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Submitted for the partial fulfillment of the degree of




SUBMITTED TO: Mrs. Sumeet Kaur

SUBMITTED BY: Bhawana Devi Roll No: 5774 Year: 2011-2013

This is to certify that Bhawana Devi, a student of Post Graduate Degree in Master of Business Economics, Goswami Ganesh Dutta Sanatan Dharma College Chandigarh, has worked in M/s Sood, Sood & Associates, Chartered Accountants, as a trainee for a period of 6 weeks, i.e. from 01.06.2012 to 20.07.2012. During the course of her training she has completed a project report titled financial Analysis of Nestle India limited. During this period we found her keen interest on acquiring insight into organizational system and procedures besides being enthusiastic in applying the concepts and theories. We wish her all the success in her career. For, Sood, Sood & Associates,

Chartered Accountants Vikas Gupta, F.C.A. (M.No. 096996) Partner

A Summer Training project is a synthesis of knowledge and experience of experts in their related fields. However, no project is possible without the guidelines and help that is extended by the experts to the student with the sole benevolent purpose of intellectual development.. THANK YOU!!!! These two words are very less to be measured when it comes to extend my gratitude towards all those who have made my internship tenure truly a learning and memorable experience. I would like to extend my gratitude to my company guide Mr. Vikas Gupta, without whose guidance and help this project would not have been possible. Also I am thankful to my faculty guide Mrs. Sumeet Kaur of my college for her continues guidance and invaluable encouragement. Lastly I would like to thanks all those officers in Association who have taken out time from their busy schedule to provide with all the information I needed.


I, BHAWANA DEVI hereby declare that the work which is being presented in dissertation entitled FINANCIAL ANALYSIS OF NESTLE INDIA LIMITED in partial fulfillment of Master of Business Economics, submitted in Goswami Ganesh Dutta Sanatan Dharma College is an authentic record of my work. I have not submitted this declaration to any other university for the award of any other degree.

Sumeet Kaur (Faculty Guide)

Bhawana Devi

Decision making is a fundamental part of research process. Decisions regarding that what you want to do, how you want to do, what tools and techniques must be used for the successful completion of the project. In fact it is the researchers efficiency as a decision maker that makes the project fruitful for those who concern to the area of study. The project presents the financial analysis of the Nestle India Limited. I am presenting this hard carved effort in black and white. If anywhere something is found not in tandem to the theme then you are welcome with your valuable suggestions.

My research project Financial analysis of Nestle India Limited study conducted under the guidance of Mrs. Sumeet Kaur. I believe that my project report will have been very helpful to the practical knowledge in the field of financial analysis of any organization.

Table of Contents
CHAPTER- 1 ................................................................................................................................................... 7 Company Profile........................................................................................................................................ 7 CHAPTER- 2 ................................................................................................................................................. 16 Introduction of Financial Analysis ........................................................................................................... 16 CHAPTER- 3 ................................................................................................................................................. 37 Research Methodology ........................................................................................................................... 37 CHAPTER 4 .................................................................................................................................................. 40 SWOT Analysis of the Company .............................................................................................................. 40 CHAPTER-5 .................................................................................................................................................. 43 Data Analysis and Interpretation ............................................................................................................ 43 CHAPTER-6 .................................................................................................................................................. 60 Findings ................................................................................................................................................... 60 CHAPTER-7 .................................................................................................................................................. 62 Suggestions and Recommendations ....................................................................................................... 62 Conclusion ................................................................................................................................................... 64 Bibliography ................................................................................................................................................ 65

Company Profile

COMPANY PROFILE Sood & Sood Associates is a partnership firm established in 1984 with three partners. All the three partners are in the profession of Chartered Accountant. The firm has conducted various types of audits for various Public Sector Banks, Multi National Companies, Financial Institution, Government offices and Corporate offices. The firm specializes in conducting the below mentioned activities: Concurrent Audits Statutory Audits Foreign Exchange Management Act Internal Audits ( Ranbaxy, Nestle, Cadbury)

It also provides consultancy, financial advisory services, and Tax advisory services to various entities including individuals, high net worth individuals (professionals), corporate, societies and foreign entities. The firm represents its client with government regulatory authorities like Reserve Bank of India, Income Tax officials, Sales and Service Tax officials. Nature of Job includes: Practicing in company law matters Direct and Indirect Tax Foreign Exchange Management Act In the firm, the employees directly report to the partners of the firm. From the training perspective the objective of the firm is to provide an insight into the working culture of financial institutions, to strengthen their mental and logical ability of the trainee and guide them to work in a professional environment. The main focus of the firm is to provide quality services to its clients and they never compromise on their professional fronts under any circumstances.


Nestle India Limited (Nestle India) is a subsidiary to Nestl S.A. a global food products company based in Switzerland. Nestle India principally is engaged in the manufacturing, marketing, exporting and sales of food & beverage products which include milk products, nutrition products, beverages, chocolates and confectionery. It markets its products under international brand names which include Nescafe, Milo, Nestea Maggi, and Milky bar, Kit Kat, Milkmaid, Nestl Milk, Nestl Slim Milk and Nestl Fresh. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed financial ratios of the company.

Provides key company information for business intelligence needs. The report contains critical company information ' business structure and operations, major products and services The report provides detailed financial ratios for the past five years as well as interim ratios for the last four quarters. Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios.

India is one of the fastest growing economies in the world. While we are moving towards a services-led economy but still agriculture contributes 17 per cent of the total GDP and employs 60 per cent of the population. India is one of the key food producers in the world. The Indian food industry is estimated to be worth over INR 8, 80,000 crores. The industry employs 1.6 million workers directly.


