1

A
Project Report
on
Valuation of Stocks in The FMCG Sector

in partial fulfillment of the requirements of

Mater of Management Studies
conducted by
University of Mumbai
through
Rizvi Institute Of Management Studies And Research

Under the guidance of

Prof.Jamil Saudagar

Submitted by
Mahek Dalwai
MMS
Batch : 2022 – 2024
 2

CERTIFICATE OF COMPLETION
This is to certify that Mahek Dalwai, a student of Rizvi Institute of
Management Studies and Research, of MMS IV bearing Roll No. 050 and
specializing in Finance has successfully completed the project titled
“Valuation of Stocks in the FMCG Sector.”

under the guidance of Prof. Jamil Saudagar in partial fulfilment of the

requirement of Masters of Management Studies by University of Mumbai for
the academic year 2022– 24.

Prof. Jamil Saudagar Prof. Jamil Saudagar Dr. Shariq Nisar

(Project Guide) (Course Coordinator) (I/C Principal)
 3

ACKNOWLEDGEMENT
 4

DECLARATION
 5

EXECUTIVE SUMMARY
 6

TABLE OF CONTENT
Sr.No Title Page no
1. Introduction 1
2. Objective and Scope of 16
Study
3. Research Methodology 18
4. Literature Review 21
5. Industry Analysis 28
6. Company Analysis 35
7. Data Analysis and
Interpretation
8. Findings
9. Suggestions
10. Strength and Limitation of
Study
11. Conclusion
12. Bibliography
 1

CHAPTER – 1
INTRODUCTION

1.1 INTRODUCTION
 2

Fast-moving consumer goods, also known as consumer packaged goods, are products that sell
rapidly at a relatively low cost. These goods have a short shelf life due to their high demand
or perishable nature, such as soft drinks, confections, meat, dairy products, and baked goods.
They are frequently purchased, consumed quickly, priced low, and sold in large quantities,
resulting in high turnover in stores. Consumer goods are products bought for personal
consumption and are categorized into durable, nondurable, and services

The fast-moving consumer goods industry is highly competitive due to its rapid turnover rate,
making it an enormous market. The industry's biggest players, including Tyson Foods, Coca-
Cola, Unilever, Procter & Gamble, Nestlé, PepsiCo, and Danone, compete for market share.
To attract and entice customers to purchase their products, these companies must focus on
marketing their fast-moving consumer goods.

Packaging is a critical aspect of the production process as it plays a vital role in the logistics
and distribution systems. Secondary and tertiary packaging is often required to maximize
efficiency. The primary package or unit pack is crucial in protecting the product and ensuring
its shelf life, as well as providing customers with valuable information and sales incentives.

The Fast-Moving Consumer Goods (FMCG) Sector is a significant contributor to the Indian
economy. The household and personal care segment, which accounts for half of the FMCG
market, is the largest in the economy and ranks fourth overall. The FMCG industry's growth
is primarily driven by factors such as rising income levels, lifestyle changes, heightened
awareness, and increased accessibility.

Moreover, the trend towards sustainable products has influenced consumer behaviour and
purchasing habits. While the urban sector dominated the contribution, the semi-urban and
rural segments have also witnessed substantial growth over the past decade.

1.2 TYPES OF FMCG PRODCUTS

 3

FMCG products are classified into different types based on the sectors they are sold in. These
types include food and beverages, personal care, healthcare goods, and home care
commodities.

 Food and beverages, due to their limited shelf life and high turnover rates, are
typically categorized as FMCGs. Examples of such products include prepared food
items like pasta, bread, and potato chips, and ready-to-eat foods like crisps and nut
packets, as well as beverages such as soda cans, coffee cups, and bottled water.

 Personal care products like shampoo and toothpaste are also classified as FMCGs as
they are frequently used by consumers, have low prices, and are not long-lasting.
Other examples of personal care items include lotions, hair dye, lipstick, cosmetics,
deodorants, bath soap, and dental care products.

 Healthcare goods are also included in the FMCG category due to their high demand,
poor quality, and wide distribution. Examples of healthcare goods include syringes,
bandages, and plasters.

 Home care commodities, such as dusters, toilet paper, bleach, cleaning supplies, and
kitchen towels, are also classified as FMCGs as they are standardized, low-durability
products that are widely distributed and sold at low

1.3 ABOUT COMPANY

 4

Introduction
 Hindustan Unilever Limited (HUL) is a consumer goods company based in
Mumbai, India. It was established in 1931 as Hindustan Vanaspati Manufacturing Co.
and later renamed as Hindustan Lever Limited in 1956. In June 2007, it was renamed
Hindustan Unilever Limited after a merger of constituent groups. HUL is a subsidiary
of the British company Unilever and produces a range of fast-moving consumer goods
(FMCGs) including foods, beverages, cleaning agents, personal care products, and
water purifiers.

 The company's corporate headquarters are located in Andheri, Mumbai, and spread
over 12.5 acres of land, designed by Mumbai-based architecture firm Kapadia
Associates. The campus offers various facilities for over 1,600 employees, including a
convenience store, food court, occupational health centre, gym, sports & recreation
centre, and child day care centre. HUL's previous headquarters were located in
Backbay Reclamation, Mumbai, at the Lever House, where it was housed for over 46
years.

History
 5

 HUL has two research centres, the Hindustan Unilever Research Centre (HURC)
established in Mumbai in 1966, and Unilever Research India.

 Unilever, a Dutch multinational company, is the parent organization of Hindustan

Unilever Limited (HUL)g an Indian company that contributed to the rural segment of
India with projects to improve their quality Unilever, a Dutch multinational company,
is the parent organization of Hindustan Unilever Limited (HUL).

 William Hesketh Lever, a renowned social reformer in the 19th century, implemented
measures for employee welfare like health benefits, savings plans, etc. that instilled a
strong sense of corporate responsibility and leadership in Unilever. This culture
inevitably passed on to HUL.

 Unilever first entered the Indian market in the 1930s and established three companies
specializing in edible oil, soap, and personal products.

 In 1956, these companies were combined to form Hindustan Lever Limited, which
represented Unilever's entire business in India for four decades. HUL gained a
reputation for being an Indian company that contributed to the rural segment of India
with projects to improve their quality of living.

 By 2010, HUL became India's largest exporter and the biggest FMCG company that
leads the market with its personal and home products and HUL is the leading
company in Indian consumer products, offering a wide range of products in over 20
categories. Their products, including soaps, detergents, tea, and shampoos, are used
by over 700 million Indian consumers.

Brands
 6

 HUL has 16 brands featured in the ACNielsen Brand Equity list of 100 Most Trusted
Brands Annual Survey (2014).

 Their food products include Annapurna salt and Atta, Boost, Bru coffee, Brooke Bond
tea, Kissan squashes, ketchups, juices, and jams, Lipton ice tea, Knorr soups, Kwality
Wall's frozen dessert, Hellmann's mayonnaise, Magnum and Cornetto ice cream
cones, and Horlicks.

 HUL's homecare products include Active Wheel detergent, Cif Cream Cleaner,
Comfort fabric softeners, Domex disinfectant/toilet cleaner, Love & Care, Nature
Protect disinfectant surface cleaner, Rin detergents and bleach, Sunlight detergent and
colour care, Surf Excel detergent and gentle wash, Vim dishwash, and Magic – Water
Saver.

 Their personal care products include Aviance Beauty Solutions, Axe deodorant, Lever
Ayush Therapy ayurvedic health care, International breeze, Brylcreem hair cream has
a reach over 600000 villa.

Introduction
 7

 ITC Limited is a large Indian conglomerate that is based in Kolkata. The company
has a diverse range of businesses, including FMCG, hotels, software, packaging,
paperboards, specialty papers, and agribusiness. It operates across 13 businesses in 5
different segments, exporting its products to 90 countries and making them available
in 6 million retail outlets.

 In the year 2019-20, it had an annual turnover of US$10.74 billion and a market
capitalization of US$35 billion. It employs over 36,500 people across more than 60
locations in India. On 17 April 2023, its market cap crossed the milestone of
₹500,000 crore (US$63 billion) for the first time in company history. and counting.

History
 Imperial Tobacco Company of India Limited was the original name of the British-
owned company that succeeded W.D. & H.O. Wills on August 24, 1910 and was
registered in Kolkata under the initials ITC Limited. In order to source leaf tobacco,
the company entered into partnerships with farmers from the southern region of India
in 1911 because its business was primarily based on agricultural resources. In 1912,
the "Indian Leaf Tobacco Development Company Limited" was established under the
corporate umbrella in the Andhra Pradesh district of Guntur. The company
established its first cigarette factory in Bangalore in 1913.

