Working Capital Analysis: A Comparative Study of Hindustan Unilever Limited

(HUL) and Indian Tobacco Company (ITC)

A
DISSERTATION
SUBMITTED FOR THE FULFILLMENT OF DEGREE OF
MASTER OF COMMERCE IN ACCOUNTANCY & LAW
(COMMERCE)

Under the Supervision Of: Submitted By:

PROF. PRAMOD KUMAR VISHNU VERMA
Head (Dept. Of Accountancy & Law M.COM 4TH SEM
And Dean (Faculty of Commerce) 1805714

FACULTY OF COMMERCE
DAYALBAGH EDUCATIONAL INSTITUTE
(DEEMED UNIVERSITY)
DAYALBAGH, AGRA

Working Capital Analysis: A Comparative Study of Hindustan Unilever

Limited (HUL) and Indian Tobacco Company (ITC)
(August 2019)

1
 TABLE OF CONTENT

CHAPTER CHAPTERS PAGE NO.

NO.
1) INTRODUCTION
 INTRODUCTION 6-8
 NEED 9
 OBJECTIVE 9
 RESEARCH METHODOLOGY 10

2) REVIEW OF LITERATURE

3) PROFILE OF COMPANIES

4) ANALYSIS AND FINDING

5) SUGGESTIONS AND CONCLUSIONS

 REFERENCES

 BIBLIOGRAPHY

 ANNEXURE

2
 CERTIFICATE

This is to certify that the dissertation entitled “Working capital analysis: a

comparative study of Hindustan Unilever Limited (HUL) and Indian Tobacco
Company (ITC)” submitted by Vishnu Verma , roll no.1805714 to the Dayalbagh
Educational Institute, Dayalbagh, for the partial fulfilment of the degree of “ Master
of Commerce (International Business)”, is a record of bona fide research work carried
out by her, under my supervision, further, this work has not been submitted for award of
any other degree.

PROF. PRAMOD KUMAR

PLACE: AGRA (SUPERVISOR)
HEAD (DEPT.OF ACCOUNTANCY & LAW)
DATE:

3
 DECLARATION

I Vishnu Verma, student of M.Com (International Business) Dayalbagh Educational

Institute hereby declare that the project report titled “working capital analysis: A
Comparative Study Of Hindustan Unilever Limited (HUL) And Indian Tobacco
Company (ITC)” is my original research work and has not been previously submitted
for the award of any degree, diploma, fellowship or any other programme in any
institution.

Vishnu Verma
M.Com 4th Sem
1805714

4
 ACKNOWLEDGEMENT

The Dissertation Entitled, “Working Capital Analysis: A Comparative Study Of

Hindustan Unilever Limited (HUL) And Indian Tobacco Company (ITC) “Demanded A
Lot Of Research And A Proper Methodology To Bev Followed. I Take The Privilege Of
Conveying My Heartiest Gratitude To Almighty God Without Whom The Study Will Not
Able To Seen In Sunlight, I Wish To Record My Deep Feeling Of Love, Affection And
Gratitude To My Parents Without Whose Blessing It Would Not Have Been Possible For
Me To Complete This Dissertation. I Would Like To Record My Heartfelt Gratitude To
Library Members And Company’s Which Provide Me the Related on Their Websites.
I Would Like To Record My Gratitude To My Supervisor, Prof. Pramod Kumar, and
Head (Dept. Of Accountancy & Law) , Faculty Of Commerce, Dayalbagh Educational
Institute For His Supervision, Advice And Guidance From The Very Early Stage Of This
Research As Well As Giving Me Extraordinary Experience Throughout The Work.
Above All and The Most Needed, He Provided Me Unflinching Encouragement And
Support In Various Ways. His Truly Knowledge and Skill Has Made Him as a Constant
oasis Of Ideas and Passion In Commerce, Which Exceptionally Inspire And Enrich My
Growth as A Student And A Researcher, Want To Be, I Am Indebted To Him More Than
He Knows.
I Am Also Grateful To The Research Scholars Especially Of The Department, My
Classmates And My Friends Whose Valuable Support And Study Material Helped A Lot
In The Progress Of My Work. Finally, I Would Like To Thank Everybody Who Was
Important To The Successful Realization Of Dissertation, As Well As Expressing My
Apology That I Could Not Mention Personally One By One.

5
 INTRODUCTION

MEANING OF WORKING CAPTTAL

Working Capital are those capital which is required or used to meet day to day expenses or financing
of short term or current asset it is called Working capital.
Working capital refers to the investment by the company in short terms assets such an cash, marketable
securıties. Net current Assets or networking capital refers to the current assets less current liabilities.
Working capital is also called Trading Capital. Circulating the working capital is an important to
measure the company's operational and financial efficiency. Any company should have a right amount
of cash and lines of credit for its business needs at all times.

Symbolically, it means:-

Working capital = current assets – current liabilities

Current Assets

Current assets are those assets which can be converted into cash within One year or less than one year.
In current assets, we include cash, bank, debtors, bill receivables, prepaid expenses, outstanding
incomes.

Current Liabilities

Current Liabilities are those liabilities which can be paid to respective parties within one year or less
than one year incomes at their maturity. In current liabilities, we includes creditors,
outstanding bills, bank overdraft, bills payable and short term loans, outstanding expenses, and advance.

6
 Kind Of Working Capital

On The Basis Of Concept On The Basis Of Time

Gross variable working

Net Working
Working Fixed Working Capital capital
Capital
Capital

Regular Reserve Seasonal Special

Working Working Working Working
Capital Capital Capital Capital

The types of working capital are :

 Gross working capital

 Net working capital
 Permanent working capital
 Temporary working capital

1.) GROSS WORKING CAPITAL: In fact, working capital means gross working capital. It
means the firm’s investment in current assets. Current assets are the assets which be
converted into cash within an accounting period or one year ( normally).

GROSS WORKING CAPITAL = TOTAL CURRENT ASSETS

7
2) NET WORKING CAPITAL: Net Working Capital Mean the difference between current
assets and current liabilities. Current liabilities mean the liabilities which the firm has to pay
within the one year ( or act period). E.g. Creditors (A/P, Purchase ledger balance, trade payable),
outstanding expenses, bills payable, bank overdraft, etc. the result of net working capital may be
positive or also be a negative.

If CA > CL = Positive net working capital

If CA < CL = Negative working capital

3) FIXED WORKING CAPITAL: Fixed working capital is that amount of capital which must
be in cash or current assets for continuing the activities of business.

4)TEMPORARY WORKING CAPITAL : Sometimes, it may possible that we have to pay

fixed liabilities, at that time we need working capital which is more than permanent working
capital, then this excess amount will be temporary working capital.

8
 NEED OF THE STUDY

Working capital is very important for every business organization because it is the lifeblood of the
business. Without insufficient working capital, any organization cannot run smoothly or
successfully. The need of working capital for the companies is to fulfil the requirement of fund for daily
purpose or operation. But currently the capital market or normal market is facing the recession.
Therefore companies have to face the problem of meet out the fund requirement which is necessary for
the daily operation mentioning the above Problem this study have been conducted. This study will
facilitated to the companies to find out the current position of the capital and compare itself with the
other companies. Creditors can understand the Companies position to pay their credit. This study
will also beneficiated to the student in application of classroom study in the practical life.
Working capital is an important aspect for companies. This is important to manage the working capital
for business. Working capital includes current assets and current liabilities.

After considering the various review of literatures, researcher found that various study have been
conducted regarding working capital. But no studies have been found regarding these two companies
Hindustan Unilever Limited and Indian Tobacco Company for the selected period.

OBJECTIVE OF THE STUDY

 To analyse working capital of selected companies.

 To study the various component of working capital.

 To compare working capital of selected companies.

9
RESEARCH METHODOLOGY

 Research Design

The research design for the study have been descriptive as well as analytical because it have
been carried out with specific objectives and utilizes the large number of data of FMCG
Selected companies.

 Collection of Data

The studies have been primarily base on secondary data. The Secondary data have been
collected From reports and researches published in journals, magazines, newspapers, web
sites Periodicals, Annual Financial Reports, Corporate Sustainability Reports.

 Duration of Study

The data have been considered for a period of four years commencing from financial year
2015-2016 to 2018-2019.

 Tools
For the data analysis various accounting tools like liquidity ratio, profitibility ratio,
turnover ratio, leverage ratio, valuation ratio.

