Institute of Management Technology

2014-2016

Financial Report and Analysis

Ratio Analysis
Of
Dabur India Limited

Submitted To Submitted By
Prof. Dr. T.P. Ghosh
Section A, Group 9,
Gautam Kumar Tangudu-140201049
Gupta VatsalVimalbhai -140201050
Harshit Dalmia-140201051
Himanshu Mittal-140201052
Himanshu Singh-140201053
Imad Ahmad Khan-140201054
INTRODUCTION

Dabur India Limited has marked its presence with significant

achievements and today commands a market leadership
status.

Leading consumer goods company in India with a turnover

of Rs. 5,283 Crore (FY12)

17 ultra-modern manufacturing units spread around the

globe

Products marketed in over 60 countries

Wide and deep market penetration with 50 C&F agents,

more than 5000 distributors and over3.4 million retail
outlets all over India

Net Margin Ratio = PAT/total revenue

This ratio for a company (typically expressed as a percentage) shows

how much of each dollar earned by the company is translated into
profits. It is a good representative of how well the companys
management is in reducing the overall expenses. A good management
should be able to reduce the expenses and convert majority of the
revenue into profit.

This ratio will vary from industry to industry as similar business

constraints will exist in each distinct industry. This can be derived from
the fact that the expenses of an IT industry will be far less than the
expenses of a FMCG company, hence the revenue-to-profit-
convertibility will be affected. But this doesnt mean that the industry
is a bad option to invest in. If the Net Margin Ratio for that company is
more than its competitors in the same industry then it means that the
management of this company is doing a good job.

The trend for Dabur India Ltd. is as follows-

2010-11 2011-12 2012-13 2013-14

14.26% 12.15% 13.30% 13.50%

6000
4979.65
5000
4443.62

4000 3812.68
3306.96
3000 total revenue
PAT
2000

1000 590.98 672.1

471.41 463.24

0
2010-11 2011-12 2012-13 2013-14

The Net Margin Ratio for Dabur India Ltd. has been somewhat constant
over the years with a slight slump from 2010-11 to 2011-12 which was
2% approx. But the positive part is that the company has always
recorded an increase in the PAT.

The management needs to work on reducing the expenses so that the

profit increases for their shareholders.

Return on Total Asset = PAT/total asset

A ratio that measures a company's Profit After Tax (PAT) against its
total net assets. The ratio is considered an indicator of how effectively
a company is using its assets to generate earnings. The greater a
company's earnings in proportion to its assets (and the greater the
ratio from this calculation), the more effectively that company is said
to be using its assets.

This ratio is an effective tool to analyze the companys performance

based on its asset utilization. This ratio will vary from industry to
industry as similar business constraints will exist in each distinct
industry. This statement is derived from the fact that in an industry all
the companies will have somewhat the same capital investment (in
assets). Production/manufacturing companies have high value of
assets since they have plants and machineries as compared to IT
industry which have very little asset investments. Hence the ROTA for
such IT industry will always be higher than that of manufacturing
industry.

Dabur India Ltd.s ROTA-

2010-11 2011-12 2012-13 2013-14

19.58% 16.31% 21.12% 21.53%

Dabur has been providing constant Returns on its assets over the past
years except during a slump in 2010-11 to 2011-12 when it dropped
from 19.58% to 16.31%. But from 2012-13 onwards it got back to its
original position and has since then provided a ROTA above 21%. This
is a healthy ratio considering Dabur is in the FMCG sector and deals
with manufacturing activity and is capital intensive.

3500
3121.8
3000 2840.71 2798.45
2407.91
2500

2000
PAT
1500 total asset
1000 672.1
590.98
471.41 463.24
500

0
2010-11 2011-12 2012-13 2013-14
From the graph we can see that there has been a constant increase in
the Total Assets and comparatively the PAT has increased but during
the slump period of 2010-2011 to 2011-12 it can be seen that there
has been a drop in the ROTA. Otherwise the PAT increase has been in
sync with the increasing total assets.

Return on Capital Employed = (PAT + finance cost)/capital

employed

ROCE is a measure of profitability and efficiency of a company and acts

as a very good indicator of the companys health. Its the best judge of
the companys performance and is used extensively by the
shareholders for investment purposes. A higher ROCE indicates that
the capital was used efficiently. ROCE should be higher than the
companys finance cost; otherwise it will indicate that the company is
not employing its capital effectively and is not generating value for the
shareholders.

Daburs ROCE-

2010-11 2011-12 2012-13 2013-14

35.72% 30.19% 33.72% 35.52%

Daburs ROCE figures portray an impressive image of the companys

fund utilization and returns generation since they have constantly
provided a (30+)%. This is a very impressive profitability indicator and
also indicates that the management has been able to utilize the funds
efficiently and provide favorable returns for all the investors of the
company.
 2500

1946.7
2000 1807.19
1581.08
1500 1353.17
PAT+finance cost
1000 capital employed
691.45
609.38
483.41 477.34
500

0
2010-11 2011-12 2012-13 2013-14

Return on Equity = PAT/shareholder's funds

The amount of returns generated for the shareholders as a percentage

of equity shareholders fund. Return on equity measures a corporation's
profitability by revealing how much profit a company generates with
the money shareholders have invested.

This is a very good indicator of a companys financial performance. It

also tells about the companys profit paying capacity and the value it
generates for its shareholders. Every shareholder expects the company
to pay returns on his investment and this ratio tells him what to expect
from the company.

