Financial Analysis of FMCG

Management Accounting
Financial Analysis of Indian FMCG Market
Submitted to: Prof. Prakash Singh

Submitted on: 08-July-2018
Submitted by –
Aishwarya Jain – IPMX11003
Kunal Jhamb – IPMX11012
Shivang Sharma – IPMX11033
Shivani Dutta – IPMX11034
Shreyas Cashyap – IPMX11035
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Contents
Introduction, Overview and Market Size ................................................................................................ 4
Motivation............................................................................................................................................... 4
Choice of Industry ............................................................................................................................... 4
Choice of Players ................................................................................................................................. 5
Macroeconomic factors affecting FMCG industry .................................................................................. 5
Market Segments .................................................................................................................................... 5
Competitive Landscape ........................................................................................................................... 6
Brief Overview of the Major Players ....................................................................................................... 6
Colgate-Palmolive ............................................................................................................................... 6
Hindustan Unilever Limited ................................................................................................................ 7
Marico ................................................................................................................................................. 7
Dabur India Limited............................................................................................................................. 7
Johnson & Johnson ............................................................................................................................. 8
Procter & Gamble ............................................................................................................................... 8
Business Model ....................................................................................................................................... 8
Cost Structure ....................................................................................................................................... 10
Porters 5-Force Model for the FMCG Industry ..................................................................................... 11
Buyer Power ...................................................................................................................................... 11
Supplier Power .................................................................................................................................. 11
Threat of New Entrants ..................................................................................................................... 12
Threat of Substitutes......................................................................................................................... 12
Degree of Rivalry ............................................................................................................................... 12
Recently in the NEWS ........................................................................................................................... 12
Entrance of Patanjali – Disruption in the Indian FMCG Sector. ........................................................ 12
Patanjali’s impact on market being limited – MNCs companies diversify their products to take on
new threat......................................................................................................................................... 13
India to continue witnessing Mergers and Acquisitions (M&A) in the FMCG sector ....................... 13
Johnson & Johnson ordered to pay $417m in damages after losing lawsuit linking talc powder to
cancer ................................................................................................................................................ 13
International Financial Reporting Standards ........................................................................................ 14
The new standards ............................................................................................................................ 14
Fundamental difference between existing and new standards ....................................................... 14
Impact on companies ........................................................................................................................ 15
Financial Statement Analysis ................................................................................................................ 16
Balance Sheet.................................................................................................................................... 16
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Profit & Loss ...................................................................................................................................... 17
Cash Flow .......................................................................................................................................... 18
Financial Ratio Analysis ......................................................................................................................... 18
Sources .................................................................................................................................................. 26
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Indian FMCG Industry
Introduction, Overview and Market Size
For decades, the fast-moving consumer goods (FMCG) industry has been the forerunner of India Inc.
and the country’s economy. The industry has successfully met daily needs and created aspirational
brands. The industry has been at the forefront of innovation, providing world-class products at
affordable prices and making them available in the remotest parts of the country. It is the 4th largest
sector in the Indian economy.
A CII-BCG report suggests fundamental shifts towards premium products, e-commerce, Tier II/III area
driven growth etc. Health and wellness is a prominent influencer in shaping consumer preferences
and shopping habits; demand for Organic, Ayurveda and other specialty products is on the rise. There
is also a focus on improving packaging and designing of products to enhance experiences and shelf
life, and reduce costs.
With the emergence of e-commerce and digital connectivity, rural distribution is expanding.
Partnerships with e-commerce players stand to gain. In order to maintain competitive advantage,
there is emphasis on achieving high supply chain effectiveness through upstream/downstream
partnership, revenue sharing etc.
In 2017–18, FMCG market in India is estimated to be ~$52.7 billion in size and is expected to grow at
a CAGR of 27.8% to reach $103.7 billion by 2020. The growth is primarily driven by growing awareness
among growing youth population, easier access, changing lifestyles and rise in income levels. Brand
consciousness has also aided demand. Total consumption expenditure is forecasted to increase from
$1,595 billion in 2016 at a CAGR of 22.6% during 2016–2021.
Motivation
Choice of Industry
The FMCG industry is an interesting choice to study due to massive growth opportunities in the sector.
The sector touches the everyday life of consumers and is characterised by presence of both national
and international players dictating the market. The industry is continuously affected by the macro and
micro environments and vice versa. The industry though at the mature stage, is constantly evolving
and is being affected by the technological advancements, changing in political and legal policies and
varying customer demands. Recent events in the Indian policy scenario including demonetisation and
introduction of GST has impacted the sector most. Demonetisation affected the sector adversely –
with nearly half of its incremental demand coming from rural and semi-urban areas, these were the
worst hit by the demonetization exercise. A liquidity crunch in these non-urban centres and delays in
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realization meant that FMCG companies saw a genuine contraction in demand. But the biggest
advantage for FMCG companies from GST could be a lot more structural in nature.
Choice of Players
The industry has a very wide portfolio of products and is quite fragmented in terms of the various
medium–small size companies offering specialised products. However, the sector is dominated 2–3
large MNCs and domestic companies that are the leaders. The choice is players is a factor of the pure-
play companies operating in the household and personal care segment of the market and that also
hold a significant share in the Indian FMCG market.
Macroeconomic factors affecting FMCG industry
FDI in organised retail: The government approved 51% FDI in multi-brand retail in 2006, which will
boost the nascent organised retail market in the country. It also allowed 100 per cent FDI in the cash
and carry segment and in single-brand retail.
Food Security Bill (FSB): FSB would reduce prices of food grains for Below Poverty Line (BPL)
households, allowing them to spend resources on other goods and services, including FMCG products.
This is expected to trigger higher consumption spends, particularly in rural India, which is an important
market for most FMCG companies.
Goods and Service Tax (GST): The rate of GST on services lies between 0-18% and on goods lies
between 0-28%. Major consumer product manufacturing companies like PepsiCo, Dabur, Hindustan
Unilever etc. are aligning their supply chains, IT infrastructure and warehousing systems ahead of
unified GST regime, so as to facilitate seamless interstate movement of goods. Prices of commodities
in the FMCG sector, like soaps, shampoo, detergents, biscuits, savory snacks etc decreased after the
implementation of GST, leading to a 3-8% decrease in prices of goods at modern retail stores.
Warehousing cost for FMCG companies is estimated to fall by 25-30% backed by the implementation
of the GST.
Fall in prices of agricultural commodities:
Most of the FMCG companies in the Indian markets also have a major exposure to the processed foods
space. Over the last one year, the price of most of the agricultural inputs that go into processed foods
like flour, edible oil, pulses, cereals have all gone down sharply due to a glut of supply in the agri
market. That has led to reduction in input costs for these FMCG companies. FMCG is also a very
inflation-sensitive sector as it has to do with purchasing power of people.
Market Segments
The Indian FMCG Industry can be categorised into the following 3 key segments:
FMCG Segments
Household and Personal

