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Comparative Study on Financial Performance of Hindustan Unilever and

Nestle India

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Indian Journal of Natural Sciences www.tnsroindia.org.in ©IJONS

Vol.10 / Issue 60 / June / 2020 International Bimonthly ISSN: 0976 – 0997

RESEARCH ARTICLE

Comparative Study on Financial Performance of Hindustan Unilever and

Nestle India
Pramod Kumar Patjoshi1 and Girija Nandini2

1Associate Professor, School of Management, Centurion University of Technology and Management,

Odisha, India
2Assistant Professor, School of Management, Centurion University of Technology and Management,

Odisha, India

Received: 23 Mar 2020 Revised:26 Apr 2020 Accepted: 27 May 2020

*Address for Correspondence

Pramod Kumar Patjoshi
Associate Professor,
School of Management,
Centurion University of Technology and Management,
Odisha, India

This is an Open Access Journal / article distributed under the terms of the Creative Commons Attribution License
(CC BY-NC-ND 3.0) which permits unrestricted use, distribution, and reproduction in any medium, provided the
original work is properly cited. All rights reserved.

ABSTRACT

In present uncertain environments, measuring the financial performance as well as financial position is
most significant for corporate sector in the field of manufacturing. The study of financial performance
replicates the financial position as well as profitability of the corporate sector is vital as there are neck
and neck competitions in the same business. As the comprehensive data about the financial performance
and position accessible for all therefore the manager, investors, and creditors can put on the different
financial strategy by financial analysing their tactical thinking in the investment decisions. Accordingly,
this research comprises the financial performance of two major firm sin consumer and non-durables
manufacturing companies in India i.e. Hindustan Unilever Ltd. and Nestle India Ltd. To examine the
financial performance of Hindustan Unilever Ltd. and Nestle India Ltd. data has been composed from
the data published from different website for the ten years from 2009-10 to 2018-19. Different financial
ratios and t test have been applied to study the financial performance of Hindustan Unilever Ltd. and
Nestle India Ltd.

Keywords: Financial Performance, Financial Ratios; Current Ratio, Inventory Turnover Ratio, Net Profit
Margin and Return on Total Assets.

INTRODUCTION
Now a day’s all over the world companies are not only concern about their sales but also they want more
productivity, management style, skilled manpower, increased quality of the products, good service quality and
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Vol.10 / Issue 60 / June / 2020 International Bimonthly ISSN: 0976 – 0997

Pramod Kumar Patjoshi and Girija Nandini

marketing. Competition is very high in the global market, so all the corporates have to be ready to meet the
challenges. So analyzing financial performance of the company is the measure task to follow. Financial performance
of the company is the key issue in every company. Finance is the provision of money and resources at the time of
requirement. Financial management is concerned about the arrangement and so also utilization of funds in a
company. Finance managers have to plan and control the financial resources. They have to take number of decisions
in a company by using different financial management techniques. The final results of the proper decisions will be
found in profit and loss account and balance sheet of the corporates. Profit and loss account gives the profit and loss
of a business for a particular period of time whereas balance sheet shows the financial position of business for a point
of time. Financial Performance analysis is mainly concerned with the analysis of profit and loss account and balance
sheet of a company. Financial statement analysis, financial ratio analysis are the common techniques which are used
to measure the financial performance of a company. Different financial ratios are used to know the financial health of
a company. Short term liquidity position and also long term financial position can be analysed through the help of
different financial ratios. Financial ratios are very much helpful to know how effectively the company is using its
assets to get profit, how efficiently the organization is operating its business, how the company is managing its debt.
It shows whether the company will be sustainable in long run or not. It explains whether the company is able to
satisfy the stakeholders or not. It gives the overall financial performance of the company.

