Chapter-1

INTRODUCTION

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INTRODUCTION
Object of the Project
Finance & its functions are the part of economic activity. Finance is very essentially needed for
all types of organizations viz; small, medium, large-scale industries & service sector. Hence the
role of finance manager & the subject finance accounting gained maximum importance.
Liberalization, Globalization & Privatization created new challenges to Entrepreneur &
Corporate in carrying their day to day activities. So, finance is regarded as the life blood of a
business organization.
Master of Management Studies is professional course which develop a new body of knowledge
& skill set & make as available for those seeking challenging carriers in the of liberalization &
globalization.

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Introduction of the topic

India is one of the top five economies in the world in terms of market potential and ranked as the
third biggest economy in Asia in terms of gross domestic product. All these make investment in
India a lucrative option for the investors across the world. The capital market of India forms an
important part of the development of the nation. Nowadays people are showing more interest to
invest in shares or derivatives. Investors are more conscious about the past performance of the
company, market fluctuations, and reason for fluctuation, economic policy and inflation etc.,
before making an investment in securities. Otherwise, the investors can be applied security
analysis. There are two alternative approaches for security analysis such as technical and
fundamental analysis. Technical analysis is a method of evaluating securities by analyzing the
statistics generated by market activity, such as past prices and volume.
The objective of Fundamental analysis is to appraise intrinsic value of a security. The intrinsic
value is the true economic worth of a financial asset. The fundamental analyst has to estimate the
intrinsic worth of a security by considering key economic and financial variables and see
whether the actual price is above or below its intrinsic value. Finally, the investors take buy or
sell decision depending upon the result drawn from those analyses. The main purpose of this
analysis is for long-term perspective in nature.

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Objectives of the Study

To study Fundamental Analysis.
To analyze the current trend FMCG sector in India.
To conduct Fundamental analysis for BSE/NSE listed FMCG companies.
Limitation of the study

The study is confined only to the FMCG companies in Bombay Stock Exchange.
External factors may adversely affect the industry as well as its share price. Government
policies, competition, tax imposition, global market, FDI/FII etc. Hence, the movement

of stock price is not 100 per cent predictable.

The present study uses ratios as an important tool of analysis which itself has a number of
limitations on its applicability..

Chapter 2
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Profile of the Institution

FMCG Sector in India

The overall fast moving consumer goods (FMCG) market is expected to increase at a compound
annual growth rate (CAGR) of 14.7 per cent to touch US$ 110.4 billion in the period 2012-2020,
with the rural FMCG market anticipated to increase at a CAGR of 17.7 per cent to US$ 100
billion during 2012-2025.
The market size of the Indian FMCG sector is expected to reach US$ 135 billion by 2020 from
US$ 44.9 billion in 2013. It is also the fourth largest sector in the Indian economy and has grown
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at an annual average of about 11 per cent over the last decade. Food products, the leading market
segment with 43 per cent of the overall market revenue together with personal care at 22 per cent
make up two-thirds of the sector's revenue.
The Government of India's policies and regulatory frameworks such as relaxation of license rules
and approval of 51 per cent foreign direct investment (FDI) in multi-brand and 100 per cent in
single-brand retail are some of the major growth drivers in this sector. The government has also
amended the Sugarcane Control Order, 1966, and replaced the Statutory Minimum Price (SMP)
of sugarcane with Fair and Remunerative Price (FRP) and the State Advised Price (SAP).
There is a lot of scope for growth in the FMCG sector from rural markets with consumption
expected to grow in these areas as penetration of brands increases. Also, with rising per capita
income, which is projected to expand at a CAGR of 7.4 per cent over the period 2013-19, the
FMCG sector is anticipated to witness some major growth.

Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai,
Maharashtra. It is owned by Anglo-Dutch company Unilever which owns a 67% controlling
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share in HUL. HUL's products include foods, beverages, cleaning agents and personal care
products.
HUL was established in 1933 as Lever Brothers and, in 1956, became known as Hindustan Lever
Limited, as a result of a merger between Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and
United Traders Ltd. It is headquartered in Mumbai, India and employs over 16,500 workers,
whilst also indirectly helping to facilitate the employment of over 65,000 people. The company
was renamed in June 2007 as "Hindustan Unilever Limited".
Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its
products are available in over 6.4 million outlets in the country. As per Nielsen market research
data, two out of three Indians use HUL products.
Brands
HUL is the market leader in Indian consumer products with presence in over 20 consumer
categories such as soaps, tea, detergents and shampoos amongst others with over 700 million
Indian consumers using its products. Eighteen of HUL's brands featured in the ACNielsen Brand
Equity list of 100 Most Trusted Brands Annual Survey (2012), carried out by Brand Equity, a
supplement of The Economic Times.
The "most trusted brands" from HUL in the top 100 list (their rankings in brackets) are:

1. Clinic Plus (4)

2. Lifebuoy (10)
3. Fair & Lovely (11)
4. Rin (12)
5. Surf Excel (13)
6. Lux (14)
7. Pepsodent (17)
8. Closeup (19)
9. Pond's (20)
10. Sunsilk (26)
11. Dove (37)
12. Vim (43)
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13. Pears (79)

14. Lakme (81)
15. Vaseline (86)
16. Wheel (87)
17. Hamam (95)
18. Rexona (96)

Leadership
HUL has produced many business leaders for corporate India, including Harish Manwani, the
non-executive chairman of HUL and currently the chief operating officer of Unilever. He is also
a member of Unilever Leadership Executive team (ULE), which comprises the company's top
management and is responsible for managing Unilever's profit and loss, and delivering growth
across its regions, categories and functions. Sanjiv Mehta was appointed as the Managing
Director and Chief Executive Officer of HUL with effect from 10 October 2013.
HUL was ranked 4th in the Hewitt Global Leadership Survey 2007 with only GE, P&G and
Nokia ranking ahead of HUL in the ability to produce leaders.A study conducted by Aon Hewitt,
The RBL Group and Fortune in 2011, ranked the company number six in the list of 'Top
Companies for Leaders 2011 Study Results'. The company was awarded the CII- Prize for
Leadership in HR Excellence at the 2nd CII National HR Conclave 2011 held on October 2011.

ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its
diversified business includes five segments: Fast Moving Consumer Goods (FMCG), Hotels,
Paperboards & Packaging, Agri Business & Information Technology.
Established in 1910 as the Imperial Tobacco Company of India Limited, the company was
renamed as the Indian Tobacco Company Limited in 1970 and further to I.T.C. Limited in 1974.
The periods in the name were removed in September 2001 for the company to be renamed as
ITC Ltd. The company completed 100 years in 2010 and as of 2012-13, had an annual turnover
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of US$8.31 billion and a market capitalisation of US$45 billion. It employs over 25,000 people
at more than 60 locations across India and is part of Forbes 2000 list.
Products and Brands
Cigarettes
ITC Ltd sells 80 percent of the cigarettes in the India, where 275 million people use tobacco
products and the total cigarette market is worth close to $6 billion (around Rs.35,000 crore)
ITC's major cigarette brands include W.D. & H.O. Wills, Gold Flake Kings, Gold Flake
Premium,Gold Flake Super Star, Navy Cut, Insignia, India Kings, Classic (Verve, Menthol,
Menthol Rush, Regular, Citric Twist, Mild & Ultra Mild), 555, Silk Cut, Scissors, Capstan,
Berkeley, Bristol, Lucky Strike, Players, Flake and Duke & Royal.[

Other businesses
1) Foods: ITC's major food brands include Kitchens of India; Aashirvaad, Mint-o, gum-o, B
natural, Sunfeast, Candyman, Bingo! and Yippee!.[32] ITC is India's largest seller of branded
foods with sales of over Rs. 4,600 crore in 2012-13.[33] It is present across 4 categories in the
Foods business namely Staples, Snack Foods, Ready-To-Eat Foods and Confectionery.
2) Lifestyle apparel: ITC sells its products under the Wills Lifestyle and John Players brands.
Wills Lifestyle was accorded the Superbrand status and John Players was included in the top 10
Most Trusted Apparel Brands 2012 by The Economic Times.[6]
3) Personal care products include perfumes, haircare and skincare categories. Major brands are
Fiama Di Wills, Vivel, Essenza Di Wills, Superia and Engage.