Food and Beverages Healthcare
Care
Focus of the Study
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1. Food and Beverages (F&B): This segment includes health beverages, staples/cereals, bakery
products, snacks, chocolates, ice cream, tea/coffee/soft drinks, processed fruits and
vegetables, dairy products, and branded flour. F&B segment accounts for ~19% of the overall
market share of the industry.
2. Healthcare: It accounts for 31% market share of the industry and includes OTC products.
3. Household and Personal Care: The segment is the largest and accounts for 50% share of the
sector. It includes oral care, hair care, skin care, cosmetics/deodorants, perfumes, feminine
hygiene and paper products, Fabric wash and household cleaners.
Competitive Landscape
 Among the FMCG companies in India Hindustan Unilever Limited is most catered company to
almost every segment in the industry. The major companies of strategic groups in FMCG
industry are Hindustan Unilever Limited, ITC Limited, Nestle India, Emami Limited, Colgate-
Palmolive (India) Limited, Dabur India Limited, Procter & Gamble, Godrej Consumer Products
Limited and Cadbury India.
o HUL’s share in FMCG market (personal care) is 37.4%
 Domestic companies such as Marico, Dabur and Emami lead in natural product category by
offering herbal products. For instance, Marico's flagship brand Parachute Coconut Oil has no
foreign competition.
 Ayurveda products have garnered consumers’ interest, which has resulted in growth of FMCG
major, Patanjali Ayurveda, with a revenue of US$ 1.57 billion in FY17. The company aims to
expand globally in the next 5 to 10 years.
Market Share of Companies in Selected Segments
Segment Market Leader (Share) Others Major Players (Share)
Hair Care Marico (29%) Dabur (17%)
Shampoo HUL (47%) P&G (27%)
Oral Care Colgate (55%) HUL (30%), Dabur (13%)
Skin Care HUL (54%) CavinKare (12%), Godrej (3%)
Brief Overview of the Major Players
Colgate-Palmolive
Colgate-Palmolive is an American consumer products firm founded in 1806 and
headquartered in New York. The Indian headquarter is in Mumbai running successfully since
1902. It is the leading name in India in the oral care segment, and the products offered by the
company in the oral care segment include toothpaste, toothbrushes, tooth powder,
mouthwash and whitening products. The company also manufactures personal care products
such as liquid hand wash, body wash, skin care, hare care and shaving products.
 In the toothpaste category, the Company offers products, including Colgate Total
Charcoal Deep Clean Toothpaste, Colgate Active Salt Neem Toothpaste and Colgate
Sensitive Pro-Relief (CSPR) Enamel Repair Toothpaste.
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 In the toothbrush category, the Company offers the Colgate 360 degree Toothbrush
range, including 360 degree Charcoal Gold, 360 degree Whole Mouth Clean, 360
degree Visible White and 360 degree Floss-Tip, and Colgate ZigZag Black Toothbrush.
 In the Personal Care category, the Company offers Palmolive's Foaming Hand Wash
range in approximately two variants.
 Net sales were Rs. 4,490 crores for FY 2016-17
 Profit after Tax was Rs. 577.4 crores for FY 2016-17
Hindustan Unilever Limited

Hindustan Unilever Limited is the largest consumer goods company in India, established in
1933 and is based out of Mumbai. The company known for its presence across almost all
categories of consumer products, has a variety of products in each of the categories targeted
at almost all the customer segments. It has products in over 20 consumer categories majorly
Food & Drink, Personal care, Home care and Water purifier serving over 700 million customers
across the country and is undoubtedly the market leader in the FMCG sector.
 Some of the famous brands of HUL are Dove, Lux, Lifebuoy, Pears, Hamam, Lyril,
Rexona, Surf Excel, Wheel, Comfort, Clinic Plus, Sunsilk, Fair & Lovely, Pond’s, Lakmè,
Vaseline, Bru, Taj Mahal, Lipton, Brooke Bond, Cornetto, Kisan, Annapurna, Magnum,
Close up, Pepsodent, and many more.
 Net sales of INR 33,895 crores (FY 2016-17). Unilever has over 67% shareholding in
HUL.
Marico
Founded in 1991, Marico is a leading Indian consumer goods company based out of Mumbai
and operating in the beauty and wellness space. Currently present in 25 countries across
emerging markets of Asia and Africa, Marico has nurtured multiple brands in the categories
of hair care, skin care, edible oils, health foods, male grooming, and fabric care.
 Its India business markets household brands such as Parachute, Parachute Advansed,
Saffola, Hair & Care, Nihar, Nihar Naturals, Livon, Set Wet, Mediker and Revive among
others that add value to the life of 1 in every 3 Indians. The International business
offers unique brands such as Parachute, HairCode, Fiancée, Caivil, Hercules, Black
Chic, Isoplus, Code 10, Ingwe, X-Men and Thuan Phat that are localized to fulfil the
lifestyle needs of their international consumers.
 Annual turnover of Rs. 5,936 crores for FY16-17
 Net profit of Rs. 799 crores for FY 16-17
Dabur India Limited