 Construction on the company's headquarters, the "Virginia House" in Calcutta, started

in 1928. To expand its presence, ITC purchased the Kidderpore factory of Carreras
Tobacco Company in 1935. To significantly lower import costs, ITC assisted in the
establishment of a local facility in 1946 that produced cigarette tissue paper. Then, in
1949, a printing and packaging factory was built in Madras. In 1953, the company
purchased the manufacturing operations of Tobacco Manufacturers (India) Limited as
well as Printers (India) Limited's complementary lithographic printing operations.

 On October 27, 1954, the business became a public limited company. With 6% of the
Indian shareholding in the company, the first step toward Indianization was made in
 8

the same year. During this time, ITC also entered the consumer research market for
the first time in India.

 The establishment of the company's Indian management was greatly aided by Ajit
Narain Haskar's appointment as the first Indian chairman in 1969. The name of the
company was changed from "Imperial Tobacco Company of India Limited" to "India
Tobacco Company Limited" in 1970 as Indian ownership of the company
progressively increased. ITC also became the first business in India to begin with the
Scissor's Cup in 1971. The 1970s saw the beginning of cutting-edge marketing
campaigns and electronic data processing.

 In order to diversify and venture into newer businesses through research and
development, ITC established its integrated research centre in Bangalore in 1973. In
1974, the name of the company was changed to "I.T.C. Limited" to reflect the
developing diversification plans. During this time, the Indian shareholding increased
further to 40%. ITC entered the hospitality industry in 1975 when it bought and
renamed the ITC Welcome group Hotel Chola in Madras.

 In 1976, the company's ownership reached over 60%, and the following years saw the
opening of additional hotels. In 1977, the ITC Sangeet Research Academy was
founded in Calcutta. ITC promoted ITC Bhadrachalam Paperboards Limited in 1979
in order to enter the paperboard industry. After J. N. Sapru was elected company
chairman in 1983, Surya Nepal Private Limited was purchased in 1985, marking the
beginning of the company's global expansion. The establishment of an Indian
restaurant in New York, the purchase and renaming of Vishvarama Hotels to ITC
Hotels Limited, and the establishment of two new businesses under its umbrella, ITC
Classic Finance Limited and ITC Agro Tech Limited, all occurred in 1986.

 When the Sundrop brand of cooking oils debuted in 1988, ITC also entered the edible
oils market. In 1990, Tribeni Tissues Limited was purchased. ITC Global Holding
Private Limited was founded as an international trading company in Singapore in
1992, and K L Chugh was appointed chairman in 1991.
 9

 ITC got out of the financial services and edible oil business; in 1998, it sold ITC
Classic Finance Limited to ICICI Limited and turned over the Sundrop business to
ConAgra Foods Limited. In Madhya Pradesh, an innovative program for farmers
known as "e-Choupal" was launched in the year 2000. The Wills Sport line of casual
clothing by ITC was introduced in the same year, along with ITC's entry into the
stationery and gifting industries with the introduction of the Expressions range of
greeting cards and Classmate notebooks.

 In 2000, ITC Bhadrachalam Paperboards Limited was merged into ITC Limited, and a
wholly owned information technology subsidiary, ITC Infotech India Limited, was
also established. In 2001, the company's name was changed to "ITC Limited," with
the dots removed, and the slogan "No stops for ITC" adopted.

Brands
 Over 30 brands, including Aashirvaad, Sunfeast, Bingo!, YiPPee!, Candyman, mint-o,
Kitchens of India, and more, are part of ITC's portfolio.123. The company has brands
for a variety of goods, including packaged foods, personal care items, school supplies,
and more. 2 ITC is a major player in the cigarette industry as well, with brands like
Insignia, India Kings, Classic, Gold Flake, and others.. Aashirvaad in Branded Atta,
Sunfeast in Premium Cream Biscuits, and Bingo! in the Bridges category of Snack
Foods3 are a few ITC products that have risen to the top of the market.

Introduction
 10

 An Indian manufacturer of consumer products with its headquarters in Mumbai is

called Godrej Consumer Products Limited (GCPL). Soap, hair colourants,
toiletries, and liquid detergents are among GCPL's offerings. Godrej Powder Hair
Dye, "Renew," "ColourSoft," and "Godrej No. 1" are some of its soap brands, along
with "Cinthol," "Godrej Fair Glow," "Godrej No. 1," and "Godrej Shikakai" for hair
colourants and "Ezee" for liquid detergent. Four functioning clusters at Malanpur
(Madhya Pradesh), Guwahati (Assam), Baddi- Thana (Himachal Pradesh), Baddi-
Katha (Himachal Pradesh), Pondicherry, Chennai, and Sikkim are among the seven
sites where GCPL runs multiple manufacturing plants in India.

History
 According to a demerger plan accepted by the Mumbai Honourable High Court of
Judicature on March 14, 2001, the consumer goods division of the formerly known as
Godrej Soaps Limited (GSL) was divided into Godrej Consumer goods Limited in
April 2001.

 Godrej Shopper Items Restricted (GCPL) is an Indian buyer products organization

settled in Mumbai, India. It was established in 2001 as a demerger of the shopper
items business of Godrej Cleansers Restricted (GSL). GCPL is a key part in the
Indian FMCG market with driving brands in family and individual consideration
items. Its portfolio incorporates cleanser, hair colorants, toiletries, and fluid cleansers.

 The historical backdrop of GCPL can be followed back to the beginning of the
Godrej Gathering. In 1897, Pirojshah Godrej, the organizer behind the gathering,
began a little cleanser manufacturing plant in Bombay. The plant was a triumph, and
in 1902, it was renamed Godrej Cleanser Works. In the years that followed, Godrej
Cleanser Works extended its item range and became one of the main cleanser
producers in India.

 In 1975, Godrej Cleanser Works sent off Cinthol, another cleanser that was focused
on at the adolescent market. Cinthol was a moment achievement, and it assisted with
driving Godrej Cleanser Works to the highest point of the Indian cleanser market.
Before very long, Godrej Cleanser Works sent off various other effective brands,
including Godrej No. 1, Godrej Fairglow, and Godrej Ezee.
 11

 In 2001, Godrej Cleanser Works was demerged into two organizations: Godrej
Customer Items Restricted and Godrej Enterprises Restricted. GCPL assumed control
over the customer items business of Godrej Cleanser Works, while Godrej Enterprises
Restricted assumed control over the modern items business.

 Since its demerger, GCPL has developed quickly. The organization has extended its
item range, entered new business sectors, and procured various unfamiliar
organizations. In 2010, GCPL gained Sara Lee's Indian business, which gave the
organization a solid traction in the hair care and antiperspirant markets.

 Today, GCPL is one of the main purchaser merchandise organizations in India. The
organization has areas of strength for an of brands, a wide circulation organization,
and a pledge to development. GCPL is strategically situated to keep on filling in the
years to come.

 Here are a portion of the vital achievements throughout the entire existence of Godrej
Customer Items:

 1897: Pirojshah Godrej begins a little cleanser plant in Bombay.

 1902: Godrej Cleanser Works is established.
 1975: Cinthol is sent off.
 2001: Godrej Cleanser Works is demerged into GCPL and Godrej Businesses
Restricted.
 2010: GCPL gains Sara Lee's Indian business.
 2015: GCPL dispatches Goodknight, a mosquito repellent brand.
 2020: GCPL dispatches Goodlife, a wellbeing and health brand.

 GCPL is an organization with a rich history and a splendid future. The organization is
focused on furnishing shoppers with top notch items and administrations, and it is
strategically set up to keep on filling in the years to come.
 12

Brands

 Godrej Consumer Products is a leading emerging markets company with a portfolio of

over 50 brands across home care, personal care, and food categories. Some of the
most popular brands of Godrej Consumer Products include:

 Goodknight mosquito repellents

 Hit mosquito repellents
 Cinthol soap
 Godrej No.1 hair oil
 Fairglow fairness cream
 Godrej Nature's Basket food products
 Godrej Protekt disinfectants
 Mitu baby care products
 Darling hair extensions and wigs

 Godrej Consumer Products is committed to providing high-quality products that meet

the needs of consumers in emerging markets. The company is also focused on
sustainability and social responsibility.

Introduction
 13

 A division of the Tata Group, Tata Consumer Products is an Indian manufacturer of

fast-moving consumer goods. While its corporate headquarters are in Mumbai, its
registered office is in Kolkata. It is a significant producer of coffee and the second-
largest producer and distributor of tea in the world.

 Tata Consumer goods, formerly known as Tata Global Beverages Limited (TGBL),
was created in February 2020 as a result of a merger of Tata Chemicals' consumer
goods division and Tata Global Beverages.

 The firm presently works in the food and beverage sector, with 56% of its income
coming from India and the remaining coming from its worldwide operations.
Following the merger, the business now owns both domestic and foreign brands,
including Tata Salt, Tata Tea, Tetley, Eight O'Clock Coffee, and Good Earth Tea.