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4) Stationery: Brands include Classmate, PaperKraft and Colour Crew.Launched in 2003,

Classmate went on to become India's largest notebook brand in 2007.
5) Safety Matches and Agarbattis: Ship, i Kno and Aim brands of safety matches and the
Mangaldeep brand of agarbattis (Incense Sticks).
6) Hotels: ITC's Hotels division (under brands including WelcomHotel) is India's second
largest hotel chain with over 90 hotels throughout India. ITC is also the exclusive franchisee in
India of two brands owned by Sheraton International Inc. Brands in the hospitality sector owned
and operated by its subsidiaries include Fortune Park Hotels and WelcomHeritage Hotels.
7)

Paperboard: Products such as specialty paper, graphic and other paper are sold under the

ITC brand by the ITC Paperboards and Specialty Papers Division.[43]

8) Packaging and Printing: ITC's Packaging and Printing division operates manufacturing
facilities at Haridwar and Chennai and services domestic and export markets.[44]
9) Information Technology: ITC operates through its fully owned subsidiary ITC Infotech India
Limited, which is a SEI CMM Level 5 company.

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Nestl India is a subsidiary of Nestl S.A. of Switzerland. With eight factories and a large
number of co-packers, Nestl India is a vibrant Company that provides consumers in India with
products of global standards and is committed to long-term sustainable growth and shareholder
satisfaction.
The Company insists on honesty, integrity and fairness in all aspects of its business and expects
the same in its relationships. This has earned it the trust and respect of every strata of society that
it comes in contact with and is acknowledged amongst India's 'Most Respected Companies' and
amongst the 'Top Wealth Creators of India'.
After more than a century-old association with the country, today, Nestl India has presence
across India with 8 manufacturing facilities and 4 branch offices.
Nestl India set up its first manufacturing facility at Moga (Punjab) in 1961 followed by its
manufacturing facilities at Choladi (Tamil Nadu), in 1967; Nanjangud (Karnataka), in 1989;
Samalkha (Haryana), in 1993; Ponda and Bicholim (Goa), in 1995 and 1997, respectively; and
Pantnagar (Uttarakhand), in 2006. In 2012, Nestle India set up its 8th manufacturing facility at
Tahliwal (Himachal Pradesh).
The 4 Branch Offices located at Delhi, Mumbai, Chennai and Kolkata help facilitate the sales
and marketing activities. The Nestl Indias Head Office is located in Gurgaon, Haryana.

Products

Nestl has 8,000 brands,[22] with a wide range of products across a number of markets, including
coffee, bottled water, milkshakes and other beverages, breakfast cereals, infant foods,
performance and healthcare nutrition, seasonings, soups and sauces, frozen and refrigerated
foods, and pet food.[23]
As of year end 2010, Nestl held 29.7% of the shares of L'Oral, the world's largest company in
cosmetics and beauty. Its brands including Garnier, Maybelline, and Lancme as well as The

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Body Shop stores. LOral holds 10.41% of the shares of Sanofi-Aventis, the world's number 3
and Europe's number 1 pharmaceutical company.[24]

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Dabur is India's largest Ayurvedic medicine & related products manufacturer. Dabur was
founded in 1884 by Dr. SK Burman, a physician in West Bengal, to produce and dispense
Ayurvedic medicines. German company Fresenius SE bought a 73.27% equity stake in Dabur
Pharma in June 2008 at Rs76.50 a share. The German company had also purchased another
17.62% shares from the market through an open offer at the same price. Dr. Burman designed
Ayurvedic medication for diseases such as cholera and malaria. The Dabur name is derived from
the Devanagri rendition of Daktar Burman.
Dabur's Ayurvedic Specialities Division has over 260 medicines for treating a range of ailments
and body conditions, from common cold to chronic paralysis. Dabur International, a fully owned
subsidiary of Dabur India formerly held shares in the UAE based Weikfield International, which
it disposed of on 25 June 2012.
Dabur India Limited is the fourth largest FMCG Company in India with Revenues of over Rs
7,073 Crore & Market Capitalisation of US $5 Billion. Building on a legacy of quality and
experience of over 130 years, Dabur operates in key consumer products categories like Hair
Care, Oral Care, Health Care, Skin Care, Home Care & Foods.