Founded in 1884 and headquartered in Ghaziabad is world’s largest Ayurvedic medicine and
natural health care company with over 250 herbal/ayurvedic products. The company has
offerings in key consumer product categories such as Health supplements, Oral care, Hair care,
Skin care, Home care, Medicines and Digestives.
 Dabur India is also a world leader in Ayurveda with a portfolio of over 250
Herbal/Ayurvedic products. Its FMCG portfolio today includes five flagship brands
with distinct brand identities.
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 Dabur as the master brand for natural healthcare products, Vatika for premium
personal care, Hajmola for digestives, Réal for fruit juices and beverages and Fem for
fairness bleaches and skin care products.
 Revenues of over Rs. 7,680 crores
Johnson & Johnson

Johnson & Johnson (J&J) India, a subsidiary of Johnson & Johnson USA, is one of the leading
players in the Indian pharmaceutical and consumer products business. It has an employee
strength of over 1,800. It started business in India in 1947 in Bombay with Johnson’s Baby
Powder, and, over time, introduced other products like toothbrushes, Johnson’s Baby Cream
and Prickly Heat Powder. In the 50 years since its establishment as a modest 12 employee
outfit, Johnson & Johnson India has gained a reputation for delivering high-quality products
at competitive prices.
 Today J&J is a household name with several popular brands like Band-Aid, J&J Baby
Powder and Prickly Heat Powder.
 Stayfree Secure has become the leading sanitary napkin in the country with a volume
market share of 46 per cent.
 Ethicon, a franchise of J&J Medical India, is a leading manufacturer of surgical
material.
 Eprex launched in 1995 was one of the first successful biotech brands to be marketed
in India.
 J&J also has a strong presence in the contact lenses market in the country.
Procter & Gamble

Richardson Hindustan Limited (RHL) was established in 1964, as a public limited company and
obtained an industrial license to manufacture Menthol and Vicks range of products. In 1984,
it became an affiliate of Procter and Gamble (P&G), USA. P&G operates under three entities
in India - two listed entities 'Procter & Gamble Hygiene and Health Care Limited' and 'Gillette
India Limited', as well as one 100 per cent subsidiary of the parent company in the US called
'Procter & Gamble Home Products'.
 Today, it serves over 650 million consumers across India and its presence pans across
the beauty and grooming segment, the household care segment, as well as the health
and well-being segment.
 Some of its most popular brands include Vicks, Ariel, Tide, Whisper, Olay, Gillette,
Ambipur, Pampers, Pantene, Oral-B, Head & Shoulders, Wella and Duracell.
 The company has currently invested in the country via its five plants and nine contract
manufacturing sites, as well as through the 26,000 jobs it creates directly and
indirectly.
Business Model
The focus of the FMCG business models has shifted from being cost-effective to being demand-
oriented and customer-facing.
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Below are some important branches of a general business model of an FMCG industry:
Procurement
Research and
Manufacturing Product
Development
FMCG Value
Chain
CRM
Sales and
Customer
Distribution
Service
Integrated
Suplly Chain
Value-Creation Model for FMCG companies

 Mass-market brand building and product innovation: allows branded FMCG
companies to achieved reliable growth and gross margins that are typically 25% above
non-branded players.
 Building relationships with grocers and other mass retailers: By partnering on
innovation and in-store execution and tightly aligning their supply chains, large FMCG
companies secured broad distribution as partners grow. Small competitors lack such
access.
 Actively cultivating categories in developing markets: This proves to be a
tremendous source of growth with expansion of market and rising income levels in
developing countries.
 Centralisation: This synergy-based model has kept general and administrative
expenses at 4 to 6% of revenue.
 M&A to consolidate markets: After updating portfolios with new brands and
categories, FMCG companies apply superior distribution and business practices to
grow those brands and categories.
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Cost Structure
Major costs involved in the FMCG sector include:
1. Raw Materials - Raw materials form the major chunk of costs for FMCG companies. For
example, both Unilever and P&G spend about 30% of their total outlay on raw materials
needed to manufacture the final products.
2. Purchase of finished goods – This is another major category of items where instead of raw
materials, goods which are already processed to a certain degree are purchased outright to
be used by the FMCG companies in their products. Values range from 12-20% for major
players in the industry.
3. Power and Fuel – The smallest of the major expenses, this bracket included spending on
electricity, water supply, heating and other consumables during the manufacturing process.
All companies usually spend less than 1% of their total costs on these items.
4. Employee cost – Salaries, gratuity, pension and other compensation like welfare programs
given to the employees fall into this category. The expenditure range is between 6 to 14% of
total expenses.
5. Other Manufacturing Expenses – This bracket includes expenses for freight and
transportation, logistics, repair and maintenance of machinery, packaging and labelling etc.
J&J has a very low value of less than 2% compared to the other 2 companies which have
around 5.5% set aside for these expenses.
6. Selling and Administrative Expense – This very broad head covers expenses ranging from
advertising and marketing to audit expenses, rent paid on buildings and other properties to
distribution charges and commissions on sales etc. On average, around 30% of the total
expenses of all the companies fall under this category.
7. Miscellaneous expenses – Any write-offs, extraordinary items, travel expenses, donations,
expenses as part of CSR initiatives fall in this category. All companies usually spend less than
5% of their annual budget on these items.
Value Value Value

Value (%) Value (%) Value (%)
EXPENDITURE : (in 2017) (Rs.) (Rs.) (Rs.)
P&G J&J Colgate-Palmolive
Raw Materials 966.08 56.59918 2,302.03 46.86619 1,473.40 47.98458
Power & Fuel Cost 11.23 0.657926 31.9 0.649441 44.16 1.438169
Employee Cost 114.1 6.684711 679.07 13.82494 305.93 9.963297
Other Manufacturing Expenses 90.45 5.299142 84.97 1.729873 179.77 5.854613
Selling and Administration Expenses 488.08 28.59486 1,593.74 32.44638 950.8 30.96493
Miscellaneous Expenses 36.94 2.164183 220.21 4.483176 116.51 3.79441
TOTAL 1706.88 100 4911.92 100 3070.57 100
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P&G
Raw Materials Power & Fuel Cost