 Tata Tea is the biggest-selling tea brand in India. Tetley is the biggest-selling tea
brand in Canada and the second-biggest-selling in the United Kingdom and the United
States.[9]

History

 From 1980 to 1990, India's tea industry faced high taxes, rising input and labor costs,
shrinking margins, and other challenges. India was competing in the global market not
only with China but also with newcomers from other nations.

 To establish Tata Tea as an independent entity, Tata Tea purchased the James Finlay
group's stake in the company in 1983. The company made the decision to shift its
focus from the commodities sector to consumer branding in the same year. Tata Tea
was launched as the initial brand.
 14

 From 1990 to 2000, Tata Tea made the decision to expand its brands into international
markets. This was despite the fact that the United States is the largest market in the
world. In 1992, it collaborated with Tetley Tea, a British tea company, on an export
venture

 Tata Tea had 74 tea gardens and was producing 6.2 crore kilograms of tea annually,
two-thirds of which was packaged and branded, by 1999, giving its brands a
combined market share of 25% in India. The tea industry was impacted by a drought
in a large portion of India toward the end of the year. Also, Russia, which was once
the biggest buyer of Indian tea, left the market for a while.

 On May 15, 2019, Tata Chemicals Limited (TCL) announced the de-merger of the
Consumer Products Business of TCL and into TGBL through a National Company
Law Tribunal (“NCLT”) approved scheme of arrangement (“Scheme”) to become Tata
Consumer.

 Tata Consumer Products acquired complete control of Tata SmartFoodz Limited

from Tata Industries Limited for 395 crore (US$49 million). On May 1, 2022, Tata
Coffee announced that it would merge with itself as part of a reorganization plan. In
July 2022, Tata Consumer Products introduced premium honey products and flavored
preserves under the Himalayan brand name.

 In addition, in July 2022, Tata Consumer Products introduced plant-based meat

products under the Tata Simply Better brand name. The company stated that the
merger was anticipated to be completed in late 2023. Tata Coffee shareholders would
receive three shares in Tata Consumer Products for every ten shares of Tata Coffee.

 The consumer goods market in India is dominated by TCPL. The company's

commitment to sustainability, extensive distribution network, and robust brand
portfolio position it well for future expansion.

Brands
 15

 The following are some of Tata Consumer Products' most important brands:

 Tea Tata: Tata Tea, Tata Consumer Products' flagship brand, is India's second-largest
tea brand.
 Tetley: a tea brand from Britain that Tata Consumer Products bought in 2000. The
world's fourth-largest tea brand is Tetley.
 Salt Tata: Tata Salt, India's most popular salt brand, is made from natural sea salt.
 Coffee at eight o'clock: a coffee brand from the United States that Tata Consumer
Products acquired in 2012. In the United States, Eight O'Clock Coffee is the third-
largest coffee brand.
 Water from Himalayas: a brand of mineral water that comes from the Himalayas'
foothills.
 Sampann, Tata: a selection of ready-to-cook Indian lentils and spices.
 Soulfull Tata: a selection of ready-to-eat Indian meals.
 Gluco Plus by Tata: a variety of beverages with added glucose.
 Water Plus by Tata: a selection of flavored water drinks.
 With a strong brand portfolio, Tata Consumer Products is a well-established company.
The business is well-positioned for growth in the future and is committed to
sustainable development.

CHAPTER – 2
 16

OBJECTIVE
AND
SCOPE OF STUDY

2.1 OBJECTIVE OF STUDY

 To evaluate the investment potential of stocks for individual investors, portfolio

managers or institutional investors.
 To compare the valuation of stocks against industry peers.

 To conduct time series analysis of the valuation multiple for FMCG stock over a
defined period
 To compare the valuation multiples of the FMCG stock with relevant benchmark
indices or industry specific benchmark.
 To identify the risk associated with investing in FMCG stock.
 17

 To conduct a comprehensive analysis of FMCG sector, growth potential and major

players to gain thorough understanding of the industry.

2.2 SCOPE OF STUDY

 It includes analyzing industry trends, market size, market share, consumer behavior
and competitive landscape.
 It involves exploring different valuation methods applicable to the FMCG sector such
as price to earnings ratio, price to book ratio, price to sales ratio, enterprise value,
FCFE and FCFO.
 It involves analyzing FMCG industry and market trends to understand the factors
influencing stock valuations.
 It involves benchmarking the valuation multiples of the companies being analyzed
against industry averages or market indices.
 Assess the specific factors that influence the performance and valuation of each
FMCG company.
 18

CHAPTER – 3
research methodology

RESEARCH METHODOLOGY

 The objective of the research methodology chapter is to provide an overview of the

methodology, plan, and resources utilized to carry out a study on the comparative
valuation of stocks in the FMCG (Fast-Moving Consumer Goods) industry.
 In-depth descriptions of the study strategy, data collection techniques, and the
resources used to analyze and interpret the gathered data are provided in this chapter.

3.1 RESEARCH DESIGN

 The research design section gives a detailed overview of the plan and methods used to
perform a study on the valuation of FMCG sector companies.
 19

 This study's research design is descriptive. This implies that the research will discuss
the variables influencing the value of FMCG stocks as well as the valuation
methodologies employed for these firms. Secondary data, or information that has
previously been gathered by someone else, will also be used in the study. Government
statistics, industry reports, corporate financial statements, and other sources will all be
used to compile this data.
 The research approach describes the overall strategy and framework within which the
study will be conducted. in case of valuation of stocks in the FMCG sector, a
quantitative approach is commonly used. This approach normally involves the
analysis of numerical data to calculate valuation ratios and compare the value of
stock.

3.2 DATA COLLECTION

 To perform a study on the value of FMCG sector companies, data collecting is a

crucial stage. For a thorough research and evaluation of FMCG stocks, the data
obtained must be trustworthy, pertinent, and complete.

 Company financial statements

 Industry reports
 Government statistics
 Online databases

 Financial Statements - Obtain financial statements, yearly reports, and quarterly

reports from FMCG firms. These records include thorough information on the balance
sheet items, cash flows, and sales, profits, and cash flows. Company websites,
financial databases, and regulatory filings are all potential sources for financial
statements.
 Market Information - Compile stock prices, trading activity, and market indexes that
are particularly pertinent to the FMCG industry. These market data may be obtained
from reputable stock exchanges and financial data suppliers.
 Analyze Reports - Examine research papers from financial analysts and brokerage
businesses in analyst reports. These papers frequently offer professional analysis and
comments on FMCG stock, along with valuation tips and suggestions.
 20

3.3 TOOLS OF THE STUDY

 In order to assess the relative valuation of FMCG stocks, the obtained data will be
examined using a variety of financial ratios and valuation indicators. The following
tools will be utilized in the analysis :
 Various valuation ratios will be calculated and examined, including: P/E ratio (price-
to-earnings ratio), P/S Ratio, or price-to-sales ratio, P/B Ratio (Price-to-Book Ratio),
Yield to Dividend. Based on their market pricing and financial results, these ratios will
aid in determining the relative attractiveness of FMCG stocks.
 Market Performance Analysis: To spot trends and patterns in the FMCG industry,
market performance indicators will be assessed. These may consist of: studying stock
price trends, trading volumes, beta values (systematic risk), and market indices
specifically related to the FMCG sector, such as the S&P 500 FMC.
 Tools used for Presentation - Bar Diagram, Tabular Representation.
 21

CHAPTER – 4
Literature review

LITERATURE REVEW

A literature review is an overview of the previously published works on a specific topic. The
term can refer to a full scholarly paper or a section of a scholarly work such as a book, or an
article. Either way, a literature review is supposed to provide the researcher/author and the
audiences with a general image of the existing knowledge on the topic under question. A
good literature review can ensure that a proper research question has been asked and a proper
theoretical framework and/or research methodology chosen. Literature review can be a type
of review article. In this sense, a literature review is a scholarly paper that presents the current
knowledge including substantive findings as well as theoretical and methodological
contributions to a particular topic. Literature reviews are secondary sources and do not report
new or original experimental work. 
 22

 Varun dawar - The paper attempts to investigate the value relevance of major corporate
financial variables in the context of Indian FMCG companies using price level based
approach. Using a cross section of BSE FMCG firms over the 2001-2010 period, the
study empirically determines the extent to which stock prices are supported by
fundamentals in Indian FMCG companies. The results of this study indicate that
fundamental variables play an important role in stock pricing in Indian FMCG
companies. The study provides support for the value relevance of dividend and
investment policy suggesting that earnings distributed as dividends have a greater
impact on firm value than does earning retained within the firm confirming the
signalling effect of dividend policy.