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Marico is an Indian consumer goods company providing consumer products and services in the
areas of Health and Beauty based in Mumbai.
During 200910, the company generated a turnover of about Rs 2,660 crore (USD 600 million),
in respect of its food, hair care and skin care related activities. Marico's own manufacturing
facilities are located at Goa, Kanjikode, Jalgaon, Pondicherry, Dehradun, Baddi, Paonta Sahib,
Perundurai and Daman.
In Bangladesh, Marico operates through Marico Bangladesh Limited, a wholly owned subsidiary.
Its Manufacturing facility is located at Shirirchala, near Gazipur.

Brands
The organization holds a number of brands including
1. Parachute
2.

Saffola

3. Hair&Care,
4. Nihar,
5. Mediker,
6. Revive,
7. Manjal,
8. Kaya Skin Clinic,
9. Livon,
10. Set Wet,
11. Zatak,
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12. Fiancee,
13. HairCode,
14. Eclipse,
15. X-Men,
16. Hercules,
17. Caivil,
18. Code 78
19. Black Chic

Marketing
Indian expatriates in the Middle East had been smuggling Parachute oil with them for their daily
use when export of the oil was restricted prior to the 1991 economic liberalization. Marico
decided to try to sell products in that market after liberalization, but found that Arab customers
did not like the scent of coconut, wanted a less sticky hair product, and needed a product to
counteracted the high level of chlorination in their water. When Marico reformulated its product,
its market share in the Arab Mideast grew from 2% in 2002 to more than 20% by 2008.

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Chapter - 3
LITERATURE REVIEW

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LITERATURE REVIEW
A brief review of literature would help the researcher, reader and other research scholars in
gaining an insight into the studies, which were made in areas related to the subject of this study.
The findings of some of the studies are briefly findings of some of the studies are briefly.
Jeffery Abarbanell and Brain Bushee (1977)
Fundamental Analysis, Future Earnings and Stock

Prices, in their study examined the

relationship between accounting based fundamental signals and future earnings of security
prices. They applied multiple regression analysis to analyse the data. The study found that
investors are not completely relying on the information given by the analyst. They also found
that the variables such as Gross Domestic Product, inflation, firm specific variables are prior
earnings, expected earnings growth, relation between fundamental signal and future earnings,
revisions and forecast errors are most influencing factors in fundamental analysis.
Sandip Mukherji, Manjeet, and Kim (1997),
AFundamental Analysis of Korean Stock Returns in their article examined about the relation
between stock return and fundamental variables in Korean firms annual stock returns during the
period of 1982-83. The study found that stock returns are positively related to book-market ratio,
sales-price ratio and debt-equity ratio. It is also found that return is negatively related to firm size
and not significantly related to earnings price ratio. They suggested that book-market and salesprice ratios are more efficient indicators than the earnings-price and the debt-equity ratio.
Jiang Xia (2000)
Fundamental Analysis of Price on Chinese Steel Products in his paper considered five
fundamental factors such as price index of steel product, Gross National Product, exchange rates,

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interest rates, imports and exports are influencing over the price of steel products. A hedonic
function model was applied which reflects the relation between prices of varieties of
heterogeneous goods and empirical tests applied by using Chinese annual data for the year 1978?
98. The study found that the above said variables are influencing at 62 per cent over the steel
price. The price index and Gross Domestic Product have positive significant relation which
depicts that higher the price index and Gross Domestic Product, higher the steel price. The
exchange rate have negative impact over the steel price, the interest rate does not have influence
over the steel price and finally it is found that import and export influence the steel price of the
product.
Mehmet Sarac (2007)
Does Fundamental Analysis Matter for Foreign Investors? An Empirical Analysis of Foreign
Investment in the Istanbul Stock Exchange The paper analyzed about the buy and sell decisions
of foreign investors are related to financial indicators of the firms listed on the Istanbul Stock
Exchange. Based on the monthly data from January 2000 to April 2006, the study found that the
operating leverage, profitability and solvency are the most important factors while investing in
the manufacturing stocks. Foreign investors consider solvency is a major factor whereas, local
investors considers the profitability of a firm.
Hence, the present study focused to fill the research gap of the previous study and attempt to
make a fundamental analysis on FMCG sector in India.

