inflation in June, 2022 was also unacceptably high, at 18.86% (The Daily
Star, January 2023). 

Figure 3: CPI Inflation

Source: IDLC Securities Ltd

10
Inflation hit a 10-year high of 9.5% in August. This was caused by around 23% increase in
gas prices, high commodity price and BDT depreciation. Due to high food prices,
consumers tightened their belts and reduced their purchases across home and personal care
segments (HPC). Simultaneously, firms had to increase the prices of consumer goods by
20% to 80% to offset the rising cost of raw materials and the strengthening of the dollar.
With an apt monetary policy, CPI inflation has come down to 8.7% in December 2022
from the peak of 9.52% recorded in August 2022. The revised inflation target is now 7.5%
for FY23 (IDLC Securities Limited 2023 Outlook, 2023)
-Exchange rate 
Around 80% of the raw materials used in the FMCG business are imported. Since the
Bangladeshi taka fell against practically all of its main trading partners' currencies, the
cost of importing energy, industrial raw materials, food, and rose, hitting the FMCG
industry.

Figure 4: Interbank Exchange Rate

However, growth of import LC openings in July-August 2022 slowed to 0.4% YoY. The
decline in commodity prices on the global market has assisted in curbing import increase.
(IDLC-SL Macro Update, Oct’22). 
Copra (dried coconut kernels) serves as Marico's primary raw ingredient for producing
Parachute and VAHO.Though mainly imported from India, copra and other raw materials
are also imported from Indonesia, SriLanka and Philippines. Because of the decrease in
Copra’s prices, the company's operating margin improved in FY22.
3.2 Industry analysis
By 2025, with a growth rate of 5.5% per year, the global market for fast-moving consumer
goods is expected to be worth $1.5 trillion. As of Bangladesh, the consumer products
industry is expected to be pivotal in helping the economy reach the trillion-dollar mark.

11
3.2.1 Industry Overview
In terms of gross sales, the FMCG market in Bangladesh was valued at roughly $4 billion
at the end of 2022. It is worth more than Tk 40,000 crore in local currency. FMCG items
are divided into 28 categories, which include household and personal care, beverages,
toiletries, over-the-counter medications, and so on. To put it into perspective, personal
care, household care and food are the most valuable of these industries.
The personal care market is dominated by Marico, Unilever Bangladesh,  Keya, Square, 
ACI, and other domestic companies. More than 80% of the local product market is
controlled by these companies, with Unilever alone holding 45% of the market.
3.2.2 PESTEL analysis
To evaluate the macro-environmental factors, a PESTEL analysis has been performed.
Table 3: PESTEL analysis

Factors Current scenario Step taken by Marico

Bangladesh

Political While the political situation in the To maintain their EBITDA

factors country is stable, the Russia-Ukraine
war disrupted the supply chain,
thereby raising the prices of
industrial raw materials. Nearly all
raw inputs witnessed a 20-50% surge
in price. 
margin in the 
face of increased cost of raw
material, Marico reduced
marketing expense to 7.7% in
FY22

Economic Inflation coupled with depreciation Marico Bangladesh has

factors of the BDT are hindering the sales
volume of FMCG products.
Consumers are purchasing smaller
packages and switching brands as
needed.
implemented safeguards in
the areas of cash flow
management, sourcing, and
inventory management.

Social factors With rapid urbanization and rising
income per capita, the Middle and
Affluent class (MAC) is on the rise,
paving the way for increased
spending in the FMCG segment.
Since 2020, Marico
Bangladesh has been
launching premium products
in the category of personal
and baby care in order to
capture the MAC market.

Technological By 2023, E-commerce in Bangladesh Marico is active on more than

is expected to reach USD $3 billion. 36 e-commerce platforms. It

12
 Besides, to speed up the adoption of
Industrial Revolution 4.0, the
government is investing
approximately USD 20 billion in
development and technology
acquisitions.
is increasing its spending on
digital marketing and social
media customer engagement
strategies to stay ahead of the
curve.

Environmental Bangladesh now puts a lot of weight Marico reduced carbon

on environmental, social, and dioxide production by 14.18
governance (ESG) practices to make MT and fuel consumption at
business operations more sustainable. the Shirir Chala plant by
24.55% in FY'22.
3.2.3 Porter’s Five Forces
Force 1: Rivalry among Existing Firms
 Growth Rate of Industry
If an industry's growth rate is high, a market player's sales volume increases just by
holding the starting level of market share i.e. existing company rivalry would be minimal.
As reported by The Daily Star (2022), the fast-moving consumer goods (FMCG) market in
Bangladesh has now surpassed BDT 37,000 crore with an annual growth rate of about 7-
8%.  As for MBL, the recorded sales revenue for FY 2021-22 stood at BDT 1303 Cr
implying a significant 15.3% YoY growth. So to say, the growth trajectory in the FMCG
industry is expected to continue owing to the rapid rapid urbanization, increasing
disposable income and per capita consumption.
 Swelling consumer class: According to Boston Consulting Group (2015), 20 lakh
Bangladeshis join the middle and affluent classes each year (MAC). Analysts
anticipate
that 17% of the overall population will fall into the middle-class income bracket by 2025,
and 33% by 2030. Despite being budget-conscious, this set of consumers are willing to
spend more if that implies that they are obtaining peak quality products. In addition, an
increase in rural consumption is seen as one of the primary factors driving the expansion
of the FMCG industry.
 Growing urban population: Greater demand for FMCG products has been spurred by
the country's growing urban population. The BBS predicts that by 2030, 85.95 million
people will live in urban areas in Bangladesh, and by 2040, this number would rise to
111.88 million.