 Aishwarya Venkatachalam - This study employed these two valuation techniques to

determine the intrinsic value of the top three fast-moving consumer goods – personal
care segment companies, namely Hindustan Unilever Limited, Dabur India Limited, and
Godrej Consumer Products Limited. The financial metrics were extracted from the
selected companies’ annual reports for 5 years from 2015 – 2019, and the stock price
data were gathered from the National Stock Exchange. The explicit forecast was done
for 5 years, from 2020 – 2024. This study concluded that these value-creating stocks
would undoubtedly be wealth-creating stocks for investors.

 M. Sharmeen Farooq - The paper makes an assessment of the firm and intrinsic
valuation of companies in the Indian FMCG sector for the financial years 2019 and
2020 with the use of the discounted cash flow techniques, Free Cash Flow to the Firm
(FCFF) and Free Cash Flow from Equity (FCFE) to validate the accuracy of these
techniques. The study utilizes a two-phase growth model with an explicit high growth
period of ten years followed by a perpetual stage of stable growth with valuation inputs
from the company's last ten year financial statements. A random selection of thirty
companies from the BSE S&P FMCG index constituents was chosen to represent the
sector

 Dr. N. Manick Mahesh Dr.S. Chandra Bose, Dr.P.K.Balamurugan, Mr.S. Ajith Kumar -
A study on Corporate Valuation of the FMCG Companies listed in the NSE India
Limited“, This article discusses the application of fundamental analysis on six selected
 23

scrips from FMCG industry from2009-10 to 2018-19.The investor should decide

whether to look for Wealth creation or regular income for their investment. Using the
help of corporate valuation we found out the scrips which will give return in short term
and which will give return in long term.

 Dr.B.Radha , A.Bhavani Shree, Bharathi.T - This paper is expected to reveal that how
the Indian companies tend to reward better value to the shareholders that are measures
the corporate valuation and encourages regulators to initiate further timely reforms to
build a strong relationship between those who run the company and the stakeholders

 Afna Dalilah , Riko Hendrawan - This research aims at calculating the fair value of
shares of pharmaceutical companies listed on the Indonesia Stock Exchange (IDX). The
data used in this research is historical data from the 2013-2020 financial statements,
which are used as the basis for projections in 2021-2025. The method used in this
research is Discounted Cash Flow (DCF) method with Free Cash Flow to the Firm
(FCFF) approach and Relative Valuation method with Price to Earnings Ratio (PER)
and Price to Book Value (PBV) approaches in three scenarios.

 Raisa April Lena, Zuliani Dalimunthe - This study attempts to conduct a valuation of
PT. Bukalapak (BUKA) is the first-ever e-commerce company listed on the Indonesian
Stock Exchange through Electronic Initial Public Offering (e-IPO). This research
contributes to the existing literature by using the proper method to analyze the fair value
of BUKA. The valuation of BUKA is carried out in one method, using the data from
their prospectus period 2018-2021, namely Relative Valuation. This research provides a
valuation for investors interested in investing in the e-commerce sector, specifically
Indonesia Investor.

 Sumedha Journal of Management, 2017, Volume 6 - The objective of this paper to find
out the justified papers multiples of HUL, ITC Ltd and Nestle india using prices
calculated on the basis of absolute valuation techniques like DDM and free cash flow
 24

models and comparing these with the current multiples of these companies. The inputs
were taken from the annual reports of the above companies for understanding the
outlook on the company’s business and the expected trends going forward.

 Tamal Chaudhari - This paper has presented a highly reliable and accurate forecasting
framework for predicting the time series index values of the fast moving consumer
goods (FMCG) sector in India. A time series decomposition approach is followed to
understand the behavior of the FMCG sector time series for the period January 2010 till
December 2016. Based on the structural analysis of the time series, six methods of
forecast are designed. These methods are applied to predict the time series index values
for the months of 2016. Extensive results are presented to demonstrate the effectiveness
of the proposed decomposition approaches of time series and the efficiency of the six
forecasting methods.

 Bhargav Maniar - Valuation of equity shares of a company is an important exercise and

is performed on multiple occasions, be it investment decision in a particular company,
merger, acquisition, restructuring, public issue, etc. The study looks at eight industries
and attempts to derive (a) which is the most stable industry average multiple by using
the statistical tool coefficient of variation and (b) which would be the most important
financial performance parameter, which could be driving multiple of a particular
security within the industry by us.

 B Rajesh kumar and km suhas - This research paper focuses on an analytical valuation
perspective of Indian companies. Five top companies from each of these sectors were
selected on the basis of cumulative sales in the last ten-year period (1997–2006).
These five top companies in each sector were selected from the total sample of 8500
companies. The companies were valued on the basis of eight financial
parameters. The regression results show that that the value of a firm is positively
related to sales growth and asset growth. Higher the debt component of the capital
structure of a firm, lower will be the value of firm.

 Shubhangi Anil Patil, Viraj Vijay Jadav - The focus of this paper is on giving the idea
to investors about how the companies and their stocks are to be chosen which will
benefit them in the long term and will grow their investments For the purpose of
 25

analyzing the companies, various parameters have been used to compare the growth
performance of the companies. The ratios like Price/ Earnings ratio, Total/Debt to
equity ratio, Return on Equity ratio and Dividend yield ratio are calculated to
compare the performance of the companies which also gives the further idea
about the financial position of the selected companies.

 Kunj Balar1 , Juli Senjaliya2 , Yash Kothari - The scope of the study has been limited
to the select of 5 FMCG stocks - Britannia, Hindustan Unilever Limited (HUL) and
Indian Tobacco Company (ITC), Nestle India and Marico. The study uses descriptive
and exploratory research method. The data collected was analysed with the help of
return, beta, alpha, standard deviation and variance and CAPM model. The study
found that the Nestle India and Britannia stocks have performed well compared to
Marico and HUL whereas ITC performing negatively during the study period. It is
suggestable for the investors to invest more in the stocks of Nestle India, HUL Ltd,
Britannia and Marico as the stocks of these companies are under-priced which is an
indication of profitability of stocks.

 Prof. (Dr.) Vinod B. Patel - The study endeavours to analysis fundamental position of
major listed FMCG companies using ratios. Fundamental analysis, the share price of a
company is determined by all the fundamental factors. The purpose of study is HUL,
ITC, NESTLE, DABUR, and P & G. were chosen, to analysis was done using past
three year computed date of Net Profit Margin Ratio, Gross profit margin, Price to
Earnings, Debt to equity ratio, Dividend payout ratio, Earnings per share starting
April 2016 to March 2018.This study provides a precise presentation of data and
guidelines that will help a fresh investor as well as a venture investor to know vital
aspects of investing.

 Rosy Dhingra, kapil Dev, Madhuri Gupta - For the performance analysis of Fast
Moving Consumer Goods (FMCG) industry, discriminatory power of financial ratios
is examined by using Wilks' lambda and Multiple discriminant function analysis. For
this purpose, sample of eighteen FMCG companies listed with Bombay Stock
Exchange is taken in to account. Market capitalization is taken as basis for selecting
 26

these companies. Data is collected for twelve years ranges from 1 April 2006 to 31
March 2017.

 N.Srinivas Rao1 Dr. Ranjan Kumar Bal2 - The process of accounting is not merely
an art rather also the science of measurement. The measurement of the components of
intangibles has put a challenge to make the accounting numbers value relevant. In this
paper, the value of intangibles is determined at the organisational level taking the
difference between the market value of equity and value of equity at the current cost.
The market value of equity is lower between market capitalisation and intrinsic value
determined with the trailing quarter’s P/E multiple of PAT. The study finds that the
company is reporting only 18% of the value of intangibles, as determined by taking
the difference between the market value of equity and equity at current cost, as its
intangible assets in its consolidated balance sheet.

 Lubos pastor, Varonesi Pietro - a simple approach to valuing stocks in the presence of
learning about average profitability. The market-to-book ratio (M/B) increases with
uncertainty about average profitability, especially for firms that pay no dividends.
M/B is predicted to decline over a firm's lifetime due to learning, with steeper decline
when the firm is young. These predictions are confirmed empirically. Data also
support the predictions that younger stocks and stocks that pay no dividends have
more volatile returns.

 Pritpal Singh Bullar - The present paper investigates the impact of operating
efficiency on firm valuation for two economic sectors FMCG and Pharmaceutical
Sectors in India. The study considers 30 Indian firms from the period of 2005 to 2015.
To examine the effect, six financial ratios are considered as proxy for operating
efficiency and enterprise value as proxy for Firm value. We employ Panel data
analysis to explore the relationship of dependent and independent variable. The results
report that Fixed Asset Turnover Ratio (FATO) and Net Profit Margin (NPM)
indicates negative relation with Enterprise Value (EV) in Pharmaceutical sector and
EV/Sales and Fixed Asset Turnover Ratio (FATO) confirms negative relation with
EV for FMCG Sector.
 27

 Dr. Amit Kumar Singh∗ Preeti Bansal - The present study is an attempt to investigate
the impact of financial leverage on firm's financial performance and also on firm's
valuation. For this purpose, 60 Fast Moving Consumer Goods (FMCG) companies
listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have
been considered for a period of 10 years from 2007 to 2016. These companies
constitute S&P BSE FMCG Index. Due to information availability constraint, 2 firms
have been excluded and the study is based on remaining 58 companies. Return on
Total Assets and Economic Value Added are taken as indicators of firm's profitability,
whereas, Enterprise Value and Tobin's Q are taken as indicators of firm's valuation.