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Chapter -4

RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

Method of Study
The project includes the study of fundament factors for FMCG companies. Methodology is the
science of dealings principles of procedure in research study.
Research Design and Period of the Study
This study is based on analytical nature and covers of five years from 2009-10 to 2013-14.
Data collection:
A major portion of the data in this study has been collected through secondary sources of data.

Secondary data sources include:

Annual reports of FMCG companies
BSE/ NSE Websites.
Data from Moneycontrol.com
Books and RBI economic statistics of 2014.

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Sample Profile:
Sample Selection Criteria
The study is based on the secondary data. The audited financial statements of the companies are
the main source of data. The FMCG companies which satisfied the following criteria have been
selected.
The criteria are:

FMCG companies listed in BSE

Availability of data for a period of five years
Accounting year must be from April to March

Companies that satisfy the above conditions are:

1.
2.
3.
4.
5.

ITC
Hindustan Unilever
Nestle India
Marico
Dabur

Conceptual Framework
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Fundamental analysis was done based on past five years data available and the ratios used are as
follows:

Economic Analysis
Gross National Product, Gross Domestic Production, Savings rate, Inflation rate, Interest rate,
Exchange rate, Foreign exchange reserves, Agro production, Govt. Receipts, Govt. Expenditure
Balance of Payments etc.

Industry Analysis
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Growth rate and SWOT analysis

Company Analysis
Earnings per share, Dividend per share, Dividend payout ratio, Price Earnings RATIO, Return on
Equity, Earnings yield ratio, Dividend yield ratio, Price to book value Ratio, Intrinsic value
Earnings per Share (EPS)
The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serves as an indicator of a company's profitability.
Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding
over the reporting term, because the number of shares outstanding can change over time.
However, data sources sometimes simplify the calculation by using the number of shares
outstanding at the end of the period.
Diluted EPS expands on basic EPS by including the shares of convertibles or warrants
outstanding in the outstanding shares number.

Dividend per Share (DPS)

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The the sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is
the total dividends paid out over an entire year (including interim dividends but not including
special dividends) divided by the number of outstanding ordinary shares issued.
DPS can be calculated by using the following formula:

D - Sum of dividends over a period (usually 1 year)

SD - Special, one time dividends
S - Shares outstanding for the period

Dividend Payout Ratio (DP Ratio)

The DP ratio is the ratio between the DPS and EPS of the firm, i.e., it refers to the proportion of
the EPS which has been distributed by the company as dividends. Dividend payout ratio may be
calculated as follows:
Dividend Payout Ratio = Dividend per share/Earnings per share x 100.
The payout ratio provides an idea of how well earnings support the dividend payments. More
mature companies tend to have a higher payout ratio.

Price to Earnings Ratio (PE Ratio)

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The PE Ratio indicates the expectations of the equity investors about the earnings of the firm.
The PE ratio is one of the most widely used measures of financial analysis in practice and is
calculated as follows.
Price to Earnings ratio = Market price of share/Earnings per Share.
Return on Equity (RoE)
The RoE examines profitability from the perspective of the equity investors by relating profits
available for the equity share holders with the book value of the equity investment.
Return on Equity = Profit after Tax/Net Worth x 100
Price to Book Value Ratio
The book value of a share provides a floor below which the market price of a share is not
expected to fall. Shares which have lower PB Ratio may be considered as a safer investment
and vice versa.
Price to Book Ratio = Market price per share/Book value per share.

Profitability ratios
A class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs
incurred during a specific period of time. For most of these ratios, having a
higher value relative to a competitor's ratio or the same ratio from a previous
period is indicative that the company is doing well.