13
 Labor Force Participation Rate: According to the World Bank (2021), Bangladesh's
labor force participation rate in 2021 was 56.9%, significantly higher than that of
several other Asian countries. One of the most important factors contributing to the
expansion of fast-moving consumer goods is the shift in lifestyle and related spending
habits among the employed population.
Takeaway: Rivalry among existing firms is driven down due to increasing growth rate of
the industry
 Concentration and Balance of Competitors
As we know, markets led by a few key players result in intense rivalry amongst those
players.
In Bangladesh, the FMCG market exhibits oligopoly characteristics. There are
approximately sixty enterprises currently functioning in the FMCG industry, which
includes food and beverage, personal care, and health care. Reckitt reported a negative
growth of 7.3% in turnover and a profit growth of 9.3% as disclosed in their latest annual
financial statements for the year ended 31 December 2021. In the case of beauty and
personal care, seven players control nearly 95% of the market share: Unilever Bangladesh
Ltd., Aromatic Cosmetics Ltd., Keya Cosmetics Ltd., Square Toiletries Ltd., etc. Unilever
dominates the majority of the personal care market with popular brands. Other players
include Hemas Bangladesh, Dabur Bangladesh, Emami Bangladesh and Reckitt Benckiser
Bangladesh (RB). According to RB's financial statements for the FY21, the company's
revenue declined by 7.3% while profits increased by 9.3%.
In the case of Marico, the emphasis is on the personal care segment. In FY 2019-20,
Marico's sales of value-added hair oil (VAHO) increased by 25.23% to Tk 262.34 crore,
while sales of baby items and skincare products increased by 43% to Tk 65.4 crore.
Takeaway: Due to the oligopolistic character of the industry, there is competitive rivalry
among existing firms.
 Differentiation and switching cost
If product differentiation is low and switching cost is high, competition among rivals is
driven down.
Low levels of product differentiation and low switching costs characterize the FMCG
industry. If a competing brand offers the same product at a lower price, consumers switch
to it. This makes it difficult for businesses to attain a greater market share.
As reported by The Daily Star (January 2023), as a result of the rising cost of living, many
low and middle-income consumers in Bangladesh have either abandoned branded products
14
or switched to smaller packs, causing FMCG manufacturers and marketers to record a
sales slowdown in 2022. The amount of FMCG companies' non-essential product sales
decreased by almost 10% on average. In addition, corporations have increased the pricing
of consumer goods by 20%-80% to compensate for rising raw material costs on global
markets.
Takeaway: Due to the industry's minimal switching cost and lack of product
differentiation, competition among established companies remains high.
 Exit Barrier
High barriers to exit may compel a company to remain in the market, hence intensifying
rivalry.
Firms with higher amounts of capital investment/machineries and greater number of
employees have higher exit barriers. If firms like Marico Bangladesh want to switch to a
new form of business, there might be financial constraints due to the large sum of capital
or money already invested in the cost of the equipment.
Takeaway: High exit barrier prevalent in the FMCG drives up rivalry among existing
firms
Factor 2: Threat of New Entrants
 Economies of Scale
Moderate capital-intensive businesses benefit from economies of scale, reducing the threat
of new competitors. That is, when sales volume increases, per unit cost decreases.
Most FMCG product categories necessitate quite modest investments in plan, property,
machinery, and other fixed assets. FMCG enterprises in Bangladesh have had a marginal
PPE to Total Asset ratio over the years, reflecting moderate economies of scale. For
example, Marico Bangladesh Limited reported total assets of BDT 705 Cr in FY22, of
which BDT 98.1 Cr were PPE. The ratio - around 15% did not differ much from the
preceding quarters of the same year.
Takeaway: The threat of new entrants is moderate. 
 Access to Distribution Channels
When new companies enter a market, they are at a disadvantage if the existing companies
already have relationships with suppliers and distribution channels. This makes new
companies less of a threat.
It is crucial for businesses in the FMCG sector to ship goods in large quantities across the
nation. Companies can choose to rely on internal distribution or form strategic alliances

15
with well-known distribution channels to achieve this. When new businesses want to enter
the market, this phenomenon serves as a barrier.
There are currently 1,400,000 retail outlets in Marico's distribution network. In FY22, the
firm adopted a channel-exclusive distribution model to better assist the development of
new brands and the placement of the proper product mix in retail outlets.
Takeaway: Cost of accessing distribution channels drives the threat of new entrants down.
Factor 3: Threat of Substitutes
 Availability of substitutes
As is well known, higher substitute availability increases the threat of substitutes.
The FMCG sector produces rather uniform goods. If you don't have access to Marico's
saffola oil, you may use Fresh Oil; if you don't have access to soybean oil, you can use
sunflower oil; if you don't have access to Colgate toothpaste, you can use Dabur Red
Toothpaste or even Meswak.
Takeaway: Moderate availability of substitutes add to the threat of substitutes
 Price of substitutes
Lower price of substitutes increases threat of substitutes
High substitute threat indicates that customers can satisfy their needs with
products/services from competing brands (Hopkins B, 2018). Marico is currently
attempting to increase its profit margins by concentrating on premiumisation. In 2020,
Marico launched its first male grooming brand "Studio X" in Bangladesh, offering a vast
selection of premium products. Premiumization is also present in the Babycare and food
and oil segments. However, the majority of its competitors, such as Teer, Radhuni, Fresh,
etc., operate in the budget-friendly segment.
Takeaway: Lower price of substitutes drives up the threat of substitutes
Factor 4: Bargaining Power of Buyers
 Wealth/Size of Buyers: If the size of buyers is large, bargaining power of buyers is
high
When it comes to purchases involving food and beverages or personal care, consumers
now have a greater variety of options. Price sensitivity has taken precedence over brand
sensitivity in this age of inflation. As rising prices put more pressure on Bangladeshi
consumers' monthly budgets, more and more people are choosing cheaper packs or
switching brands. That is, customers may quickly abandon Marico's Parachute Skinpure
Lotion in favor of Unilever's Dove Lotion if the latter's price increases.
Takeaway: The moderate size of buyers elevates their negotiating power.
16
Factor 5: Bargaining Power of Suppliers
 Importance of raw material
If raw materials play a significant role in the production of the product under
consideration, suppliers' negotiating leverage will increase.
During the pandemic, rising input costs were one of the greatest challenges for all major
FMCG companies, including Marico, Nestle, and Unilever. In order to maintain their
profit margins, the companies had to constantly raise the prices of their products. Copra, a
key raw material for 60% of Marico Bangladesh's portfolio, has been under pressure
during FY22 due to the volatility of global markets and supply chains.
Takeaway: High importance of raw material drives up the bargaining power of suppliers
 Number of suppliers
In the FMCG industry, suppliers' bargaining power is typically low due to the vast number
of suppliers and the low cost of switching suppliers.
As a result of their needs and product line, Marico Bangladesh have partnered with a
variety of suppliers. In a nutshell, firms that have not established strategic ties with
suppliers will be at a disadvantage. 
Takeaway: Comparatively large chunk of suppliers weaken suppliers' bargaining position.
3.3 Company Analysis
To determine the internal and external factors affecting MBL, SWOT analysis and ratio
analysis have been performed.