 SELECTION CRITERIA
Two FMCG companies have been considered for research purpose. These companies
have been selected on the basis of their highest revenue basis as on 31st march 2018.

 ANALYSIS OF DATA
Data have been analysing on the basis of Ratio Analysis, Bar Diagram, Average, and
Percentage and bar diagram. Other statistical tools have been used as per the requirement
of the study.

10
 REVIEW OF LITERATURE

National review

S.no year Author’s Topic objectives Research Finding

Name Methodology
1. Dec D. Working To analysis the The primary The fixed asset
2018 Muthusamy Capital efficiency of methods are used turnover ratio shows
and M. Management inventories and for collection of that the asset are
Sathish in its components ancillary’s details utilized by the firms
Kumar Ancillary’s and receivable in during period of were more
of BHEL the Ancillary study. The annual efficiently and
Unit. 3. To study reports are used useful.
the method of as secondary The sales to working
financing of which is audited capital ratio show
working capitals and some updated the firms have
budgeted in information inefficiency in using
Ancillary Unit. collected in working capital.
newspapers and
website of BHEL
about the concern.

2. June Rimsha Working  To determine Ratio that shows This study was
2018 Khalid Capital whether there is how many times aimed to detect the
Management significant firm inventory is impact of working
and relationship sold and replaced capital management
Profitability between over a particular on profitability of
Inventory period. The days electrical equipment
turnover ratio in the period can sector of KSE listed
and profitability be divided by the companies of
of the firm inventory Pakistan.
 To examine turnover formula
the significant to calculate the
relationship days it takes to
between current sell the inventory
ratio and firms on hand or
profitability "inventory
turnover days."

11
3. Sep Pinku Paul Analysis of The broad The study covers The authors received
2018 the Effect of objective of the the different no financial support
Working present study is aspects of for the research,
Capital to identify the working capital authorship and/or
Management effect of management and publication of this
on working capital tries to establish a article.
Profitability management on relationship
of the Firm: firm’s between these
Evidence profitability in aspects and
from Indian steel industry, profitability of the
Steel especially in thesteel industry.
Industry Indian context. The period of the
study has been
considered for 17
years, that is,
2000–2016. The
data has been
collected from
Centre for
Monitoring Indian
Economy
(CMIE).
4. April Tehreem Working 1) To examine to 1.Inventory The study was aimed
2018 Saif capital significant turnover to detect the impact
management relationship of working capital
and between current 2.current ratio management on
profitability ratio and firm profitability of
profitability. 3.debt to equity electrical equipment
2) To evaluate ratio Sector of KSE
the significant listed companies of
relationship 4. operating ratio Pakistan. For this
between debt to flow to debt ratio. purpose regression
equity ratio and model was applied
profitability of and different
the firm. assumption test was
also applied for the
model fitness.

12
5. July Poonam Working  To analyse the  To carry out the The current ratio
2018 Rani Capital working capital present study, the trend shows that the
Dr. Pradeep Management performance of methodologies ratio is above the
Kumar of NMDC the company. that have been standard of
Aggarwal Ltd.  To understand adopted are stated 2:1.Based on the
An Analysis the concept of as follows: data, the liquid
working capital  Sample Design: position of the
and its The study has company shall be
importance. been carried out considered as very
 To determine by selecting a strong. But the ratio
the amount of company namely is very high it
the working NMDC Ltd, indicates idleness of
capital employed which is one of the funds which
by the company. the leading iron reduce the
ore company in profitability of the
India. company.  Again
 Data Source: quick ratio of the
The study is company is much
completely based higher than the
on secondary data standard of 1:1
which is collected which shows that the
from published company has a good
annual reports of liquid position but
the company from also shows the
its own website. underutilization of
the available funds.
6.. Dec. Mr .Shiva working 1.)To study the The sample for The selected
2016 Kumar capital working capital the study has been performance
management management of selected a indicators have
- it’s impact Coal India Ltd. company named shown a positive
on liquidity 2.)To examine COAL INDIA ltd outlook except
and the liquidity which is one of debtor’s turnover
profitability - position of Coal the top public ratio and collection
a study of India Ltd. sector companies period which have
coal India ltd in the mining shown negative
sector. trend.
7. Feb L. Effects of The main The study is Inventory turnover
2013 Ganesamoo Working objective of the analytical in ratio indicates very
rthy Capital study is to know nature and it high ratio in all the
Management the relationship primarily years it indicates
on that depended on overtrading.
Profitability exist between secondary data. Cash turnover ratio
of Select working capital For this purpose of the company
Automobile management and annual reports of shows efficient use
Companies profitability of the selected of working capital.
in India select companies were
13
 automobile collected and
companies. calculations were
made from it. The
period of the
study was nine
years from 2003-
2004 to 2011-
2012.
The study
selected two
automobile
companies such
as Tata Motors
limited (TATA)
and Mahindra and
Mahindra limited
(M&M)

8. June Moirangthe Working Keeping in view For this study, The industry should
2013 m Biren Capital the importance one of the leading try to control the
Singh Management of working plastic industries growth rate of
: An capital in India namely current assets as
Essential management in National Plastic compared to current
Tool of business finance, Industries Ltd., liabilities to some
Business an attempt is Mumbai has been extent as per the
Finance - A made to study purposively industry needs and
Case Study the contribution selected. The situations to
of National towards a crucial period of study maintain proper
Plastic element in covers five years, level of net working
Industries financial from 2006-07 to capital.
Limited management. 2010-2011. The
(NPIL) The specific study covers
objective of this mainly the
article is to have Working capital
a comprehensive trend and
analysis of analysis,
working capital Efficiency of
decisions and working capital
practices and Test of
followed by liquidity and
National Plastic profitability
Industries
Limited (NPIL)
over the past five
years through a
14
 study of working
capital trend,
liquidity ratios
and efficiency
ratios related to
utilization of
current assets
9. July Mr.Pushpak A Study on To draw findings Research is the No loans and
2010 umar.B Working and make systematic advances have been
Capital conclusions on process of granted by the
management the basis of the collecting and companies on the
in Public above analysis. analyzing data in basis of shares,
Enterprises To analysis the order to increase debentures and other
trend in our understanding securities..
investment in of the
working capital phenomenon
and its about which we
components of are concerned or
the Ancillary interested. It is
Unit. the in-depth
search for
knowledge.
10. Aug Jyoti Impact of To study the This study is The Inventory
2010 Mahato Working back ground and based on conversion period is
Capital characteristics of secondary data. In use as proxy for
Management the Telecom this research we inventory policy.
on industry in India will see the The average value of
Profitability: To analyse data different working inventory conversion
Indian related to capital period is 105.69
Telecom working capital management days. This means,
Sector management and practices and its firms in the sample
profitability of impact on needs on average
Telecom profitability of 8 105.69 days to sell
industry firms in Indian Telecom inventory
India Industry listed on
the Indian stock
Exchange for a
period of five
years from 2010–
2015.