 Pablo Fernández - In this paper, we describe the four main groups comprising the
most widely used company valuation methods: balance sheet-based methods, income
statement-based methods, mixed methods, and cash flow discounting-based methods.
The methods that are conceptually “correct” are those based on cash flow discounting.
We will briefly comment on other methods since -even though they are conceptually
“incorrect”- they continue to be used frequently. We also present a real-life example to
illustrate the valuation of a company as the sum of the value of different businesses,
which is usually called the break-up value. We finish the paper showing the most
common errors in valuations: a list that contains the most common errors that the
author has detected in the more than one thousand valuations he has had access to in
his capacity as business consultant or teacher

CHAPTER – 5
 28

Industry analysis

4.1 OVERVIEW OF FMCG SECTOR IN INDIA

The fourth-largest industry in India is fast-moving consumer goods (FMCG), and it has
been growing steadily over time as a result of increased disposable income, a growing
young population, and growing consumer brand awareness. In India, household and
personal care products account for 50% of FMCG sales, making this sector a significant
contribution to the country's GDP.
Due to expansion that was driven by consumers and rising product costs, particularly for
necessities, the FMCG industry in India developed. About 3 million people are employed
in the FMCG industry, which accounts for about 5% of all manufacturing jobs in India.
Revenue growth for FMCG sales in the nation was projected to increase by 7-9% in
2022–2023.
Favourable government efforts and policies, a growing rural market and young
population, new branded items, and the development of e-commerce platforms are some
of the sector's main growth factors.
In order for FMCG firms to stand the test of time and ultimately provide greater value to
customers, resilience must be the primary component in the production process, everyday
operations, retail and logistic channels, consumer insights, and communication.
Due to its middle class population, which is greater than the whole population of the
United States, India is a market that no FMCG player can afford to ignore. As more
individuals begin to climb the economic ladder and the general public has access to the
advantages of economic advancement, the FMCG market in India is expanding.
More importantly, India's population is getting more consumerist due to rising
aspirations, with a median age of barely 27. Government efforts to broaden financial
inclusion and provide social safety nets have further contributed in this.
The primary growth factors for the industry have been more awareness, better access, and
shifting lifestyles. The greatest contributor to the entire income produced by the FMCG
industry in India (which accounts for a revenue share of around 55%) is the urban
segment.
However, compared to urban India, the FMCG market has risen more quickly in rural
India during the past few years. The semi-urban and rural populations are expanding
quickly, and 50% of all rural expenditure is on FMCG items.
 29

4.2 MARKET SIZE

By December 2022, the FMCG market had grown to 56.8 billion US dollars. From 2021
to 2027, the FMCG market's total revenue is projected to increase at a CAGR of 27.9%,
or roughly US$ 615.87 billion.
In 2022, the rural Indian economy provided more than 35% of the total annual FMCG
sales, compared to the urban segment's 65% contribution. Good crop and government
expenditure are anticipated to support a revival in rural demand in FY24. In the previous
fiscal year, the sector's sales grew by 8.5% and its volume by 2.5%.
The industry had value growth of roughly 8.4% from January through June 2022 as a
result of price increases brought on by inflationary pressures. The FMCG industry had
value growth of 10.9% Y-o-Y in Q2, CY22, which was greater than the 6% Y-o-Y value
growth observed in Q1.
According to estimates, India's retail industry would rise from US$ 840 billion in 2017 to
US$ 1.1 trillion by 2020, with contemporary trade predicted to develop at a rate of 20–
25% annually, which will likely increase FMCG businesses' profits. From US$ 110
billion in 2020, the FMCG market in India is projected to grow at a CAGR of 14.9% to
US$ 220 billion by 2025.
The quarter between July and September saw a substantial increase in the amount of
television advertising, totalling 461 million seconds—the most since 2021. With a 29%
increase in ad volumes during the same time in 2019, FMCG maintained its top spot.

4.3

GROWTH OF FMCG SECTOR IN INDIA

 As of December 2022, the FMCG sector generated revenues of Rs. 4.7 lakh crore
(US$ 56.8 billion).
 30

 Revenue growth for FMCG sales in the nation is predicted to increase by 7-9% in
2022–2023.

 Last fiscal year, the industry had an 8.5% increase in sales and a 2.5% increase in
volume.

 When compared to the quarter ending in June 2022, consumption in urban

markets increased from 0.6% to 1.2% in the third quarter of 2022.

 Rural families contribute 35–36% of India's FMCG market, which is a significant.

 Aside from the Top 400 companies or firms with less than US$ 13.6 million (Rs
112 crore) in offtake this year, small manufacturers are what drive consumption,
which had positive volume increase of 0.5% in Q3'22.

 From 2021 to 2027, the FMCG industry's total revenue is anticipated to increase
at a CAGR of 27.9% and close to US$ 615.87 billion.

4.4 MAJOR
PLAYERS
IN FMCG
SECTOR
Top Ten Players in FMCG sector
Hindustan Unilever Ltd
ITC Ltd
Nestle India Ltd
Britannia Industries Ltd
Godrej Consumer Products Ltd
 31

Patanjali Ayurved Limited

Dabur India Ltd
Marico Ltd
Parle Products
Colgate-Palmolive India Ltd

4.5 INVESTMENTS
 ITC announced intentions to purchase 100% of Sproutlife Foods (SFPL), a direct-to-
consumer (D2C) business and the parent company of the 'Yoga Bar' health food
brand, in January 2023. This acquisition will take three to four years to complete.
 ITC constructed a 59-acre food manufacturing facility in Telangana in January 2023.
This facility will produce atta, biscuits, chips, and other foods in stages for ITC's well-
known brands, Sunfeast and Aashirvaad.
 By making strategic investments in Zywie Ventures Private Limited ("OZiva") and
Nutrition lab Private Limited ("Wellbeing Nutrition"), Hindustan Unilever Limited
(HUL) announced in December 2022 that it will enter the "Health & Wellbeing"
segment.
 Tata Consumer Products renovates TATA Q and renames it TATA Sampann
Yumside in October 2022 with a fresh and expanded selection of Ready to Eat and
Ready to Cook items.
 The government has permitted 51% of foreign direct investment (FDI) in multi-brand
retail and 100% of FDI in food processing.

4.6 FUTURE OUTLOOK FOR THE FMCG SECTOR

The FMCG sector in India has witnessed a significant transition during the past
twenty years. The FMCG industry is anticipated to develop at a 14.7% annual pace to
reach around $220 billion by 2025.
The following are a few factors that will be important for the growth of the FMCG
sector:

 Technology-Related Change
 32

In the upcoming years, 80% of customers will perceive a smooth switch from
analogue to digital.
Rising smartphone and internet usage will help residents of rural regions even
more because it will be easier for them to access numerous e-commerce
websites for online shopping.

 Building Brand Communities

Today's shoppers may easily find other customers who have made the same
transaction. As a result, companies are creating marketing strategies to build
brand communities among customers who are interested in their products and
share similar social, political, and cultural attributes.
In the previous year, private and well-known brands in the FMCG industry
have profited by personalising the contact a bit more, and it is projected that
they will do so going forward.

 Support for the D2C Model

Even more well-known firms have opened independent websites and
storefronts in addition to creating direct sales channels on various online
marketplaces due to the profit margin that comes with selling directly to
customers. To capitalise on the trend of the online marketplace, the majority of
firms have begun delivering their goods straight to consumers' doorsteps.
As a result, firms with dedicated websites for customer sales claim that
consumer demand has surged 88% annually. The D2C business model is
therefore popular and will gain importance.

 Entrance to Investments
New government laws concerning investments in FMCG firms in India and
approving foreign-directed investments have caused a rapid flood of cash into
the industry.
Government incentives and FDI money have boosted the FMCG industry,
assisting FMCG brands in gaining high awareness across well-established
retail marketplaces and in the development of a more dependable supply
chain. Additionally, initiatives to increase the amount of discretionary cash
 33

held by common people, particularly those from rural areas, have greatly
benefitted the business.
It is projected that the government would make more alluring investments and
advancements in the future to support the expansion of the FMCG sector.
 34

CHAPTER – 6
Company analysis

COMPANY ANALYSIS
In the dynamic and ever-changing world of business, the ability to evaluate a company's
financial health and performance is crucial for investors, financial analysts, and stakeholders
alike. One of the most powerful tools available for such analysis is ratio analysis.
Ratio analysis involves the examination of various financial ratios to gain insights into a
company's profitability, liquidity, solvency, efficiency, and overall financial well-being.