3.3.1 SWOT Analysis

The SWOT analysis of Marico Bangladesh reveals the following:

Figure 5: SWOT analysis

3.3.2 Time series analysis
The ratios of MBL have been calculated from FY19-22.
Table 4: Time-series analysis
FY19 FY20 FY21 FY22

17
 Liquidity ratios
Current ratio 1.25 1.21 1.03 1.34
Quick ratio 0.90 0.72 0.53 0.78
Cash ratio 0.12 0.12 0.09 0.11

Profitability ratios
Gross Profit Margin 48.99% 57.8% 58.9% 54.3%
Net Profit Margin 23.08% 27.01% 27.5% 27.3%
Return on Equity 144.80% 196.76% 205.58% 164.32%
(ROE)
Return on Assets 44.74% 55.22% 57.56% 55.35%
(ROA)

Solvency ratios
Debt to asset ratio 0.04 0.04 0.07 0.02
Total debt to equity 0.15 0.15 0.25 0.05
ratio
Times Interest earned 116.56 76.79 226.55 125.47

Efficiency ratios
Inventory turnover 3.18 3.04 2.58 2.76
Inventory Conversion 114.6 120.26 141.7 132
Period
Receivables turnover 389.32 294.71 207.48 222.27
Average Collection 0.94 1.24 1.76 1.64
Period

Valuation ratios
P/E 22.37 18.60 21.05 20.88
EPS 64.23 84.01 98.69 112.82
P/Sales 51.60 50.22 57.85 56.94

3.3.3 Cross-sectional analysis

Since Reckitt Benckiser is an MNC like Marico, their ratios have been compared.
Table 5: Cross-sectional analysis

For FY21 MBL RB

Liquidity ratios
Current ratio 1.03 1.23
Quick ratio 0.53 0.92
Cash ratio 0.09 0.86
Profitability ratios
Gross Profit Margin 58.9% 52.55%
Net Profit Margin 27.5% 16.35%
Return on Equity (ROE) 190% 92.05%
Return on Assets (ROA) 57.56% 25.14%
Solvency ratios
Debt to asset ratio 0.07 5.25
Total debt to equity ratio 0.25 17.26
Times Interest earned 226.55 92
Efficiency ratios

18
 Inventory turnover 2.58 3.72
Inventory Conversion Period 141.7 121.7
Receivables turnover 207.48 97.01
Average Collection Period 1.76 5.24
Valuation ratios
P/E 21.05 27.84
EPS 98.69 171.03

4.0 Pro-forma financial statements

The pro-forma statements for FY23-FY27 have been prepared taking into account
historical performance as well as future outlook.
4.1 Income Statement assumptions
i) Revenue
From FY19-22, Marico Bangladesh Limited has maintained a revenue CAGR of 14.12%.
The company reported 15% revenue increase in FY22, underpinned by 6% growth in
volume. As the company's portfolio has become more diversified, the proportion of non-
coconut oil revenues has been continuously rising. The company's sales growth has been
sustained not just by its core brands - Parachute, Nihar and Parachute Advanced - but also
by its expansion into new markets, including baby care, health, skincare, and shampoo.
In addition, the company is heavily focusing on e-commerce by investing in digital
marketing and providing personalized content. 
Table 6: Revenue forecast

Revenue forecast (in Cr)

Particulars FY'19 FY'20 FY'21 FY'22 FY'23 FY'24 FY'25 FY'26 FY'27

PCNO 605.4 636.3 698.9 800.35 864.4 933.5 1008.2 1088.9 1176.0

VAHO 209.5 262.3 321.8 378.9 454.7 545.6 654.7 785.7 942.8

Color 5.6 5.8 6 4.5 4.05 4.05 4.05 4.05 4.05

Health & Beauty 0 14.4 39.4 43 51.6 61.9 74.3 89.2 107.0

Baby Segment 0 9.3 16.7 22.8 28.2 34.8 42.9 53.0 65.5

Others* 40.7 51.4 47.9 51.5 56.7 62.3 68.5 75.4 82.9

Total revenue 861.2 979.5 1130.7 1301.1 1459.5 1642.2 1852.8 2096.2 2378.3

19
Source: Compiled by the assignee
*Others include food and oil, male grooming. (FY21 and FY22).
*Others include skin care, baby care, male grooming (FY'20)

✔PCNO & VAHO: The share of PCNO to revenue came down to 61% in FY22 from
around 80% in FY16. However, the category still remains the highest top-line driver
posting a YoY revenue increase of nearly 14% in 2022. However, as reported by Marico,
the company expects a 3% volume growth and 6% value growth in the VAHO segment in
the coming years. Given the strong brand equity, it is safe to project a single-digit revenue
growth of 9% for the next 5 years. However, homegrown brands are also competing in the
Hair Oil segment, such as - Square Group's Jui, Mousumi Industries' Cute and so on. 
On the flipside, from FY19-22, VAHO has posted a de-growth even though the revenue
contribution increased from 28.46% in 2021 to 29.07% in 2022.  However, in the face of
gradually easing inflation, we have taken a growth rate of 22.5% for this vertical. It is
mentionable that MBL is now targeting the bottom of the pyramid in VAHO with
innovation and as customers increasingly seek value for money.
✔Baby Care: With respect to Bangladesh, the baby care market is worth BDT 200 Cr. In
2019, MBL launched the Just For Baby segment and kept adding to the range during
2020-21. In fact, the baby toothpaste has been MBL’s first product in the Oral care
category. Baby categories have registered strong YoY growth of around 80% in FY21. As
reported by Statista, the Baby Care segment is expected to have a CAGR (2023-27) of
4.64%. 
While Johnson and Kodomo compete with Parachute Only For Baby, they operate in
Bangladesh through agents and lack infrastructure. Furthermore, people are wary of
counterfeit goods, particularly Johnson products. So, despite being on the market for only
four years, Marico's baby line has become a formidable competitor.
✔Health & Beauty: MBL's success can be attributed to the identification of a need gap
for natural ingredients-based skin care and haircare products. Unlike its rivals, MBL
distinguished itself from the pack by offering natural products that may address a wide
variety of skin issues. In 2021, the company introduced Saffola honey, Parachute Naturale
shampoos, rash and face creams for babies. Thus, driven by multiple launches under
Parachute and Skinpure, the company posted a YoY 174% growth in FY21 followed by
6.63% in FY22.