15
 INTERNATIONAL REVIEW

S.No Year Author’s Topic Objective Research Finding

Name Methodology
1. Jan Mohammad Working Capital Studying the The research tries The First
2011 Alipour Management and effect of to study the effect Regression
Corporate different of working capital Model: With
Profitability: components of management on testing the first
Evidence from cash profitability of the hypothesis, result
Iran conversion accepted indicates that
cycle on the companies in there is a
profitability of Tehran stock significant relation
the companies. exchange. between the
concluding Multiple average collection
about the regression and period and
relationship correlation profitability.
between analysis has been The Second
working used to study the Regression
capital relationship Model: H
management between hypothesis states
and independent that there is a
profitability of variables (cash significant relation
the companies conversion cycle between Inventory
and its Turnover in Days
components) and and profitability.
dependent variable
(GOP).
2. Nov Bhavesh Working Capital (i) To study The study is based 1. This study is
2012 Chadamiya Management in it working on the secondary mainly based on
Dr. Vijay Companies capital position data taken from the secondary data
Pithadia in the selected annual reports of derived from
units. selected units. And the annual reports
(ii) To all the data relating of industry. The
examine the to history, growth reliability and the
efficiency of and development finding are
Receivable of selected contingent upon
Management Industries, it will the data published
of selected be in annual report.
units. collected mainly 2. There are many
(iii) To from the books and approaches for
examine the magazine relating evaluation Cash.
efficiency of to the There are
Inventory industry and no common views
Management published papers, among experts.
16
 of selected reports, articles 3. The study is
units. and 3from the limited to Ten
various years only.
newspapers,
bulletins and other
journals like
Charted
Secretary,
Management
Account, and
Chartered
Account.
3. May Dr. Thair A. Profitability and The effect of the This study aimed
2012 Kaddumi Working Capital WCM on to shed light on
Management performance of the effect of
The Jordanian Jordanian working capital
Case Industrial Firms is management on
tested by panel the profitability of
data regression. Jordanian
The panel data Industrial firms,
regression used has using two
some benefits alternative
relative to period measures of
average cross- profitability as a
sectional data like proxy of the
increasing in the performance and
degrees of two regression
freedom, more models, the panel
precise estimates data cross-
due to the sectional time
efficiency gain series has been
brought by the used.
availability of
large number of
observations, and
reducing the
problem of co-
linearity among
explanatory
variables
4. July Asghar Ali Working Capital To find the Data is obtained The study showed
2012 & Syed Atif Management: Is It effect of from the website a positive impact
Ali Really Affects the working of State Bank of of working capital
Profitability? capital on Pakistan having management on
Evidence from profitability of balance sheet profitability,
Pakistan firms. • To find analysis report of working capital on
17
 the effect of joint stock total assets and
total assets on companies listed impact of total
profitability of on the Karachi assets on
firms. Stock Exchange profitability of 15
from 2003 to 2008. companies of 3
different sectors
of Pakistan.
6. April Kazi “the impact of To find out theThe study applied Receivable
2012 Naimulbari working capital effects of co-relational Collection Period.
management on different research. The Payable Deferral
profitability components of process of Period.
working measurement is Inventory
capital central to Conversion
management quantitative Period.
on research because it Cash Conversion
profitability. provides the Cycle.
To Study a fundamental
relationship connection
between the between empirical
objectives of observation and
liquidity and mathematical
profitability expression of
of quantitative
pharmaceutical relationships
s industries inSampling is almost
Bangladesh. to do a complete
census of most
population. A
properly designed
sample is more
efficiently
managed, less
costly and can
provide the level
of information
necessary for the
desired objectives
7. Aug 1.To This study is based On the basis of
2016 Sumathi A A study on the understand and on the secondary key findings from
And effect of working analyse the data collected from this study it has
Narasimhai capital on the relationship Infosys’s been observed that
ah T profitability of betweenManag Annual Report, the management
Infosys ement of Balance Sheet, of a firm can
working Financial Ratios increase the value
capital and and various other for their
Profits of the financial shareholders by
18
 firm. statements. Data is decreasing the
2. To find out also extracted from credit period
the effects of different websites. allowed. The
different management can
components of also create returns
workingcapital for their
on the profits shareholders by
of the firm. adding more
inventories to
meet an optimum
level.
8. July Jakpar S Working Capital To empirically In this study, the This study is
2017 Management and examine financial data are aimed at
Profitability: whether there collected from the investigating the
Evidence from is a significant DataStream and relationship
Manufacturing relationship the annual report between the
Sector in between the of relevant working capital
Malaysia working companies listed at management and
capital the Bursa Malaysia firm’s
management in Malaysia. profitability. For
and firm’s The model that is the purpose of
profitability used in this study analysis, a sample
is Pooled Ordinary of 164
Least Squares manufacturing
(OLS), Random or firms over a 5
Fixed effect years period from
Regression Model. 2007 to 2011 was
selected. The
sample data were
obtained from
DataStream and
Bursa Malaysia
website.

9. Mar Sin Huei Ng The Impact of • To find the The objective of he descriptive
2017 Working Capital effect of the systematic statistics based on
Management on working review is to offer the data collected
Firm’s capital on total collective from 122
Profitability: assets of firms understandings Malaysian
Evidence from through theoretical manufacturing
Malaysian Listed blend such that the firms for the
Manufacturing review process period of 2007-
Firms enhances the 2012 with total
methodological 732 firm-year
rigor for observations. The
19
 academicians and mean value of
develops a reliable GOI is 17.25% of
knowledge base total assets and the
for practitioners ( standard deviation
shows volatility of
15.80% with a
range between
−26.62% and
161.86%. The
degree of
aggressiveness of
investment
policies shows the
average current
assets is 50.65%
of total assets.
10. Aug Navena A Study On The To study the Managing the the study it has
2018 Nesa Impact Of The relationship working capital is been found that
Kumar Working Capital between an important part among the
Management On Working of short-term working capital
The Profitability Capital financial components,
Of The Leading Management management. The inventory turnover
Listed and long-term financial period is affecting
Automobile Profitability of management often the Net Operating
Companies In Leading Listed receives more profitability of
India (2006- Automobile attention although automobile sector.
2012) companies at many researchers, It has been found
S&P CNX top Jose et al. (1996) that there is a
500 in India ²⁹, Deloof (2003) negative
from (2006- ³⁰ have shown that relationship exists
2012). short-term (i.e.) reduction in
financial the inventory days
management also will increase the
has a clear effect company’s
on the profitability profitability
of a firm.
11. Mar Zaher Zaher Abdel To importance The current study There is a positive
2019 Abdel Fattah Al-Slehat of the net uses the relationship
Fattah Al- working descriptive and between the net
Slehat capital that is analytically working capital
reflected on methodology by and profitability;
the using the indicator hence profitability
profitability of of the net working is measured by net
the listed capital and operating income
industrial indicators of and return on
companies in profitability. assets. There is no
20
the Amman relationship
Stock between the net
Exchange working capital
during the and profitability;
period under hence profitability
study. is measured by
profit margin

21
Hindustan Unilever Limited

INTRODUCTION

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, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent,
Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s 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 world’s 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.

Hindustan Unilever Limited is India's largest Fast Moving Consumer Goods (FMCG) Company. It is
present in Home & Personal Care and Foods & Beverages categories. HUL has about 15,000 employees,
including over 1400 managers The fundamental principle determining the organization structure is to
infuse speed and flexibility in decision-making and implementation, with empowered managers across
the company’s nationwide operations.

22
Company vision
We meet every day needs for nutrition, hygiene and personal care with brands that help people feel
good, look good and get more out of life. Sustainability is at the heart of our business, and through our
brands, we seek to inspire people to take small everyday actions that can add up to a big difference for
the world. Our deep roots in local cultures and markets around the world give us our strong relationship
with consumers and are the foundation for our future growth. We will bring our wealth of knowledge
and international expertise to the service of local consumers a truly multi- local multinational. Our long-
term success requires a total commitment to exceptional standards of performance and productivity, to
working together effectively, and to a willingness to embrace new ideas and learn continuously. To
succeed also requires, we believe, the highest standards of corporate behaviour towards everyone we
work with, the communities we touch, and the environment on which we have an impact. This is our
road to sustainable, profitable growth, creating long-term value for our shareholders, our people, and our
business partners.

PERFORMANCE
After stagnating between 1999 and ’04, the company is back on the growth track. In the past three years,
HUL’s net sales have witnessed a CAGR of 11%, while net profit has 12 posted a CAGR of 17%. The
company is set to gain further momentum, given the revival of consumer spending. HUL sells products
at different price points straddled between the entire value chains. In the past few years, it has
diversified into processed foods, ice creams, water purifiers and specialized chemicals. But home and
personal care (HPC) continues to remain the bread & butter segment for the company. This division
accounted for 72% of HUL’s revenue and 91% of its profit (before interest and tax) during the year
ended December ’07. So, it won’t be wrong to call HUL a personal care major.

GROWTH DRIVERS The Company has been launching new products and brand extensions, with
investments being made towards brand-building and increasing its market share. HUL is also
streamlining its various business operations, in line with the ‘One Unilever’ philosophy adopted by the
Unilever group worldwide. Introduction of premium products and addition of new consumers via market
expansion will be HUL’s growth drivers.

23
FINANCIALS
HUL’s net sales have recorded a CAGR of more than 11% over the past three years, while its net profit
has posted a CAGR of 17% during the same period. While its sales have maintained a secular growth
trend, profit margins have shown an erratic trend during the period. High dividend yield, steady growth
and strong market standing in its product categories have enabled HUL to command premium
valuations, compared to other FMCG companies.