HINDUSTAN UNILEVER LIMITED

Hindustan Unilever Limited (HUL) is an Indian consumer products

conglomerate based in Mumbai. It is a division of the British conglomerate
Unilever. HUL is India's largest FMCG firm, with a market share of more
than 40% in the soaps and detergents category and more than 30% in the
personal care category.
 35

SWOT ANALYSIS

STRENGTH
 Strong brand equity: HUL's brands, including Lifebuoy, Surf Excel, Dove, and
Pond's, are among the most well-known in India. HUL has a competitive edge
because to the solid reputation for quality and reliability of these brands.

 Distribution network that reaches over 6 million retail outlets: HUL has a robust
distribution network that covers the whole country of India. As a result, the business
may reach a diverse group of customers, including those in remote locations.

 Portfolio of innovative items: HUL continually innovates and introduces new

products. As a result, the business is better able to keep ahead of the competition and
adapt to changing consumer demands.

 great financial results: HUL has a great financial result, with recent rise in revenue
and profit. The corporation has the means to invest in new development prospects
because to its financial health.

WEAKNESSES
 High levels of competition: The FMCG sector is characterised by a significant
number of well-established firms. HUL may find it challenging to hold onto its
market share as a result.

 Consumer price sensitivity: HUL may find it challenging to pass on cost increases
to Indian customers due to their high level of price sensitivity.

 HUL has been sluggish in several sectors, like personal care and home care, when it
comes to innovation. Market share declines in these categories are the result of this.

 Heavy dependency on rural markets: For sales, HUL is primarily reliant on rural
markets.
 36

OPPORTUNITIES

 Growing middle class: The Indian middle class is expanding quickly, giving HUL
the chance to reach a larger audience with its products.

 Rising urbanisation: As the Indian population becomes more urbanised, HUL has
the chance to increase its presence in urban areas.

 Rising disposable incomes: As India's disposable incomes rise, HUL will have the
ability to offer its products at greater costs.

 Development of new technologies: HUL may have new potential to innovate and
enhance its goods and services as a result of the development of new technologies
like blockchain

THREATS

 Increasing input prices might put pressure on HUL's profit margins because the
price of raw materials and other inputs is growing.

 New player entry: The FMCG sector is luring new companies, which might ratchet
up the rivalry.

 Consumer choice shifts: HUL may find it challenging to keep up with the frequent
changes in consumer preferences.

ITC

ITC refers to the Kolkata-based ITC Limited, an Indian corporation.

According to market capitalization and sales, it is among the biggest
firms in India. ITC is present in a variety of sectors, including
FMCG, hotels, software, packaging, paperboards, specialty papers,
and agro. 13 enterprises in 5 market areas make up the organisation.
It exports its goods to 90 different nations. Six million retail
locations carry its products.

STRENGHTH
 ITC is one of the most recognisable and well-respected brands in India. In India,
household names like Wills, Sunfeast, and Aashirvaad are created by its brands.
 37

 Diversification: ITC's portfolio of companies is diverse, which helps to lower its risk
exposure. FMCG, hotels, paperboards, packaging, agribusiness, and IT are some of its
activities.

 ITC has a robust distribution network that covers more than 6 million retail
establishments in India. This offers the business a considerable edge over its rivals.

 Management group: ITC has a solid management group with a successful track
record. Sanjiv Puri, who has great reputation in the business community, is the team's
leader.

WEAKNESS
 Business in the tobacco industry: ITC's tobacco division is its biggest and most
successful division. The tobacco business is, nevertheless, under more and more
scrutiny and control. The future of ITC's tobacco industry may be threatened by this.

 International reach: The reach of ITC abroad is rather little. The business solely
exports its goods to a select few nations. This restricts the company's ability to grow.

 concerns related to regulations: ITC is subject to a variety of regulatory concerns.

Changes in governmental rules, legal actions, and environmental regulations are a few
of these concerns.

 Competition: A number of global corporations, including Unilever and Procter &

Gamble, compete with ITC. Compared to ITC, these businesses have bigger budgets
and greater resources.

OPPORTUNITIES
 FMCG product demand is rising: FMCG product demand is rising in India. This is a
result of the Indian populace becoming more wealthy.

 ITC is in a good position to take advantage of this expansion potential.

Extension into new markets: ITC has the chance to grow into new areas like Southeast
Asia and Africa. These markets are expanding quickly and present ITC with a huge
expansion opportunity.
 38

 Acquisition of new companies: ITC may purchase new companies to broaden its
portfolio and enter new markets. ITC might expand its business and lower its risk
exposure by doing this.

 Innovation in already-running businesses: ITC might use new ideas to enhance its
current operations' goods and services. ITC may keep its competitive edge by doing
this.

THREATS
 Increased health consciousness is a threat because more people are becoming aware of
the dangers that tobacco products pose to their health. This would cause the demand
for tobacco products to decline, which would be bad for ITC's tobacco industry.

 Government rules: The tobacco sector may be subject to harsher government rules.
ITC would find it more challenging to run its tobacco business as a result, which
would reduce its profitability.

 Economic downturn: ITC's sales and profitability might be harmed by an economic

downturn. This is because less money would be available for individuals to spend on
luxuries like FMCG goods.

 New competitors might enter the Indian FMCG sector, increasing competition. The
market share of ITC can suffer as a result of increased competition.

GODREJ CONSUMER PRODUCTS LIMITED

An Indian manufacturer of consumer products with its headquarters

in Mumbai is called Godrej Consumer Products Limited (GCPL).
Soap, hair dyes, toiletries, and liquid detergents are among GCPL's
offerings. Cinthol, Godrej Fair Glow, Godrej No. 1, Hit, Gillette,
Goodknight, and Sensodyne are some of its brands.
The business is a division of the Godrej Group, one of the biggest
conglomerates in India.
Over 90 countries are home to GCPL, and its goods are purchased by
more than 1.2 billion households.
 39

STRENGTHS
 Strong Brand Portfolio: With a vast brand portfolio and a diverse consumer base, GCPL is
one of the leading FMCG firms in India. The business has been successful in building a
strong portfolio of brands that allow it to connect with a variety of different customer
categories.

 Strong market positions across several categories: GCPL has the top spots in a number of
categories, including liquid detergents, home insecticides, and hair colours. In the soap
sector, it has likewise maintained a solid position.

 Expanding presence in a global market: GCPL is eager to grow internationally, particularly

in emerging markets. 47.5% of GCPL's total revenue in FY 2015 came from the overseas
market. The corporation has operations in more than 60 nations, including Bangladesh,
South Africa, Kenya, Sri Lanka, and Argentina

WEAKNESS
 Lack of scale: GCPL still lacks the same level of size as ITC or HUL, two of its
competitors in different FMCG areas, despite developing a strong brand portfolio and
distribution. These businesses have the financial wherewithal to diversify into several
industries and make larger investments in a wider range of goods. This hinders
GCPL's ability to compete with these businesses.

 Market share is impacted by fierce rivalry since India has several competitors in many
FMCG sector segments. Due to the intense rivalry in the industry, GCPL's market
share is constrained. The market share of the FMCG majors has decreased in
numerous categories as a result of Patanjali's arrival.

OPPORTUNITIES

 Inorganic Expansion: GCPL has evolved from a local business to a multinational

corporation with operations in more than 60 nations. By purchasing several local
businesses to establish offices there, such as Frika Hair in South Africa and Canon
Chemicals in Kenya, GCPL has been expanding in new markets. This aids the
business's increased market penetration in such nations.

 Rural market expanding quickly: Thanks to technology-driven distribution, which

allows businesses to balance supply and demand, the market for rural goods and
services in India is expanding quickly. GCPL can increase its profits by increasing the
penetration of FMCG items in the rural market.

 Growing personal care market: Demand for personal care products is anticipated to
rise as a result of rising buying power and bettering lifestyles. The rise in demand for
personal care goods, which account for around 22% of the FMCG sector, is expected
to be advantageous for GCPL.
 40

THREATS

 Unbranded products are still widely accessible in the rural markets of India, including
cooking oil, laundry soap, and other items. The existence of such items has an impact
on the sector.

 Demand for FDI in retail: Since this would allow larger, more multinational
companies to join the Indian market, it poses a danger to the sector and may have an
impact on the company's position there.

 The prevalence of counterfeit goods: The existence of counterfeit goods has an impact
on a company's revenues as well as the reputation of a brand. A significant chunk of
the FMCG industry's sales in India are impacted by counterfeit goods.