Nestle India Limited, a subsidiary of Nestle S.A. of Switzerland, was incorporated in 1959. Nestle S.A. of Switzerland holds around 62 per cent stake in the company. It is a leading branded processed food companies with a large market share. The company first unit at Moga stated in 1961 for manufacturing milk products

Second factory at Choladi (Tamil Nadu) in 1967 to produce beverage

Third plant at Nanjangud (Karnataka) in 1989 The Company entered the chocolate business introducing Nestle Premium chocolate in 1990. Company's products are sold under brand names such as Milkmaid, Everyday, Cereal, Nescafe, Maggi, clairs, etc. It launched the world famous Kitkat chocolates in 1995. In 2001, it launched Nestle Pure Life bottled water. To capture the market in coastal areas, the company launched Maggi cubes in prawn flavor to cater to consumers' tastes. In the area of chocolate and confectionery, Nestle Munch, a crisp wafer biscuit with chocolayer, was rolled out nationally. In the milk and cereal category, Everyday Dairy Whitener showed satisfactory growth while Nestle Growing up Milk, launched in 1999, was launched nationally. The company ventured into beverage section by launching new blend of coffee powder, vanilla and mocha. The company also made its foray into the iced tea segment. Nestle Pure Life bottled water was launched in early 2001. Nestle Bar- One was re-launched after renovating it to make it smoother, creamier and better meets consumer need. Nestle India has been continuously paying dividends to its shareholders for the last 20 years and has a marvelous track record of average dividend payout ratio which has been over 70 per cent.


The company broad product portfolio includes Milk Products & Nutrition, Beverages, Prepared Dishes & Cooking Aids and Chocolates & Confectionary. Milk Products & nutrition The company milk products & nutrition portfolio encompasses a wide range of products that includes milk, skimmed milk, value added products like condensed milk, curd, ghee, yogurt, cheese. These products are sold under various popular brands - Nestle Every day, Nestle Milkmaid, Nestle Milk, Nestle Fresh n Natural, etc. The company enjoys the leadership position in infant milk foods business under the famous brand Cereal with a market share of more than 68 percent. The Milk products and Nutrition division contributes more than 46 per cent to the companys revenues.

Beverages Under the beverages segment, the company mainly sells instant coffee. It is the largest coffee company in India, commanding market share of more than 11 per cent. Besides, it sells a melted chocolate drink, Nestle Milo. The beverages division contributes around 17 percent to the company's revenues. Beverages contribute a major portion in the total export market. The company exports instant coffee to various countries such as Russia and Japan. Besides, it also exports some of its other products.

Prepared Dishes & Cooking Aids Nestle' Maggi 2 -Minute Noodles has become an almost synonymous name for instant noodles in India. The company later extended culinary products such as sauces, pizza sauce, healthy soups and magic spice cubes. The company also introduced new variants of noodles such as Vegetable Atta Noodles, Dal Atta Noodles and Rice Noodles Mania under its Maggi Noodles umbrella in the last few years. This division contributes 23 per cent to the company's revenues.

Chocolates & Confectionary The company also has a strong presence in the chocolates & confectionary business. With a more than 18 per cent market share, it is the second largest confectionary company in India. The company sells its world famous Kit Kat brand in India along with some other brands such as Nestle Munch (wafer chocolate), Nestle Milk bar, Polo (mint


confectionary) etc. The Chocolates & Confectionary division contributes 14 per cent to the company's revenues.

The total contribution by the export stands at 13 per cent of the company total revenue, which is mainly through export of coffee to Russia. Nestle India Limited is one of the top players in the processed food & beverages industry and the largest producer of instant coffee in India. Under Chocolates & Confectionary, Kitkat and Polo is a successful international as well as Indian brand. And under Milk Products & nutrition, Cereal is a market leader.



Nestle is acknowledged for its understanding of consumer needs. The business of prepared dishes and cooking aids grew rapidly as it focused on delighting the consumers and developing the products that enhance accessibility to nutrition. The business encompasses the MAGGI which is the pioneer of TASTE BHI HEALTH BHI concept. MAGGI philosophy is that everyday meal should be a celebration of taste

health and happiness throughout the year. Nestle provided inputs to the Nestle Group R&D for the development of an innovative product MAGGI Bhuna Masala.

Company is the leader in the instant coffee with NESCAFE. Though 2009 was a challenging year for the coffee business in India primarily due to adverse climatic and whether conditions that were experienced, the Coffee and Beverages business further straightened its position as a leader in instant coffees. While NESCAFE Cappuccino had a successful start, popularly priced products supported growth in the south and limited edition NESCAFE SUNRISE Rich Mountain blend received very good feedback and despite the challenging environment NESCAFE performed satisfactorily, achieving volume and market share growth in India.

During the year based on relevant consumers insights, NESTLE KITKAT was relaunched with an improved taste delivery making it more chocolaty and crispy. And to further improve penetration NESTLE KITKAT was launched in a new unique single finger format at the price point 0f RS.5/-.


Further innovation in NESTLE MUNCH saw the launch of the GURU pack at the higher price point of Rs 10/-and this coupled with the reintroduction of NESTLE CHOTU MUNCH at the price point of Rs2/- contributed to the brand performance.

In recent years NESTLE MILKYBAR with its strong communication supported with successful innovations has continued to lead the growth in white confectionary segment.

During the year, your company also became the leader in the clairs category with NESTLE ECLAIRS,

In the mint segment NESTLE POLO continued to grow market share. In 2009 the company continued efforts to increase the availability and visibility of the range of the confectionary products.

The other products that the portfolio contains include NESTLE EVERYDAY Dairy Whitener, NESTLE MILKMAID Sweetened Condensed Milk, NESTLE SLIM Milk, NESTLE NESVITA Dahi and NESVITA yogurts which continued to do well during the year. In a very competitive market, the EVERYDAY brand has led volume growth in the dairy whitener category resulting in a further increase in the overall market share and consolidating the companys position as market leader.

Introduction of Financial Analysis



Financial statement refers to such statement which contains financial information about an enterprise. Their report profitability and the financial position of the business at the end of the Accounting period. The term financial statement includes at least two statements which the accountant prepares at the end of accounting period. The two statements are:
The Balance Sheet Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms structure of assets, liabilities and owner equity, and so on and the Profit and Loss account shows the result of operations during a certain period of time in terms of revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firm. The first task of financial analysis is to select the information relevant to the decision under consideration to total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of the interface and conclusions. Financial Statement is the process of selection, relation and evaluation.