RISKS
Being an MNC operating in India, HUL is more conservative in its strategies than its Indian
counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by domestic
players in various categories. Prolonged inflation may lead to margin contraction, in case HUL is not
able to pass on this burden to consumers. The company’s large size also poses a problem, since it does
not give HUL the agility to address the competition it faces from national and regional players.

TO SUM IT UP
HUL’s up-and-running business model is a treat for investors seeking exposure in the 13 FMCG
segment. The company has delivered in the past and has the potential to do better in future. In the small
and medium term, HUL is a better bet than ITC.

24
HUL BUSINESSES

HOME CARE

PERSONAL CARE

25
FOOD AND BEVERAGES

WATER PURIFIER

26
HUL food PRODUCT
HUL is one of India’s leading food companies. Our passion for understanding what people want and
need from their food - and what they love about it - makes our brands a popular choice.

Annapurna
Annapurna Atta is aimed at helping the homemaker provide wholesome, tasty nutrition to her family.
Launched nationally in 1998, Annapurna Atta is aimed at helping the homemaker provide wholesome,
tasty nutrition to her family. Annapurna Farm Fresh Whole Wheat Atta is made from premium quality
wheat grains. These grains are ground using advanced technology so that the Atta absorbs more water
while kneading, makes Rotis stay soft for a longer time and retains the nutrition of vitamins and
minerals of the wheat grains. Annapurna was awarded the prestigious ‘Awaaz Consumer Award” for the
most preferred brand of Atta for two successive years in 2006 and 2007.

From our range

27
Red Label
The brew that bonds. The taste of Red Label brings alive the little moments that bring us closer to
people we love. It is the simple act of sharing a cup of Red Label that often adds magic to everyday
moments, strengthening the relationships that matter most to us. Life is lived in those moments, one sip
at a time.
Key facts

 Red Label is a 105 year old brand and has tremendous equity and heritage in the Indian market.

 It is the second largest tea brand in the country.

 It has both leaf and dust variants, as well as a health and immunity variant - Red Label Natural Care.

 It is now proven that regular consumption of 3 cups of Red Label Natural Care every day can enhance
one's immunity and help one fall ill less often.

 Red Label holds the Guinness Record for the world’s largest tea party.

FROM OUR RANGE

Taaza
The great refreshment of Taaza inspires women to have an identity beyond their homes and to refresh
their lives. Many young women in emerging India live life bound within their roles as a mother, wife
and daughter in law. In the process, they lose their own identity. However, a changing India and

28
examples of women achievers as portrayed by media, is leading to an awakening of her desire to carve
out an identity for herself. She is however limited by her own inhibitions and a sense of inertia.

Taaza recognizes this latent need and also believes that every woman has innate talent. The fresh green
leaves in Taaza give her amazing refreshment that inspires her to realize her talent. Taaza is her ally and
confidant.

Key facts
 Taaza is a 20 year old brand with strong presence in North & West India.
 It is the 3rd largest tea brand in the country with a portfolio spanning in both leaf and dust
segments.
 It has a strong presence in the out of home segment in South India

From our range

Taj Mahal
A taste for the finer things in life. Crafted from carefully selected tender leaves from India’s finest tea
gardens, the lingering aroma of Taj Mahal always has an impact. When a cup of Taj is served,
compliments follow. Taj Mahal is not just a cup of tea, it is a sensory experience.

Key facts
 Taj Mahal was launched in 1966 by Brooke Bond.
 Ustad Zakir Hussain, the tabla maestro was the brands ambassador for almost two decades,
exemplifying both discernment as well as the pursuit of excellence.
 Taj Mahal since 2007 has Saif Ali Khan as its ambassador, a relevant choice for today’s India.

29
 From our range

Bru
Some moments in life are special and close to the heart. Bru makes these moments with loved ones even
more magical…Its India’s largest coffee brand that offers a range of products in Instant coffee,
Conventional coffee and premixes....Its rich aroma and unique blend makes every moment come alive…

In the year 1962 Brooke Bond India creates the branded roast and ground coffee segment launching
Deluxe green label. 1968 gave birth to the first Instant coffee chicory mix under the brand name
Bru…Ever since its inception, Bru has been on a constant endeavour to bring better products and
formats to the consumer with every passing year. With the launch of cappuccino in 2007 Bru was a
pioneer to launch instant coffee premixes in India for the youth. Bru’s specially selected and freshly
roasted coffee beans offer a great cup of aromatic coffee that makes those moments of genuine warmth
and happiness even more special…

Key Facts
 Number 1 coffee brand in India
 Unilever’s only coffee brand
 Enjoys a rich heritage, came into existence in 1962 under the brand name Deluxe green label.
 Consistently offering better and newer products to the consumer through improved packaging
solutions and innovative product formats
 Enjoys a strong presence at various out of home locations

30
From our range

Kissan
Kissan acts as a catalyst, easing stressful moments at the dining table. With Kissan, good food is loved
not shoved, Kissan wants to be the brand which will help dissolve tension between mother and the
family during informal good food moments. Kissan acts as a catalyst, easing stressful moments at the
dining table. With Kissan, good food is loved not shoved!

Key facts

 Kissan is in its 62nd year of its existence in India.

 Category leaders in Jams with an All India Share of 65%.

From our range

31
Knorr
Knorr helps families make meal times special, nutritious, tasty and healthy. It is not wrong to say that
the category of soups was launched by Knorr in India. The Knorr range of soups is available in a number
of tasty and exciting varieties. There is a flavour to literally suit every taste palate; the Classic range of
soups with flavors like Thick Tomato, Mixed Vegetable and Chicken Delite, the Oriental range with
flavours like Sweet Corn Vegetable, Sweet Corn Chicken and Hot n Sour and the Snacky range (pasta
/noodles in soup) with innovative flavours like Masala Twisty Pasta soup and Thai Curry Noodle soup.

This year has also seen the addition of the Indian soup range with lip smacking flavours inspired by
Indian cuisine; these include soups like Tomato Chatpata, Corn Mast Masala, Veg Hara Bhara, etc.
Whether it is giving the Indian consumer a choice of 17 delicious varieties of soups or helping her make
restaurant like Chinese food at home Knorr has always been at the forefront in taking the lead and in
partnering with the Indian housewife. The Knorr portfolio has now expanded with yet another launch;
the launch of the Indian Ready to Cook range. Knorr Indian Ready to Cook helps the consumer make
her family's favourite dishes at home and helps her get restaurant like taste at home itself. Knorr as a
brand has always set out to empower homemakers and enable them to make healthy, wholesome and
delicious food options. All Knorr products are healthy, completely preservative free and low on sodium
and cholesterol content. The brand has also played a key role in helping the Indian housewife in more
ways than one- whether it is through the launch of books like Soups and More, through on ground
events, soup demonstrations and sampling or through its latest venture – a website www.CookitUp.in.

www.CookitUp.in is a one stop shop for every single cooking need and a recipe site to discover and
befriend for life! Whether it is authentic recipes for every occasion, a powerful search engine that helps
you churn out any recipe need with ingredients within your reach or ideas for resourceful and tasteful
use of leftovers in the fridge.

Key facts
 Knorr in India is generic to soups.
 Knorr is the largest soup brand in India and has a lion’s share of the soup market in India – 70%
 All Knorr products have no added preservatives and are a healthy choice option

From our range

32
Kwality Wall's
Kwality Wall’s, the brand with a big heart, offers a range of delightful frozen desserts that bring smiles
to the faces of millions of Indians – kids, teens and adults. We do so with our very popular brands -
Cornetto, Feast, Paddle Pop, Selection & our award winning parlour concept, Swirl’s.

In a world of stress, denial and restraint, providing moments of daily pleasure to consumers, through our
delightfully delicious products, is our passion. We believe in spreading happiness and smiles through
every cone, cup, stick and tub we sell. Our biggest satisfaction comes from the look of bliss and
happiness of our consumers faces, as they devour our products. Our passion is inspired by our love for
simple ingredients like Milk, Fruit and Chocolate, which make our products the best “Pleasure Food”
there is Mention ice cream, and most people in India think of Kwality Wall’s and the big heart. The
brand with the big heart logo is behind many much-loved ice cream classics – from indulgent treats like
Cornetto & Feast (for teens and young adults), to Moo & Paddle Pop (for kids), to family favourites like
our Selection range of Red Tubs, Italian Gelato and Viennetta.