Employee Cost Other Manufacturing Expenses
Selling and Administration Expenses Miscellaneous Expenses
Porters 5-Force Model for the FMCG Industry
Buyer Power
The consumer base of this industry is larger than any other industry and they have little or no
influence on the price of the product. The consumer always possesses great choice of brands
within the product category and they can shift from one to another without much influence.
Hence, buyer power is quite strong in this industry. They have power when they provide threat to
shift from one brand to another brand. In FMCG retailers should also take into the account for
analysis. Retailers can always decide which brand to stock and consumers don't show much
interest to wait if one brand of choice is not available. So retailers can always make choice
between brands and they have more buyer power than consumers.
Supplier Power
Supplier power is little or limited in the FMCG industry. The industry always has great number of
suppliers with great size. There will not be any uniqueness in the product or service of suppliers
and the manufacturer can always shift from one supplier to other supplier. However
manufacturers face some amount of supplier power due to the cost they have to incur when
switching suppliers. Suppliers who do large business with manufacturers are always obliged to
their customers.
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Threat of New Entrants
Threat of new entrants is limited in this industry. The new entrants generally cater to local or small
markets contributing to the large unorganized sector. Raw materials for most of the segments in
FMCG industry can be easily procured. The investment will not be high for machinery and other
assets required for most of the products in the industry. Also the basic technology is easily
available. These factors can make the local or small manufactures to enter easily in the industry.
But this industry requires high initial launch cost and distribution network is always a challenge.
These factors act as a barrier for any new entrants in the industry and virtually provide low threat
of new entrants.
Threat of Substitutes
The FMCG industry bears a high threat of substitutes. The industry possesses many organized
players with great number of local manufactures. The products in the industry can always be
imitated and marketed. The industry possesses high level threat of substitutes in rural market than
in the urban.
Degree of Rivalry
The degree of rivalry is high in the industry. There are many global players along with local
manufacturers. The industry enjoys low customer loyalty. The customers always have wide choice
of brands and the switching cost is always minimum or negligible. There will be only slight
difference in the quality of brands. So the competition is fierce in the industry to attract customers
and retain them.
Threat of New Entrants Power of Suppliers :

: Low Low
Competitive
Rivalry : High
Threat of Substitutes :
Power of Buyers : High
High
Recently in the NEWS
Entrance of Patanjali – Disruption in the Indian FMCG Sector.

What started in 1997 as a small sized pharmacy, Patanjali Ayurveda Ltd. (PAL), today, is arguably the
fastest growing company in the Indian FMCG sector, a USD 50 Billion industry once dominated by
multinational behemoths – the likes of Unilever, P&G, Nestle, Colgate - Palmolive, Johnson & Johnson.
From shampoo and biscuits to ghee and noodles, and now apparel and footwear – no
other indigenous company has built such a well-diversified product portfolio. It has grown more than
ten times in revenue in last five years, an unparalleled feat in India’s FMCG industry. The company
which is targeting revenues of Rs. 10,000 crore for FY 2016-17 and Rs. 20,000 -25,000 crore in FY 2018
has extensive sales channel of over 5000 distributors, 15,000 stores, and 100 mega-marts. Moreover,
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it has also tied up with retail chains like Future Group, Reliance Retail, Hyper City and Star Bazaar as
well as leading e-commerce platforms. Patanjali has managed to capture the imagination of the Indian
consumer with its focus on ayurvedic and herbal products and is rapidly gaining market share across
diverse segments.
Patanjali’s impact on market being limited – MNCs companies diversify their products
to take on new threat
While it is not possible to single out Patanjali's impact on the mainstream Indian fast moving consumer
goods (FMCG) companies, the overall performance of FMCG companies in the past two quarters on
and off the bourses hints at a limited impact so far.
Most companies have taken on Patanjali by diversifying their portfolios to include ayurvedic or other
herbal products. Colgate, for instance, is launching Cibaca Vedshakti, a low-priced herbal toothpaste,
to take on Patanjali's Dant Kanti and Dabur. “I think as far as Patanjali is concerned, there's a huge
learning for a lot of us in terms of how quickly they have scaled up. At the same time, as a market
leader, it is important that we continue to innovate. I think they are operating in a space where I
believe multiple players' playing will actually grow the market, “said Saugata Gupta, CEO of Marico, in
the company's first quarter earnings call.
India to continue witnessing Mergers and Acquisitions (M&A) in the FMCG sector
India will continue to see merger and acquisitions (M&A) and private equity activity within the FMCG
sector both on a domestic and cross-border basis, notwithstanding the global economic slowdown,
according to a report by consulting firm PwC.
While Godrej had made a series of acquisitions in the past three years in Indonesia, Africa and
Argentina, Wipro Ltd acquired Singapore based LD Waxon, which sells skincare and healthcare
products, in December 2012. Wellness and beauty company VLCC acquired Malaysia's Wyann
International in November, 2012.
On the other hand, multinationals have also been in M&A activities in India. After acquiring
Ahmedabad-based FMCG firm Paras Pharmaceuticals in 2011, Reckitt Benckiser had sold part of it
homegrown firm Marico Industries. Future Consumer Enterprises acquired MNS Food in May 2015
(deal size not disclosed); Godrej Agrovet acquired Creamline Dairy for $23 million in December 2015.
The same month, Hindustan Unilever announced the acquisition of Indulekha for $50 million.
And, this month, Future Retail announced the acquisition of Heritage Foods. This, it said, would
complement its existing network of 379 small-format EasyDay stores in north India.
Johnson & Johnson ordered to pay $417m in damages after losing lawsuit linking talc
powder to cancer
A Los Angeles jury on Monday ordered Johnson & Johnson to pay a record $417 million to a
hospitalised woman who claimed in a lawsuit that the talc in the company’s iconic baby powder causes
ovarian cancer when applied regularly for feminine hygiene.
The verdict in the lawsuit brought by the California woman, Eva Echeverria, marks the largest sum
awarded in a series of talcum powder lawsuit verdicts against Johnson & Johnson in courts around the
US.
Echeverria alleged Johnson & Johnson failed to adequately warn consumers about talcum powder’s
potential cancer risks. She used the company’s baby powder on a daily basis beginning in the 1950s
until 2016 and was diagnosed with ovarian cancer in 2007, according to court papers.
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The evidence in the case included internal documents from several decades that “showed the jury
that Johnson & Johnson knew about the risks of talc and ovarian cancer,” Robinson said. Johnson &
Johnson had many warning bells over a 30 year period but failed to warn the women who were buying
its product,” he said.
Johnson & Johnson spokeswoman Carol Goodrich said in a statement that the company will appeal
the jury’s decision. She says while the company sympathizes with women suffering from ovarian
cancer that scientific evidence supports the safety of Johnson’s baby powder.
International Financial Reporting Standards
The new standards

