ANALYSIS OF FINANCIAL STATEMENTS OF ITC LIMITED

TABLE OF CONTENTS:
(1) INTRODUCTION TO FMCG INDUSTRY
(2) PROFILE OF ITC LIMITED
(3) OBJECTIVE OF ANALYSIS AND
METHODOLOGY
(4) FINANCIAL ANALYSIS USING RATIO
ANALYSIS
(5) INTERPRETATIONS OF RATIOS
(6) RECOMMENDATIONS
(7) REFERENCES







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INTRODUCTION TO FMCG INDUSTRY
Fast Moving Consumer Goods (FMCGs) are goods that are consumed in a short span of time and are most
often consumed daily. FMCGs are one of the most important sectors of an economy, represent nearly 2.5%
of the countrys GDP, and are often referred to as defensives as they comprise the basic day to day needs
of the citizens.

With a population of over one billion, India is one of the largest economies in the world in terms of
purchasing power and increasing consumer spending, next to China.

Indian FMCG sector is the fourth largest in the economy, creates employment for more than three million
people in downstream activities and 14million in total and has the market size of US$13.1 billion. The
industry has tripled in size over the last 10 years, growing much faster than in past decades. This has been
facilitated by the many changes in the Indian economic and industrial landscapereduced levels of
taxation, easier import of materials and technology, reduced barriers to entry of foreign players, growing
organizational maturity of Indian players, growth of media, and, of course, the growing affluence and
appetite for consumption of the Indian consumer. The industrys potential to grow further and faster is
awesome, given the low penetration of most categories and rising consumer incomes.

The industry has witnessed healthy Foreign Direct Investment (FDI) inflow, as the sector accounted for 3
percent of countrys total FDI inflow in April 2000 to October 2013. Organized retail share is expected to
double to 14-18 percent of overall retail market by 2015.

The Indian FMCG sector is highly fragmented, volume driven and characterized by low margins with almost
half the market accounted for by unbranded, unpackaged home made products. The middle class and the
rural segments of the Indian population are the most promising market for FMCG, and give brand makers
the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste,
skin care, shampoos, soaps, detergents, etc, in India, have low per capita consumption as well as low
penetration level, but the potential for growth is huge.

The FMCG sector is characterized by a well-established distribution network spread across nearly twelve to
thirteen million retail outlets (including five million in 5,160 towns and seven million in 627,000 villages), low
penetration levels, increasing consumption, high brand awareness, intense competition between the
organized and unorganized segments, and a strong MNC presence.

The FMCG sector is one of the larger employers in the country. The total salary outlay of the sector on
direct employment is estimated at approximately 6% of turnover, i.e. US$ 1.5 billion (Rs. 7,000 crores).






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FMCG market has 4 main segments:














Trends in FMCG revenues over the years
The FMCG sector in India generated revenues worth
US$ 36.8 billion in 2012, a 5.7 per cent rise
compared to the previous year.






Size of the consumer durables market
Consumer durables market is expected to double at
14.8 per cent CAGR to US$ 12.5 billion in FY15 from
US$ 6.3 billion in FY10.

FMCG
Health
Care
Personal
Care
Food and
Beverages
Household
Care
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Market break-up of FMCG industry
Food products are the leading segment,
accounting for 43 per cent of the overall
market.




Shares in the consumer durables
market in India
Urban markets account for the major share
(65 per cent) of total revenues in the
consumer durables sector in India.



Robust GDP growth, opening up of rural markets, increased income in rural areas, growing urbanization
along with evolving consumer lifestyles and buying behaviors have all been drivers of this growth.
FMCG consumption is becoming more and more broad-based, and has reached an inflexion point where
the growth can be expected to take off, following the traditional S-shaped curve witnessed across many
markets. While on an average, the growth of the industry will be strong, it will not be uniform. Variations are
likely across product categories, companies and locations.
It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in
2003. The overall FMCG market is expected to increase at a CAGR of 14.7 percent to US$ 110.4 billion
during 2012-2020, with the rural FMCG market expected to increase at a CAGR of17.7 percent to US$ 100
billion during 2011-2025.


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Mega Trends across Consumers, Markets, and Environment which will shape the
Industry by 2020:

(1) Accelerating Premiumization:
Continuous income growth coupled with an increased willingness to spend will push consumer up-
trading and demand for higher priced, better quality (real or perceived) products.

(2) Evolving Categories:
Many consumers with rising economic status will shift from basic need to want based products.
In addition, evolving lifestyle behavior and emphasis on beauty, health, and wellness will see
increased requirements for customized and more relevant products.