To present a complex data contained in the financial statement in simple and understandable form. To classify the items contained in the financial statement inconvenient and rational groups. To make comparison between various groups to draw various conclusions.


To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest and dividends.

To make comparative study with other firm. To know the trend of the business. To know the efficiency of the management. To provide useful information to the management.


The following procedure is adopted for the analysis and interpretation of financial Statements: The analyst should know the plans and policies of the managements that he may be able to find out whether these plans are properly executed or not. The extent of analysis should determine so that the sphere of work may be decided. If the aim is find out, Earning capacity of the enterprise then analysis of income statement will be undertaken. On the other hand, if financial position is to be studied then balance sheet analysis will be necessary. The financial data be given in statement should be recognized and rearranged. It will involve grouping the similar data under some heads. Breaking down of individual components of the statement according to nature. A relationship is established among financial statements with the help of tools and techniques of analysis such as ratios, trends, common size, and fund flow, etc. The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained which help in decision making. The conclusion drawn from the interpretation is presented to the management in the form of the report.

Analyzing financial statement involves evaluating three characteristics of the company: Its liquidity Its profitability Its insolvency. A short-term creditor, such as a bank, is primarily interested in the liquidity. A long-term creditor, such as a bondholder, however, looks to profitability and solvency measures that indicate the companys ability to survive over a long period of time



Various tools are used to evaluate the significance of financial statement data. Three commonly used tools are these Ratio Analysis Fund Flow Analysis Cash Flow Analysis

Ratio analysis isnt just comparing different numbers from the balance sheet, income statement, and cash flow statement. It means comparing the number against previous year of other companies, the industry, or even the economy in general. Ratios look at the relationship between individual values and relate them to how a company has performed in the past, and its performance in the future.

A ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. In simple language ratio is one number expressed in terms of another and can be worked out by dividing one number into another. For example, Current assets of the firm are 5, 00,000 and Current liabilities are 2, 50,000 then the ratio of current assets to current liabilities will work out to be 2 such type of ratio are called simple or pure ratios.

Ratios are worked out to analyze the following aspects of business organization A) Solvency Long term Short term Immediate B) Stability C) Profitability D) Operational efficiency

E) Structural Analysis F) Effective utilization of resources

G) Leverage or external financing

Since a ratio is a mathematical relationship between two or more variables, accounting figures, such relationship can be expressed in different ways as follows:A) As a pure ratio
For example the equity share capital of a company is Rs. 20, 00,000 & the preference share capital is Rs. 5,00,000 the ratio of equity share capital to preference share capital 20,00,000:5,00,000=4:1



B) As a rate of times In the above case the equity share capital may also be described as 4 times that of preference share capital. Similarly, the cash sales of a firm are Rs. 12, 00,000 & credit sales are Rs. 30, 00,000. So the ratio of credit sales to cash sales can be described as 2.5[30, 00,000/12, 00,000] = 2.5 times are the credit sales.




C) As a percentage
In such case, one item may be expressed as a percentage of some other items. For example, net sale of the firm are Rs.50, 00,000 & the amount of the gross profit is Rs. 10,00,000 then the gross profit may be described as 20% of sales [10, 00,000/50, 00,000]


The ratio analysis requires following steps Calculation of ratios Comparing the ratio with some predetermined standards. The standard ratio may be the past ratio of the same firms industrys average ratio or projected ratio or the ratio of the most successful firm in the industry. In interpreting the ratio of the particular firm the analyst cannot reach any fruitful conclusion unless the calculated ratio is compared with the predetermined standard.

The ratio can be compared in three different ways

a) Cross section analysis One of the ways of comparing the ratios of the firm is to compare them with the ratio or ratios of some other selected firm in the same industry at the same point

of time. The cross section analysis helps the analyst to find out as to how a particular firm has performed in relation to its competitors. The cross section analysis is easy to be undertaken as most of the data required for this may be available in financial statement of the firm. b) Time series analysis By comparing the present performance of the firm with the performance of the same firm over the last few years, an assessment can be made about the progress of the firm. Time series analysis helps the firm to assess whether the firm is approaching the long-term goals or not. The time series analysis looks for Important trends in financial performance Shift in trend over the years Significant deviation if any from the other set of data. c) Combined analysis If the cross section & time analysis, both are combined together to study the behavior & pattern of ratio, then meaningful & comprehensive evaluation of the performance of firm can definitely be made. A trend of ratio of a firm compared with the trend of ratio of the standard firm can give good results, for example, the ratio of operating expenses to net sales for firm may be higher than the industry however, over the years it has been declining for the firm, whereas the industry average has not shown any significant changes. The combined analysis shows that the ratio of the firm is above the industry average, but it is decreasing over the years & approaching the industry average.


Ratio analysis is a technique of analysis and interpretation of financial statements. It is a process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of better understanding of financial strengths and weaknesses of a firm. There are number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only few appropriate ratios from the same keeping in mind the objective of analysis.

The following are the fore step involved in the ratio analysis

Selection of the relevant data depending upon the objectives of the analysis

Calculation of the ratio from the above data

comparison of the ratio with the past ratio

Interpretation of the ratio


The interpretation of the ratios is an important factor. The limitations of ratio analysis should also be kept in mind while implementing them. The impact of factors such as price level changes, change in accounting policies, etc. should also be kept in mind when attempting to interpret ratios. The interpretation of the ratio can be made in the following ways: Single Absolute Ratio: Generally speaking one cannot draw any meaningful conclusion when a single ratio is considered in isolation. But single ratios may be studied in relation to certain rules of thumb which are based upon well proven convention as for example 2:1 is considered to be a good ratio for current assets to current liabilities. Group of Ratios: Ratios may be interpreted by calculating a group of related ratios. A single ratios supported by another related additional ratios become more understandable and meaningful. For example, the ratio is current assets to current liabilities to draw more dependable conclusion.