Every country stipulates a method for companies to report financial data based on rules called
accounting standards. India has so far followed Indian Generally Acceptable Accounting Principle
(IGAAP). However, from FY17, it will follow Ind-AS whose principles are closely based on international
accounting system called IFRS. This will increase comparability of Indian companies with their
international counterparts. The transition will have a considerable impact on the computation of
revenue, operating profit, net profit, and net worth of the listed companies. Sectors including metals,
telecoms, oil & gas, and real estate are likely to be impacted most.
Fundamental difference between existing and new standards

The new accounting standards recognize substance over form and importance of the fair value to
compute financial statements. This means accurate reporting will gain importance over just complying
with legal provisions and it should reflect the most current picture of financials.
Under existing standards New standards Impact
Revenues calculated net of excise Revenues will be calculated by Higher revenue, lower margin and
and duties adding excise duty EPS neutral.
Most companies having Mandates ESOP, cost booked Likely to increase employee cost
employee stock option (ESOP) under fair value accounting
based on Intrinsic Value
Proposed dividend is recognized Proposed dividend in a year when Likely to increase the year end
in the same year approved by shareholder book value of the company. This
may lower RoE of high dividend
paying companies
Under M&A assets are recognized Asset and liability to be Companies having high goodwill
at book value recognized at fair value and in balance sheets will see volatility
continent liabilities to be in their earnings
accounted at fair value. Goodwill
value to be tested annually
Current investment valued at cost Needs to be values at fair value Greater volatility in other income,
or market value cash-rich companies will be more
impacted
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Redeemable preference share Will be treated as liability, Higher debt to equity and lower
treated as part of equity preference dividend will be EPS
treated as interest cost
Major repair charges as expense Allowed to capitalize Could lead to lower EPS
Impact on companies
It will impact how key financials such as revenue, operating profit, net profit, book value, goodwill,
and return on equity will be computed. For instance, under the existing rules, sales are calculated after
deducting excise duty. Under the new norms, excise duty will be treated as a tax on manufacturing
activity. Hence, it should be a part of revenue. This will increase the revenue of companies, but depress
operating margin. However, EPS will remain unchanged.
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Financial Statement Analysis
Balance Sheet
The following table analyzes the major discrepancies among the accounting practices of the 3
companies over the past 5 years –
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Profit & Loss
Below is the comparison table and some important observations from the P&L comparison –
Few observations –
1. Sales turnover grew marginally for all players as consumer demand grew
2. Excise Duty: Significant increase for P&G due to change in taxation resulting in
expensive imports
3. Power & Fuel Cost: Higher for Colgate Palmolive due to their business model
4. Depreciation: Due to implications of INDAS on the organizational structure.
5. PBT: Only marginal changes on all players
6. Deferred Tax: Increase mainly to offset uncertainties after application of INDAS
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Cash Flow
The below mentioned table analyzes the cash flows for all the 3 shortlisted companies –
Financial Ratio Analysis
Liquidity ratio
Current ratio
Current ratio is used for getting the idea of company’s ability to pay its short term liabilities
with its current assets. A higher ratio indicates the capability of a company to pay its current
liabilities. The current ratio can give a feeling of the effectiveness of an organization's working
cycle or its capacity to transform its assets into money. Organizations that experience
difficulty getting paid on their receivables or have long stock turnover can keep running into
liquidity issues since they can't ease their liabilities.
Current Ratio = (Current Assets / Current Liability)
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Analysis
We see a relatively steady trend in the current ratio. Colgate has a lower current ratio than
the Industry average especially during the last 5 years. Both J&J and P&G have maintained
almost the same current ratio value over the years and have current ratio higher than industry
average, indicating that they will be in a better position to pay their current liabilities. A high
current ratio may not indicate that a company is doing well. It could be that inventory and
cash is lying idle and not used to their potential.
Quick Ratio/ Acid Test Ratio

Quick ratio measures whether a firm has enough short term assets to cover its current
liabilities with cash and marketable securities. The acid-test ratio is far more strenuous than
the working capital ratio, primarily because the working capital ratio allows for the inclusion
of inventory assets.
Quick Ratio = (Current Asset – Inventory)/ Current Liability
19 | P a g e
Analysis
The quick ratio is a better reflection of how easily a company can pay its current debt. Here,
we observe the pattern to be very similar to that for current ratio. The relative ranking of all
the 3 companies is much similar to that in Current ratio. A higher quick ratio shows higher
liquidity. High liquidity is looked upon favourably by creditors as it indicates ease of recovering
debt.
Debt Equity Ratio

Debt equity ratio is used to know company’s financial leverage. It can be measured by dividing
a company’s total debt liabilities by its stockholders’ equity. The ratio indicates how much
debt a company is using to finance its assets relative to the amount of value represented in
the equity.
Debt Equity Ratio (DER) = (Total Liabilities / Shareholder's Equity)
Analysis:
As per the graphs above, Colgate Palmolive has a very low Debt Equity ratio and on contrast,
J&J has a very high ratio. It is evident that while Colgate Palmolive does not rely on debt, J&J
relies heavily on debt versus equity for their operations and expansions. It is interesting to
notice here that both the companies operate on a much lower level of debt as compared to
the industry standard.
Efficiency Ratios
Fixed Assets Turnover Ratio
20 | P a g e
Ratio of net sales to fixed assets. It helps to know the company’s ability to generate net sales
from fixed- asset investments.
Fixed Asset Turnover Ratio = Sales Revenue / Total Fixed Assets
Analysis
Higher ratio shows that the company has been more effectively using the assets to generate
revenues. Fixed assets are essential part because they usually represent the largest
component of total assets. A declining trend in fixed asset turnover may mean that the
company is over investing in the property, plant and equipment (as evident from the trends
of Colgate in the last 2 years). It could also mean that the sales of the product have been
falling.
Inventory Turnover Ratio