(3) Goldmine at BOP:
A significant majority of the population in the country, especially in the rural markets, will become
an important source of consumption by moving beyond the survival mode. This bottom-of-the-
pyramid (BOP) segment will require tailored products at highly affordable prices with the potential
of very large volume supplies.

(4) Rapid Globalization:
While many leading foreign multinational companies (MNCs) have operated in the country for
years, given liberal policies, the next decade will witness increased competition from Tier 2 and 3
global players. In addition, larger Indian companies will continue to seek opportunities
internationally and also gain access to more global brands, products, and operating practices.

(5) Growing Modern Trade:
The share of modern trade will increase and may be expected to account for nearly 30 per cent of
the total trade by 2020. This channel will compete with existing traditional trade (approximately 8
million stores which will continue to grow) and offer both a distribution channel through its cash &
carry model as well as other avenues to interact with the consumer.

(6) Enabling Policies:
Many government policies under consideration, if executed, can help create a more suitable
operating environment. This will help boost both demand and supply. Demand will go up because
of increase in income levels and spread of education and supply will be augmented by removal of
process bottlenecks and boost in infrastructure investments.







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Key Concerns for the sector:

High inflation
Rising cost of inputs
Emergence of private labels
Counterfeits and pass-offs
Rupee depreciation may hit margins of companies
Infrastructure bottlenecks
















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PROFILE OF ITC LIMITED
ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited.
As the Company's ownership progressively Indianised, the name of the Company was changed from
Imperial Tobacco Company of India Limited to India Tobacco Company Limited in 1970 and then
to I.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide
range of businesses - Fast Moving Consumer Goods comprising Foods, Personal Care, Cigarettes
and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks and Safety
Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and Information
Technology - the full stops in the Company's name were removed effective September 18, 2001. The
Company now stands rechristened 'ITC Limited', where ITC is today no longer an acronym or an
initialized form.
Packaging and Printing: Backward Integration
ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's
Cigarettes business. It is today India's most sophisticated packaging house.
Entry into the Hospitality Sector - A 'Welcom' Move
In 1975, the Company launched its Hotels business with the acquisition of a hotel in Chennai which was
rechristened 'ITC-Welcomgroup Hotel Chola' (now renamed My Fortune, Chennai). The objective of ITC's
entry into the hotels business was rooted in the concept of creating value for the nation. ITC chose the
Hotels business for its potential to earn high levels of foreign exchange, create tourism infrastructure and
generate large scale direct and indirect employment. Since then ITC's Hotels business has grown to
occupy a position of leadership, with over 100 owned and managed properties spread across India under
four brands namely, ITC Hotels - Luxury Collection, WelcomHotels, Fortune Hotels and WelcomHeritage
Paperboards & Specialty Papers
In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited.
Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and became a
Division of the Company, Bhadrachalam Paperboards Division. In November 2002, this division merged
with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers Division. ITC's
paperboards' technology, productivity, quality and manufacturing processes are comparable to the best in
the world. It is directly involved in education, environmental protection and community development.
Agri Business - Strengthening Farmer Linkages
In 1990, ITC set up the Agri Business Division for export of agri-commodities. The Division is today one of
India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000
with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million farmers.

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Lifestyle Retailing - Premium Offerings
ITC also entered the Lifestyle retailing business with the Wills Sport range of international quality relaxed
wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later expanded its range to
include Wills Classic formal wear (2002) and Wills Clublife evening wear (2003). ITC also initiated a foray
into the popular segment with its men's wear brand, John Players, in 2002.
Information Technology - Business Friendly Solutions
In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC Infotech India
Limited, to more aggressively pursue emerging opportunities in this area. Today ITC Infotech is one of
India's fastest growing global IT and IT-enabled services companies and has established itself as a key
player in offshore outsourcing, providing outsourced IT solutions and services to leading global customers
across key focus verticals - Banking Financial Services & Insurance (BFSI), Consumer Packaged Goods
(CPG), Retail, Manufacturing, Engineering Services, Media & Entertainment, Travel, Hospitality, Life
Sciences and Transportation & Logistics.
Branded Packaged Foods - Delighting Millions of Households
It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In
2002, ITC entered the confectionery and staples segments with the launch of the brands mint-
o and Candyman confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introduction
of Sunfeast as the Company entered the biscuits segment. ITC entered the fast growing branded snacks
category with Bingo! in 2007. In 2010, ITC launched Sunfeast Yippee! to enter the Indian instant noodles
market. In just over a decade, the Foods business has grown to a significant size under seven distinctive
brands, with an enviable distribution reach, a rapidly growing market share and a solid market standing.
Personal Care Products - Expert Solutions for Discerning Consumers
ITC entered the Personal Care Business in 2005. In eight years, the Personal Care portfolio has grown
under 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel' and 'Superia' brands which have received encouraging
consumer response and have been progressively extended nationally. In May 2013, the business
expanded its product portfolio with the launch of Engage - one of India's first range of 'couple deodorants'.
Education & Stationery Products - Offering the Greenest products
ITC launched line of premium range of notebooks under brand Paperkraft in 2002. To augment its offering
and to reach a wider student population, the Classmate range of notebooks was launched in
2003. Classmate over the years has grown to become India's largest notebook brand and has also
increased its portfolio to occupy a greater share of the school bag. Years 2007- 2009 saw the launch of
Practical Books, Drawing Books, Geometry Boxes, Pens and Pencils under the 'Classmate' brand.