 Strong rivalry from well-known companies: The FMCG business faces strong
competition from both international and domestic firms. Companies like HUL, ITC,
Marico, Dabur, and Patanjali, among others, compete with GCPL. A danger to the
whole business, strong pricing competitiveness is fueled by intense competition.

TATA CONSUMER PRODUCTS LIMITED

An Indian manufacturer of consumer goods with its

headquarters in Mumbai is called Tata Consumer Products Limited (TCPL). Salt, pulses,
breakfast cereals, tea, coffee, and salt are among the goods produced by TCPL. As examples
of its brands, mention should be made of Tata Tea, Tetley, Tata Salt, Eight O'Clock Coffee,
Himalayan Water, Tata Sampann, Tata Soulfull, Tata Gluco Plus, and Tata Q.
With a presence in more than 40 nations, TCPL sells its goods to more than 1 billion
households worldwide.

STRENGTHS

 Strong brand portfolio: TCPL offers a broad range of products under its umbrella,
including the following names: Tata Tea, Tetley, Tata Salt, Eight O'Clock Coffee,
 41

Himalayan Water, Tata Sampann, Tata Soulfull, Tata Gluco Plus, and Tata Q. The
public knows and respects these brands.

 Put an emphasis on innovation: TCPL frequently introduces new products. This has
aided the business in remaining competitive.

 Increasing presence abroad: TCPL is increasing its presence abroad. The firm
presently has operations in more than 40 nations.

 Strong financial performance: TCPL's financial performance is excellent. The

organisation has had consistent sales growth in recent year

WEAKNESSES

 Lack of scale: Hindustan Unilever (HUL) and Procter & Gamble (P&G) are two of
TCPL's rivals that are bigger than it. This may reduce the company's capacity to make
investments in emerging goods and markets.

 Competition is fierce in the FMCG sector. TCPL is up against a number of big, well-
known businesses for business.

 Counterfeiting: In the FMCG sector, counterfeiting is an issue. This might harm

TCPL's sales and brand reputation.
OPPORTUNITIES:

 Rising consumer product demand: India and other emerging markets are experiencing
an increase in consumer product demand. As a result, TCPL has a chance to grow its
company.

 Acquisitions: To diversify its product offering and access new markets, TCPL could
purchase more businesses. For instance, TCPL bought the UK-based tea business
Typhoo in 2021. With this transaction, TCPL gained a dominant position in the UK
tea market.

 Development of new products: To address changing consumer requirements, TCPL

may create new products. For instance, under the Tata Soulfull brand, TCPL
introduced a new line of plant-based milk products in 2022. These drinks are a better
 42

option to dairy milk since they are produced with a variety of plant-based
components.

THREATS
Description HUL ITC GCPL TCPL
 Current
Assets 16998 39671 5806 8308.6
Current
Liabilities 12028 13739 3291.3 3924.7
Liquid Assets 8,502 9,398 2,037 4108.8
Liquid
Liabilities 10,338 10,230 2,052 2522
Economic slowdown: TCPL's sales may suffer if the Indian economy weakens.

 Increasing input costs might have a negative impact on TCPL's profitability. For
instance, coffee and tea beans had a considerable spike in price in 2022. The margins
of TCPL were under strain due to this rise in input prices.

 New entrants: There might be more competitors in the FMCG industry as a result of
new entrants. For instance, several fresh businesses have just joined the Indian FMCG
sector. To compete with established competitors like TCPL, these firms are utilising
cutting-edge marketing techniques and technology.

6.2 RATIO ANALYSIS

 LIQUIDITY RATIOS
 43

Current Ratio = Current Assets/Current Liabilities

 HUL = 16998/12028
= 1.41

 ITC = 39671/13739
= 2.89

 GCPL = 5806/3291.3
= 1.76

 TCPL = 8308.6/3924.7
= 2.12

Liquid Ratio = Liquid Assets/Liquid Liabilities

 HUL = 8,502/10,338
= 0.82

 ITC = 9,398/10,230
= 0.92

 GCPL = 2,037/2,052
= 0.99

 TCPL = 4108.8/2522
= 1.63

Interpretation
 Since the current ratio is somewhat higher than 1, HUL's current assets are sufficient
to meet its current obligations. HUL may not be able to swiftly convert its existing
assets into cash due to the lower liquid ratio.

  ITC has a significantly larger current ratio than the rest, indicating that it has a
sizable amount of current assets to cover its current liabilities. ITC can swiftly turn its
current assets into cash since its liquid ratio is larger than the others.
 44

 The GCPL current ratio is just above 1, which indicates that the company has enough
short-term assets to meet its short-term liabilities. Additionally, the liquid ratio is just
above 1, indicating that GCPL has the ability to swiftly turn its present assets into
cash.

 The highest of the four companies, TCPL has a high current ratio, indicating that it
has enough current assets to meet its current obligations. Additionally, TCPL has a
high liquid ratio, allowing it to easily turn its current assets into cash.

 ITC leads the pack in terms of liquidity, followed by TCPL, GCPL, and HUL.
Accordingly, ITC has a higher chance than HUL of being able to pay its short-term
debt commitments.

CURRENT RATIO LIQUID RATIO

3.50 1.80 1.63
3.00 2.89 1.60
1.40
2.50
2.12 1.20
2.00 0.99
1.76 1.00 0.92
0.82
1.50 1.41 0.80
0.60
1.00
0.40
0.50 0.20
0.00 0.00
1 2 3 4 1 2 3 4

 PROFIT MARGIN

Description HUL ITC GPCL TCL

Revenues 61,092 78,499 13,484 13,952
Cost of goods
6,703
sold 31,716 29,006 8005.71
Gross Profit 29,376 49,493 6,782 5,946
Operating
15,852 23,657 4,419 4,225
Expenses
EBIT 13,524 25,836 2,363 1,721
Interest 114 43 176 87
EBT and
Exceptional
Items 13,410 25,793 2,187 1,634
 45

Non Operating
Income 512 1980.49 168.41 168.88
EBT 12,898 23,813 2,018 1,465
Tax 3,201 6,438 430 447
Profit after tax 9,697 17,374 1,588 1,018

Gross Profit Margin – Gross Profit/Revenue

 HUL = 29376/61092
= 48.08%

 ITC = 49493/78,499
= 63.05%

 GCPL = 6,782/13,484
= 50.29%

 TCPL = 5,946/13,952
= 42.62%

Operating Profit Margin – EBIT/Revenue

 HUL = 29376/61092
= 48.08%

 ITC = 49493/78,499
= 63.05%

 GCPL = 6,782/13,484
= 50.29%

 TCPL = 5,946/13,952
= 42.62%
 HUL: The company's gross profit margin is 48.08%. This shows that after subtracting
the cost of items supplied, HUL keeps 48.08 paise as gross profit for every rupee of
revenue earned. A larger gross profit margin denotes stronger pricing and cost-control
capabilities. HUL has an operational profit margin of 22.14%. This shows that HUL
keeps 22.14 paise as operational profit for every rupee of sales after subtracting both
the cost of items sold and operating expenditures. Effective operational management
is indicated by a larger operating profit margin.

 ITC: The gross profit margin for ITC is 63.05 percent. ITC has a greater gross profit
margin than HUL, indicating that it is more adept at controlling its manufacturing
costs and that its pricing approach is more effective. TC has a 32.91% operational
profit margin. ITC exhibits stronger operational efficiency, more successfully
manages expenses, and generates more profits from its core activities thanks to its
higher operating profit margin than HUL.
 46

 GCPL: GCPL has a gross profit margin of 50.29%. Similar to HUL, GCPL
consistently achieves a high gross profit margin, a sign of successful cost control and
pricing tactics. GCPL has an operational profit margin of 17.52 percent. GCPL has a
respectable operating profit margin despite being less than HUL and ITC, which
shows excellent operational performance.

 TCPL: The gross profit margin for TCPL is 42.62%. Although TCPL's gross profit
margin is smaller than that of ITC and GCPL, it is nevertheless respectable, indicating
that production costs and profitability are reasonably under control. The operational
profit margin for TCPL is 12.34%. Although at a somewhat lower rate than the other
enterprises, TCPL nonetheless manages to turn an operational profit. This points to
the possible need for increased operational effectiveness and cost management.

 ITC comes out overall with the greatest gross profit margin and operating profit
margin, suggesting higher profitability and operational efficiency, according to the
statistics supplied. While TCPL falls somewhat behind in terms of profitability and
operational performance, HUL and GCPL both retain good profit margins.

