Beruflich Dokumente
Kultur Dokumente
of Hindustan Unilever
Ltd.
Prepared By
BHARAT NARULA
SECTION: B
ROLL NO: 72
ACKNOWLEDGEMENT
BHARAT NARULA
CONTENTS
Objective
1. Introductions:
About the industry
About the company
2. Analysis of Company on the basis of ratios
EXECUTIVE SUMMARY
The fast moving consumer goods (FMCG) segment is the fourth largest
sector in the Indian economy. The market size of FMCG in India is
estimated to grow from US$ 30 billion in 2011 to US$ 74 billion in 2018.
Food products is the leading segment, accounting for 43 per cent of the
overall market. Personal care (22 per cent) and fabric care (12 per cent)
come next in terms of market share.
The Government of India has also been supporting the rural population
with higher minimum support prices (MSPs), loan waivers, and
disbursements through the National Rural Employment Guarantee Act
(NREGA) programme. These measures have helped in reducing poverty
in rural India and given a boost to rural purchasing power.
Hence rural demand is set to rise with rising incomes and greater
awareness of brands.
Urban trends
Top Companies
Road Ahead
The FMCG sector has grown at an annual average of about 11 per cent
over the last decade. The overall FMCG market is expected to increase at
(CAGR) of 14.7 per cent to touch US$ 110.4 billion during 2012-2020, with
the rural FMCG market anticipated to increase at a CAGR of 17.7 per cent
to reach US$ 100 billion during 2012-2025.Food products is the leading
segment, accounting for 43 per cent of the overall market. Personal care
(22 per cent) and fabric care (12 per cent) come next in terms of market
share.
TYPES OF RATIOS
In view of the requirements of the various users of ratios, we may classify them into
following four categories.
LIQUIDITY RATIOS
Liquidity ratios provide information about a firm's ability to meet its short-term financial
obligations. They are of particular interest to those extending short-term credit to the firm.
The objective of this ratio is to assess the ability of the firm to meet its
current/short tem obligations.
The concerned users of this ratio here are creditors, Banks, who are interested in the short
term solvency or liquidity of a firm
A) Current Ratio
B) Liquid / Quick Ratio
C) Super Quick Ratio
Current Ratio
Current ratio is a measure of firms short-term solvency. It indicates the availability of current
assets in rupees for every one rupee of current liability. It is also called Bankers Ratio or
working capital ratio (if expressed as a percentage). Standard ratio is 2:1.
Current Ratio =
Current Assets
___________________
Current Liabilities
2014
2013
2012
0.83
0.75
0.74
2011
0.86
0.76
HUL
As the conventional rule says it must in 2:1 ratio. But the trend just opposite if we compare
ratio with 2011 which was .86 and it has came down to .75 in 2015. Thus company has more
liabilities then assets. This is not good for company in long run. The trend shows that
company has increased its liabilities and others factors might be responsible for it. As we
know Indian economy was growing at its slowest pace and low availability of credit might be
the reason behind this .
COMPARISON OF CURRENT RATIO WITH INDUSTRY AND Colgate-Palmolive
(India) Ltd
COMPANY
Hul
Colgate &
Palmolive
Industry
201
201 201
5
2014
2013 2
1
0.75
0.74
0.76 0.83 0.86
0.80
2.55
0.85
1.98
1.07
1.93
1.09
1.68
1.12
1.78
Interpretation
As we can see from the above trend there has been significantly decrease
in Current ratio of Hul but less as compared to C&G. So it means although
it has decreased but very less . On the other hand Industry has
maintained Ratio. Now this reveals that the liquidity position of the company became
worse from last two years but HUL needs to maintain the industry standards to
maintain the supremacy in market.
Current ratio
3.00
2.50 2.55
2.00
1.98
HUL
Colgate&Pamolive
1.93
1.68
1.50
1.00
0.50
0.00
2015
2014
1.78
1.12
0.86
1.09
0.83
1.07
0.76
0.85
0.74
0.80
0.75
Industry
2013
2012
2011
LIQUID/QUICK RATIO
Liquid ratio is also termed as "Liquidity Ratio", "Acid Test Ratio" or "Quick
Ratio". The true liquidity refers to the ability of a firm to pay its short term
obligations as and when they become due. A standard of 1:1 absolute
liquidity ratio is considered an acceptable norm .