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ITC is one of India's foremost private sector companies with:
A market capitalization of US $ 45 billion.
A Turnover of US $ 7 billion.
26% compound annual growth in total shareholder returns over the last 17 years.
30,000 employees.
20.4% growth in net profits.
19.9% growth in gross revenue.
Rs 9.45 earnings per share.
Rs Crores
Key Economic Indicators 2008-09 2009-10 2010-2011 2011-12 2012-13 CAGR

Gross Revenue 23,059 26,200 30,528 34,872 41,810 16%
Net Revenue 15,612 18,153 21,168 24,798 29,606 17%
Exports 1,762 2,239 2,464 2,315 3,474 18%
Contribution to
Government/Exchequer
11,142 13,573 15,843 17,936 22,012 19%
Cost of Bought out
Goods and Services
9,907 10,685 13,133 14,215 17,214 15%
Employee Benefits
Expense
891 1,003 1,140 1,258 1,387 12%
Payments to Providers
of Capital
- Interest and
Dividend
- Retained Profits


1,425

1,634


3,891

-391


3,512

986


3,596

2,073


4,235

2,565


31%

12%

Additionally, during such period, the Companys Gross Revenues and Net Profits recorded an impressive
compound growth of 13.2% and 21.8% per annum respectively. Return on Capital Employed improved
substantially from 28.4% to 45.7% while Total Shareholder Returns, measured in terms of increase in
market capitalization and dividends, grew at a compound annual growth rate of over 26%, placing the
Company amongst the foremost in the country in terms of efficiency of servicing financial capital.



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REVENUE AND PROFIT BEFORE DEPRECIATION, INTEREST AND TAX (PBDIT),
REVENUE AND PROFIT BEFORE INTEREST AND TAX, PROFIT BEFORE TAX AND
PROFIT AFTER TAX.
Rs Crores
2013-14 2012-13 GOLY%
PBDIT 13562 11566 17.3
PBIT 12662 10771 17.6
PBT 12659 10684 18.5
PAT 8785 7418 18.4



Rs Crores
Full Year
GOLY% 2013-14 2012-13
Segment Revenue (Net)

A. FMCG Cigarettes
Others

TOTAL FMCG
B. Hotels
C. Agri business
D. Paperboards, Paper and
Packaging

TOTAL

Less : Inter Segment Revenue
Net Sales/Income From
Operations


15456
8099



13970
6983



10.6
16.0

23555 20953 12.4

1133
7752
4861



37301

1074
7201
4237



33464

5.5
7.7
14.7



11.5
4418 3859 14.5
38223 29606 11.1



SEGMENT REVENUE - 2013/14
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BOARD OF DIRECTORS
Chairman
Y C Deveshwar
Executive Directors
Nakul Anand P V Dhobale K N Grant
Non-Executive Directors
A Baijal S Banerjee A Duggal

A V Girija Kumar S H Khan R E Lerwill

S B Mainak S B Mathur P B Ramanujam

S S H Rehman Meera Shankar K Vaidyanath
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OBJECTIVE OF ANALYSIS AND METHODOLOGY

OBJECTIVE OF THE STUDY
The objective of the study is to analyze the financial statements of ITC limited using the technique of ratio
analysis so as to determine:
The financial position that is the strength and weakness of the firm over the past years.
The performance level of the firm over the years compared with the industry and its competitor.
The efficiency of management policy framework and its execution levels.
The future prospects of the firm in terms of overall growth in the industry.
METHODOLOGY USED
(1) Source of data:
The data extracted for the purpose of analysis is from a secondary but reliable source.