LITERATURE REVIEW
Deloof (2003) Investigated that big companies are investing huge amount of money in the working capital. So it is
very important to manage the working capital of the company as it will affect the financial performance of the
companies. He has used correlation and regression analysis for the study. He found that there is a negative
correlation between gross operating income and bills receivable, bills payable and inventories of the companies.
While Dheenadayalan and Deviananbrasi4 (2007) have found Z score of their sample companies. They have studied
for a period of 1997 to 2007. They found that the company’s financial position was not good, they are also facing
insolvency. On the other hand Boubacar (2011) have done their studies to find whether the foreign Bank subsidiaries
financial performance is good or not. They found that the ownership is generally with the parent bank. Similarly
Srinvas(2010) has studied the financial performance of different banks after and before merger in India. He has taken
six banks for his study. He found that private banks financial performance is better than the public sector bank after
merger. Whereas Bhatasna and Raiyani (2011) have investigated the financial position of Textile Industries in
India.They have taken Z score method for their analysis. They found that some of the selected companies are
financially good throughout the study period. But in some company Z score is lower. Additional Paul (2011)
investigated to find the financial performance of NBFCs. He has done the comparative study of NBFCs. He found a
sound financial health of the selected companies for the particular period. Similarly, Patjoshi (2016) in his study
involves the financial performance of two major companies i.e. HINDALCO and NALCO aluminium manufacturing
companies in India. To analyze financial performance of HINDALCO and NALCO data has been self-possessed
from the data published from different website for the ten years from 2005-06 to 2014-15. Different financial ratios
and t test have been employed to study the financial performance of HINDALCO and NALCO.

Brief Profile of Nestle India Ltd.

Nestle started its business in India in 1961, in Moga, Punjab. Now it is with four offices and eight production units in
India. Nestle is very closely associated with India, and satisfying its stakeholder. The company is giving large
number of employment opportunities to the Indian people. Nearly one million people are getting benefit from the
employment. The quality of the company’s product is famous in both national and international market. The famous
brands of the compny are Nescafé, Maggi, Milkybar, Kit Kat, Bar-One, Milkmaid and Nestea.

Brief Profile of Hindustan Unilever Ltd.

Hindustan Unilever Ltd (HUL) started its business in 1993 in India. It is one of the biggest fast moving consumer
goods (FMCG) corporations in India. HUL is earning very high amount of profit in the competitive market where

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Vol.10 / Issue 60 / June / 2020 International Bimonthly ISSN: 0976 – 0997

Pramod Kumar Patjoshi and Girija Nandini

large numbers of competitors are entering to the market. They are achieving their target through innovations,
marketing and efficient management. Their research and development is helping them to apply innovations in the
product and marketing. The company is in the 12th position in the super 50 list of the world’s most innovative
companies in the financial year 2012-13, by Forbes.
18 brands of the company are in the ‘100 Most Trusted Brands’ list by Brand Equity. HUL mostly files 250 to 350
new patent applications in a year. The company has over 20,000 registered patents and patent applications all over
the world.

Objectives of the Study

The following are the detailed objectives of the study.
1. To analyze the financial performance as well as financial position of Hindustan Unilever and Nestle Indiafrom
2009-10 to 2018-19.
2. To study the comparative liquidity and profitability position ofHindustan Unilever and Nestle Indiafrom 2009-10
to 2018-19.

Hypothesis of the Study

Keeping the objectives in view, the hypothesis framed for the study is
Ho: There is no significant difference between different financial ratios of Hindustan Unilever and Nestle India.

METHODOLOGY OF THE STUDY

To analyze financial performance of Hindustan Unilever andNestle India data has been collected and poised from
the data published different website for the ten years from 2009-10 to 2018-19. The collected data have been suitably
re-arranged, classified and tabulated as per the requirements of the study. Different financial ratios and t test have
been employed to study the financial performance of Hindustan Unilever and Nestle India. To study financial
performance of Hindustan Unilever and Nestle India different financial ratios like Current Ratio (CR), Inventory
Turnover Ratio (ITR), Net Profit Margin (NPM) and Return on Total Assets (ROTA) have been calculated. The t test
has been employed for the testing of hypothesis.

DATA ANALYSIS AND DISCUSSION

Analysis of Major Financial Ratio

The analysis of major financial ratios alike Current Ratio (CR), Inventory Turnover Ratio (ITR), Net Profit Margin
(NPM) and Return on Total Assets (ROTA) of both the companies Hindustan Unilever &Nestle India have explained
in Table 1.Current Ratio measures the liquidity position of an organisation. Current Ratio is the relationamong of
current assets and current liabilities. It shows the competenceto meet the current obligation of an organisation.
Anappraisal on the table-1 discloses that current ratio of both companies has exposed a substantial variation during
the study period. The absolute figure of current ratio of Hindustan Unilever has an average of 0.86 and varies from
0.74 to 1.43.On the other hand the current ratio ofNestle India has recorded an average of 0.59 and varies from 0.50 to
0.68. The table indicates Hindustan Unilever recorded better liquidity position as compare to Nestle India. The
standard current ratio should 2:1 for an organisation. Consequently both the companies have low liquidity and fail to
maintain the standard of current ratio (liquidity positions)over the study period from 2009-10 to 2018-19.