Quick Ratio =
Quick Assets
___________________
Current Liabilities
0.8
0.75
0.7
0.65
2011
2012
2013
2014
2015
Looking at the last five years trend it seems that Company is facing problem in short run as
the ratio is less than 1. Therefore, it indicates that the company did not have the ability to
repay all its debts by using its most liquid assets
2015
.75
2014
.74
.99
2.55
1.13
1.98
2013
.76
1.48
1.93
2012
.83
1.49
1.68
2011
.86
1.23
1.73
Hul
1.5
Industry
1
0.5
0
2011
2012
2013
2014
2015
Interpretation:
Over the past two years, the liquid ratio for HUL has been less than the accepted standard and
industry average. Also, HUL liquid ratio is less than 1.0 in the last 5 years. Therefore, it
indicates that the company did not have the ability to repay all its debts by using its most
liquid assets. But in case of C&G it has worsened and its alarming for the company in future.
On the one hand where Industry has improved its Quick ratio both the industry has
underperformed.
Super quick asset does not include also debtors and bills receivable.
Bank overdraft being excluded because of its kind of permanent nature
with the Bank.
Again looking at the super quick, it can be seen the company very less
liquid assets. But there has been some improvement in last 2 years. Thus
company is moving in right direction and it will calm the nerves of
investor.
COMPANY
Hul
Colgate &
Pamolive
Industry
2015
2014
0.26
2013
2012
2011
0.23
0.19
0.25
0.22
0.27
1.45
0.32
0.92
0.52
0.89
0.45
0.53
0.6
0.67
Interpretation:
As the thumb rule says and Industry the quick ratio must be greater than
1 but both the leader and peer have decreasing trend in last five years .
But Hul has performed better than C&P in term of maintain the ratio . In
2011 C&P was following the industry but then it started decreasing where
industry improved its ratio.
Hul
Colgate & Pamolive
Industry
2012
2013
2014
2015
3.5
3
2.97
2.82
2.5
2.66
2.12
2
1.5
1
0.5
0
2011
2012
2013
2014
2015
HUL
As the thumb rule says this ratio tells that how much firm has ability to pay its debt and if
equity is more than the total debt of the firm so firm will face low risk. Now if we see the
trend over 5 years it shows us that company has huge debt . Huge in the term as HUL is one
of the largest FMCG Company. So if the ratio is more than 2 it means the debt was more than
equity . But it is declining which is a good sign for the company and shareholders. Now let us
compare it with its peer and industry to really know where the company stand.
COMPARISON OF Debt to Equity RATIO WITH INDUSTRY AND Colgate-Palmolive
(India) Ltd
HUL
Colgate &
Pamolive
Industry
2011
2.82
2012
2.12
2013
3.31
2014
2.97
2015
2.66
1.72
1.23
1.59
1.07
1.67
1.17
1.48
1.01
1.21
0.89
HUL
Colgate & Pamolive
Industry
1.5
1
0.5
0
2011
2012
2013
2014
2015
It looks like HUL has high debt as compared to its peer. It was at its peak in 2013 but slowly
it started to come down which means it is reducing its debt. The graph shows that company is
financing its activities by introducing equity shareholders. But if we look at Colgate &
Palmolive it is known to be following industry trend and thus increasing investors confidence
in it . its good have low D/E ratio as in future it might be bigger worry for company .
EBIT
___________________
Interest coverage ratio =
Fixed interest charges
HUL
6000
4000
2000
0
2702.74
2011
2012
173.94
2013
134.21
2014
329.37
2015
A large value of this ratio means that company has huge surplus of money but it was not
using it for the expansion. But from 2011 we have seen a decline in trend which means
company is going for investment. Also high ratio means company is able to meet its
obligations to paying its interest in time. This is good news for long term investors because it
means the company future is secure. Now let us compare it with the industry and its peer.