(2) Period of analysis:
The period taken into consideration for the purpose financial analysis is from financial years
ranging from 2011 to 2014. That is:
FY11: 1/4/2010 to 31/3/2011
FY12: 1/4/2011 to 31/3/2012
FY13: 1/4/2012 to 31/3/2013
FY14: 1/4/2013 to 31/3/2014

(3) Technique used for analysis:
The technique used for the financial analysis is ratio analysis. A ratio is a statistical yardstick
by means of which relationship between two or various accounting figures can be compared or
measured. It is essentially concerned with the calculation of relationships which after proper
identification and interpretation may provide information about the operations and state of
affairs of a business enterprise. The analysis is used to provide indicators of past performance
in terms of critical success factors of a business. This assistance in decision-making reduces
reliance on guesswork and intuition and establishes a basis for sound judgment.

Why only ratio analysis is used for financial analysis?
Simplifies financial statements
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Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the
factors associated with successful and unsuccessful firm. They also reveal strong firms and
weak firms, overvalued and undervalued firms.
Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its
basic functions of forecasting. Planning, co-ordination, control and communications.
Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the
performance of different divisions of the firm. The ratios are helpful in deciding about their
efficiency or otherwise in the past and likely performance in the future.
Help in investment decisions: It helps in investment decisions in the case of investors and
lending decisions in the case of bankers etc.
Provides sufficient insight to appraise the future prospect of the firm.

Type of ratios analyzed:

A. Liquidity Ratios
The objective of this ratio is to assess the ability of the firm to meet its current/short
term obligations. The concerned users of this ratio here are creditors, Banks, who are
interested in the short term solvency or liquidity of a firm. Every company should strike
a balance between two very essential contradictory requirements i.e. liquidity and
profitability for efficient financial management.

Current Ratio:
Current Assets
Current Ratio = ---------------------------
Current liabilities

Current Assets include Cash and Bank Balance, Marketable
Securities, Inventory, Debtors, Bills Receivable, Prepaid Expenses
etc.
Current Liabilities include Creditors, Bills Payable, Bank Overdraft,
Proposed Dividend, Provision for Taxation, Outstanding expense etc.
Current Ratio assesses short term solvency i.e. the ability to meet
short term obligation of the company.
Subject to deeper enquiry, generally a current ratio of 2:1 is
considered satisfactory.

Quick Ratio:
Quick Assets
Quick Ratio = ---------------------------
Current liabilities
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Quick Assets: CA - (Inventory + Prepaid Expenses)

The idea behind Quick Ratio is to assess more strictly the firms ability
to meet out short term obligations.
Inventory and prepaid expenses are excluded because these two
items are generally considered less liquid-able than any other items of
Current assets.
Generally a quick ratio of 1:1 is considered satisfactory, subject to
deeper enquiry.

B. Capital Structure or Leverage Ratios
The ratios under this category are very relevant from the point of view of long term
funds providers. They are interested to know whether the company is viable enough to
refund the long term loan along with interest or whether the company shall be able to
pay dividend to shareholders etc.
So ratios here focus on the long term solvency of the company.

Debt Equity Ratio

Outsiders Funds External Equities
Debt Equity Ratio = --------------------------- Or ------------------------
Insiders Funds Internal Equities

Total Debt
Or ----------------------------
Shareholders Funds

Long Term Loan + Current Liabilities
= ---------------------------------------------------------
Share Capital (Equity+Pref.) + Reserve &
Surplus - Accumulated loss

This ratio reflects the proportion of owners stake in the business.
Excess liabilities tend to cause insolvency and working capital
problem.
There is standard of 2:1, which says that debts should not exceed
twice of the Shareholders funds. (Subject to deeper enquiry)
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A higher ratio shows a large share of financing by the creditors of the
firm, a low ratio shows the opposite.
If a debt equity ratio is 1:2, it shows that for every rupee of outsiders,
the firm has two rupee of owners capital. In other words, the stake of
creditors is one-half of the owners. So creditors are safe.
If Debt equity ratio is high, the owners have liquidated their stake or if
the project fails, the creditors would lose. So also it gives a very bad
impression that owners do not have faith in their company.

Dividend Coverage Ratio:
Earnings after Tax
Dividend Coverage Ratio: = -----------------------------
Preference Dividend

This ratio shows the ability of a firm to pay fix amount of dividend on
preference shares.
Like the interest coverage ratio, this ratio also ascertains the margin
available to Preference Share Holders.