20
Statista estimates that the market for cosmetics and personal care products will expand by
3.71 percent this year. For the forecast, the projected revenue growth rate for this industry
is 20% due to the growing number of working women and the limited number of brand
alternatives.

Figure 6: Employment of women

Cost of Goods Sold
Revenue increased by 15.3% in FY22 while cost of goods sold increased by 28%
compared to the prior year's increase of 12.8%. The rising cost of sales can be attributed to
the higher prices of raw materials in the international market. Besides, as a result of the
increase in the custom duty on Liquid Paraffin by 5% in the FY '22 budget, MBL's cost of
raw materials went up.
However, MBL's Cost of Sales as a Percentage of Revenue has dropped to 45.7% thanks
to the price decline of copra and crude oil. And the price is gradually declining further -
from 32.52 Peso/Kg in November 2022 to 28.52 Peso/Kg in February 2023. 

Figure 7: Copra price (Price/Kg)

Source: Philippine Coconut Authority

21
For the past 3 years, MBL has had an average COGS of around 43% of sales. With
multiple product launches since 2019, it is expected that Marico will experience increased
economies of scale. In addition, with China reopening, businesses are expected to pick up
speed. As reported by the IMF, inflationary pressures will take a dip to 4.2% in 2024. As
reported by Marico India, Bangladesh has experienced consistent currency growth of 9%
in Q3 of FY23 which will further bring down import cost. The congestion problems that
plagued major ports around the world are beginning to improve as lower demand takes
root. Even more so, MBL's framework for Enterprise Risk Management includes (i)
hedging to manage exchange rate volatility and (ii) transport cost optimization. Taking
into account all of these variables, we predict that COGS will represent 45% of sales in
2023 and will decline to 40.5% of revenue during the following four years as the price of
oil, gas, and electricity continues to stabilize.
General & Administrative Expense 
General and administrative costs represented 9.8%, 9.13%, and 9.64% of sales in the fiscal
years 2020, 2021, and 2022, respectively. In accordance with this, a 9% ratio has been
assumed over the predicted period of FY23–27.
Marketing, Selling & Distribution Expense
Cost optimization was implemented by MBL in FY22 in order to preserve its operating
profit margin. As such, in FY22, there has been a 7.7% YoY decline in growth and the
proportion of marketing and distribution expenses to revenue (%) has decreased to 9.62%.
As the gross margin gradually takes up from 2023, it is safe to assume that MBL will raise
its investment in this segment to spread the word about their new products.  Consequently,
for FY23, the expense to revenue ratio has been assumed to be 10% and 12.25% onwards. 
4.2 Balance Sheet assumptions
Property, plant & equipment (PPE)
From FY19-FY22, MBL has invested substantial sums in setting up its private refinery
plant, constructing a new factory building in Mouchak, setting up in-house production
capacity for hair color and baby powder and so on. Starting in 2021, MBL has been
investing BDT 227 crore phase-wise in Mirsharai EPZ on the construction of a third
manufacturing facility. The construction assets increased by BDT 31.1 Cr in FY22. 
It’s been considered that the remaining BDT (227-31.1) Cr or, BDT 196 Cr (appx) is
spread across the next 4 years. Taking into account both operational capital expenditures
and maintenance capital expenditures, it is likely that MBL will report an increase of BDT
60 Cr from FY23 to FY25, followed by BDT 50 Cr in FY26 and FY27.

22
Table 7: Capex schedule

Capex Schedule

  FY'21 FY'22 FY'23 FY'24 FY'25 FY'26 FY'27

Beginning balance 64.7 77.3 96.8 137.4 170.0 196.0 208.5

(-) Depreciation 11.6 16.6 16.96 24.48 30.9 32.75 38.84

(+) Capex 24.2 36.2 60.00 60.00 60.00 50.00 50.00

Closing PPE 77.3 97 137.4 175.4 204.7 221.0 233.1

For the forecasted years, we have taken a depreciation rate of 17.50% of total gross capex.
This figure was determined by using an average of Marico's past depreciation rates for all
of their gross capital equipment.
Inventories
In FY20, FY21 and FY22, inventory was reported at 41%, 43% and 39.13% of Cost of
Goods sold respectively. Consequently, for the forecasted years, inventory will account for
41.2% of cost of goods sold (COGS)
Cash & Cash equivalents
For MBL, Cash and Cash equivalents has been determined using the Indirect Method as
follows: 
Table 8: Cash Forecast

Cash Forecast

FY’22 FY’23 FY’24 FY’25 FY’26 FY’27

Net income 356.2 408.9 469.6 567.8 654.2 756.0

Add: depreciation 16.7 16.94 24.48 30.69 32.75 38.84

Less: Working capital 98 113.5 118.4 130.2 132.4 186.8

OCF 275 312 376 468 554 608

23
 Less : capex 36.1 60.0 60.0 60.0 50.0 50.0

Less: dividend 283.5 252 362 441 504 599

Net loan 20 30 40 50 40 25

Net change in cash in 2023 -25 30 -22.36 27 60 4

Add: Beginning cash 39.6 50.5 80.8 58.5 85.8 146.3

End balance 50.5 80.8 74.22 101.55 152.02 156.5

To forecast the dividend, MBL’s long history of paying out hefty dividends have been
considered. During FY16-FY21, MBL's dividend payout ratio was between 91.2% and
115%. However, to offset the costs associated with building its factory in Mirsarai EPZ,
MBL has lowered its Dividend Payment Ratio to 72% (appx.)  for FY22. The dividend
payment ratio for MBL is estimated to be at least 85% during the forecasted period (2023-
2027). Notably, MBL increased their dividend from BDT 20 in Q1 FY22 to BDT 45 in Q1
FY23.
Table 9: Dividend Forecast