Key facts

 Unilever is the world's largest ice cream manufacturer with an annual turnover of more than €5
billion.
 Heart brand products are sold in more than 40 countries worldwide
 Also sold as Algida in Italy & Turkey, Langnese in Germany, Kibon in Brazil, Streets in
Australia and Ola in the Netherlands
 Kwality Wall’s turnover has doubled in the last 3 years. We strive to keep driving the business at
growth rates significantly ahead of market, and become the number one frozen dessert/ Ice
Cream player in India.

33
 FROM OUR RANGE

Lipton
World’s #1 tea brand

Lipton Yellow Label is a premium, full-bodied tea, made out of the finest teas; perfect form the
‘healthy’ Indian .Lipton Yellow Label has a unique blend that has high levels of natural Thiamine,
which along with other goodness of tea can help you clear your mind.

The range also contains, Lipton Clear Green tea, which combines the goodness of antioxidants and
purifying effect of water to help cleanse your body naturally.

FROM OUR RANGE

34
Consolidated balance sheet of Hindustan Unilever limited

Balance Sheet of Hindustan Unilever ------------------- in Rs. Cr. -------------------

Mar 19 Mar 18 Mar 17 Mar 16 Mar 15

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 216.00 216.00 216.00 216.00 216.35
Total Share Capital 216.00 216.00 216.00 216.00 216.35
Revaluation Reserves 0.00 0.00 0.00 0.00 0.67
Reserves and Surplus 7,418.00 6,859.00 6,274.00 6,063.00 3,507.76
Total Reserves and Surplus 7,418.00 6,859.00 6,274.00 6,063.00 3,508.43
Employees Stock Options 25.00 0.00 0.00 0.00 0.00
Total Shareholders Funds 7,659.00 7,075.00 6,490.00 6,279.00 3,724.78
NON-CURRENT LIABILITIES
Other Long Term Liabilities 804.00 666.00 574.00 395.00 170.11
Long Term Provisions 1,049.00 772.00 485.00 594.00 956.35
Total Non-Current Liabilities 1,853.00 1,438.00 1,059.00 989.00 1,126.46
CURRENT LIABILITIES
Trade Payables 7,070.00 7,013.00 6,006.00 5,498.00 5,288.90
Other Current Liabilities 782.00 972.00 809.00 864.00 908.05
Short Term Provisions 501.00 651.00 387.00 290.00 2,585.87
Total Current Liabilities 8,353.00 8,636.00 7,202.00 6,652.00 8,782.82
Total Capital And Liabilities 17,865.00 17,149.00 14,751.00 13,920.00 13,634.06
ASSETS
NON-CURRENT ASSETS
Tangible Assets 3,907.00 3,776.00 3,654.00 2,902.00 2,435.50
Intangible Assets 436.00 366.00 370.00 12.00 22.03
Capital Work-In-Progress 373.00 430.00 203.00 386.00 479.01
Fixed Assets 4,716.00 4,572.00 4,227.00 3,300.00 2,936.54
Non-Current Investments 256.00 256.00 260.00 319.00 654.11
Deferred Tax Assets [Net] 339.00 255.00 160.00 168.00 195.96
Long Term Loans And
396.00 404.00 352.00 162.00 583.46
Advances
Other Non-Current Assets 784.00 523.00 387.00 419.00 0.44

35
Total Non-Current Assets 6,491.00 6,010.00 5,386.00 4,368.00 4,370.51
CURRENT ASSETS
Current Investments 2,693.00 2,855.00 3,519.00 2,461.00 2,623.82
Inventories 2,422.00 2,359.00 2,362.00 2,528.00 2,602.68
Trade Receivables 1,673.00 1,147.00 928.00 1,064.00 782.94
Cash And Cash Equivalents 3,688.00 3,373.00 1,671.00 2,759.00 2,537.56
Short Term Loans And
0.00 0.00 0.00 0.00 657.27
Advances
Other Current Assets 898.00 1,405.00 885.00 740.00 59.28
Total Current Assets 11,374.00 11,139.00 9,365.00 9,530.00 9,263.55
Total Assets 17,865.00 17,149.00 14,751.00 13,920.00 13,634.06
OTHER ADDITIONAL
INFORMATION
CONTINGENT LIABILITIES,
COMMITMENTS
Contingent Liabilities 2,009.00 1,699.00 1,241.00 1,158.00 1,072.71
CIF VALUE OF IMPORTS
Raw Materials 0.00 0.00 0.00 0.00 827.62
Stores, Spares And Loose Tools 0.00 0.00 0.00 0.00 23.93
Capital Goods 0.00 0.00 0.00 0.00 81.88
EXPENDITURE IN FOREIGN
EXCHANGE
Expenditure In Foreign
1,382.00 1,285.00 1,214.00 1,084.00 949.61
Currency
REMITTANCES IN FOREIGN
CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign
- - - - 1,963.46
Currency
EARNINGS IN FOREIGN
EXCHANGE
FOB Value Of Goods - - - - 81.07
Other Earnings 324.00 387.00 541.00 559.00 492.36
BONUS DETAILS
Bonus Equity Share Capital 131.69 131.69 131.69 131.69 131.69
NON-CURRENT INVESTMENTS
Non-Current Investments
- - - - 0.02
Quoted Market Value
Non-Current Investments
2.00 2.00 6.00 319.00 654.11

36
Unquoted Book Value
CURRENT INVESTMENTS
Current Investments Quoted
2,693.00 2,855.00 3,519.00 1,265.00 1,792.03
Market Value
Current Investments Unquoted
- 2.00 6.00 1,202.00 856.33
Book Value

37
INDIANTOBBACO COMPANY

INTRODUCTION
ITC is one of India's foremost private sector companies with a market capitalization of nearly US $ 18
billion and a turnover of over US $ 4.75 billion. ITC is rated among the World's Best Big Companies,
Asia's 'Feb. 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most
Respected Companies by Business World and among India's Most Valuable Companies by Business
Today. ITC also ranks among India's top 10 `Most Valuable (Company) Brands', in a study conducted
by Brand Finance and published by the Economic Times. ITC employs over 21,000 people at more than
60 locations across India. The Company continuously endeavours to enhance its wealth generating
capabilities in a globalizing environment to consistently reward more than 3,72,000 shareholders, fulfil
the aspirations of its stakeholders and meet societal expectations. This overarching vision of the
company is expressively captured in its corporate positioning statement: "Enduring Value. For the
nation. For the Shareholder." ITC is not a pure-play FMCG company, since cigarettes is its primary
business. It is diversifying into non-tobacco FMCG segments like foods, personal care, paper products,
hotels and agri-business to reduce its exposure to cigarettes.

PERFORMANCE
Despite diversification, ITC’s reliance on cigarettes is still huge. The tobacco business contributes 40%
to its revenues, and accounts for over 80% of its profit. This cash generating business has enabled it to
take ambitious, but expensive bets in new segments and deliver modest profit growth.

ITC’s non-cigarette FMCG business — which contributes 15% of its revenues — eroded close to 8% of
ITC’s profit last year. Its other businesses like hotels and paper together account for over 20% of ITC’s
profit. Agri-business, which is its second-largest revenue earner, contributes one fourth to its revenues,
but only 3-4% to its PBIT.

GROWTH DRIVERS
ITC’s backward integration to ensure that its products pass efficiently from the farms to consumers has
helped it to cut down supply and procurement costs. ITC’s non-cigarette FMCG business leverages the
large distribution network the company has developed by selling cigarettes over the years. A rich

38
product mix, along with ramp-up of investments in its new sectors, will be instrumental in charting
ITC’s growth path.

FINANCIALS:
During the past three fiscals, ITC’s consolidated revenue has seen a CAGR of 22%. Its profit has grown
at just 12% during the same period. ITC’s sales and profits have displayed a secular growth trend. But
the pressure of sustaining its new businesses, as well as higher tax burden on the cigarette business, is
straining its profits. After undeterred growth spanning eight quarters, ITC witnessed a marginal de-
growth in net profit for the trailing four quarters ended June ’08.

RISKS:
Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for ITC. So, it
has started an ambitious diversification plan, which has its own set of risks. With its foray into the
conventional FMCG space, ITC has entered the high-clutter branded products market. This will burden
its resources in terms of ad spend and brand building. Creating brand recall and building market share in
new products are ITC’s key challenges. Export ban and rising crop prices pose a threat for its agri-
business, taxing its margins.