Inventory turnover ratio is the association among sales and inventory. Inventory turnover ratio displays how well
the organisation manages its inventory and how many times inventory transformed into sales in anaccounting
period. Inventory should uphold at a proper level, which stabilities production process and sales prerequisite. A
higher inventory turnover ratio is a good sign and indicateslesser inventory holding period. From the above it found

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Vol.10 / Issue 60 / June / 2020 International Bimonthly ISSN: 0976 – 0997

Pramod Kumar Patjoshi and Girija Nandini

that the inventory turnover ratios of Hindustan Unilever shows an increasing trend by recorded minimum of 7.34
times and maximum 15.78 times. On the contrary the inventory turnover ratios of Nestle India show a decreasing
trend by recorded minimum of 9.64 times and maximum 12.80 times. The averages inventory turnover ratios are
11.82 times and 11.23 times for Hindustan Unileverand Nestle India respectively. As per Indian Manufacturing
Companies the average inventory turnover ratio should 2.12 times. From the above both the companies have
maintained higher inventory turnover ratios as compare to standard inventory turnover ratio during the study
period. Accordingly, it presentedeffective management of inventory by both the companies during mentioned
period.Hindustan Unilever can able to manage inventory better than Nestle India over the period of study.

Net Profit Margin furnishes a relationship between Net Profit (Profit after Tax) & Sales and designates the
completeproficiency of the management in manufacturing, selling, administrative and other activities of the firm.
The table-1 reveals that net profit margin Hindustan Unilever has shown an increasing trend and fluctuated from
11.68% to 15.79% during study period, whereas the net profit margin of Nestle India has fallen down from 13.07% in
2009-10to 6.88% in 2014-15 and then increased to 15.89% in the year 2018-19. The average net profit margin of
Hindustan Unileverand Nestle India are 13.71% and 12.22% respectively which proposes Hindustan Unilever has
performed better thanNestle India for the study period.

Return on total assets is mostsignificant ratio used for evaluating the overall efficiency of the firms, by way of the
objective of firms is to make the most of its earnings. It can find from the table-1 that both the companies return on
total assetshave shown an increasing trend for during the study period. The absolutepercentage of this ratio
fluctuates between 11.84% and 35.27% for Hindustan Unilever. Correspondingly, return on total assets of Nestle
India has fluctuates between 88.72% and 381.03%. But it can also perceive that in all the years of study there is a wide
gap in returns on total assets between the Hindustan Unilever and Nestle India. The average returns on total assets
are 21.21% and 248.84%, which proposesNestle India has performed better than Hindustan Unilever.As a result, the
returns on total assets of the both the companies are satisfactory during the period under study.

Analysist-Test: Paired Two Sample of Current Ratios

Table 2 reviews the results of current ratios of Hindustan Unilever along withNestle Indiafrom 2009-10 to 2018-
19through the assistance of t-test. The t-test consequence for the current ratio indicates that mean current ratio of
Hindustan Unileveris more as compared to that of the Nestle India; leading to the decision that liquidity position of
Hindustan Unileveris better. In contrast, lower variance for Nestle India current ratio as compared to Hindustan
Unilevercurrent ratio clearly designates that former is more consistent than the latter. Nevertheless, the correlation
value is 0.17 represents positive correlation of current ratio among both the companies during study period. The p-
value of 0.00, which is less than 0.01, specifies a significant difference in the value of current ratio between Hindustan
Unilever and Nestle Indiaat 1 percent level of significance.