Particulars FY'21 FY'22 FY'23 FY'24 FY'25 FY'26 FY'27

1st interim dividend 30 20 45 40 45 45 55

2nd interim dividend 20 20 30 45 40 50 50

3rd Interim dividend 20 20 20 30 35 45 55

Final dividend 20 20 20 30 40 50 50

Total Dividend per Share 90 80 120 140 160 190 210

Total Dividend 284 252 378 441 504 599 662

Dividend payout ratio 91.20% 71.91% 88.6% 93.9% 89% 91.5% 88%

24
Retained Earnings
Retained earnings for MBL amounted to BDT 121 Cr and BDT 235 Cr in FY21 and
FY22, respectively.
Table 10: Retained earnings forecast
FY23 FY24 FY25 FY26 FY27

Beginning balance 235 391.4 450.2 556.2 704.4

(+) Net income 408.9 469.6 567.8 654.2 756

(-) Dividend 283.5 362 441 504 589

End balance 391.4 450.2 556.2 704.4 853.4

Liabilities
Owing to decreased working capital investment requirements, MBL was not required to
take out sizable short-term loans. As such, MBL has funded most of its capital expenditure
initiatives with internal funds and has not taken out any long-term loans. Hence, MBL has
maintained a very low debt-to-equity ratio over the years. In fact, MBL's times interest
earned (TIE) ratio was 271.76 in FY22. During the projected period (FY23 - FY27), we
have therefore assumed exclusively short-term loans in the range of 15 Cr to 30 Cr.
Speaking of trade payable, in the preceding years, MBL has been able to gradually
enhance its Cash Conversion Cycle due to a lowering Accounts Payable ratio. The
Account Payable ratio lowered to 5.2x in FY22 from 16.5x in FY17. From FY20 to FY22,
trade payments comprised around 60% of COGS on average. So, the payables have been
projected based on this ratio.
4.3 Pro-forma income statement
The following pro-forma income statement has been prepared for the forecasted years.
Table 11: Pro-forma income statement

Figures (in
Cr)
  FY’20 FY’21 FY’22 FY’23 FY’24 FY’25 FY’26 FY’27
Sales 980 1130.7 1303.2 1490.6 1704.5 1956.1 2253. 2505.1
2
Growth rate % 11.74% 15.38% 15.26% 14.4% 14.3% 14.8% 15.2% 15.6%
                 

Cost of sales 412 464 596 670.8 724.1 792.2 912.5 1055.5
Gross profit 568 666.7 707.2 819.8 980.1 1163.9 1340. 1550.05
6
GP margins % 58% 59% 54% 55% 60% 60% 60% 60%
                 

25
 Other income 10 6.3 1.7 3.1 2 2.5 3.0 3.0

General and -96 -109 -119 -134.2 -153.4 -175 -202.8 -234.5
admin
expense
Marketing & -115 -136 -125 -149.1 -208.8 -239.6 -276.0 -319.1
Selling
expense
Operating 357 428 464.90 539.72 619.88 750.71 864.8 999.4
profit (EBIT)
Net finance 19.30 13.00 9.00 15.7 17.9 20.5 23.7 27.4
income
Profit before 376.30 441.00 473.90 562.89 662.74 765.08 883.2 1019.80
contribution 8
to WPFF
Contribution -18.8 -22.1 -23.7 -27.8 -31.9 -38.6 -44.4 -51.3
to WPFF
Profit before 357.5 418.9 450.2 534.75 629.61 726.83 839.1 968.81
tax (PBT) 2
Income tax -93 -109 -94 -118.7 -136.3 -164.9 -188.8 -219.5
Net income 264.5 309.9 356.2 408.9 469.6 567.8 654.2 755.8
4.4 Pro-forma Balance Sheet
The following pro-forma balance sheet is obtained.
Table 12: Pro-forma balance sheet
(In Crores) FY'19 FY'20 FY'21 FY'22 FY'23 FY'24 FY'25 FY'26 FY'27

Non-Current 57.7 89.44 139.4 137.57 242.7 262.4 311.6 300.94 291.90
Assets

Property, 46.9 64.7 77.2 98.1 139.9 175.4 204.7 221.9 233.1
plant and
equipment

Intangible 0.4 0.2 0 0 0.7 0.4 0.8 0.9 2

assets

Right-of-use 0 17.5 16.5 29.3 45 38.9 25 40.8 35.4

asset

Deferred tax 4.8 4.7 1.9 1.4 4 5.2 3.2 6 6.5

asset

Advances, 5.1 2.3 13.3 7.4 25.20 21.40 11.40 14.50 13.50
deposits and
prepayments