Capital Gearing Ratio :
Equity Share Capital + Res. & Surps.
Capital Gearing Ratio = ---------------------------------------------------------
Pref. Share Capital + Long Term Debt

This ratio is calculated to test the long term financial position of a firm.
If numerator is higher than denominator, its a low gearing ratio and otherwise
its a high gearing ratio.
A high gearing ratio is not good for a new company or in such companies
where future earnings are uncertain.

C. Activity Ratios
As the term itself speaks, the various activities of a firm should aim at maximizing the
overall objective of the company. So the firm has to ensure that all the activities should
be efficiently managed, properly supported by the assets or resources. In other words,
it can be said that there should be optimum and efficient utilization of the assets or all
resources of the firm, leading to more profitable activities. These ratios are also called
turnover ratio because they indicate the speed with which assets are converted or
turned over into sales.

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Debtors Turnover Ratio:

Net Credit Sales
Debtor Turnover Ratio: = --------------------------------
Average Debtors

Net Credit Sales = Total Sales Cash sales Sales Return

Average Debtors = Simple average of debtors at the beginning
and at the end of the year.
(Opening Debtors + Closing Debtors)
= --------------------------------------------------------
2
No. of days in a year
Average Collection Period = -----------------------------------
Debtor Turnover Ratio

A high Debtors ratio indicates less credit time allowed by the firm to its
clients and it is good and the vice versa.

Inventory Turnover Ratio:
Cost of Goods sold
Inventory Turnover Ratio: -------------------------------
Average Inventory

Cost of Goods Sold = Total Net Sales Gross Profit
= (Opening Inventory + Purchase +
Direct Expenses Closing Inventory)

Average Inventory = Simple average of Inventory at the
beginning and at the end of the year.

(Opening Inventory + Closing Inventory)
= ----------------------------------------------------------
2


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No. of days in a year
Inventory Conversion Period = -----------------------------------
Inventory Turnover Ratio

This ratio shows how fast the inventory can be sold.
A high inventory ratio is good from the point of view of better and
quick utilization of inventory.

Working Capital Turnover Ratio:
Cost of Goods Sold
Working Capital Turnover Ratio: -----------------------------------
Average Working Capital

Cost of Goods Sold
Or ---------------------------------
Net Working Capital

Working Capital (Net) = Current Assets Current Liabilities

Average Working Capital (WC) = Simple average of Inventory
at the beginning and at the
end of the year.

(Opening WC + Closing WC)
Or --------------------------------------------
2
The ratio shows the number of times the working capital is turned over
in the course of the year.
This ratio measures the efficiency with which the working capital is
being used by a firm.

Fixed Assets Turnover Ratio:
Net Sales
Fixed Assets Turnover Ratio = ---------------------------
Fixed Assets

Cost of Goods Sold
Or --------------------------------
Average Fixed Assets
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This ratio shows the extent to which the investment in fixed asset
contributes to sales.
A higher ratio shows fixed assets are properly utilized.

D. Profitability Ratios
These ratios are based on the premise that a firm should earn sufficient profit not only
on turnover but also for shareholders.
If the profit is inadequate, then the operating expenses cannot be recovered so also
dividend cannot be paid to owners.
Generally the ratios under this head are broadly classified under two heads:
1) Profit ratios based on Turnover
2) Profit ratios based on Investment

1) Profit ratios based on Turnover

Gross Profit Ratio:
Gross Profit
Gross Profit Ratio = ---------------------------- X 100
Net Sales

Gross Profit = Net Sales -- Cost of Goods Sold
Gross profit depends on prices, sales volume and costs. Any change
in these factors affects gross profit.
A high gross profit ratio is a sign of good management and it also
gives an idea as to how far the operating and non-operating expenses
can be tolerated.
A low gross profit ratio may point towards danger signals like a higher
cost of production, lower selling price and many more.

Operating Ratio:
Cost of goods sold + operating
expenses
Operating Ratio = ----------------------------------------- X100
Net Sales

Operating expenses: Indirect operating expenses taken to P/L
= Office & administration +Selling & Dist.exp.

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Expenses Ratio:
Cost of goods sold
Cost of gods sold ratio = --------------------------------------------X100
Net Sales

Operating Expenses
Operating Exp. ratio = --------------------------------------------X100

Net Sales

Financial Expenses
Financial Exp. Ratio = --------------------------------------------X100
Net Sales

A high expense ratio represents little margin for interest, tax and
dividends.