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Operating Margin
A ratio used to measure a company's pricing strategy and operating efficiency.
Calculated as:

Operating margin is a measurement of what proportion of a company's revenue is left over after
paying for variable costs of production such as wages, raw materials, etc. A healthy operating
margin is required for a company to be able to pay for its fixed costs, such as interest on debt.
Also known as "operating profit margin" or "net profit margin".
Gross Profit Margin
A financial metric used to assess a firm's financial health by revealing the proportion of money
left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as
the source for paying additional expenses and future savings.
Calculated as:

Where:COGS = Cost of Goods Sold

Also known as "gross margin."

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Net Profit Ratio

The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining
profit after all costs of production, administration, and financing have been deducted from sales,
and income taxes recognized. As such, it is one of the best measures of the overall results of a
firm, especially when combined with an evaluation of how well it is using its working capital.
The measure is commonly reported on a trend line, to judge performance over time. It is also
used to compare the results of a business with its competitors.
Net profit is not an indicator of cash flows, since net profit incorporates a number of non-cash
expenses, such as accrued expenses, amortization, and depreciation.
The formula for the net profit ratio is to divide net profit by net sales, and then multiply by 100.
The formula is:
(Net profit / Net sales) x 100
The measure could be modified for use by a nonprofit entity, if the change in net assets were to
be used in the formula instead of net profit.
'Fixed-Asset Turnover Ratio'
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's
ability to generate net sales from fixed-asset investments - specifically property, plant and
equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the
company has been more effective in using the investment in fixed assets to generate revenues.
The fixed-asset turnover ratio is calculated as:

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This ratio is often used as a measure in manufacturing industries, where major purchases are
made for PP&E to help increase output. When companies make these large purchases, prudent
investors watch this ratio in following years to see how effective the investment in the fixed
assets was.
"Inventory Turnover"

A ratio showing how many times a company's inventory is sold and replaced over a period. The
days in the period can then be divided by the inventory turnover formula to calculate the days it
takes to sell the inventory on hand or "inventory turnover days."

Earnings Retention Ratio

Earning Retention Ratio is also called as Plowback Ratio. As per definition, Earning Retention
Ratio or Plowback Ratio is the ratio that measures the amount of earnings retained after
dividends have been paid out to the shareholders. The prime idea behind earnings retention ratio
is that the more the company retains the faster it has chances of growing as a business. This is
also known as retention rate or retention ratio. There is always a conflict when it comes to
calculation of Earnings retention ratio, the managers of the company want a higher earnings
retention ratio or plowback ratio, while the shareholders of the company would think otherwise,
as the higher the plowback ratio the uncertain their control over their shares and finances are.

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Formula to calculate Earnings Retention Ratio or Plowback ratio

This ratio shows the amount that has been retained back into the business for the growth of the
business and not being paid out as dividends. The formula is
= Plowed back gross profits / total gross profits
= Total Gross Profits Payout ratio
= (Total Net Profit / Number of Total share) - (Dividend / Share)
The investors prefer to have a higher retention ratio in a fast growing business, and lower
retention ratio in a slower growing business.

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CHAPTER - 5

DATA ANALYSIS & INTERPRETATION

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DATA ANALYSIS & INTERPRETATION

Economic Analysis

Economic analysis deals with the analysis of operating in the overall economy. In security
analysis, the expected course of the economy must be inquired into because overall economic
conditions and economic activities affect corporate profits and investors expectations and
thereby affect the security prices in decisions. Investors consider those variables of the
economy, which affect the performance of the company in which they tend to invest. The
economic variables used in this study such as,
Gross National Product, Gross Domestic Production, Savings rate, Inflation rate, Interest
rate, Exchange rate, Foreign exchange reserves, Agro production, Govt. Receipts, Govt.
Expenditure Balance of Payments etc.

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Industry Analysis
Predicting Sales Of Fast-Moving Consumer Goods In India

Nielsen predicts that Indias FMCG industry will grow from $37 billion in 2013 to $49
billion in 2016.

Indian FMCG industry expected to grow 7% in 2014, 10% in 2015 and about 12% in
2016, taking the sales in 2016 to $49 billion.

Distribution growth, innovations around sachet offerings, employment rates and index of
industrial production (IIP) are key influencers of FMCG sales in India.