Historical Comparison: One of the easiest and most popular ways of evaluating the performance of the firm is to compare its present ratios with the past ratios called comparison overtime. When financial ratios are compared over a period of time, it gives an indication of the directions of the change and reflects whether the firms performance and financial position has improved, deteriorated or remained constant over a period of time. Projected ratio: Ratios can also be calculated for further standard based upon the projected or Performa financial statements. These future ratios may be taken as standard for comparison and the ratios calculated on actual financial statements can be compared with the standard ratios to find out variances, if any. Such variances help in interpreting and taking corrective action for improvement in future. Inter-firm comparison: Ratios of one firm can also be compared with the ratios of some other selected firms in the same industry at the same point of time. This kind of comparison helps in evaluating relative financial position and performance of the firm.


The ratio analysis is one of the most important tools of financial analysis. It is used as a device to analyse and interpret the financial health of the enterprise. A. Managerial use of Ratio Analysis 1. Helps in decision making: Financial statements are prepared primarily for decision making. But the information provided in the financial statement is not an end in itself and no meaningful conclusion can be drawn from these statements alone. Ratio Analysis helps in making decision from the information provided in these financial statements. 2. Helps in financial forecasting and planning: Ratio analysis is of much help in the financial forecasting and planning. Planning is looking ahead and the ratios calculated for a number of years work as a guide for the future.


Meaningful conclusions can be drawn for future from these ratios. Thus, ratio analysis helps in forecasting and planning. 3. Helps in communicating: The financial strength and weakness of the firm are communicated in the more easy and understandable manner by the use of ratios. 4. Helps in co-ordination: Ratios even help in co-ordination which is of utmost importance in effective business management. 5. Helps in control: Ratios analysis even helps in making effective control of the business. B. Utility to share holders/ investors An investor in the company will help to assess the financial position of the concern where he is going to invest. His first interest will be the security of his investment and then a return in the form of dividend or interest. For the first purpose he will try to assess the value of fixed assets and loan raised against them. The investors feel sufficient if the investors have sufficient amount of assets. C. Utility to creditors The creditors or the suppliers extend short term credit to the concern. They are interested to know whether financial position of the concern warrants their payments at the specified time or not. The concern pays short term creditors out of its current assets. If current assets are quite sufficient to meet current liabilities then the creditors will not hesitate in extending credit facility.

D. Utility to employees The employees are also interested in the financial position of the firm especially profitability. Their wage increases and the amount of fringe benefits are related to the volume of profits earned by the concern. The employees make use of information available in financial statement.


E. Utility to governmentGovernment is interested to know the overall strength of the industry. Various financial statements published by industrial units are used to calculate ratios for determining short term, long term and overall financial position of the concerns. Profitability index can also be prepared with the help of ratios.


The ratio analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, but there are number of limitations: Limited use of a Single ratio: A single ratio, usually, does not convey much of a sense. To make a better interpretation a number of ratios have to be calculated which is likely to confuse the analyst then help him in making any meaningful conclusion. Lack of Adequate Standards: There are no well adopted standards for all ratios which can be accepted as norms. It renders interpretation of ratios is difficult. Limitation of Accounting: Like financial statements, ratios also suffer from the inherent weakness of accounting records such as their historical nature. Ratios of the past are not necessarily true indicator of the future. Change of Accounting Procedures: Change in the Accounting Procedures by a firm often makes ratio analysis misleading. Personal Bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to be interpreted and different people interpret the same ratio in different ways. Incomparable: Not only industries differ in their nature but also the firms of a similar business widely differ in their size and accounting procedures, etc. it makes comparison of ratios difficult and misleading. Price Level Change: While making ratio analysis, no consideration is made to the change in price levels and this makes the interpretation of ratios invalid.

Ratios no substitute: Ratio analysis is merely a tool of financial statement. Hence, ratios become useless if separated from the statements from which they are compounded.


Section 210 0f the companies act requires preparation of balance sheet at the end of each trading period.

SECEDULE VI PART I FORM OF BALLACE SHEET Balance sheet on .. Figures Figures Figures for the for the for the previous LIAILITIES current previous ASSETS year year year Rs. Rs. Rs. SHARE CAPITAL FIXED ASSETS : Authorizedshares of Rs. Each Issued: (Distinguishing between the various classes of capital and stating particulars satisfied below, in respect of each class) .shares of Rseach. Distinguishing as far as possible Between expenditure upon. a. Goodwill b. Land c. Buildings d. leaseholds Subscribed : (distinguishing between the various classes of capital and e. railway sidings f. plant and machinery Figures for the current year Rs.


stating the particulars specified below, in respect of each Class)..shares of Rs..each.. Rs. Called up. ( of the above shares.. shares are allotted as fully paid up pursuant to a contract without payments being received in cash)

g. Furniture and fittings. h. Development of property i. Patents, trademarks and designs j. Livestock, and k. Vehicles, etc (Under each head the original cost and the additions thereto and deductions therefore during the year, and the total depreciation written off or provided Up to the End of the year is to be stated. Depreciation written off or Provided shall be allotted under the different asset heads and deducted in arriving at the value Of the fixed assets.) In every case where the original cost cannot be ascertained, without unreasonable expenses or delay, the valuation Shown by the books is to be given. For the purpose of paragraph, such valuation will be the net amount at which an asset stood in the companys books at the commencement of this

(Of the above shares..shares are allotted as fully paid up by the way of bonus shares)

Specify the source from which bonus shares are issued e.g. , Capitalization of profits and reserves or from share premium Account.