8000
6000
Industry
4000
2000
0
2011
2012
2013
2014
2015
Interpretation :
Now we can only HUL has a good Interest Coverage ratio even exceeding the industry by a
great margin. Although its good but it means that company is sitting under a lot of cash but it
is not doing investment. If we look at year 2011, in the same year we have a lot of corruptions
& scandals which made a lot of fear in the industry about the functioning of the government.
As the sentiments improved we have a seen a steep decline ICR which is good where as C&G
has good ICR.
Since know of the Company give preference dividend thus it cannot be calculated.
ACTIVITY RATIO
Activity ratios are employed to evaluate the efficiency with which the firm
managers and utilizes its assets. These ratios are also called turnover
ratios because they indicate the speed with which assets are being
converted or turned over into sales. Activity ratios, thus, involve a
relationship between sales and asset.
The various ratios to be discussed under this head are follows :
1)
2)
3)
4)
5)
6)
20.92
2011
32.57
30.97
34.32
39.35
2012
2013
2014
2015
Hul
As we see the ratio is showing an increasing trend ,we can say the company is giving less
time to its creditors for payment . It seems that company liquidity resources are sufficient to
tackle any situation
Now let us compare it with Industry and its peer
Debt Turnover
ratio
Hul
Colgate &
Palmoliv
Industry
2011
20.92
2012
32.57
2013
30.97
2014
34.32
2015
39.35
53.18
30.8
38.96
65.39
70.26
139.08
99.53
173.67
57.18
139.3
4
Hul
Colgate & Palmoliv
100
Industry
50
0
2011
2012
2013
2014
2015
Interpretation :
Well it seems as Colgate & Palmolive is doing much better from last 2 years but it is much
lower than the industry standard. So Hul needs to increase it debt turnover ratio so that it
could utilize it for others things.
This shows that the management has implemented an optimum credit policy for generating
sales as well as converting the debtors into cash as soon as possible in the industry. This
shows a positive sign for the managements activity as per debtors turnover ratio is
concerned
HUL
4
2
0
2011
2012
2013
2014
2015
No if we compare the ratio from 2011 it seems it has improved significantly which means the
company is having less inventory. It is good for the company as it will save a lot of money
and increase profit. Now let us compare the Inventory turnover ratio with industry and its
peer
Inventory Turnover ratio
HUL
Colgate &
Pamolive
2011
2.74
2012
4.66
2013
5.52
2014
5.52
2015
6.06
4.73
5.34
6.42
6.69
6.09
Industry
4.09
5.98
6.61
6.64
7.51
Industry
2
0
2011
2012
2013
2014
2015
Interpretation:
Looking at the last 5 year trend we can see HUL has outperformed its peer and approaching
industry standards . Whereas the C&G ITR has declined if we look the last year ratio raising
worry sign for the management. We cannot say that HUL has outperformed but approaching
Industry standards. In long run Investors will be excited to invest in a company which has
fewer inventories .
HUL
4
2
0
2011
2012
2013
2014
2015
Since HUL is showing a decreasing trend over last five years which seems
some bad decisions taken by management due to which Working Capital
is decreasing which includes your assets and liabilities .
Working Capital
turnover ratio
HUL
Colgate
&
Pamoliv
e
Industr
y
2011
6.1
2012
6.71
2013
5.83
2014
5.37
2015
5.08
5.64
6.27
6.52
6.8
6.22
4.9
6.34
6.68
6.64
7.35
HUL
Colgate &
Pamolive
Industry
2
0
2011
2012
Interpretation:
2013
2014
2015
Looking at the data we can say HUL is not able to utilized its working
capital properly as compared to industry and C&G. It is showing a
negative trend since last 3 years where as industry and its peer is way
ahead. It can be due to some internal factors. Management has to think
how they can get optimum and efficient utilization of the assets or all
resources of the firm, leading to more profitable activities. The firm may
not have high working capital ratio as that of the industry but has a
sustained its turnover ratio in a stable manner with optimum levels of
working capital available at all times, unlike its peer which has shown
volatile performance of working capital ratio.
This ratio shows the extent to which the investment in fixed asset
contributes to sales. A higher ratio shows fixed assets are properly
utilized.