Indias FMCG industry is massive. In 2013, 8.4 million outlets served 1.26 billion people and
accounted for US$37 billion in sales.
The last three years have been challenging for Indias FMCG industry. Sales have been affected
by a weak economy and high inflation. Consumer confidence which we found has a strong
correlation with FMCG sales, has also dipped in this period. In more recent months, however,
confidence is rebounding and the sector appears to be one with perceptible signs of a sustained
recovery.

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The FMCG Industry Milieu

To understand the declining FMCG growth trend and predict how the future looks like, we must
first understand the sales environment. There are several forces at play that affect the FMCG
industry in India.
Through multivariate regression modelling and custom forecasting, Nielsen arrived at driversbased FMCG forecasts incorporating a range of influencing variables. This helps in
understanding market dynamics, gain foresight into current and emerging trends and to plan
better.

Nielsen used a three step approach to forecast FMCG sales value.

1. Identify the drivers impacting sales through regression modelling
2. Quantify the impact of each of the drivers
3. Finally, forecast FMCG sales for the next three years using the identified drivers and their
future values
All the above variables were modelled against FMCG sales to attain sales drivers. Using these
drivers and their impact on FMCG, we were able to forecast sales for 2014 - 2016.
Drivers Of FMCG Sales
Overall 8 factors have emerged which play a direct role in influencing FMCG sales. We have
classified these drivers of sales into two categories: those that marketers can control and those
they cannot. The good news is marketers can directly influence more than half of the drivers of
sales.
Given the Indian FMCG consumers preference for traditional trade outlets and the challenge for
marketers in actually reaching the consumer, its understandable that availability is the biggest
driver of FMCG sales. This is followed by employment rates, which generates income, and then

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proliferation of sachets (low volume packs), which have a low outlay and are easy on the wallet.
Sachet packs also play a strong role in recruiting new buyers and in inducing trials.
Using Sales Drivers To Explain Growth On Decline
FMCG growth has been slowing for some time now, sliding by 8.1% from 2010 to 2013. In a
clear indication that sales drivers have played a part in this decline, a slowdown was seen in the
rate of distribution expansion and the rate of sachet launches during the same period. Admittedly,
weakening macroeconomic variables also contributed to the overall FMCG slowdown.

Here is a closer look at how some of the drivers affect FMCG sales:
Availability: The slowdown in distribution expansion has held up growth. The distribution
expansion in 2013 has slowed down to 1.1% from a healthy 2.3% in 2010.
Awareness: While the extent of the impact is smaller, yet, the effect of lower television gross
rating points (GRP) has affected sales.
Macro factors: Declining FMCG growth seems to be reflective of the Indian economy as a
whole. The key macroeconomic indicators have weakened; GDP slowed from 7.9% in 2009 to
5.7% as of Nov. 12, 2013. The Index of Industrial Production (IIP) has also plunged from 5.8%
in 2009 to 1.7% in November 2013. This has affected the economy and the consumers
purchasing power.
Sachet (Low volume packs): New product launches through sachets have fuelled growth over
the years. The growth in the number of low-volume packs hit 31.1% from 2009 to 2010. The rate
then dropped to 10.5% from 2012 to 2013. This drop in sachet innovations has impacted FMCG
growth.

34 | P a g e

What The Future Holds

The dark clouds of sales growth of the last few years appear to be clearing. Nielsen expects a
steady recovery over the next few years. While we dont expect growth rates to touch the levels
we saw in 2010, we do expect the numbers to improve.

The primary factors expected to drive a spurt in sales are a stronger GDP and rise in
employment. An increase in the rate of availability through distribution expansion is also
expected to support sales growth.
Nielsen expects the Indian FMCG sector to touch US$49 billion by 2016. The early signs of
revival include a recovering GDP, a strengthening economy and higher consumer sentiment
about their employment opportunities.
Road Ahead
Research firm Nielsen has projected that rural India's FMCG market will go past the US$ 100
billion mark by 2025. Online portals are expected to play a key role for companies trying to
35 | P a g e

break into the hinterlands. The Internet has contributed in a big way, facilitating a cheaper and
more convenient means to increase a company's reach.
Exchange Rate Used: INR 1 = US$ 0.016 as on February 25, 2015