Investment 0 0 0 1.3 2.5 3 1.3 1.3 1.3

property

Other 0.5 0.04 30.5 0.07 25.5 18.2 20.2 15.5 0.1
financial

26
assets

Current 400 411 440 567 687 749 821 907 1,095
Assets

Inventories 109 163 198 233 281.73 304.2 348.5 383.26 443.12

Advances, 43.6 60.1 41.3 74.8 84.18 115.7 110 121 135.2
deposits and
prepayments

Other 209 142 157 209 240 240.0 260.0 253.4 286.5
financial
assets

Cash and 38.3 42 39.6 50.5 80.8 89.00 102.4 149.7 230.0
cash
equivalents

Assets held - 3.6 3.6 0 0 0 0 0 0

for sale

Total Assets 457.8 500.7 579.3 704.8 950.7 1041.4 1132. 1288.6 1465.7
6

Shareholder's 130 139 178 292 449 507 554 763 921
Equity

Share capital 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5

Share 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2
premium

Retained 73.5 82.1 121 235 391.9 450.2 556.2 706.4 863.9
earnings

Non-current 6.5 25.4 15.4 12.3 12.5 16.5 11.00 19.5 14

liabilities

Employee 6.5 8.6 3.2 4.4 4 6 3.5 4.5 4

benefit
obligation

Lease - 16.8 12.2 7.9 8.5 10.5 7.5 15 10

liabilities

Current 321 337 400 424 491 528 561 507 532
liabilities

Loans and 20 0 25 0 15 30 20 20 25
borrowings

Employee 1 0.7 2.1 2.4 2.4 2.2 2.4 2.4 2.4

benefit
obligation

27
Trade and 254 271 308 355 399.3 431.2 471.6 440.0 456.8
other payable

Lease - 4.3 4.5 4.9 8.4 4.5 7.2 5 7.5

liabilities

Current tax 46 60.5 60.4 61.4 66 60 60 40 40

liabilities

Total 327 362 416 436 503 544 572 527 546
liabilities

Total 457.6 500.9 593.4 727.5 951.9 1,041 1132. 1290 1466.3
Shareholder's 7
equity and
liabilities

28
5.0 Valuation
5.1 Free Cash Flow to Equity (FCFE) Model
Free Cash Flow to Equity (FCFE) is a valuation tool that estimates the sum of cash that
might be distributed to equity shareholders. To put it another way, it's the cash left over
after paying for things like capital expenditures, debt, and operating expenses.

FCFE = Net Income + Depreciation & Amortization – Change in

Net Working Capital - CAPEX + Net Borrowing
The assumptions pertaining to WACC calculation are as follows: 
Modified Capital Asset Pricing Model (CAPM)
This model has been utilized to determine the cost of equity of MBL. The formula is as
follows:

Cost of equity, Ke = Rf + β × (Rm – Rf) + SP + CSRP

Where,
SP = Size Premium
CSRP = Company-specific risk premium

The analyst has used a 10-year T-Bond rate of 8.5% as the risk-free rate. Market returns
have been estimated using monthly DSE index data from 2014-2022. It has been found
that the average market return is 5.02%. However, this value has not been considered as it
reflects stock return volatility in response to past price shocks. Hence, considering
historical average inflation rate (6%) and real GDP growth rate (7%), the market return is
assumed to be 13% keeping in line with the economic growth of the country.
Now, speaking of betas, equity betas are a measure of a company's overall systematic risk,
which includes both business risk (dangers associated with the company's core operations
and the way those risks interact with the external economic climate) and financial risk
(arising from debt obligations). Despite MBL's lower financial risk due to its reluctance
towards long-term loans, its revenue model is closely correlated with the macroeconomy.
Businesses in the FMCG industry, for example, are feeling the effects of inflation by
seeing a decline in discretionary spending from consumers. Consequently, the Beta for
Marico Bangladesh has been deemed to be 0.7. 
With 1300 Cr in revenue, Marico is well protected against size-related risk. The CSRP
factors include:
1. Financial strength
2. Profitability and stability of earnings

29
 3. Corporate governance
Given MBL's low debt-to-equity ratio and consistent year-over-year revenue growth, its
CSRP is deemed to be quite negligible. Taking into account all of these factors, the cost of
equity is calculated to be 12.2%.
Weighted Average Cost of Capital (WACC)
MBL has taken on very little long-term debt, and it is anticipated that it will continue to
finance all of its initiatives with internal financing for the foreseeable future. If the
company does take out a long-term loan, the interest rate is expected to be 9%, which is
the lending ceiling rate established by the Bangladesh Bank.  Thus, this 9% has been
considered as the pre-tax cost of debt for MBL. Considering a tax rate of 22.5%, the after
tax cost of debt is found to be 6.8%. 
The market value of equity is calculated as the product of price per share and number of
outstanding shares. This produced a value of BDT 7628 Cr. As MBL continues to
regularly refinance its loans, the value of the debt has been estimated at BDT 25 Cr. Thus,
the total value of capital stands at BDT 7653 Cr with equity making up 99.7% of the total.
Thus, WACC of 12.16% is obtained. It is mentionable that in FY21 and FY22, MBL’s
WACC stood at 10.35% and 10.45% respectively.
Table 13: WACC forecast

WACC calculation
0.39
Cost of debt 6.98% weight of debt %
12.18 99.6
Cost of equity % weight of equity %
Cash Flow & WACC  intrinsic value
determination  12.16%

 Change in Net Working Capital: Difference between current liability values

(excluding short-term debt) and current asset values (excluding cash and cash
equivalents) is used to derive net working capital change for 2023-2027.
 Terminal value and equity value: For estimating the terminal value, the three-stage
model is taken into consideration. The three-stage model is split into the following
periods: an initial period of either very fast or very slow growth, followed by a period
of small increases or decreases and finally stabilization at a moderate growth rate that
is expected to persist throughout the company's lifetime.

30
Since 2019, MBL has registered revenue growth in the range of 13%-15% and this growth
is expected to continue in the next 5 years (till 2028). Bangladesh has a fairly young
workforce than its neighboring countries, with 68.3% of its population being of working
age and a median age of 27 years. On the back of this young working-class population, it
is logical to expect that the FMCG business will flourish at a rate of 8-10% during 2028-
2040. By the year 2030, it is anticipated that Bangladesh will become the 9th largest
consumer market and it is the goal of the country to acquire the status of a developed
nation in the year 2041. After 2041, MBL's growth is expected to decelerate in lockstep
with Bangladesh's economy, which would start declining as it becomes a developed
country - as proposed by The Catchup Effect Theory. Thus, the terminal growth rate is
assumed to be 7% for Marico. 
Thus, the terminal value and firm value stand at BDT 15189 Cr and BDT 9983.6 Cr
respectively. The equity value is obtained by deducing debt and adding back cash. The
intrinsic value is thus found to be BDT 3206.4. 
5.2 Dividend Discount Model
Since MBL has a consistent dividend history, the dividend discount model can be used to
help gauge the stock's potential worth. Since 2018, MBL’s dividend payout ratio has been
around 90% on average since 2018. For MBL, majority of the Gordon Growth Model
(GGM) assumptions are valid:
 The business is stable and 
 The company has stable financial leverage
 The majority of the company's free cash flow (FCF) is distributed as dividends.
But, MBL, or any other company for that matter, is unlikely to boost their dividend at a
consistent rate. As a result, a ballpark dividend growth rate of 4.5% has been anticipated in
relation to overall economic growth. DDM analysis calculates the total net present value
(equity value) of the projected dividends paid by MBL to be BDT 8763 Cr as of March 15,
2023, using a discount rate of 12.2%. The intrinsic value of a share is calculated by
dividing the equity value by the number of outstanding shares. This yields an intrinsic
value of BDT 2781.9 per share, which represents around 15% undervaluation over the
stock's current market price of BDT 2421.5. (closing price on 15th March, 2023).