TO SUM IT UP:
ITC’s growth story is still evolving. ITC is eyeing the pie which HUL and other FMCG players
currently enjoy. Though risky, the company’s business model will pay off in the long run. ITC has
proved its expertise in the cigarettes, hotels, paper and agri-businesses. Investors who want to bank on
its execution ability in FMCG can consider the stock with a long-term horizon.

ITC BUSINESS

39
 ITC LTD.

PAPERBOARDS,
FMCG HOTELS AGRI BUSINESS PACKING AND
PAPER

40
FOOD PRODUCT OF ITC ARE -
ITC made its entry into the branded & packaged Foods business in August 2001 with the launch of the
Kitchens of India brand. A more broad-based entry has been made since June 2002 with brand launches
in the Confectionery, Staples and Snack Foods segments. The packaged foods business is an ideal
avenue to leverage ITC's proven strengths in the areas of hospitality and branded cuisine, contemporary
packaging and sourcing of agricultural commodities. ITC's world famous restaurants like the Bukhara
and the Dum Pukht, nurtured by the Company's Hotels business, demonstrate that ITC has a deep
understanding of the Indian palate and the expertise required to translate this knowledge into delightful
dining experiences for the consumer. ITC has stood for quality products for over 98 years to the Indian
consumer and several of its brands are today internationally benchmarked for quality.

The Foods business carries forward this proud tradition to deliver quality food products to the consumer.
All products of ITC's Foods business available in the market today have been crafted based on consumer
insights developed through extensive market research. Apart from the current portfolio of products,
several new and innovative products are under development in ITC's state-of-the-art Product
Development facility located at Bengaluru. Leadership in the Foods business requires a keen
understanding of the supply chain for agricultural produce. ITC has over the last 98 years established a
very close business relationship with the farming community in India and is currently in the process of
enhancing the Indian farmer's ability to link to global markets, through the e-Choupal initiative, and
produce the quality demanded by its customers. Thislong-standing relationship is being leveraged in
sourcing best quality agricultural produce for ITC's Foods business.
The Foods business is today represented in 4 categories in the market. These are:

 Ready To Eat Foods

 Staples
 Confectionery
 Snack Foods
In order to assure consumers of the highest standards of food safety and hygiene, ITC is engaged in
assisting outsourced manufacturers in implementing world-class hygiene standards through HACCP
certification. The unwavering commitment to internationally benchmarked quality standards enabled
ITC to rapidly gain market standing in all its 6 brands:

 Kitchens of India
 Aashirvaad
 Sunfeast
 mint-o
 Candyman
 Bingo!

41
‘Ready To Eat’ Products from ‘Kitchens of India’
Keeping alive long forgotten culinary traditions, ‘Kitchens of India’ presents its range of ready-to-eat
cuisines. Each one of these legendary delicacies has been created by the Master Chefs of ITC Hotels,
following rare, closely guarded recipes, handed down through the ages, from one generation to the next.
These delicacies are now available in imported 4-layer retort pouches that keep them fresh for as long as
24 months (Vegetarian) & 12 months (Non Vegetarian and Desserts) from the date of packaging

Bukhara

Bukhara, a village in Uzbekistan, was a meeting place for the traders from Asia and Europe. It was also
a spot on the fabled Silk Route, a passage commonly used by traders, scholars and nomads. It was on
this route that the unique Bukhara style of cooking was born.

The Master Chefs of ITC Hotels have whipped up the delectable bite into history with this cuisine from
the North-West Frontier Province with a masterpiece like Dal Bukhara.

Dal Bukhara

Dal Bukhara is an exquisite culinary treat made from Whole Black Lentils simmered with prized Indian
Spices over a coal fire, for long hours on end.

Dum Pukht

42
The art of ‘Dum’ cooking (cooked in its own juices) traces its origin to the times of the ‘Nawabs of
Awadh’ who ruled the Northern Provinces of India during the 18th century. ‘Kitchens of India’ has
currently introduced ‘Mirch Ka Salan’ in this range.

Mirch Ka Salan

An extravagant delicacy made from succulent green chillies, delicately cooked in thick gravy of roasted
peanuts, almonds and sesame seeds.

43
Consolidated balance sheet of Indian Tobacco Company
Mar 2019 Mar 2018 Mar 2017 Mar 2016 Mar 2015
Particulars
( ).Cr ( ).Cr ( ).Cr ( ).Cr ( ).Cr

SOURCES OF FUNDS :

Share Capital 1225.86 1220.43 1214.74 804.72 801.55

Reserves Total 56723.93 50179.64 44126.22 40851.71 29934.14

Equity Share Warrants 0.00 0.00 0.00 0.00 0.00

Equity Application Money 0.00 0.00 0.00 0.00 0.00

Total Shareholders Funds 57949.79 51400.07 45340.96 41656.43 30735.69

Secured Loans 0.00 0.00 0.01 3.60 0.02

Unsecured Loans 11.13 17.99 25.83 38.69 53.00

Total Debt 11.13 17.99 25.84 42.29 53.02

Total Liabilities 57960.92 51418.06 45366.80 41698.72 30788.71

APPLICATION OF FUNDS :

Gross Block 22852.69 18690.08 16895.59 15005.32 21726.97

Less : Accumulated Depreciation 4366.29 3124.09 2015.35 994.35 7548.48

Less:Impairment of Assets 0.00 0.00 0.00 0.00 0.00

Net Block 18486.40 15565.99 14880.24 14010.97 14178.49

Lease Adjustment 0.00 0.00 0.00 0.00 0.00

44
Capital Work in Progress 3401.36 5025.58 3537.02 2419.17 2114.14

Producing Properties 0.00 0.00 0.00 0.00 0.00

Investments 26578.00 23397.22 18585.29 13324.53 8405.46

Current Assets, Loans & Advances

Inventories 7587.24 7237.15 7863.99 8519.82 7836.76

Sundry Debtors 3646.22 2357.01 2207.50 1686.35 1722.40

Cash and Bank 3768.73 2594.88 2747.27 5639.20 7588.61

Loans and Advances 2060.22 2410.51 1618.85 917.22 843.44

Total Current Assets 17062.41 14599.55 14437.61 16762.59 17991.21

Less : Current Liabilities and

Provisions

Current Liabilities 9248.38 8810.50 6679.31 6251.82 5561.49

Provisions 369.94 39.24 142.91 85.99 6106.09

Total Current Liabilities 9618.32 8849.74 6822.22 6337.81 11667.58

Net Current Assets 7444.09 5749.81 7615.39 10424.78 6323.63

Miscellaneous Expenses not written 0.00 0.00 0.00 0.00 0.00

off

Deferred Tax Assets 397.04 411.76 545.25 521.72 467.74

Deferred Tax Liability 2441.18 2329.70 2416.95 2389.15 2099.34

Net Deferred Tax -2044.14 -1917.94 -1871.70 -1867.43 -1631.60

45
Total Assets 53865.71 47820.66 42746.24 38312.02 29390.12

Contingent Liabilities 1572.79 1067.20 716.23 608.95 585.95

46
LIQUIDITY RATIO
CURRENT RATIO
It is defined as ratio of current assets to current liabilities. The concept behind this ratio is to ascertain
whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and
inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term
debt, payables, accrued expenses and taxes). In theory, the higher the current ratio, the better.
CURRENT RATIO: CURRENT ASSETS
CURRENT LIABILITIES
I.e. inventory + cash and bank + debtors + bills receivable
Creditors + bills payable + o/s expenses + bank overdrafts
Year end 2019 2018 2017 2016 2015
HUL 1.36 1.28 1.03 1.43 1.05
ITC 1.77 1.64 2.11 2.64 1.54

2.5

1.5 HUL
ITC
1

0.5

0
2015 2016 2017 2018 2019

Interpretation
Current Ratio of HUL is less than that of ITC for the last 5 years and is close to 1 for the entire period.
However Cash and Bank Balance as a percentage of the Current Asset for HUL (Cash and Bank Balance
comprising almost 40% of Current Assets) is more than that of Current Asset for ITC which have Cash
and Bank Balance as 16% of current Assets. Also as a company operating in FMCG sector HUL need
not have to maintain a huge volume of current asset against its current liabilities.