2) Profit ratios based on Investment

Return on Capital Employed:
The term Capital Employed refers to long term funds supplied by the
creditors and owners of the firm. It can be determined by two ways.
One by adding long term liabilities with shareholders funds and the
other by adding net working capital with fixed assets.

Net Profit after tax
Return on Capital Employed: ------------------------------ X 100
Average Capital Employed

Capital Employed = Share holders funds+ Long term
loan Accumulated Loss

= Fixed Assets + Net Working Capital

(Opening + Closing) Capital
Employed
Average Capital Employed: ---------------------------------------------------
2
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A comparison of this ratio with similar firms, with the industry average
and over the years speaks about how efficiently the long term funds of
the creditors and owners are being used.
The higher the ratio, the more efficient is the firm in utilizing its funds.

Earning Per Share:

Net Profit available to Equity Shareholders
Earning per Share: ------------------------------------------------------------
Number of Equity Shares

EPS being a widely used ratio is a measure of profitability from the
owners point of view. Higher the ratio, investors will be more
attracted.
Here Net Profit refers to Net Profit after taxes and preference
dividend.
Higher EPS is a good sign for owners, also gives a positive
impression about the company outside.

Dividend Per Share:

Net Distributed Profit to Equity
shareholders
Dividend per Share: ---------------------------------------------------------------
Number of Equity Shares

It is nothing but the dividend paid to the ordinary shareholders,
calculated per share basis.
Higher the ratio, investors will be more attracted.

Dividend Payout Ratio:

Dividend per Share
Dividend Payout ratio = ------------------------------------- x 100
Earning per Share

As the ratio itself speaks, this ratio tries to establish the relationship
between the profit belonging to equity shareholders and amount paid
to them.
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Dividend payout ratio in % when subtracted from 100 shows the
percentage of profit retained by the business.
This ratio when compared with industrial average and over the years,
throw light on its reasonability.

Price Earning Ratio:

Market Price of share
Price Earning Ratio: -------------------------------------
EPS
This ratio represents that for every rupee of earning per share, how
much the price being paid by the market.
This ratio is reviewed over the years to reflect the trend towards
appreciation in the value of shares per every rupee of EPS.
This ratio is of much use in calculating the Intrinsic Value of share.
Intrinsic value is very relevant for deciding whether to purchase a
companys share or not.






















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(4) Method used for interpretation:
The interpretation of the various ratios is done at two levels:
1. The individualistic firms performance from financial years 2011 to 2014. For example, in
the case of interpreting the current ratio the data interpreted will be shown in this manner:
Mar '14 Mar '13 Mar '12 Mar '11
1.30 1.27 1.20 1.14
2. The firms performance pitched with the industrial performance and competitor (HUL). For
example, in the data interpreted for the current ratio will be shown in this manner:
Mar '14 Mar '13 Mar '12 Mar '11
Industry 1.12 1.062 0.976 1.022
ITC Limited 1.30 1.27 1.20 1.14
HUL 0.74 0.76 0.83 0.86

(5) Data of Industry:
For arriving at a rational interpretation the industrys data is imperative. The performance of the
firms ratios with respect to industrial ratios for the period FY11 to FY14 is a relevant yardstick for
gauging the firms overall performance.
Now, for calculating the industrial ratios, the cumulative data of the following firms are taken into
consideration:
ITC Limited
Hindustan Unilever Limited
Nestle India
Dabur
Emami





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(6) Profile of HUL:
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company with a
heritage of over 80 years in India and touches the lives of two out of three Indians.
HUL works to create a better future every day and helps people feel good, look good and get more
out of life with brands and services that are good for them and good for others.
With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin
care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water
purifiers, the Company is a part of the everyday life of millions of consumers across India. Its
portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair &
Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke
Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit.
The Company has over 16,000 employees and has an annual turnover of INR 27408 crores
(financial year 2013 - 2014). HUL is a subsidiary of Unilever, one of the worlds leading suppliers of
fast moving consumer goods with strong local roots in more than 100 countries across the globe
with annual sales of 49.8 billion in 2013. Unilever has 67.25% shareholding in HUL.

Financials:

The domestic consumer business grew by 9% with 4% underlying volume
growth in a challenging environment.
Operating profit grew by 12% with operating margins improving +40 bps.
Cash from operations was up Rs. 462 crores over the previous year.
Last year basic EPS Rs. 17.56 per share.