This ratio indicates the speed with which assets are converted or turned
over into sales.
HUL
2011
2012
2013
2014
2015
HUL is performing well over last few years. As this ratio indicated
how quickly the company is able to convert its fixed assets into
sales .
High ratio means shows fixed assets are properly utilized.
2011
5.59
HUL
Colgate &
Pamolive
Industry
3.94
4.18
5.14
4.27
5.43
4.52
3.97
4.37
2015
6.95
3.34
4.49
Interpretation:
The data shows HUL is the start performer even outperforming the
whole industry.
It means the management is able to liquefy the inventories so that it
can be properly utilized and help in the expansion of business .
HUL
Industry
3
2
1
0
2011
2012
Proprietary Ratio
2013
2014
2015
This ratio represents out of rupee one of shareholders funds, how much
has been invested in assets. In other words, company aims at maximum
amount of shareholders funds should be utilized against fixed assets.
HUL
2011
2012
2013
2014
2015
Since the ratio is less than 1 it means the HUL is borrowing more money to fund itself
In the long run its is not good for the company and shareholders
Proprietary ratio
0.12
0.1
HUL
0.08
0.06
Industry
0.04
0.02
0
2011 2012 2013 2014 2015
HUL
Colgate &
Palmolive
Industry
2011
0.08
0.04
0.1
Proprietary ratio
2012
2013
0.06
0.08
0.03
0.08
0.03
0.07
2014
0.07
2015
0.06
0.02
0.06
0.02
0.05
PROFITABILITY RATIOS
The profitability ratios are calculated to measure the operating efficiency
of the company. Besides management of the company, creditors and
owners are also interested in the profitability of the firm. Creditors want to
get interest and repayment of principal regularly. Owners want to get a
required rate of return on their investments. This is possible only when the
company earns enough profits.
Generally the ratios under this head are broadly classified under two
heads:
1) Profit ratios based on Turnover
2) Profit ratios based on Investment
Gross profit
__________________________
Gross profit ratio =
Net sales
Gross profit = Net Sales - Cost of goods sold
A low gross profit ratio may point towards danger signals like a
higher cost of production, lower selling price and many more.
HUL
0.44
0.46
0.48
0.47
2012
2013
2014
2015
Gross profit
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2011
2012
2013
2014
2015
Interpretation :
A lower Gross profit ration indicates high production cost, low selling
prices etc . Whereas Colgate is following industry standards and is neck to
neck with industry.
Although it has decreased and remained volatile while Colgate performed
really well in last five years. Low ratio might be due to increasing rate of cost of
goods the firm.
General Interpretation:
- A high net profit ratio is a good sign as it ensures sufficient
return to owners, more coverage for additional expenses, etc.
- A low net profit ratio gives a bad sign but the company may earn
more profit by selling more quantities. Pricing in a competitive
market is guided by this phenomenon.
0.1
HUL
0.13
0.12
0.11
2011
0.12
0.12
2012
2013
0.12
2014
2015
2012
2013
2014
2015
Interpretation:
Hul is again performing badly with its net profit ratio
remain stagnate all 5 years. Its alarming bell for the
management to look into the matter as quickly as
possible to increase investors confidence. Colgate has
also performed bad as compared to industry. Both the
company need to look in their expenses
C) Operating Ratio
This ratio mainly deals with operating cost incurred during opearions . it is
calculated as :
COGS + Operating Expenses
__________________________
Operating ratio =
Net sales
0.81
0.79
0.78
0.78
2012
2013
2014
2015
0.67
0.6
0.4
0.2
0
2011
HUL
Operating Ratio
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2011
2012
2013
2014
2015
Interpretations :
Looking at the trend and the net and gross profit ,it can be
predicted that Hul margins are decreasing due to rise in COGS
and other expenses .Where as Colgate is approaching Industry to
give positive affect in market
D) Expenses Ratio :
This ratio talks about the various expenses by breaking them
down
Operating expenses
Operating Expense ratio =
____________________________________
Net sales
Administrative Expenses
__________________________
Administrative Exp ratio =
Net sales
Selling Expenses
__________________________
Selling Expense ratio =
Net sales
HUL
Colgate &
Palmolive
Industry
HUL
Colgate &
Palmolive
Industry
Hul
Colgate &
Palmoliv
Industry
2011
0.38
0.32
0.32
2014
0.51
2015
0.52
0.37
0.45
0.41
0.43
0.38
0.41
0.37
0.41
Administrative
ratio
2011
2012
0.28
0.25
2013
0.25
2014
0.26
2015
0.26
0.31
0.28
0.35
0.29
0.35
0.28
2014
0.22
2015
0.22
0.26
0.29
0.28
0.3
0.06
0.12
0.38
0.37
0.25
0.24
0.32
0.25
0.28
0.28
COGS Ratio
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2011
2012
2013
2014
2015
2012
2013
2014
2015
Administrative ratio
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2011
2012
2013
2014
2015
Interpretation:
As we have seen there continues increase in operating cost due to margins have
decreased.