Less : Calls unpaid : (1.)By Directors (2.)By others Add : Forfeited shares : (Amount originally paid up any capital profit or reissue of

forfeited shares should be Transferred to capital reserves.) Notes : 1. Terms of redemption and conversion (if any) of any redeemable preference capital are to be stated together with the earliest date of redemption or Conversion. 2. Particulars of any option on unissued Share Capital are to be specified. 3. Particulars of different classes of preference share are to be given. These particulars are to be given Along with share capital. In the case of subsidiary companies, the number of shares held by holding company as well as by the ultimate holding company and its subsidiaries shall be separately stated in respect of Subscribed

Act after deduction of the amount previously provided or written off for depreciation or diminution in value, and where any such asset is sold, the amount of sale proceeds Shall be shown as deduction. Where the sum have been written off on a reduction of capital or a revaluation of assets, every balance sheet, subsequent to the reduction or revaluation shall show a reduced figures with the date of reduction in place of the Original cost. Each balance sheet for the first five years subsequent to the date of reduction shall show also the Amount of the reduction made. Similarly, where sums have been added by writing up the assets, every balance sheet subsequent to such writing up shall show the increased figure with the date of increase in place of the original Cost. Each balance sheet for the first five years subsequent to the date of the writing up shall also show the amount of increase Made.

INVESTMENTS : Showing nature of


share capital. The auditor is not required to certify the correctness of such shareholdings as certified by the Management. RESERVES AND SURPLUS : (1.)Capital Reserves (2.)Capital Redemption Reserves. (3.)Share Account premium

investment s and mode of valuation, for example, cost or market value, and distinguishing between(1.)Investment in government or trust securities. (2.)Investment in shares, Debentures or bonds. (showing separately shares fully paid up and partly paid up and also distinguishing the different classes of shares and showing also in similar details investments in shares, debentures or bonds of subsidiary companies) (3.)Immovable properties. (4.)Investment in capital of Partnership firms. (Aggregate amount of companys quoted investments and also the market value thereof shall be shown) (Aggregate amount of companys unquoted investments shall also be shown)

(Showing details of its utilization in the manner provided in Section 78 in the Year of utilization). (4.)Other reserves specifying the nature of each reserves and the amount in respect Thereof.

Less : Debit balance in profit and loss account (if any) (the debit balance in profit and loss account shall be shown as a deduction from the



uncommitted reserves, if any)

CURRENT ASSETS : (1) Interest accrued on

(5.)Surplus, i.e., balance in profit and loss account after providing for propose allocations, namely: Dividend, Bonus and Reserves (6.)Proposed addition to reserves (7.)Sinking funds (Additions and deductions since last balance sheet to be shown, under each of the specified Heads. The word fund in relation to any reserve should be used only where such reserves are specifically represented by earmarked Investments.)

Investments. (2) Stores and spare parts. (3) Loose tools (4) Stock in trade (5) Work-in-progress [in respect of (2) and (4), mode of valuation of stock shall be stated and the amount in respect of raw materials shall also be stated separately where Practicable. Mode of valuation of work-in-progress shall be stated] (6) Sundry Debtors. a. Debts outstanding for b. a period exceeding six Months.

SECURED LOANS : c. Other debts. (1) Debentures. (2) Loans and advances from Banks. Less Provision. ( The amounts to be shown under sundry debtors shall

(3) Loans and advances from Subsidiaries. (4) Other loans advances and

(loans from directors and/or managers should be shown separately)

include the amounts due in respect of the goods sold or services rendered or in respect of other contractual obligations but shall not include the amount which are in the nature of loans or advances)

Interest accrued and due on Secured Loans should be included under the appropriate sub-heads Under the head Secured Loans. The nature of security to be Specified in each case. Where loans have been guaranteed by managers and/or directors, a mention thereof shall also be made and also the aggregate amount of such loans under each head. In case of debentures, terms of redemption or conversion (if any) are to be stated together with earliest date of redemption or conversion. UNSECURED LOANS :

In regard to sundry debtors particulars to be given separately of-

(a) Debts considered good and in respect of which the Company is fully secured. (b) Debts considered good for which the company holds no security other than the Debtors personal security. (c) Debts considered doubtful or bad. Debts due by directors or other officers of the company or nay of them either severally or jointly with Other person or debts due by firms or private companies respectively in which any director is a partner or a director or a Member to be separately stated.


(1) Fixed deposits. (2) Loans and advances from subsidiaries (3) Short term loans and advances : (a) From bank. (b) From others. (Short term loans include those which are due for repayment not later than one year as at the date Of the balance sheet. (4) Other loans advances : (a) From banks. (b) From Others. and

Debts due from other companies under the same management within the meaning of subsections of Section 370 to be disclosed With the names of the companies. The maximum amount due by directors or other officers of the company at any time during the year to be shown by the way of note. The provision to be shown under this head should not exceed the amount of debts stated to be considered doubtful or bad and any surplus of such provision, if already created, should be shown at every closing under Reserves and Surplus under a separate sub-head Reserve for Doubtful or Bad Debts. (7)

(Loans from directors and/or managers should be shown separately Interest accrued and due on unsecured loans should be included under an appropriate subheads under the head Unsecured Loans Where loans have been guaranteed by manager, and/or directors, a

(7A) Cash balance on hand. (7B) Bank balance(a) With scheduled banks. (b) With others ( in regard to bank balances particulars to be given separately of-


mention thereof shall also be made together with the aggregate amount of such loans under each head. This does not apply to fixed deposits.)

(a) The balance lying with scheduled banks on current accounts, call accounts and Deposit accounts. (b) The names of the bankers other than the Scheduled banks and the balances lying with each such banker on current account, call account and deposit account and the maximum amount outstanding at any time during the year with each such banker. (c) The nature of the interest, if any, of any director or his relative in each of the Bankers. LOANS AND ADVANCES : 8 (a.) Advances and loans to subsidiaries b) Advances and loans to partnership firms in which the company and any of its Subsidiaries are a partner. (9) Bills of exchange (10) Advances recoverable

CURRENT LIABILITIES AND PROVISIONS: A. CURRENT LIABILITIES: 1. Acceptance 2. Sundry Creditors 3. Subsidiary Companies 4. Advance Payments and unexpired discounts for the portion for which value has still to be given, e.g., in the case of the following companies :Newspapers, fire insurance, theatres, clubs, banking, Steamship companies, etc.