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14
Return on Net Worth (%) 88.2 74.0 77.7 94.7 104.1
Return on Capital Employed (%) 103.8 87.5 96.8 109.1 130.2
Basic EPS (after exceptional
items) [Rs]
10.10 10.58 12.46 17.56 17.88


Future Plans:

Market leader Hindustan Unilever (HUL) is setting up 14 new consumer clusters as part of an
aggressive initiative to drive growth across smaller but fast-growing markets cross India. Rural
markets contribute to 55% of the total FMCG consumption in India. This will transform the HUL
organization from a four-branch structure at the front-end to 14 distinct consumer clusters that will
roll up into five sales branches based out of seven physical locations. The new clusters will kick-off
from September 21, 2014 with 14 new leadership positions to empower talent within the system.





ITC LIMITED
25

(7) WHY HUL HAS BEEN CHOSEN TO BE A COMPETITOR FOR COMPARISON:






























ITC LIMITED
26

FINANCIAL ANALYSIS USING RATIO ANALYSIS

LIQUIDITY RATIOS:
Current Ratio:

As per the rule of thumb says that the current ratio should be at least 2 that is the current assets should
meet current liabilities at least twice.








Now, by seeing the current ratios of ITC Limited from 2011 to 2014 we can easily examine that there is an
increasing trend.
As we can observe that the firm was having a current ratio of 1.14 in FY11 which is lower than the
standard. The firm was trading with considerable amount of liabilities in its books and is having the weakest
current ratio as compared with others. As we compare the current liabilities of FY11 with FY14,
Comparison of current ratio with Industry and HUL:





Mar '14 Mar '13 Mar '12 Mar '11
1.30 1.27 1.20 1.14
Mar '14 Mar '13 Mar '12 Mar '11
Industry 1.12 1.062 0.976 1.022
ITC Limited 1.30 1.27 1.20 1.14
HUL 0.74 0.76 0.83 0.86
1
1.1
1.2
1.3
1.4
Mar '11 Mar '12 Mar '13 Mar '14
C
U
R
R
E
N
T

R
A
T
I
O

FY2011-14
CURRENT RATIO [ITC]
ITC
ITC LIMITED
27









As we can observe from the above chart that ITC has always been the outperformer

Quick Ratio:


Now, as we can observe from the chart above that the quick ratio of
Comparison of Quick Ratio with Industry and HUL:


0.00
0.20
0.40
0.60
0.80
Mar '11 Mar '12 Mar '13 Mar '14
Q
U
I
C
K

R
A
T
I
O

FY2011-14
QUICK RATIO [ITC]
ITC
Mar '14 Mar '13 Mar '12 Mar '11
0.68 0.66 0.51 0.50
Mar '14 Mar '13 Mar '12 Mar '11
Industry 0.72 0.74 0.68 0.92
ITC Limited 0.68 0.66 0.51 0.50
HUL 0.46 0.46 0.45 0.44
0
0.5
1
1.5
Mar '11 Mar '12 Mar '13 Mar '14
C
U
R
R
E
N
T

R
A
T
I
O

FY2011-14
CURRNET RATIO [INDUSTRY VS ITC VS
HUL]
ITC
HUL
Industry
ITC LIMITED
28


As we can observe from the chart above that ITC Limited

CAPITAL STRUCTURE OR LEVERAGE RATIOS:

Debt Equity Ratio:











0.00
0.20
0.40
0.60
0.80
1.00
Mar '11 Mar '12 Mar '13 Mar '14
Q
U
I
C
K

R
A
T
I
O

FY2011-14
QUICK RATIO [INDUSTRY VS ITC VS HUL]
ITC
HUL
Industry
Mar '14 Mar '13 Mar '12 Mar '11
- - - 0.01
0.00
0.01
0.01
0.02
Mar '11 Mar '12 Mar '13 Mar '14
D
E
B
T

E
Q
U
I
T
Y

R
A
T
I
O

FY2011-14
DEBT EQUITY RATIO [ITC]
ITC
ITC LIMITED
29

Comparison of Debt Equity Ratio with Industry and HUL:












ACTIVITY RATIOS:
Debtors Turnover Ratio:







Mar '14 Mar '13 Mar '12 Mar '11
Industry 0.18 0.26 0.37 0.19
ITC Limited - - - 0.01
HUL - - - -
Mar '14 Mar '13 Mar '12 Mar '11
19.97 27.82 26.50 23.91
0.00
10.00
20.00
30.00
Mar '11 Mar '12 Mar '13 Mar '14
D
E
B
T
O
R
S