Company Analysis
Earnings per Share (EPS)

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

17.88

17.56

12.45

10.68

10.09

11.05

9.39

7.88

6.45

10.64

115.87

110.76

99.73

84.91

67.94

3.85

3.39

2.66

2.71

4.99

8.95

6.65

5.47

5.13

3.86

36 | P a g e

Dividend per Share (DPS)

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

13.00

18.50

7.50

6.50

6.50

6.00

5.25

4.50

4.45

10.00

48.50

48.50

48.50

48.50

48.50

1.75

1.50

1.30

1.15

2.00

4.00

1.00

0.70

0.66

0.66

37 | P a g e

Dividend Payout Ratio (DP Ratio)

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

72.69

105.35

60.22

61.17

75.20

54.31

65.42

57.09

69.04

109.63

41.85

43.78

48.63

66.54

83.52

45.40

44.23

48.88

42.46

40.06

44.68

7.51

12.78

12.85

17.10

38 | P a g e

Price to Earnings Ratio (PE Ratio)

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

39 | P a g e

Return on Equity (RoE)

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

40 | P a g e

Price to Book Value Ratio

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

41 | P a g e

Operating Margin
Company
March

March

March

March

March

Name

2013

2012

2011

2010

2014

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

15.97

15.51

14.88

13.57

15.74

37.47

35.54

35.55

34.08

33.02

21.39

22.29

20.53

19.91

19.74

16.95

17.34

17.54

19.06

19.17

15.19

15.32

13.96

14.62

16.63

42 | P a g e

Gross Profit Margin

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

15.04

14.59

13.89

12.45

14.70

34.76

32.88

32.77

30.97

29.74

17.77

18.96

18.48

17.87

17.58

15.84

15.66

16.56

17.91

18.06

13.93

14.35

12.90

13.44

15.37

43 | P a g e

Net Profit Ratio

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

13.50

14.37

12.01

11.52

12.29

25.57

24.05

23.97

22.91

21.30

12.16

12.76

12.75

13.00

12.67

13.49

13.32

12.17

14.27

15.03

14.73

12.41

11.14

13.29

11.65

44 | P a g e

'Fixed-Asset Turnover Ratio'

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

9.42

8.34

7.17

7.53

7.01

1.37

1.45

1.44

1.40

1.32

2.84

3.27

4.83

8.71

9.74

4.84

4.70

4.38

4.39

4.31

5.45

6.99

7.03

6.18

7.88

45 | P a g e

Inventory Turnover"
Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

9.89

9.93

8.74

6.92

8.97

4.52

4.53

6.53

6.05

6.04

12.37

11.18

11.60

12.33

11.61

8.72

8.70

7.19

8.65

11.31

5.55

4.81

6.26

5.98

6.36

46 | P a g e

Earnings Retention Ratio

Company

March

March

March

March

March

Name

2014

2013

2012

2011

2010

Hindustan
Unilever Ltd.
ITC
Nestle India
Dabur
Marico

22.74

-25.45

37.00

32.81

21.25

45.69

44.08

42.91

30.96

3.69

57.62

57.52

53.03

43.52

30.04

54.65

55.77

54.82

56.53

58.69

55.32

91.58

87.38

83.87

83.75

47 | P a g e

Chapter - 6

FINDINGS

48 | P a g e

FINDINGS

49 | P a g e

Chapter -7
RECOMMENDATIONS

50 | P a g e

RECOMMENDATIONS

51 | P a g e

Chapter - 8
CONCLUSION

52 | P a g e

CONCLUSION

53 | P a g e

Chapter -9

BIBLIOGRAPHY

54 | P a g e

BIBLIOGRAPHY
INTERNET SITES
www.icicisecurities.co.in
www.economicstimes.com

www.reliancesecurities.co.in
www.wikipedia.org
Books
NCFM Advanced Mutual Fund Module
NISM Mutual Fund Distribution Module

55 | P a g e

APPENDICES

56 | P a g e

57 | P a g e

58 | P a g e

59 | P a g e

60 | P a g e

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65 | P a g e