Analysist-Test: Paired Two Sample of Inventory Turnover Ratios

The above table evidently displays that mean value of inventory turnover ratio is higher of Hindustan Unileveras
compared to Nestle India over the period of study, describes the better inventory management applies of Hindustan
Unilever. On the other hand the inventory turnover ratio of Hindustan Unileverhas shown more variation than that
of Nestle India, as variance shows higher value of Hindustan Unileverthan that of Nestle India. The correlation value
of inventory turnover ratios of both companies is -0.38 denotesnegative correlation between both the companies. The
p-value of 0.30in case of inventory turnover ratio point towardno significant difference between the inventory
turnover ratios of both the companies.

Analysist-Test: Paired Two Sample of Net Profit Margin

The mean of net profit margin is higher in case of Hindustan Unileveras compared to Nestle India. The variation of
Hindustan Unilevernet profit margin is less than the Nestle Indianet profit margin as variance is found to be less in

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Vol.10 / Issue 60 / June / 2020 International Bimonthly ISSN: 0976 – 0997

Pramod Kumar Patjoshi and Girija Nandini

Hindustan Unilever for the study period. As the correlation is 0.23 which indicates that there is a positive correlation
present between net profit margin of Hindustan Unilever and Nestle India. At this juncture too there is no significant
difference between Hindustan Unilever and Nestle India net profit margin as the p-value is 0.05.

Analysist-Test: Paired Two Sample of Return on Total Assets

From the table 5, it is demonstrated that return on total assets has not shown the similar trend like that of net profit
margin. The mean value and the variance of return on total assets of Nestle India are found much higher than that of
Hindustan Unilever. Consequently there is less consistency in case of Nestle India return on total assets. The
correlation value of 0.58 suggests returns on total assets of both companies are highly positive correlatedpresent
between return on total assets of Hindustan Unilever and Nestle India. The p value proves that there is a significant
difference between Hindustan Unilever and Nestle India return on total assets among the two companies for the
study period.

CONCLUSION

This research is associated to the comparative financial performance of Hindustan Unilever and Nestle India over ten
years from 2009-10 to 2018-19. Interpretation to succeeding evaluation, it can be determined that during the study
period the complete performance in relations to profitability and liquidity position have varied significantly for both
the companies. Hindustan Unilever recorded better liquidity position as compare to Nestle India but both the
companies have maintained low liquidity position and fail to maintain the standard of current ratio (liquidity
positions) over the study period. In contrast both the companies presented effective management of inventory
during mentioned period while Hindustan Unilever can able to manage inventory better than Nestle India over the
period of study. In the case of net profit margin Hindustan Unilever has performed better thanNestle India for the
study period. Nonetheless in the case of return on total assets Nestle India has performed far better than Hindustan
Unilever.It can observe from the t test that there is significant difference between current ratio and return on total
assets of Hindustan Unilever and Nestle India. Therefore the null hypothesis (there is no significant difference
between different financial ratios of Hindustan Unilever and Nestle India) is rejected and alternative hypothesis is
accepted in the case of current ratio and return on total assets. While the inventory turnover ratio and net profit
margin has shown no significant difference.Consequently the null hypothesis (there is no significant difference
between different financial ratios of Hindustan Unilever and Nestle India) is accepted and alternative hypothesis is
rejected for inventory turnover ratio and net profit margin.

REFERENCES

1. Bhatasna, P.B. andRaiyani,J. R. (2011). “A Study on Financial Health of Textile Industry in India: A ‘Z’ – Score
Approach” Indian Journal of Finance, Vol.5, No.1 p.9-16..
2. Chundawat, D.S. and Bhanawat, S.S. (2000).“Working Capital Management Practices in IDBI assisted Tube and
Tyre Companies”, The Management Accountant, Vol 35, no 2, pp.99-102.
3. Deloof. M. (2003). “Does working capital management affects profitability of firms” vol 30 no 3 pp.33-43.
4. Dheenadayalan V and Devianabrasi, R.(2007). “Financial Health of Cooperative Sugar Mill a Case Study of
NPKRR Cooperative Sugar Mills Ltd., Indian Co-operative Review, vol 7 no 3 pp.192-197.
5. Boubacar, H. (2011). “The Financial Performance of Foreign Bank Subsidiaries” Indian Journal of Finance, Vol.5,
No.1, p.3-8.
6. Patjoshi, P. (2016). “A Comparative Study on Financial Performance of HINDLCO and NALCO” International
Journal of Business Environment, 5(3),:2373-2379.
7. Paul, P. (2011). “Financial Performance Evaluation- A comparative Study of some Selected NBFCs “Indian
Journal of Finance, Vol. 5 No.5 p.13-22’