T
U
R
N
O
V
E
R

R
A
T
I
O

FY2011-14
DEBTORS TURNOVER RATIO [ITC]
ITC
0.00
0.10
0.20
0.30
0.40
Mar '11 Mar '12 Mar '13 Mar '14
D
E
B
T

E
Q
U
I
T
Y

R
A
T
I
O

FY2011-14
DEBT EQUITY RATIO
[INDUSTRY VS ITC VS HUL]
ITC
HUL
Industry
ITC LIMITED
30

Comparison of Debtors Turnover Ratio with Industry and HUL:












Inventory Turnover Ratio:



0
2
4
6
8
Mar '11 Mar '12 Mar '13 Mar '14
I
N
V
E
N
T
O
R
Y

T
U
R
N
O
V
E
R

R
A
T
I
O

FY2011-14
INVENTORY TURNOVER RATIO [ITC]
ITC
Mar '14 Mar '13 Mar '12 Mar '11
Industry 39.72 36.51 34.31 36.16
ITC Limited 19.97 27.82 26.50 23.91
HUL 33.96 34.13 27.27 24.34
Mar '14 Mar '13 Mar '12 Mar '11
4.52 4.53 6.53 6.05
0.00
20.00
40.00
60.00
Mar '11 Mar '12 Mar '13 Mar '14
D
E
B
T
O
R
S

T
U
R
N
O
V
E
R

R
A
T
I
O

FY2011-14
DEBTORS TURNOVER RATIO
[INDUSTRY VS ITC VS HUL]
ITC
HUL
Industry
ITC LIMITED
31

Comparison of Inventory Turnover Ratio with Industry and HUL:












Fixed Assets Turnover Ratio:



1.6
1.65
1.7
1.75
1.8
1.85
Mar '11 Mar '12 Mar '13 Mar '14
F
I
X
E
D

A
S
S
E
T
S

T
U
R
N
O
V
E
R

R
A
T
I
O

FY2011-14
FIXED ASSETS TURNOVER RATIO [ITC]
ITC
Mar '14 Mar '13 Mar '12 Mar '11
Industry 9.66 9.90 10.22 9.29
ITC Limited 4.52 4.53 6.53 6.05
HUL 10.2 10.21 8.79 7.02
Mar '14 Mar '13 Mar '12 Mar '11
4.52 4.53 6.53 6.05
0
5
10
15
Mar '11 Mar '12 Mar '13 Mar '14
I
N
V
E
N
T
O
R
Y

T
U
R
N
O
V
E
R

R
A
T
I
O

FY2011-14
INVENTORY TURNOVER RATIO
[INDUSTRY VS ITC VS HUL]
ITC
HUL
Industry
ITC LIMITED
32

Comparison of Fixed Assets Turnover Ratio with Industry and HUL:






PROFITABILITY RATIOS:
Gross Profit Ratio:

0
2
4
6
8
Mar '11 Mar '12 Mar '13 Mar '14
F
I
X
E
D

A
S
S
E
T
S

T
U
R
N
O
V
E
R

R
A
T
I
O

FY2011-14
FIXED ASSETS TUROVER RATIO
[INDUSTRY VS ITC VS HUL]
ITC
HUL
Industry
Mar '14 Mar '13 Mar '12 Mar '11
Industry 3.73 3.79 3.89 3.82
ITC Limited 1.83 1.80 1.81 1.69
HUL 6.77 6.73 6.26 5.65
Mar '14 Mar '13 Mar '12 Mar '11
4.52 4.53 6.53 6.05
ITC LIMITED
33



Comparison of Gross Profit Ratio with Industry and HUL:












Net Profit Ratio:

28
30
32
34
36
Mar '11 Mar '12 Mar '13 Mar '14
G
R
O
S
S

P
R
O
F
I
T

R
A
T
I
O

FY2011-14
GROSS PROFIT RATIO [ITC]
ITC
Mar '14 Mar '13 Mar '12 Mar '11
Industry 20.59 19.09 18.82 18.13
ITC Limited 34.76 32.88 32.77 30.97
HUL 15.04 14.59 13.89 12.45
0
10
20
30
40
Mar '11 Mar '12 Mar '13 Mar '14
G
R
O
S
S

P
R
O
F
I
T

R
A
T
I
O

FY2011-14
GROSS PROFIT RATIO
[INDUSTRY VS ITC VS HUL]
ITC
HUL
Industry