5. Unclaimed dividends. 6. Other liabilities (if any) 7. Interest accrued but not due on loans B. PROVISIONS 8. Provision taxation 9. Proposed dividends. 10. For contingencies. 11. For provident fund Scheme. 12. For insurance. 13. Other provisions. A foot-note to the balance sheet may be added to show separately :(1) Claims against the (2) company not Acknowledged as debts. (3) Uncalled liabilities for

in cash or in kind or for value to be received, e.g., Rates, taxes, Insurance, etc (11) Balances with customs, port trust, etc. (where payable on demand)

[The instructions regarding sundry debtors apply to Loans and Advances also. The amounts due from other companies under the same management within the meaning of sub-section (1B) of section 370 should also be given with the names of the companies; the maximum amount due from every one of these at any time during the year must be shown]

MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted) (1) Preliminary expenses. (2) Expenses including commission or brokerage or underwritten or

on Shares partly paid. (4) Arrears of fixed (5) Cumulative dividends. (The period for which the dividend is in arrear or if there is more than one class of shares, the dividend on each such class that is in arrear, shall be stated. The amount should be stated before deduction of income tax, except that in case of tax-free dividends the amount shall be shown free of income tax and the fact that it is So shown shall be stated.) (6) Estimated amount of Contracts remaining to be executed on capital account and not provided for. (7) Other company for which the company is contingently liable.

Subscription of shares or Debentures. (3) Discount allowed on the Issue of shares or debentures. (4) Interest paid out of capital during construction( also stating the rate of interest)

(5) Development expenditure not adjusted. (6) Other sums (specifying natured) PROFIT AND LOSS ACCOUNT (show here the debit balance of profit and loss account carried forward after deduction of the uncommitted reserves, if any)


Research Methodology


Research is defined as a systematic, gathering recording and analysis of data about problem relating to any particular field. The following sections determine the strength, reliability and accuracy of project: Research Design Research Design pertains to the great research approach or strategy adopted for particular project. A research project has to be conducted significantly making sure that the data is collector accurately and economically. The study used a descriptive research design for the purpose of getting insight over the issue. It is to provide an accurate picture of some aspects of market environment.

Collection of data

Oraganisation of data

Presentation of data

Analysis of data

Interpretation of data


Method of Data Collection Secondary Data has been gathered through the internet and published data. Internal audit report of the company Annual report of the company Journals and magazines OBJECTIVE OF THE STUDY To understand the strong hold of nestle India. To find out the competitive advantages of Nestle India To know the earning capacity or profitability. TOOLS USED FOR ANALYSIS In this present study ratio analysis is used as a tool for doing financial analysis of Nestle India limited. Bar graph, charts are used to depict the financial information.

Limitations of the study

The time period provide for the project was not sufficient enough to gather data for a big organization. Complexity to gaining information. Non-availability of the most recent statistical data. Because of the limitation of information, some assumptions were made. So there may be some personal mistake in the report. Besides this, it was very difficult to carry out the whole analysis on the basis of limited scope of study.


SWOT Analysis of the Company


High quality and safe food products at affordable prices, endorsed by the NESTLE Seal of Guarantee. Recognized Nutrition, health and Wellness Company. Strong and well differentiated brands with market share leadership. Product innovation and renovation based on consumers insights. Well diversified product portfolio across categories and income strata. Efficient supply chain. Responsive organizations structure and strong management team. Distribution structure that allows wide reach and coverage in the target markets. Capable and committed human resources. Participation in Global Business Excellence (GLOBE). Strong financial position.

Complex supply chain configuration. Cascading indirect taxes. Price point portfolio. There is not much margins for retailers to prefer its sales. The distribution cost is high as compared to the competition in the local market.


Price of raw material and fuels. Availability of agro based commodities. Food inflation. White collar talent.

Potential for expansion in smaller towns and other geographies. Recovery of out of home segment. Leverage Nestle Technology to develop more products that provide Nutrition, health and wellness at affordable price. Company can open separate stores to eliminate retailers. They have an opportunity to expand or capture the market by adding its product line.


Data Analysis and Interpretation



2011 Gross Revenue Profit Before interest and taxation Interest Impairment loss and fixed assets(Net) Provision for contingences(Net) Provision For tax Net Profit Profit Brought Forward Amount Transferred from share Premium account Amount Transferred from general Reserves Balance available for appropriation Interim Dividends Special dividend Final Dividend Proposed Corporate Dividend Tax Transfer to general reserves Surplus carried in profit and loss account
51,672 9,610

(Rs in Millions)
43,581 8,052

14 103 323 2620 6550 1001 7551 3471 1205 795 655 1425

16 3 305 2387 5341 125 432 431 6329 2281 732 1157 696 534 1001

Key Ratio Earnings per Share (Rs.) Dividend per Share (Rs.)

67.94 48.50

55.39 42.50

Pursuant to scheme arrangement Include special dividend of Rs. 7.50 per share, paid under the Scheme of arrangement.



18.5 18 17.5 17 16.5 16 2007 2008 2009 2010 2011 EBIT %

Net Income
60000 50000 40000 30000 20000 10000 0 2007 2008 2009 2010 2011 Net Income


Final dividend of Rs 12.50 per equity share of the face value of Rs.10/- year 2011, amounting to Rs. 1,205 Million. This is in addition to the two Interim Dividends for 2011, aggregating to Rs. 36.00 per equity share, paid in May 2011 and 2011 (amounting to Rs. 3,471 Million). The total payout for 2011 would be Rs. 5,470 Million (including the corporate dividend tax). Further dividends will continue to be based on the need of the company to deploy internal accruals for business expansion and an appropriate debt equity ratio.

