BUSINESS VALUATION PROJECT

Valuation of FMCG sector Hindustan Unilever Limited

BY GROUP- X7
ACHAL MITTAL -006
AKSHAT AGARWAL- 015
ARNAV KULKARNI- 071
AYUSH MADAN- 040
 Company overview:
Hindustan Unilever Limited (HUL) is India's largest Fast-Moving Consumer Goods company
with a heritage of over 80 years in India.
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 to name a few.
The Company has about 18,000 employees and has a net sales of INR 33895 crores (2016-17).
HUL is a subsidiary of Unilever, one of the worlds leading suppliers of Food, Home Care,
Personal Care and Refreshment products with sales in over 190 countries and an annual sales
turnover of 52.7 billion in 2016. Unilever has over 67% shareholding in HUL.

Industry and Competitive analysis

Porters Five Force Analysis - HUL

Bargaining Power of Unilevers

Customers/Buyers (Strong Force)
Low switching costs (strong force)
High quality of information (strong force)
Small size of individual buyers (weak force)

Threat of New Entrants or New Threat of Substitutes or

Entry (Weak Force)
Low switching costs (strong force)
High cost of brand development
(weak force)
High economies of scale (weak
force)
Competitive Rivalry or Competition
with Unilever (Strong Force)
High number of firms (strong force)
High aggressiveness of firms (strong
force)
Low switching costs (strong force)
Substitution (Weak Force)
Low switching costs (strong force)
Low substitute availability (weak
force)
Low performance to price ratio of
substitutes (weak force)

Bargaining Power of Unilevers Suppliers

(Moderate Force)
Moderate size of individual suppliers
(moderate force)
Moderate population of suppliers (moderate
force)
Moderate overall supply (moderate force)
 SWOT Analysis - HUL
Strengths: Threats:
1) Market leader in consumer goods 1) Removal of import restrictions resulting in
2) Extensive & integrated distribution system replacing of domestic brands
3) High Brand awareness 2) Tax and regulatory structure
4) Different products for different income 3) Rural demand is cyclical in nature and also
groups depends upon monsoon.
5) Low operational costs 4) Competition in the market:
6) Favourable governmental Policy: 5) Increasing price of commodities
7) Part of the Unilever group, hence strong 6) Intense and increasing competition amongst
brand equity other FMCG companies can affect business of
8) Reach of 6.4 million retail outlets HUL
9) Two R&D centres in India in Mumbai and 7) FDI in retail thereby allowing international
Bangalore brands
10) Over 700 million Indian consumers 8) Competition from unbranded and local
products can hurt Hindustan Unilever's
market

Opportunities: Weaknesses:
1) Untapped rural market, 1) Lower scope of investing in technology and
2) changing life style achieving
3) Increase in purchasing power of consumers 2) Economies of scale, especially in small
4) Large domestic market with more population sectors.
o 3) Low exports levels.
5) High consumer goods spending 4) Market share is limited due to presence of
6) Expanding market: other strong FMCG brands
7) Awareness in usage rate of consumer goods 5) Hindustan Unilever faced controversies like
8) Mergers and acquisitions to strengthen the skin lightening creams, pollution etc.
brand 6) Decreasing Market share

PEST analysis

Political:
Indias deregulatory environment has helped MNCs in India to expand into various
products and services, after 1991. HUL took advantage of this situation and merged with
TATA oil mills company and Lakme ltd. enabling HUL to enter new markets of
cosmetics and food oil of which it was not a part before and wanted to enter.
 HUL does not support any political party or any government by funding its operations
since it is a business entity and wants to restrict its operation to that field only, also it
knows how sensitive people of India are in terms of political alliances.
Economic:
In 2009, when whole world faced the major economic crises, Asian countries were least
hit due to their not so strong reliance on interest based investments.
When Unilever was making loss in most of the countries abroad it remained profitable in
India although profits declined. Raw materials sourcing is the first step of supply chain
and fluctuation in them could disturb the pricing of the products.
The brands that Unilever sells are everyday products so people are sensitive to their
pricing and constant price change can put them off.
Chemicals and palm oil are the major raw materials used and inflation keeps eating the
bottom line for soaps and detergents which are formed from these raw materials. India
stands on lowest level when it comes to per capita consumption on personal care
products: HUL has been trying to change that perception for years.
In India HUL faces direct completion not only by MNCs but also local producers who are
successful to the extent that it is almost impossible to break their market share and
loyalty.
Social
HUL launched program SHAKTI for women in rural areas to empower them and make
them independent.
Initiatives like increasing awareness among villagers about the importance of cleanliness
through Lifebuoy hand washing scheme since 2010.
Pure-It in-home water purifier has provided over 74 billion liters of safe drinking water
by end of 2016. Through Domex Toilet Academy, we have helped build over one lakh
toilets in rural households impacting over six lakh people.100% of childrens Frozen
Desserts and edible ice products have 110 kilocalories or fewer per portion.
CO2 emission per ton of production in our factories in India has reduced by 49%, water
usage has reduced by 53% and total waste generated has reduced by 45% compared to
2008 baseline.

Technological
It has been easier for HUL to manage its large supply network and monitor the inventory
situation.
Factories have been installed with automated operations which have eliminated the errors
that manual work could produce and also increased the efficiency and productivity.