Table 14: Dividend Discount Model

31
 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27
Dividend per share 60 65 95 90 80 115 140 160 190 210
Total dividend (In Cr) 189 204.75 299 284 252 362 441 504 599 662
Growth rate 10% 8.33% 46.2% -5.3% -11.1%
Terminal value 12404
Total value 205 299 284 252 362 441 504 599 13066

5.3 Relative Valuation

In this section, a Comparable Company Analysis is undertaken by comparing MBL’s
valuation multiples to those of its peers. This analysis is fairly simple to run, and the
required data are typically readily available (publicly traded firms). In short, Comps offer
an acceptable valuation range, whereas valuation methods like DCF depend on a wide
variety of presumptions. 
Six FMCG companies’ average P/E, P/BV and P/Sales have been taken as the benchmark
to calculate Marico’s intrinsic value per share.
Table 15: Relative Valuation

Marico’s
Industry Marico’s data intrinsic Remark
price
P/E = 27.54 EPS = 113.07 BDT 3113.9 Undervalued
P/BV = 9.97 BV/share = 295.08 BDT 2941.9 Undervalued
P/Sales = 2.16 Sales = 1490.6 BDT 3019.6 Undervalued

32
6.0 Recommendation & Conclusion
The FCFE model estimates that MBL is worth BDT 3206.4, or a 24.1% premium to its
current market price. So, a BUY recommendation on the stock seems appropriate. DDM,
on the other hand, values MBL share at BDT 2781.9, suggesting the same conclusion.
Further supporting evidence for this conclusion can be found in the following premises:
 While the company relied on the Parachute Coconut Oil brand for more than 80% of
its revenue up until 2012, it has now successfully transitioned to a multi-brand
portfolio. As of 2022, the non-hair oil segments account for close to 40% of the top
line.
 MBL’s profit margins have improved as the company diversified its product line with
more premium offerings like Red King Cooling Oil, Beardo, Saffola and so on. As a
matter of fact, the firm's gross margin has skyrocketed to nearly 55% in FY’22 from
25% in FY'12.
  MBL has continuously been a cash-rich firm with a high dividend payout ratio
(varying from 70.81% in FY’17 to 115% in FY'22) and dividend yield (6.1% in
FY'22). MBL has already distributed a BDT 75 Dividend per Share in the current
fiscal year. Thus, by purchasing MBL stock, investors can receive quarterly dividend
payments.
 MBL doesn’t take out long-term bank loans and is prone to self-financing all of its
capital expenditure initiatives. As of Q3 of FY23, MBL's interest bearing liability
stands at BDT 11.5 Cr lease liabilities. Consequently, MBL today bears almost
negligible financial risk, and its bottom line will not be impacted by interest rate
swings.
 Throughout the course of the forecasted time frame, it is anticipated that MBL will
maintain its focus on investing in capacity expansion and automating its processes.
In a nutshell, with GDP and per capita income predicted to rise, spending on personal care
items is expected to grow as well. MBL's solid brand equity and robust supplier network
could help the company thrive in step with the economic upswing.

33
References
1. Final consumption expenditure (% of GDP) - bangladesh. (n.d.). Retrieved March 20,
2023, from https://data.worldbank.org/indicator/NE.CON.TOTL.ZS?
end=2021&locations=BD&start=1990&view=chart

2. Marico – make a difference. (n.d.). Retrieved March 20, 2023, from

https://marico.com/investorspdf/Annual_Report_2021.pdf
3. Effects of macroeconomic variables on consumer staples. (n.d.). Retrieved March 20,
2023, from https://www.ship.edu/contentassets/569211b0c6f243808c3c64f54e816cd2/
effects-of-macroeconomics-variables-on-consumer-staples.pdf
4. Chowdhury, M. B. (2019, March). Foreign direct investment and the manufacturing
sector in Bangladesh. Retrieved March 20, 2023, from
https://www.researchgate.net/publication/331889262_Foreign_Direct_Investment_and_th
e_Manufacturing_Sector_in_Bangladesh
5. Inflation inequality: Lower-income households facing the heat. (2022, September 29).
Retrieved March 20, 2023, from
https://thefinancialexpress.com.bd/views/opinions/inflation-inequality-lower-income-
households-facing-the-heat-1664448373
6. Report, S. (2023, January 21). 'Dhaka inflation was 11.08% last year, highest since
2011'. Retrieved March 20, 2023, from https://www.thedailystar.net/business/news/dhaka-
inflation-was-1108-last-year-highest-2011-3226761
7. Baby & Child - Bangladesh: Statista market forecast. (n.d.). Retrieved March 20, 2023,
from https://www.statista.com/outlook/cmo/beauty-personal-care/skin-care/baby-
child/bangladesh
8. Bank, A. D. (n.d.). Women at work - adb.org. Retrieved March 20, 2023, from
https://www.adb.org/sites/default/files/publication/203906/women-work.pdf
9. Monetary policy statement 2019-20. (n.d.). Retrieved March 20, 2023, from
https://idlc.com/mbr/article.php?id=321
10. Dhaka Stock Exchange Broad historical rates (DSEX). (n.d.). Retrieved March 20,
2023, from https://www.investing.com/indices/dhaka-stock-exchange-broad-
historical-data
11. Pca.gov.ph. (n.d.). Retrieved March 20, 2023, from https://pca.gov.ph/index.php/trade-
market/price-watch-2023