Inventory turnover ratio is used to compare COGS with average inventory for a period. This is
one of the important ratio because total turnover depends on sales performance. A higher
value of inventory turnover indicates better performance and lower value means inefficiency
in controlling inventory levels.
Inventory Turnover = COGS/Inventory 
21 | P a g e
Analysis
P&G and Colgate have shown similar trends in Inventory turnover ratio, with a slight decrease
and increase overtime. Still, their inventory turnover ratio is higher than industry average
which is a positive sign. J&J has a lower inventory turnover in recent years than the industry
average. This shows inefficiency in controlling inventory levels.
Debtors Turnover Ratio

Accounts receivable turnover ratio (also known as debtor’s turnover ratio) shows the
effectiveness of the company’s credit control system. Much as inventory turnover ratio,
accounts receivable turnover ratio shows how many times in a year are debtors given credit
and they fully repay it.
Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables
Analysis
22 | P a g e
The graph for Debtors Turnover ratio is closely bound for all the 3 companies and the market
Industry average. P&G closely follows the industry average. Whereas Colgate is above and J&J
is below the industry average. A high ratio implies either that a company operates on a cash
basis or that its extension of credit and collection of accounts receivable is efficient. Towards
the last 2 years, all the 3 companies have similar ratios.
Profitability ratio
Gross Margin: Profit before Interest, Depreciation and Tax

Gross margin can be measured by company’s total sales subtracted from its costs of goods
sold. The higher the ratio, the more a company retains on each rupee of sales.
Analysis:
The three companies evaluated here have done exceptionally well in terms of returns on each
unit of sales, as compared to the industry standard. J&J has somewhat managed to stay at
par with the industry. However, Colgate and P&G are way above the industry average, with
P&G topping the charts at 30% profitability.
Return on Equity Ratio

The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders’ investments in the company. In other words, the
return on equity ratio shows how much profit each dollar of common stockholders' equity
generates.
Return on Equity = Net Income/Shareholders’ Equity
23 | P a g e
Analysis
ROE is useful in comparing the profitability of a company to that of other firms in the same industry.
It illustrates how effective the company is at turning the cash put into the business into greater gains
and growth for the company and investors. The higher the return on equity, the more efficient the
company's operations are making use of those funds. During the last decade, P&G and J&J have had
much similar trends for ROE, whereas the trend for Colgate have increasingly dropped towards the
same level as the other 3 companies. This may be a direct result of some changes in the industry
driving ROE towards relatively similar levels.
Return on Assets
Return on Assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives an idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is
displayed as a percentage.
Return on Assets = Net Income/ Total Assets
24 | P a g e
Analysis
The higher the ROA number, the better, because the company is earning more money on less
investment. Much similar to ROE, the trends for ROA are similar for J&J and P&G. The trends
for Colgate have been converging to similar trends as for P&G and J&J. It seems that these
trends are driven by certain changes in the market. The ROA for P&G seem to have taken off
during the past 2 years which could be due a change in accounting policy of the company.
ROA is most useful for comparing companies in the same industry, as different industries use
assets differently.
25 | P a g e
Sources:
https://www.ibef.org/industry/fmcg-presentation
https://amritt.com/industries/india-consumer-packaged-goods-market/
https://brandequity.economictimes.indiatimes.com/news/business-of-brands/a-comprehensive-industry-risk-
review-on-indias-49-billion-fmcg-sector/62705180
https://www.ukessays.com/essays/marketing/macro-environmental-analysis-of-the-indian-fmcg-market-
marketing-essay.php
https://media-publications.bcg.com/india/Re-Imagining-FMCG-in-India.pdf
https://economictimes.indiatimes.com/markets/stocks/policy/how-new-accounting-standards-will-impact-
indian-companies/articleshow/53200549.cms
https://yourstory.com/mystory/c5edeadc03-the-epic-rise-of-patanjali-game-changer-in-indian-fmcg-industry
https://economictimes.indiatimes.com/markets/stocks/news/patanjalis-impact-on-fmcg-cos-seen-
limited/articleshow/53765232.cms
//economictimes.indiatimes.com/articleshow/21212322.cms?utm_source=contentofinterest&utm_
medium=text&utm_campaign=cppst
//economictimes.indiatimes.com/articleshow/53200549.cms?utm_source=contentofinterest&utm_
medium=text&utm_campaign=cppst
Annexures:
Detailed Balance Sheets:
1) J&J
Company : Johnson & Johnson Pvt Ltd