Dividend Rates












Earning per share

80 70 60 50 40 30 20 10 0 2008 2009 2010 2011 Earning per share


Profit and loss Account of Nestle India limited as on December 2011

Income Sale Domestic Exports Gross Less : Excise duty Net sales Other income 2011 (in thousands) 2010 (in thousands) 41,326,718 3,383,907 44,710,625 1,468,175 43,242,450 338,852 43,581,302

48,938,164 3,286,050 52,224,214 930,447 51,293,767 377,976 51,671,743

Expenditure Material consumed and purchase of goods Manufacturing and other Expenses Interest Depreciation Adjustment due to dec. inclusive of stock of finished goods

24,570,317 16,465,167 13,985 1,112,692 -86,545 42,075,616

21,386,673 13,563,778 16,430 923,601 -345,448 35,545,034 8,036,268 3,084 304,916 7,728,268

Profit Before impairment, contingencies and Tax Impairment loss/gain on fixed assets Provisions for contingencies Profit Before Taxation Income Tax Expenses Current Tax

9,596,127 103,168 323,201 9,169,758



Deferred Tax Fringe benefit Tax

-48,838 15,213 2,619,730 6,550,028 1,001,053 7,551,081

81,836 82,496 2,387,446 5,340,822 125,159 432,363 430,857 6,329,201

Profit after Taxation Balance Brought Forward Add: Transferred from share premium account Add: Transferred from general reserve Balance Available For Appropriation Dividends Interim Final proposed Special Corporate Dividend Tax General Reserve Surplus carried to the balance sheet Basic and diluted Earnings per share(in Rupee)

3,470,966 1,205,196 794,713 655,003 1,425,203 67 .94

2,217,561 1,156,989 723,118 696,398 534,082 1,001,053 55 .39


Balance Sheet Of Nestle India Limited as on December 2011

2011 Shareholders funds Share capital Reserves and surplus Net worth Deferred Tax liabilities Applications of funds Fixed assets Gross Block Less: Depreciation Net Block Capital work in progress 964,157 4,848,493 5,812,650 319,972 6,132,622 2010 964,157 3,769,340 4,733,497 368,810 5,102,307

16,407,942 7,445,894 8,962,048 796,273 9,758,321

14,048,460 6,518,538 7,529,922 1,091,689 8,621,611

Investments Current assets Loan and advances Inventories Sundry debtors Cash and Bank balance Loans and advances Total Current Assets Less: current liabilities and provisions Liabilities Provisions

4,987,379 641,863 1,555,863 1,380,487 8,565,592

4,349,117 455,933 1,936,893 1,237,589 7,979,532

5,875,906 8,347,940 14,223,846

5,074,671 6,773,157 11,847,828 3,868,296 5,102,307

Net Current Assets(liabilities) Book value

5,658,254 6,132,622


Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position or liquidity of a firm. It is calculated by dividing the total of current assets by total of the current liabilities.

Current Ratio =

Current Assets Current liabilities

1 Cash in hand 2 Cash at bank 3 Marketable securities 4 Short-term investments 5 Bills Receivables 6 Sundry Debtors 7 Inventories (stock) 8 Work- in-progress 9 Prepaid Expenses

1 Outstanding Expenses/Accrued expenses 2 Bills Payable 3 Sundry Creditors 4 Short-term advances 5 Income-tax payable 6 Dividends Payable 7 Bank Overdraft



A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time as and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. An increase in the current ratio represents the improvement in the liquidity position of a firm while a decrease in the current ratio indicates that there has been deterioration in the liquidity position of the firm.

Year Current Assets Current Liabilities Current Ratio 2011 8,565,592 14,223,846 0.60 2010 7,979,532 11,847,828 0.67

The current ratio for the company in the year 2010 was 0.67 and for the year 2011 was 0.60. So the current ratio for the firm has decreased by 0.07 which indicates that the companys liquidity position is decreasing. The main reason for this is the rise in the current liabilities of the company from 11,847,828 in 2010 to 14,223,846 in 2011.There may not be sufficient funds to pay liabilities.

Quick Ratio, also known as Acid Test or liquidity ratio, is the most precise test of liquidity than the current ratio. The term liquidity refers to the ability of the firm to pay its short term obligations as and when they become due. The two determinant of current ratio, as a measure of liquidity, are current assets and current liabilities.

Quick ratio =

Quick assets Current liabilities


Quick/ liquid Assets

Cash in hand Cash at Bank Bills Receivable Sundry Debtors Marketable Securities Temporary investment

Current liabilities
Outstanding or Accrued expenses Bills Payable Sundry Creditors Short term advances Income tax payable Dividends Payable


Usually, a high acid test ratio is an indication that a company is liquid and has the ability to meet its current or liquid liabilities in time and on the other hand a low quick ratio represents that the companys liquidity position is not good .


YEAR QUICK ASSETS CURRENT LIABILITIES QUICK RATIO 2011 3,578,213 14,223,846 .251 2010 3,630,415 11,847,828 .306

Hence the quick ratio of the company in 2011 was .251 and 2010 was .306 shows that the quick ratio of the company has decreased by .55 because the company has purchased assets by the bank balance as the company has not taken any loan during the year so the quick ratio of the company decreased.

Manufacturing And Other Expenses 2011(rs in thousands) 2010(rs is thousands) Employee cost Salaries, wages, bonus, pension, gratuity etc. Contribution to provident and other fund Staff welfare expenses 3,982,657 126,811 214,360 4,323,828 Advertising and sales promotion Freight, transport, and distribution General license fees(net of taxes) Power and fuel Contract manufacturing charges Travelling I.T and management information system Maintenance and repairs Plant and machinery Buildings Others Taxes and general license fees Consumption of stores and spare parts Rent Rates and Taxes Training Expenses Laboratory(quality testing ) expenses Milk collection and district

2,853,949 102,088 189,771 3,145,808 1,943,555 2,035,530 1,459,570 1,597,565 456,500 418,069 400,391

2,675,119 2,403,721 1,759,874 1,588,703 461,752 460,582 436,538

327,536 36,333 71,109 434,978 272,998 219,104 209,875 205,946 165,154 151,169

278,069 33,716 59,948 371,733 226,233 151,846 176,972 201,483 175,239 137,557

development expanses Market Research Deficit on fixed assets sold/ written off Insurance Miscellaneous expenses

143,122 86,636 30,548 13,281 422,239 16,465,167

114,490 96,591 27,260 16,563 410,823 13,563,778


2011 (Rs in thousands) Opening Stock Work- in - progress Finished Goods 385,378 2,327,186 2,712,564 94,996 2,617,568

2010 (Rs in thousands) 424,279 1,977,141 2,401,420 129,300 2,272,120

Less: Excise Duty Net Opening stock(A) Less: closing stock Work- in - progress Finished Goods Less: Excise duty Net closing Stock(B) Movement in the opening and closing stock(A-B)

462,666 2,312,885 2,775,551 71,438 2,704,113 -86,545

385,378 2,327,186 2,712,564 94,996 2,617,568 -345,448



Every firm has to maintain certain level of inventory of finished goods so as to be able to meet the requirements of the business. But the level of inventory should neither be too high nor too low. Inventory turnover ratio will indicate whether the inventory has been efficiently used or not. The purpose is to see whether only the required minimum funds have been locked up in the inventory. Inventory turnover ratio indicates the number of times the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory.