Although there has been decrease in operating profit but HUL has shown more
decrease than others
Similarly Colgate has followed the industry and HUL has remained volatile
1.5
1
0.5
0
2011
2012
2013
2014
2015
Although return on capital employed has decreased comparing the last 5 years but it good if
we look at industry trend. Thus HUL is properly utilizing the money of creditors and owners.
Higher ratio is good for company and management.
Return on capital
employed Share
2011
2012
2.22
1.39
HUL
COLGATE
&PALMOLIVE
Industry
3.84
2.47
1.99
1.22
2013
1.79
2014
1.83
2015
1.95
1.88
1.41
1.23
1.38
0.96
1.59
HUL
COLGATE
&PALMOLIVE
2.5
2
Industry
1.5
1
0.5
0
2011
2012
2013
2014
2015
Interpretation :
Comparing the HUL, C&P and industry we have seen HUL is performing better then
its peer and Industry. C&P is showing a decreasing trend.
HUL
COLGATE
&PALMOLIVE
Industry
Return on shareholder
fund
2011
2012
2.05
1.09
2.67
1.39
1.43
0.68
2013
1.41
2014
1.61
2015
1.58
1.43
0.74
1.22
0.73
1.14
0.74
HUL
1
0.5
0
2011
2012
2013
2014
2015
As this ratio has Profit in the numerator it means higher the ratio it is good for the company.
Also the trend shows it almost stagnant. The picture will become clearer once we compare it
with the industry to do more accurate analysis.
2012
2013
2014
2015
Interpretation
If we compare all three we see earlier they have shown some decline but then it has
consolidated its position. Again HUL has taken the lead and performed better but
comparing the profit are low. It will be good to see that management has to quickly do
some reforms in order to regain its supremacy.
=
Earnings per Share
HUL
60
40
20
0
2011
2012
2013
2014
2015
Hul is showing a decreasing trend over last 2years but still it is ahead of its rival and industry
but it is linked to high operating cost and low profit which has put pressures on HUL margins.
2012
2013
2014
2015
Interpretation
HUL is again the leader leading the industry but it is decreasing which is not a good sign . If
we look at the industry we see that HUL is performing good because industry is also showing
a decreasing trend
=
Number of Equity Shares
HUL
10
5
0
2011
2012
2013
2014
2015
Looking at the trend it is showing an increasing trend which is a good sign for the
management. Although it shows that company profit are increasing but it doesnt tell how
much the dividend will be payed to Shareholders
2012
2013
2014
2015
Interpretation
Looking at the trend we see although it is a healthy trend but below par with industry
and peers. There is a huge difference between its peers and industry. The same trend
was shown in Profitability of the company.
HUL
10
5
0
2011
2012
2013
2014
2015
Now looking at the trend we can see there has been 10% decline in the 2015 as compared to
2014 due to decline in profit as compared to previous year. This is not a good sign as
investors confidence will decrease and they will invest money in other company.
2012
2013
2014
2015
Interpretation
Hul has increased its dividend per share issue as compared to previous years but
looking at the C&P it is way ahead. It means the investors will be attracted more
towards the C&P rather than HUL. So the management need to fix this thing in order
to convince share holders in investing in HUL.