47
 QUICK/LIQUID/ACID TEST RATIO
A liquidity indicator that further refines the current ratio by measuring the amount of the most liquid
current assets there are to cover current liabilities. The quick ratio is more conservative than the current
ratio because it excludes inventory and other current assets, which are more difficult to turn into cash.
Therefore, a higher ratio means a more liquid current position.
QUICK RATIO: (CASH + ACCOUNTS RECEIVABLES+ SHORT TERM +INVESTMENT)
CURRENT LIABILITIES

Year end 2019 2018 2017 2016 2015

HUL 1.03 1.04 1.42 1.09 1.12
ITC 1.54 1.17 1.76 1.64 1.32

1.8

1.6

1.4

1.2

1 HUL
ITC
0.8

0.6

0.4

0.2

0
2015 2016 2017 2018 2019

Interpretation
Quick ratio for HUL is less than 1 for all years against the conventionally recommended value of 1.Also the ratio
is less than that of ITC across last five years. Being a major player in FMCG sector HUL do not have to worries
in finding creditors. A small value of quick ratio also signifies efficient utilization of cash.

PROFITIBILITY RATIO
GROSS PROFIT MARGIN
48
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 = REVENUE – COGS
REVENUE
Year end 2019 2018 2017 2016 2015
HUL 32.5 33.2 29.8 30.8 27.7
ITC 49.3 47.7 43.2 46.1 41.8

100%
90%
80%
70%
60%
ITC
50% HUL
40%
30%
20%
10%
0%
2015 2016 2017 2018 2019

Interpretation

Gross profit margin of HUL is closed to 15 and is considerably less than that of ITC for the last 5 years.
AS Gross profit margin represent the company’s ability to efficiently utilize its raw materials, labour and
manufacturing-related fixed assets to generate profits, here HUL appears to be less efficient as compared
to ITC.

NET PROFIT MARGIN

49
 Calculated as net income divided by revenues or net profits by sales. It measure how much out of every dollars of
sales a company actually keeps in earnings.

NET PROFIT MARGIN= NET INCOME

REVENUE
Year end 2019 2018 2017 2016 2015
HUL 19.3 20.4 18.6 21.4 17.7
ITC 30.3 34.9 33.2 31.1 31.8

35
30
25
20
15 HUL
10 ITC
5
0
ITC
2015
2016 HUL
2017
2018
2019

Interpretation
Net Profit Margin of HUL is showing a decreasing trend except for the year 2015.Also it is less than that of ITC
for the last 5 years. Analysis of Income statement of HUL and ITC yields that average revenues for HUL is less
than that of ITC for the last 5 years. As Net Profit margin represents a comprehensive view of the profitability of
the company HUL seems to be less profitable as compared to ITC.

OPERATING PROFIT RATIO

Operating profit means profit earned by the concern from its business operation and not from other
sources.
OPERATING PROFIT RATIO = OPERATING PROFIT
NET SALES

50
Whereas Operating Profit = Gross Profit – Operating Expenses
And Net Sales = Total Sales – Sales Return

Year end 2019 2018 2017 2016 2015

HUL 28.3 27.4 26.6 23.4 27.5
ITC 49.3 45.6 48.2 42.5 43.5

2019

2018

2017 HUL
ITC

2016

2015

0 20 40 60 80 100

Interpretation
Operating Profit Ratio for HUL is consistent over the last 5 years and is considerably less than that of
ITC. Analysis of Income statement of ITC and HUL yields that for every year total sales of HUL is less
that of ITC. As Operating Profit ratio is deemed to be more reliable than Net Profit ratio for comparison
between companies, HUL seems to be less profitable in its operational activities as compared to ITC.

RETURN ON CAPITAL EMPLOYED

Indicates the efficiency and profitability of a company’s capital investments.
= NET INCOME
CAPITAL EMPLOYED
Capital Employed: Avg Debt Liability + Avg Shareholder Equity

51
Year end 2019 2018 2017 2016 2015
HUL 130.4 115.2 103.3 122.9 109.1
ITC 89.1 75.9 88.9 82.5 73.5

140
120
100
80
60 HUL
40 ITC
20
0
ITC
2015
2016 HUL
2017
2018
2019

Interpretation
ROCE for HUL is showing an increasing trend except in 2019.Also it’s more than that of ITC and
Marico in last 5 years. Analysis of Balance sheet of HUL and ITC yields that total fund employed for
HUL is less than that of ITC for all 5 years. This ratio indicates that HUL is able to generate more
returns by using less capital as compared to ITC.

EARNINGS PER SHARE

Calculated as the portion of company’s profit allocated to each outstanding share of common stock.

EPS = NET INCOME- DIVIDEND ON PREFERRED STOCK

AVERAGE OUTSTANDING SHARES

52
Year end 2019 2018 2017 2016 2015
HUL 18 16 13 11 14
ITC 15 18 16 8 11

18

16

14

12

10 HUL

8 ITC

0
2015 2016 2017 2018 2019

Interpretation
Earnings per share for HUL is gradually increasing in the last 5 years and is almost equivalent to ITC in
last 4 years, however ITC employs more capital in comparison to HUL in generating for generating he
earnings hence HUL earnings are not efficient in comparison to ITC.

TURNOVER RATIO
Turnover ratio measures the degree to which assets are efficiently employed in the firm. There are also
known as activity ratio or asset management ratio and they are important for a business concern to find
out how well the facilities at the disposal of the concern are being used.
DEBTORS TURNOVER RATIO

53
It is a measure as to how well the debtors are being used as current assets or how well assets have been
employed in the firm. It is an activity ratio which reflects upon the efficiency of the asset in generating
sales flow.
DEBTORS TURNOVER RATIO = SALES
DEBTORS

Year end 2019 2018 2017 2016 2015

HUL 45.9 39.9 42.5 49.4 32.4
ITC 56.5 52.1 48.9 42.4 37

120

100

80

60 ITC

40 HUL

20

0
2015 2016 2017 2018 2019

Interpretations

Here, the above table indicates that while it was managing it’s debtors in an increasing more efficient
fashion before 2018, there seems to have been a jump due to changing in their accounting practices.
Right after the change, in 2016-17, the company returned to a more normalized pattern. However, ITC is
still tops when it comes to keeping debtors low and payments high.

STOCK TURNOVER RATIO

It is an indicator as to with what efficiency and rapidity a firm is able to move its merchandise. It is
basically a measure of liquidity of firm’s inventory.
STOCK TURNOVER RATIO = COSTS OF GOODS SOLD
AVERAGE STOCK
Year end 2019 2018 2017 2016 2015
HUL 13.6 16.1 15.0 11.7 10.8
ITC 11.9 14.7 16.8 8.9 9.1

54
 100%
90%
80%
70%
60%
ITC
50%
HUL
40%
30%
20%
10%
0%
2015 2016 2017 2018 2019

Interpretation

As can be seen above, HUL has a higher Stock Turnover Ratio than ITC. This means that money is tied
up for less time on stocks. A quicker stock turnover also indicates that HUL makes profits on its stocks
quicker than the others, pointing towards a more competitive organization.

TOTAL ASSETS TURNOVER RATIO

It is an indicator that defines whether a firm is utilizing its assets efficiently or not. It is an activity ratio
which suggests that whether the assets of the firm are operating as desired and is contributing to the
sales of the firm.
TOTAL ASSETS TURNOVER RATIO = SALES
TOTAL ASSETS

Year end 2019 2018 2017 2016 2015

HUL 11.3 9.2 10.2 8.2 6.7
ITC 5.7 6.2 5.1 4.9 6.1

55
 12

10

6 HUL
ITC

0
2015 2016 2017 2018 2019

Interpretation
In the period under consideration, HUL achieved its best turnover ratio in the year 2017, when a sharp
decrease in total assets did not affect the growth of sales. In 2018, HUL made a heavy investment of
about Rs. 1900 crore for asset acquisition. However, it used those assets well, making a large jump of
Rs. 9200 crore in sales

LEVERAGE RATIO
Leverage Ratio used to calculate the financial leverage of the company to get an idea of the company’s
methods of financing or measure its ability to meet financial obligations.
DEBT EQUITY RATIO
The debt-equity ratio is a leverage ratio that compares a company's total liabilities to its total
shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and obligors have
committed to the company versus what the shareholders have committed.
DEBT EQUITY RATIO = ALL LONG TERM LOANS
EQUITY SHAREHOLDERS CAPITAL

Year end 2019 2018 2017 2016 2015

HUL 0.2 0.6 0.3 0.4 0.8

56
ITC 0 0 0 0 0

0.8

0.6

0.4
HUL
0.2 ITC

0
ITC
2015
2016 HUL
2017
2018
2019

Interpretation
Debt/Equity ratio for HUL is not following a trend over the last years. It is much lower than ITC for the
last five years. Analysis of balance sheet of HUL reveals that capital of HUL is funded majorly through
equity rather than debt.