Inventory turnover ratio =

Cost of goods sold Average inventory at stock Opening stock + Closing Stock 2

Average inventory at cost=

INTERPRETATION OF INVENTORY TURNOVER RATIO Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually, a high inventory turnover indicates efficient management of inventory because more frequently stocks are sold; the lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management of inventory. A low inventory turnover implies over-investment in inventories, dull business, poor quality of goods, stock accumulation, accumulation of obsolete and slow moving goods and low profit are compared to total investments.



YEAR Cost of goods sold Average Inventory at cost Inventory turnover ratio

2011 16465167 2660840.5 6.18 times

2010 13563778 2444844 5.54 times

365 Inventory conversion Period = Inventory turnover ratio

Inventory conversion period

59 days

66 days

The Inventory conversion period has shifted from 66 days in 2010 and 59 days in 2011 which shows that the company is efficiently managing their stock and its inventory turnover has also increased which shows that there is rise in sale.


Net profit ratio establishes a relationship between net profit (after tax) and sales, and indicates the efficiency of the management in the manufacturing, selling, administrative and other activities of the firm. This ratio is the overall measure of firm s profitability and is calculated as:


Net Profit Ratio =

Net profit Sales

X 100

The two basic elements of the ratio are net profit and sales. The net profits are obtained after deducting income-tax and, generally, non-operating income and expenses are excluded from the net profit for calculating this ratio. Thus, incomes such as interest on investment outside the business, profit on sale of fixed assets, etc. are excluded


Years Net profit Sales Net profit ratio

2011 6550 51293767 .0127

2010 5341 43242450 .0123

There is no much difference in the net profit ratio of year 2010 and year 2011 as the net profit and the sale has increased in the same proportion so there is not much difference in the net profit ratio of the company.


Debt equity ratio also known as External-Internal Equity Ratio is calculated to measure the relative claims of outsiders and the owners (i.e. shareholders) against the firms assets. This ratio indicates the relationship between the external equities or outsiders funds and the internal equities or the shareholders funds, thus


Debt-Equity Ratio =

Outsiders funds Shareholders funds

The two basic components of the ratio are outsiders funds i.e., external equities and shareholders funds, i.e. internal equities. INTERPRETATION OF DEBT EQUITY RATIO The debt equity ratio is calculated to measure the extent to which debt financing has been used in the business. The ratio indicates the proportionate claims of owners and the outsiders against the firms assets. Generally speaking, a low ratio is considered as favorable from the long- term creditors point of view because a high proportion of owners fund provides a larger margin of safety for them. A high debt equity ratio which indicates that the claims of outsider are greater than those of owners, may not be considered by the creditors because it gives a lesser margin of safety for them at the time of liquidation of the firm.

Years Outsiders funds Shareholders Funds Debt equity ratio 2011 5,875,90 5,812,650 1.01 2010 5,074,671 4,733,497 1.07




Final dividend of Rs 12.50 per equity share of the face value of Rs.10/- year 2011, amounting to Rs. 1,205 Million. The current ratio for the company in the year 2010 was 0.67 and for the year 2011 was 0.60. So the current ratio for the firm has decreased by 0.07 which indicates that the companys liquidity position is decreasing.

The quick ratio of the company in 2011 was .251 and 2010 was .306 shows that the quick ratio of the company has decreased by .55 because the company has purchased assets by the bank balance as the company has not taken any loan during the year so the quick ratio of the company decreased. The Inventory conversion period has shifted from 66 days in 2010 and 59 days in 2011 which shows that the company is efficiently managing their stock and its inventory turnover has also increased which shows that there is rise in sale.

There is no much difference in the net profit ratio of year 2010 and year 2011 as the net profit and the sale has increased in the same proportion so there is not much difference in the net profit ratio of the company. The Indian food industry is estimated to be worth over INR 8, 80,000 crores. Dividend payout ratio by nestle is over 70 % in last 20 year


Suggestions and Recommendations


Suggestions and Recommendations: Employee should be trained according to the changing standards of the organization. Company should conduct survey from time to time, according to which changes can be introduced in the organization to stay updated in the market. They should introduce creativity into the work, so that the employees can do their work active mindedly. Employee should be given compensation in order to keep them loyal. Employee should be more involved in decision making to become more differentiated. Company should provide incentives to shop keepers.


NESTLE good food, good life captures the very essence of Nestle and the promises they
commit to themselves every day, everywhere as the leading nutrition, health and wellness company. The companys overall is at a very good position. The company achieves sufficient profit in past two years. The company maintains low liquidity to achieve the high profitability. The company distributes dividend every year to its shareholders. The company grew significantly during these years. There were many new products and services that were launched during this time. The company enjoys monopoly in various products, i.e. significant is the name of Maggi noodles in this section. Increased demand of products helps the company remain strong. The changing lifestyle and concepts of Indians have contributing much to the growth of the company.


Annual Report of Nestle India Limited. Internal Audit report of Nestle India Limited. Rustagi R.P.-Financial Management (Galgotia, 2000, 2nd revised ed.) Jain S.P. , Narang K.L.-Accounting and financial analysis (Kalyani, 2008 edition.) Gupta Shashi K, Sharma R.K.-Financial Management Shukla M.C. , Grewal T.S.-Advanced Accounts