Daburs ROE-

2010-11 2011-12 2012-13 2013-14

42.81% 35.54% 37.75% 35.33%
 2000 1902.34
1800
1565.61
1600
1400 1303.27
1200 1101.16
1000 PAT
800 Shareholder's fund
672.1
590.98
600 471.41 463.24
400
200
0
2010-11 2011-12 2012-13 2013-14

Dabur portrays a healthy ROE paying habit, where it has generated a

minimum of 35% return for its shareholders in the past years. This is a
very good performance and should make the shareholders happy and
confident of their investments since their company is creating wealth
for them at a constant rate. There has been a slump in 2010-11 to
2011-12 period due to a decrease in the profit but an increase in the
shareholders fund. After that the company has generated an increase
in profit to sustain a healthy ROE even after constant rise in
shareholders fund.

The slump from 2010-11 to 2011-12

This slump has affected all the Profitability Ratios because all the
ratios have a common component, the Profit After Tax (PAT). PAT during
this period has declined though the scale of operations has increased
considerably. This increase in operations has not been able to trigger
an increase in the PAT due to an extra item which could not be curbed
and hence resulted in a decreased profit. This extra ordinary cost was
to the tune of Rs. 44.89 cr.
 2010-11 2011-12 2012-13 2013-14
Revenue from
Operations 3280.61 3759.33 4349.39 4870.08
PAT 471.41 463.24 590.98 672.1

As we can see from above that the PAT during the aforesaid period is
decreasing rather than increasing from Rs. 471.14 cr. to Rs. 463.24 cr.
whereas a considerable increase can be noticed in the revenue from
operations during the same period from Rs. 3280.61 cr. to Rs. 3759.33
cr. This proves that though the company was able to generate higher
revenue from up-scaling its operations, it was not able to retain the
revenue in terms of profit and hence reported a decreased profit for
this period.

This can be explained as a cause for the slump in the Profitability

Ratios for the period 2010-11 to 2011-12.

Interest Coverage Ratio = (PAT + finance cost)/finance

cost

ICR is used to determine how easily a company can pay interest on

outstanding debt. The interest coverage ratio is an indicator of the
companys capability to cover its finance cost. It tells us how many
times over the company can pay its finance cost over. The higher the
ICR, the better position the company has to pay its debt. If the ICR is
below 1.5 its interest paying capability can be questioned and anything
below 1 means the company doesnt generate enough profit to pay its
interest/finance cost and doesnt have a healthy financial situation, this
can lead to bankruptcy.
Daburs ICR-

2010-11 2011-12 2012-13 2013-14

40.28 33.85 33.12 35.73

800
691.45
700
609.38
600
483.41 477.34
500

400 finance cost

PAT+finance cost
300

200

100
12 14.1 18.4 19.35
0
2010-11 2011-12 2012-13 2013-14

Dabur projects a very strong financial backing in terms of its capability

to pay off its financial costs. Their ratios suggest that they can pay
approximately 35 times the financial cost which puts them in one of
the safest borrowers category. Raising debt from the market should
not be an issue for them since their chance of a payment default is
very low. This high ICR is because of their use of low debt in their
financial structure. This will be explained in the next ratio, Debt-Equity
Ratio.

Debt-Equity Ratio = Debt/Shareholder's funds

It indicates the proportion of Debt and Equity the company has used
for its financial setup. A high debt-equity ratio means the company is
making use of Financial Leverage to generate higher profit. Use of debt
can enable the company to achieve growth at an aggressive rate. This
is because the company has to pay only fixed interest/financial cost,
irrespective of the profit generated. So if it does well, it has financed its
operations with fixed cost and generated higher returns for its
shareholders. The drawback with a high debt equity ratio is that the
company must achieve the break even point in order to pay its finance
cost or else face bankruptcy. In any case the returns generated by the
debt should be more than the cost of this additional debt. Capital
intensive companies tend to have higher Debt-Equity Ratio in order to
finance plants and machineries.

Daburs Debt-Equity Ratio-

2010-11 2011-12 2012-13 2013-14

18.62% 21.32% 15.43% 2.33%

Dabur has considerably reduced its debt over the years and currently
has a negligible debt. Even though it shows that Dabur can fund its
operations on its own, this situation is not favorable because it means
that Dabur is not taking the advantage of Financial Leverage to
maximize its profits. Lenders prefer a low ratio and hence in future
Dabur has the option to raise debt.

2000 1902.34
1800
1565.61
1600
1400 1303.27
1200 1101.16
1000 Debt
800 Equity

600
400 252.01 277.81 241.58
200 44.29
0
2010-11 2011-12 2012-13 2013-14

This graph shows how the Dabur has been altering its financial
structure. It has considerably reduced its debt and increased equity in
its place. This is not a very favorable condition because they have
failed to utilize debt to maximize their profits and have instead
increased equity and diluted the shareholders stake in Dabur.

BETA ANALYSIS
In finance, the beta of an investment is a measure of the risk arising
from exposure to general market movements as opposed to
idiosyncratic factors. The market portfolio of all investable assets has a
beta of exactly 1. As we see in our case that Beta for all years is less
than 1 and also in 2012-13 financial year it is negative, it indicates that
either an investment with lower volatility than the market, or a volatile
investment whose price movements are not highly correlated with the
market. Negative Beta shows that the investment tends to go down
when the market goes up and vice versa.

2010-11 2011-12 2012-13 2013-14

0.6932 0.0586 -0.056 0.1911

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2010-2011 2011-2012 2012-2013 2013-2014
-0.1