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Vol.10 / Issue 60 / June / 2020 International Bimonthly ISSN: 0976 – 0997

Pramod Kumar Patjoshi and Girija Nandini

8. Shiralashetti, A.S. (2011). Performance Appraisal of the GADAG Co-Operative Cotton Textile Mill Ltd,
HULKOTI – A Case Study” SMART Journal of Business Management Studies, Vol.7, No.1, p.13-21
9. Srinivas, K. (2010). ‘Pre and Post Merger financial performance of merged Banks in India’ Indian Journal of
Finance, Vol.4, No.1, p.3-19.
10. Velavan, M.(2010)..“Measuring Financial Health of E.I.D. Parry Sugar Ltd Using ‘Z’ Scaore Model- A Case
Study” Indian Journal of Finance, Vol. 4, No.11 p.30-43.

Table 1: Trend of Major Financial Ratio of Hindustan Unilever &Nestle India

Current Inventory Net Profit Return on
Ratio Turnover Ratio Margin (%) Total Assets (%)
Year
Hindustan Nestle Hindustan Nestle Hindustan Nestle Hindustan Nestle
Unilever India Unilever India Unilever India Unilever India
2009-10 0.84 0.62 8.99 12.33 12.39 13.07 11.84 88.72
2010-11 0.86 0.55 7.34 10.49 11.68 12.79 12.31 132.13
2011-12 0.83 0.54 9.21 11.55 12.16 12.81 16.25 186.53
2012-13 0.76 0.65 10.80 12.80 14.70 12.27 12.36 245.68
2013-14 0.74 0.53 10.76 12.06 13.80 12.02 15.15 294.27
2014-15 0.75 0.50 12.57 10.33 14.00 6.88 17.21 292.26
2015-16 1.03 0.57 13.25 10.13 13.31 10.04 29.02 312.57
2016-17 0.82 0.68 14.60 11.29 14.07 12.24 29.99 354.78
2017-18 0.94 0.67 14.93 11.70 15.16 14.23 32.69 381.03
2018-19 1.00 0.58 15.78 9.64 15.79 15.89 35.27 200.40
Average 0.86 0.59 11.82 11.23 13.71 12.22 21.21 248.84
Minimum 0.74 0.50 7.34 9.64 11.68 6.88 11.84 88.72
Maximum 1.03 0.68 15.78 12.80 15.79 15.89 35.27 381.03

Table 2: t-Test: Paired Two Sample of Current Ratio

Particulars Hindustan Unilever Nestle India
Mean 0.86 0.59
Variance 0.01 0.00
Pearson Correlation 0.17
t Stat 7.68
P(T<=t) one-tail 0.00
t Critical one-tail 1.83
P(T<=t) two-tail 0.00
t Critical two-tail 2.26

Table 3: t-Test: Paired Two Sample of Inventory Turnover Ratio

Particulars Hindustan Unilever Nestle India
Mean 11.82 11.23
Variance 8.08 1.09
Pearson Correlation -0.38

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Vol.10 / Issue 60 / June / 2020 International Bimonthly ISSN: 0976 – 0997

Pramod Kumar Patjoshi and Girija Nandini

t Stat 0.55
P(T<=t) one-tail 0.30
t Critical one-tail 1.83
P(T<=t) two-tail 0.59
t Critical two-tail 2.26

Table 4: t-Test: Paired Two Sample of Net Profit Margin

Particulars Hindustan Unilever Nestle India
Mean 13.71 12.22
Variance 1.78 5.80
Pearson Correlation 0.23
t Stat 1.90
P(T<=t) one-tail 0.05
t Critical one-tail 1.83
P(T<=t) two-tail 0.09
t Critical two-tail 2.26

Table 5: t-Test: Paired Two Sample of Return on Total Assets

Particulars Hindustan Unilever Nestle India
Mean 21.21 248.84
Variance 87.80 9134.09
Pearson Correlation 0.58
t Stat -7.96
P(T<=t) one-tail 0.00
t Critical one-tail 1.83
P(T<=t) two-tail 0.00
t Critical two-tail 2.26

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