INTEREST COVERAGE RATIO

It is the measure that determines whether the firm would be able to service its debt. The ratio is the test
of solvency for the firm.
INTEREST COVERAGE RATIO = EBIT
INTEREST TO BE PAID

Year end 2019 2018 2017 2016 2015

HUL 168.05 220.7 95.9 117.6 98.7
ITC 78.8 180.2 167.8 210.7 67.9

57
 250

200

150

HUL
100 ITC

50

0
2015 2016 2017 2018 2019

Interpretation
Interest Coverage ratio for HUL is much more than that of HUL for all years except 2007. This
indicates that HUL can easily meet its interest expense. Analysis of Income statement for HUL yields
that Interest paid is much less Rs(Cr)16.98 in comparison to EBIT Rs(Cr) 7,997.43 resulting in high
value of Interest Coverage Ratio.

VALUATION RATIO
Valuation ratio measure how cheap or expensive security is as compared to some measure of profit or
value.
PRICE TO CASH FLOW RATIO
The price/cash flow ratio is used by investors to evaluate the investment attractiveness, from a value
standpoint, of a company's stock. This metric compares the stock's market price to the amount of cash
flow the company generates on a per-share basis. Higher the ratio better will be the valuation of the
company. Price/cash flow ratio (P/CF) is seen by some as a more reliable basis than earnings per share
to evaluate the acceptability, or lack thereof, of a stock's current pricing as it is not easily manipulated.
PRICE/ CASH FLOW RATIO: STOCK PRICE PER SHARE
OPERATING CASH FLOW PER SHARE
58
Year end 2019 2018 2017 2016 2015
HUL 7.2 8.7 6.6 9.2 5.9
ITC 9.4 9.1 8.3 7.2 9.8

12

10

6 HUL
ITC
4

0
2015 2016 2017 2018 2019

Interpretation
Price/Cash flow ratio for HUL is showing an increasing trend other than in 2010 when it has decreased.
P/Cf ratio for HUL is less than that of ITC for all years. In 2010 there is a drastic increase in Cash Flow
from operating activities (Rs(Cr) 20128 in 2018 to Rs(Cr)3432 in 2019) which is the reason of decrease
in the value of Price/Cash flow ratio in 2015.

PRICE TO EARNINGS RATIO

The PE ratio indicates the growth prospects, risk characteristics, degree of liquidity, shareholder
orientation and corporate image of a company. A stock with a high P/E ratio suggests that investors are
expecting higher earnings growth in the future compared to the overall market, as investors are paying
more for today's earnings in anticipation of future earnings growth.
P/E RATIO = PRICE PER SHARE
EARNINGS PER SHARE
Year end 2019 2018 2017 2016 2015
HUL 29.6 26.7 23.6 19.2 17.9
ITC 17.7 19.1 14.3 11.2 10.8

59
 30

25

20

HUL
15
ITC

10

0
2015 2016 2017 2018 2019

Interpretation
P/E ratio for HUL is showing a decreasing trend except in 2019 when it has increased. Also P/E ratio
for HUL is more than that of ITC in all years indicating a higher confidence of investors in HUL as
compared to ITC. Analysis of Income statement of HUL yields that earning has decreased from Rs
(Cr)4500 to Rs(Cr)5202 which is the reason for decrease in EPS in 2019

60
FINDING

On the basis of current ratio, it can be said that Indian Tobacco Company maintain higher current
ratio than the Hindustan Unilever Limited.
ITC has a higher average current ratio i.e. 1.77

On the basic of liquid ratio, it can be said that Indian Tobacco Company has more sound
liquidity position than the Hindustan Unilever Limited. ITC has a higher average liquidity ratio
i.e. 2.64 during the study period.
On the basis of absolute liquid/ cash ratio, it can be said that it can be said that ITC has more
sound cash position than the HUL. Indian Tobacco Company has a higher average absolute/cash
liquidity ratio i.e. 0.76 during the study period.
On the basis of inventory turnover ratio, it can be said that Hindustan Unilever Limited has more
efficiency power than the Indian Tobacco Limited. It has a higher average efficiency ratio 16.4
during the study period.
On the basis of operating profit ratio, it can be said that Indian Tobacco Company has more
efficiency power than the Hindustan Unilever Limited. It has a higher average efficiency ratio
49.3 during the study period.
On the basis of debtor turnover ratio, it can be said that it can be said that ITC has more sound
cash position than the HUL. Indian Tobacco Company has a higher average debtor turnover ratio
i.e. 56.5 during the study period.
On the basis of total current assets, it can be said that Hindustan Unilever Limited has more
efficiency power than the Indian Tobacco Limited. It has a higher average efficiency ratio 11.3
during the study period.
On the basis of debt equity ratio, it can be said that it can be said that ITC has more sound cash
position than the HUL. Indian Tobacco Company has a low average debt equity ratio and HUL
has a higher average of efficiency ratio 0.8 during the study period.
On the basis of interest coverage ratio, it can be said that Hindustan Unilever Limited has more
efficiency power than the Indian Tobacco Limited. It has a higher average efficiency ratio 220.1
during the study period.
On the basis of cash flow ratio, it can be said that it can be said that ITC has more sound cash
position than the HUL. Indian Tobacco Company has a higher average efficiency ratio i.e. 9.8
during the study period.

61
SUGGESTION

Working capital of the Indian Tobacco Company has increasing in every year and Profit also
increasing in every year. This is a good sign for the companies. It has to maintain to further, to
run the business in long run Hindustan Unilever Limited should increase the level of current ratio
in the future period according to standard norms 2:1.

Hindustan Unilever Limited should increase the level at quick ratio in the future period
according to standard norms 1:1.

Absolute liquid ratio of Hindustan Unilever Limited has constant in both years
to maintain to further Indian Tobacco Company should increase the absolute liquid assets in the
future (2017-2018, 2018-19).This is a good sign for the company and it has period.

Inventory turnover ratio has increasing in the both year of all companies. It is the good sign for
the companies. It has to maintain to further in the future period.

Debtor turnover ratio was decreasing in the current period as compared to previous year so; both
companies should increase the level of debtor turnover ratio in the future period.

Assets turnover ratio of Indian Tobacco Company has increasing. It is the good sign for the
companies. It has to maintain to further, to run in the future. Hindustan Unilever Limited should
increase the level of total asset turnover ratio in the future period.

Net Assets turnover ratio of Hindustan Unilever Limited has increasing. It is the good sign for
the companies. It has to maintain to further, to run in the future. Indian Tobacco Company
should increase the level of net asset turnover ratio in the future period.

Total current assets ratio of Hindustan Unilever Limited and Indian Tobacco Company in the
current year as compared to previous year. It is the good sign for the companies. It has to
maintain to further, to run in the future.

Total assets turnover ratio of Hindustan Unilever Limited and Indian Tobacco Company
in the current year as compared to previous year. It is the good sign for the companies. It has to
maintain to further, to run in the future. HUL should increase the level of fixed assets turnover
ratio in future period.

62
 CONCLUSION

We conclude that this study of working capital is conducted to analyse the working capital position of
selected cement companies. The companies working capital is analyse by using the tool of annual
reports from 20l4-15 to 2018-19. The working capital position of Indian Tobacco Company is good. In
the last year because the inventory turnover has increased, this is the good sign for the company. The
liquidity position of the Hindustan Unilever Limited cement is very good. FMCG Company did not
manage the liquidity position. During the year 2014-15 to 2018-19 the companies (FMCG Company)
liquidity assets were not satisfactory Indian Tobacco Company have sufficient working capital and have
better liquidity position by utilizing this short term capital.

63
 Bibliography

 Books
Financial management (M.Y. khan and Jain)
Research methodology (C.R. Kothari)

 Website
 www.wikipedia.org
 www.google.com.in
 www.ssrn.com
 www.itcportal.com
 www.hul.com.in

64
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