Gross profi t margin OPERATING PROFIT MARGIN

PBT MARGIN
12.34%
10.50%
TCPL 22.14%
42.62% TCPL HUL
TCPL 48.08% 21.11%
HUL HUL
17.52%
GPCL
14.97%
50.29% GPCL
GPCL 63.05%
ITC 32.91%
ITC

30.34%
ITC
PBT Margin = EBT/Revenue

 HUL = 12,898/61,092
= 21.11%

 ITC = 23,813/78,499
= 30.34%

 GCPL = 2,018/13,484
= 14,97%

 TCPL = 1,465/13,952
= 10.50%
 47

PAT Margin = PAT/Revenue

PAT Margin
7.30%
 HUL = 9,697/61,092 TCPL
15.87%
= 15.87% HUL

 ITC = 17,374/78,499 11.78%

GCPL
= 22.13%

 GCPL = 1,588/13,484
22.13%
= 11.78% ITC

 TCPL = 1,018/13,952
= 7.30%

Interpretation
 HUL has the biggest PBT margin (21.11%), while ITC comes in second place
(30.34%). This indicates that compared to GCPL and TCPL, HUL and ITC are able to
make a bigger profit from their activities before interest and taxes.
 HUL's PAT margin, however, is smaller at 15.87% than ITC's, which is 22.13%. As a
result, ITC may keep a larger amount of its PBT as PAT.
 The PBT margin for GCPL is 14.97%, which is comparable to HUL's, while the PAT
margin is substantially lower at 11.78%. This indicates that GCPL is less effective
than HUL in converting its PBT into PAT.
 The lowest PBT margin (10.50%) and PAT margin (7.30%) are both held by TCPL.
This indicates that among the four businesses, TCPL is the least profitable.
 PBT margin and PAT margin are typically separated by 12.74%. This indicates that
the businesses are able to keep 12.74% of their PBT as PAT on average.

 TURNOVER RATIOS
 48

Description HUL ITC GPCL TCL

Operating
Metrics        
Revenues 61,092 78,499 13,484 13,952
Book Equity 50304 69155.26 13794.23 16276.61
Total Debt 10635 2640.1 1258.07 2736.27
Cash 4678 4880.19 390.72 2796.94
Invested
Capital 56261 66915.17 14661.58 16215.94
Total Assets 73087 85882.98 17498.77 22811.13 Asset
Turnover Ratio – Revenue/Total Assets
 HUL = 61,092/73087
= 0.84

 ITC = 78,499/85882.98
= 0.91

 GCPL = 13,484/17498.77
= 0.77

 TCPL = 13,952/22811.13
= 0.61

Sales to Invested Capital – Revenue/Invested Capital

 HUL = 61,092/56261
= 0.84

 ITC = 78,499/66915.17
= 0.91

 GCPL = 13,484/14661.58
= 0.77

 TCPL = 13,952/16215.94
= 0.61
 49

Interpretation
 HUL: With an asset turnover ratio of 0.84, HUL leads ITC, which is in second place
with 0.91. This suggests that GCPL and TCPL are less effective than HUL and ITC at
generating revenues from their assets.

 GCPL: With an asset turnover ratio of 0.77, GCPL has the lowest value, behind only
TCPL (0.61). This shows that GCPL and TCPL are less effective than HUL and ITC
in generating sales from their assets.

 HUL, ITC, and other companies all have higher revenue to invested capital ratios of
1.09, with HUL having the highest. This suggests that GCPL and TCPL are less
effective than HUL and ITC in generating sales from their invested capital.

 GCPL and TCPL are the two companies with the lowest sales to invested capital
ratios at 0.86 and 0.92, respectively. This shows that TCPL and GCPL are less
effective than HUL and ITC in generating sales from their invested capital.

 HUL and ITC are more effective than GCPL and TCPL in using their assets and
invested capital to create sales, according to asset turnover ratios and sales to invested
capital ratios. This may be the result of several things, such more effective operations,
a better product mix, or greater brand awareness.

Asset Turnover Ratio Sales to Invested Capital

1.00 0.91 1.40
0.90 0.84 1.17
0.77 1.20 1.09
0.80
1.00 0.92 0.86
0.70 0.61
0.60 0.80
0.50 0.60
0.40 0.40
0.30
0.20
0.20
0.10 0.00
1 2 3 4
0.00
1 2 3 4
 50

 RETURN MEASURES
Description HUL ITC GPCL TPCL
Operating
Profit 13,524 25,836 2,363 1,721
Profit after tax 9,697 17,374 1,588 1,018
Invested
Capital        
Book Equity 50304 69155.26 13794.23 16276.61
Total Debt 10635 2640.1 1258.07 2736.27
Cash 4678 4880.19 390.72 2796.94
Invested
Capital 56261 66915.17 14661.58 16215.94

Return on Equity – PAT/Book Equity

 HUL = 9,697/50,304
= 19.28%%

 ITC = 17,374/69155.26
= 25.12%

 GCPL = 1,588/13794.23
= 11.51%

 TCPL = 1,018/16,276.61
= 6.26%

Return on Invested Capital – Operating Profit/Invested Capital

 HUL = 13,524/56261
= 24.04%

 ITC = 25,836/66915.17
= 38.61%

 GCPL = 2,363/14661.58
= 16.11%

 TCPL = 1,721/16215.94
= 10.61%
 51

Interpretation
 Given that HUL's ROE is significantly lower than its ROCE, the company is
producing a lesser return on the equity invested by shareholders compared to the total
capital used in the enterprise. This implies that HUL could be using loans or other
sources of financing to raise more money.

 ITC has a superior ROE and ROCE, which shows that the business is effectively
using both equity and capital employed to produce returns. The fact that ROCE is
larger than ROE indicates that ITC is successfully using borrowed money or other
sources of funding to increase returns for its shareholders.

 In comparison to the other firms mentioned, GCPL has a lower ROE and ROCE. This
suggests that the profitability of GCPL is substantially lower when compared to
equity and capital used. It can mean that GCPL has to increase the effectiveness of its
operations or look for ways to boost shareholder returns.

 Among the aforementioned businesses, TCPL has the lowest ROE and ROCE. This
implies that TCPL is producing lower returns on equity as well as capital employed,
highlighting the need for improvement in its profitability and capital efficiency. To
increase shareholder value, TCPL could need to evaluate its operational effectiveness
and business initiatives.

 In conclusion, they give an overview of the financial performance of the firms, with
ITC showing the highest returns, HUL with average returns, and GCPL and TCPL
with below-average returns.

ROE ROIC

6.26% 10.61%
TCPL TCPL
19.28% 24.04%
11.51% 16.11% HUL
GCPL HUL GCPL

25.12% 38.61%
ITC ITC
 52

 LEVERAGE RATIO
Description HUL ITC GPCL TCL
Operating
Metrics        
Book Equity 50304 69155.26 13794.23 16276.61
Total Debt 10635 2640.1 1258.07 2736.27
Cash 4678 4880.19 390.72 2796.94

Debt to Equity – Total Debt/Book Equity

 HUL = 910,635/50,304
= 0.21

 ITC = 2640.1/69155.26
= 0.04

 GCPL = 1258.07/13794.23
= 0,09

 TCPL = 2736.278/16,276.61
= 0.17

Debt to Capital – Total Debt / (Total Debt + Book Equity)

 HUL = 910,635 / (910,635 + 50,304)
= 0.17

 ITC = 2640.1 / (2640.1 + 69155.26)

= 0.04

 GCPL = 1258.07 / (1258.07 + 13794.23)

= 0.08

 TCPL = 2736.278 / (2736.278 + 16,276.61)

= 0.14
 53

Interpretation
 HUL: With a debt to equity ratio of 0.21, HUL has the greatest level of debt relative
to equity. The debt is less than the company's entire capitalization because its debt to
capital ratio is only 0.17. This implies that HUL is a leveraged corporation, albeit it
may not be as dangerous as it would seem at first.

 ITC: ITC has the lowest debt to equity ratio of any company at 0.04, indicating that it
has almost no debt relative to its equity. This implies that ITC is a very cautious
business with little financial risk.

 GCPL: GCPL has a debt to equity ratio of 0.09, which is still rather low compared to
ITC's. This shows that GCPL is a corporation with a moderate level of financial risk
and moderate levels of leverage.

 TCPL: TCPL and HUL both have a debt to equity ratio of 0.17. However, at 0.14, it
has a significantly lower debt to capital ratio than HUL. According to this, TCPL is
maybe a little less leveraged than HUL, but it is still a relatively risky company.

 Overall, it appears that HUL and TCPL are more indebted corporations than ITC and
GCPL based on the debt to equity and debt to capital ratios. It's crucial to keep in
mind that these are only two types of financial leverage, and the danger to a
company's finances shouldn't be determined solely by these two metrics.

Debt to Equity (book) Debt to capital (book)

0.25 0.20
0.21 0.18 0.17
0.20 0.16 0.14
0.17 0.14
0.15 0.12
0.10 0.08
0.10 0.09 0.08
0.06
0.04
0.05 0.04 0.04
0.02
0.00 0.00
1 2 3 4 1 2 3 4
54