Industry : Personal Care - Multinational
Company >> Finance >> Balance Sheet (Rs in Crs.)
Year Mar 13 Mar 14 Mar 15 Mar 16 Mar 17
SOURCES OF FUNDS :
Share Capital + 14.4 14.4 14.07 14.07 14.07
Reserves Total + 1,197.27 1,563.71 1,715.13 2,343.78 2,108.40
Equity Share Warrants 0 0 0 0 0
Equity Application Money 0 0 0 0 0
Total Shareholders Funds 1,211.67 1,578.11 1,729.20 2,357.85 2,122.47
Secured Loans + 0 0 0 0 0
Unsecured Loans + 0 0 0 0 0
Total Debt 0 0 0 0 0
Other Liabilities+ 107.44 109.94 160.01 181.34 166.97
Total Liabilities 1,319.11 1,688.05 1,889.21 2,539.19 2,289.44
26 | P a g e
APPLICATION OF FUNDS :
Gross Block + 1,016.48 1,122.23 1,757.05 803.25 899.08
Less : Accumulated Depreciation + 516.36 624.99 1,024.40 166.68 303.52
Less:Impairment of Assets 0 0 0 0 0
Net Block + 500.12 497.24 732.65 636.57 595.56
Lease Adjustment 0 0 0 0 0
Capital Work in Progress+ 55.95 162.2 110.87 330.83 402.56
Producing Properties 0 0 0 0 0
Investments + 0.01 114.22 0.01 0.01 0.01
Current Assets, Loans & Advances
Inventories + 588.6 605.16 860.82 814.44 832.45
Sundry Debtors + 350.87 380.88 533.53 709.67 859.24
Cash and Bank+ 344.51 346.14 592.7 821.78 465.42
Loans and Advances + 201.95 232.75 267.39 253.05 122.64
Total Current Assets 1,485.93 1,564.93 2,254.44 2,598.94 2,279.75
Less : Current Liabilities and
Provisions
Current Liabilities + 904.92 985.83 1,206.42 1,392.46 1,421.19
Provisions + 135.13 29.01 415.71 86.89 91
Total Current Liabilities 1,040.05 1,014.84 1,622.13 1,479.35 1,512.19
Net Current Assets 445.88 550.09 632.31 1,119.59 767.56
Miscellaneous Expenses not written off
+ 0 0 0 0 0
Deferred Tax Assets 74.09 73.41 68.58 70.78 87
Deferred Tax Liability 40.12 30.51 12.54 0 0
Net Deferred Tax 33.97 42.9 56.04 70.78 87
Other Assets+ 283.18 321.4 357.33 381.41 436.75
Total Assets 1,319.11 1,688.05 1,889.21 2,539.19 2,289.44
Contingent Liabilities+ 350.41 0 640.68 685.2 1,352.46
http://www.capitaline.com
2. Colgate Palmolive
Company : Colgate-Palmolive (India) Ltd

Mar Mar
Year 13 14 Mar 15 Mar 16 Mar 17
SOURCES OF FUNDS :
Share Capital + 13.6 13.6 13.6 27.2 27.2
Reserves Total + 475.99 586.28 756.72 1,003.84 1,246.60
27 | P a g e
Total Shareholders Funds 489.59 599.88 770.32 1,031.04 1,273.80
Total Liabilities 525.33 651.67 832.72 1,050.61 1,300.63
Gross Block + 673.54 992.7 1,282.86 1,118.45 1,351.66
Less : Accumulated Depreciation + 392.88 436.79 501.28 110.31 243.55
Net Block + 280.66 555.91 781.58 1,008.14 1,108.11
Investments + 47.12 37.13 37.13 31.16 31.16
Inventories + 185.3 225.74 252.23 291.53 292.55
Sundry Debtors + 81.21 54.73 69.64 101.54 129.9
Cash and Bank+ 428.8 285.38 254.45 288.66 294.3
Total Current Assets 783.05 670.22 682.71 775.06 855.62
Provisions
Current Liabilities + 716.8 771.46 800.28 790.16 857.75
Provisions + 64.64 70.36 66.32 152.44 124.8
Total Current Liabilities 781.44 841.82 866.59 942.61 982.55
Net Current Assets 1.61 -171.6 -183.88 -167.55 -126.93
+ 0 0 0 0 0
Deferred Tax Assets 40.57 42.55 30.97 36.11 0
Deferred Tax Liability 18.12 24.76 33.55 45.78 27.48
Net Deferred Tax 22.45 17.79 -2.58 -9.67 -27.48
Other Assets+ 71.54 70.93 59.28 110.16 149.17
Total Assets 525.34 651.66 832.71 1,050.61 1,300.62
Contingent Liabilities+ 48.74 48.41 48.55 51.43 236.46
3 P&G
Company : Procter & Gamble Hygiene and Health Care Ltd