34
Appendix A-1 (Market Return Calculation)
Date Market's Market monthly
closing return
price
1-Jan-14 4753  
1-Feb-14 4822 0.0145
1-Mar-14 4492 -0.0684
1-Apr-14 4625 0.0296
1-May-14 4421 -0.0441
1-Jun-14 4687 0.0602
1-Jul-14 4400 -0.0612
1-Aug-14 4631 0.0525
1-Sep-14 5124 0.1065
1-Oct-14 5212 0.0172
1-Nov-14 4678 -0.1025
1-Dec-14 4865 0.0400
1-Jan-15 4744 -0.0249
1-Feb-15 4762 0.0038
1-Mar-15 4621 -0.0296
1-Apr-15 4122 -0.1080
1-May-15 4616 0.1198
1-Jun-15 4532 -0.0182
1-Jul-15 4892 0.0794
1-Aug-15 4587 -0.0623
1-Sep-15 4815 0.0497
1-Oct-15 4579 -0.0490
1-Nov-15 4641 0.0135
1-Dec-15 4412 -0.0493
1-Jan-16 4321 -0.0206
1-Feb-16 4654 0.0771
1-Mar-16 4335 -0.0685
1-Apr-16 4325 -0.0023
1-May-16 4419 0.0217
1-Jun-16 4525 0.0240
1-Jul-16 4723 0.0438
1-Aug-16 4512 -0.0447
1-Sep-16 4678 0.0368
1-Oct-16 3987 -0.1477
1-Nov-16 4234 0.0620
1-Dec-16 5123 0.2100
1-Jan-17 5421 0.0582
1-Feb-17 5620 0.0367
1-Mar-17 5812 0.0342
1-Apr-17 5678 -0.0231
1-May-17 5403 -0.0484
1-Jun-17 5646 0.0450
1-Jul-17 5815 0.0299
1-Aug-17 6017 0.0347
1-Sep-17 6104 0.0145
1-Oct-17 6305 0.0329
1-Nov-17 6279 -0.0041
1-Dec-17 6053 -0.0360
1-Jan-18 6287 0.0387
1-Feb-18 5778 -0.0810
1-Mar-18 5489 -0.0500
1-Apr-18 5321 -0.0306
1-May-18 5562 0.0453

35
1-Jun-18 6239 0.1217
1-Jul-18 5305 -0.1497
1-Aug-18 5610 0.0575
1-Sep-18 5387 -0.0398
1-Oct-18 5247 -0.0260
1-Nov-18 5521 0.0522
1-Dec-18 5386 -0.0245
1-Jan-19 5,821.01 0.0808
1-Feb-19 5,711.82 -0.0188
1-Mar-19 5,491.90 -0.0385
1-Apr-19 5,202.85 -0.0526
1-May-19 5,377.70 0.0336
1-Jun-19 5,421.62 0.0082
1-Jul-19 5,138.79 -0.0522
1-Aug-19 5,095.77 -0.0084
1-Sep-19 4,947.63 -0.0291
1-Oct-19 4,682.90 -0.0535
1-Nov-19 4,731.43 0.0104
1-Dec-19 4,452.90 -0.0589
1/1/2020 4,469.65 0.0038
2/1/2020 4,480.22 0.0024
3/1/2020 4,008.28 -0.1053
4/1/2020 4,008.28 0.0000
5/1/2020 4,060.44 0.0130
6/1/2020 3,989.08 -0.0176
7/1/2020 4,214.42 0.0565
8/1/2020 4,879.14 0.1577
9/1/2020 4,963.29 0.0172
10/1/2020 4,846.10 -0.0236
11/1/2020 4,866.84 0.0043
12/1/2020 5,402.06 0.1100
1/1/2021 5,649.86 0.0459
2/1/2021 5,404.79 -0.0434
3/1/2021 5,278.16 -0.0234
4/1/2021 5,479.61 0.0382
5/1/2021 5,990.98 0.0933
6/1/2021 6,150.48 0.0266
7/1/2021 6,425.25 0.0447
8/1/2021 6,869.24 0.0691
9/1/2021 7,329.03 0.0669
10/1/2021 7,000.94 -0.0448
11/1/2021 6,703.25 -0.0425
12/1/2021 6,756.65 0.0080
1/1/2022 6,926.29 0.0251
2/1/2022 6,739.44 -0.0270
3/1/2022 6,757.83 0.0027
4/1/2022 6,655.66 -0.0151
5/1/2022 6,392.85 -0.0395
6/1/2022 6,376.94 -0.0025
7/1/2022 6,133.96 -0.0381
8/1/2022 6,457.22 0.0527
9/1/2022 6,515.11 0.0090
10/1/2022 6,307.34 -0.0319
11/1/2022 6,235.95 -0.0113
12/1/2022 6,206.81 -0.0047

36
Appendix A-2: Working capital schedule

Appendix A-3: FCFF calculation

Appendix A-4: Industry average

IBA CAREER CENTRE

INSTITUTE OF BUSINESS
ADMINISTRATION
UNIVERSITY OF DHAKA
INTERNSHIP (Session: Jan-
Mar.)2023

DECLARATION FORM

37
 Program: BBA

Date : March 25, 2023 Program: BBA

Name : Naziba Ali

Batch : 27th Roll : RH-93 No. of Courses Completed: 40

Major (if any) : Finance Current CGPA(till last semester): 3.44

Mobile No: +8801770000145 Email ID: alinaziba0@gmail.com

I do hereby declare that I have completed all the required courses (For BBA 40
Courses/MBA 20 Courses) at IBA. I do not have an ‘I’ of ‘F’ grade in any course(s)
and my CGPA till last semester is not below 2.50.
I also declare that after starting my internship, if I am found to have received ‘F’
grade in any course(s), I shall be dismissed from the internship program
automatically.

Signature of the applicant

N.B: Please submit the signed declaration form to the career center office (Room
No: 106, IBA Ground Floor) or send pdf version of the soft copy to IBA Career
Center at career.centre@iba-du.edu.

38