Jun Jun
Year 13 Jun 14 Jun 15 Jun 16 17
SOURCES OF FUNDS :
Share Capital + 32.46 32.46 32.46 32.46 32.46
Reserves Total + 772.86 970.44 1,196.22 1,619.32 493.66
28 | P a g e
Total Shareholders Funds 805.32 1,002.90 1,228.68 1,651.78 526.12
Total Liabilities 808.11 1,005.84 1,232.01 1,655.35 530.29
Gross Block + 377.47 428.07 523.66 361.6 376.06
Less : Accumulated Depreciation + 162.6 188.56 214.87 44.17 90.35
Net Block + 214.87 239.51 308.79 317.43 285.71
Investments + 0 0 0 0 0
Inventories + 118.9 118.52 119.07 127.48 177.35
Sundry Debtors + 80.87 86.05 113.94 149.62 132.8
Cash and Bank+ 166.03 269.08 618.58 1,073.18 116.83
Total Current Assets 840.7 1,012.43 1,357.11 1,631.88 603.13
Provisions
Current Liabilities + 289.12 293.11 456.95 425.76 504.97
Provisions + 152.08 208.99 258.72 85.3 124.86
Total Current Liabilities 441.2 502.1 715.67 511.06 629.83
Net Current Assets 399.5 510.33 641.44 1,120.82 -26.7
+ 0 0 0 0 0
Deferred Tax Assets 14.33 18.1 18.44 22.74 34.24
Deferred Tax Liability 11.38 10.93 14.48 13.8 7.97
Net Deferred Tax 2.95 7.17 3.96 8.94 26.27
Other Assets+ 149.55 150.66 238.84 173.44 204.17
Total Assets 808.11 1,005.84 1,232.01 1,655.35 530.29
Contingent Liabilities+ 94.2 170.66 250.5 128.97 136.53
Detailed P&L Statements
1. J&J
Company : Johnson & Johnson Pvt Ltd
29 | P a g e
Company >> Finance >> Profit & Loss (Rs in Crs.)
Mar 13 Mar 14 Mar 15 Mar 16 Mar 17
Year (12) (12) (12) (12) (12)
INCOME :
Sales Turnover + 4,071.27 4,510.48 5,656.90 5,948.80 5,989.88
Excise Duty 71.06 89.83 103.37 129.93 146.66
Net Sales 4,000.21 4,420.65 5,553.53 5,818.87 5,843.22
Other Income + 62.19 33.78 345.43 240.83 47.84
Stock Adjustments + 102.41 29.76 85.83 -40.31 30.64
Total Income 4,164.81 4,484.19 5,984.79 6,019.39 5,921.70
EXPENDITURE :
Raw Materials + 1,575.45 1,723.62 2,366.66 2,224.64 2,302.03
Power & Fuel Cost+ 28.83 30.35 34.16 32.67 31.9
Employee Cost + 510.52 548.45 654.65 661.95 679.07
Other Manufacturing Expenses + 57.37 68.29 99.76 94.48 84.97
Selling and Administration Expenses + 1,140.21 1,224.93 1,413.85 1,602.92 1,593.74
Miscellaneous Expenses + 198.1 244.45 322.95 309.59 220.21
Less: Pre-operative Expenses
Capitalised+ 0 0 0 0 0
Total Expenditure 3,510.48 3,840.09 4,892.03 4,926.25 4,911.92
Operating Profit 654.33 644.1 1,092.76 1,093.14 1,009.78
Interest + 0 0 2.92 0 0
Gross Profit 654.33 644.1 1,089.84 1,093.14 1,009.78
Depreciation+ 102.85 119.59 327.05 185.28 141.12
Profit Before Tax 551.48 524.51 762.79 907.86 868.66
Tax+ 160.97 167 220.28 294.89 300
Fringe Benefit tax+ 0 0 0 0 0
Deferred Tax+ -14.83 -8.93 14.2 -17.78 -14.77
Reported Net Profit 405.34 366.44 528.31 630.75 583.43
Extraordinary Items + 14.81 -0.46 170.85 7.36 -0.26
Adjusted Net Profit 390.53 366.9 357.46 623.39 583.69
Adjst. below Net Profit + 0 0 247.33 2.67 -2.74
P & L Balance brought forward 995.94 1,009.30 1,375.74 1,855.86 2,106.62
Statutory Appropriations 0 0 0 0 0
Appropriations + 391.98 0 652.74 382.66 783.07
P & L Balance carried down 1,009.30 1,375.74 1,498.64 2,106.62 1,904.24
Dividend 302.4 0 543.01 317.93 650.62
Preference Dividend 0 0 0 0 0
Equity Dividend % 2,100.00 0 3,860.00 2,259.63 4,624.16
Dividend Per Share(Rs) 0 0 3,860.00 2,259.63 4,624.16
Earnings Per Share-Unit Curr 2,474.24 2,544.72 2,974.98 4,022.89 3,205.26
Earnings Per Share(Adj)-Unit Curr 0 0 0 0 0
Book Value-Unit Curr 8,414.38 10,959.10 12,289.98 16,758.00 15,085.07
Book Value(Adj)-Unit Curr 0 0 0 0 0
30 | P a g e
Company : Colgate-Palmolive (India) Ltd

Mar 13 Mar 14 Mar 15 Mar 16 Mar 17
Year (12) (12) (12) (12) (12)
INCOME :
Sales Turnover + 3,324.21 3,791.31 4,238.36 4,349.11 4,520.20
Excise Duty 160.4 212.5 256.42 480.92 538.38
Net Sales 3,163.81 3,578.81 3,981.94 3,868.19 3,981.82
Other Income + 49.92 114.7 33.17 39.51 41.12
Stock Adjustments + -22.2 26.77 16.35 4.25 -5.58
Total Income 3,191.53 3,720.28 4,031.46 3,911.95 4,017.36
EXPENDITURE :
Raw Materials + 1,227.99 1,428.79 1,484.07 1,480.51 1,470.75
Power & Fuel Cost+ 19.58 22.76 32.68 37.84 44.04
Employee Cost + 249.44 211.78 258.93 262.4 288.5
Selling and Administration Expenses + 828.44 1,081.47 1,176.87 919.92 951.34
Operating Profit 706.73 778.71 855.41 946.69 984.67
Interest + 0 0 0 0 0
Gross Profit 706.73 778.71 855.41 946.69 984.67
Depreciation+ 43.7 50.75 75.02 111.41 133.24
Tax+ 176.62 183.43 200.95 236.29 253.46
Deferred Tax+ -10.35 4.66 20.46 17.82 20.54
Extraordinary Items + -1.28 47.77 -0.2 -22.5 0
Adjst. below Net Profit + 0 0 -0.17 -1.19 -60.54
P & L Balance brought forward 114.68 119.21 175.51 340.21 595.27
Appropriations + 492.23 483.57 388.38 324.93 268.34
P & L Balance carried down 119.21 175.51 345.95 595.27 843.82
Dividend 380.78 367.18 326.38 271.99 271.99
Equity Dividend % 2,800.00 2,700.00 2,400.00 1,000.00 1,000.00
Dividend Per Share(Rs) 28 27 24 10 10
Earnings Per Share-Unit Curr 31.99 35.11 36.55 19.33 21.23
31 | P a g e
Earnings Per Share(Adj)-Unit Curr 16 17.56 18.28 19.33 21.23
Book Value-Unit Curr 36 44.11 56.64 37.91 46.83
Book Value(Adj)-Unit Curr 18 22.06 28.32 37.91 46.83
3. P&G
Company : Procter & Gamble Hygiene and Health Care Ltd

Jun 13 Jun 14 Jun 15 Jun 16 Jun 17
Year (12) (12) (12) (12) (12)
INCOME :
Sales Turnover + 1,698.58 2,067.30 2,359.90 2,349.15 2,419.16
Excise Duty 11.8 16.36 26.11 73.76 98.76
Net Sales 1,686.78 2,050.94 2,333.79 2,275.39 2,320.40
Other Income + 66.96 80.2 74.64 87.61 77.3
Stock Adjustments + 33.39 -4.88 1.24 10.71 51.11
Total Income 1,787.13 2,126.26 2,409.67 2,373.71 2,448.81
EXPENDITURE :
Raw Materials + 737.89 807.91 922.16 895.48 966.08
Power & Fuel Cost+ 13.89 15.1 12.18 11.37 11.23
Employee Cost + 99.65 94.96 113.29 117.35 114.1
Selling and Administration Expenses + 534.11 610.87 703.8 527.23 488.08
Operating Profit 317.52 500.89 559.06 693.44 741.93
Interest + 0.01 5.39 5.72 6.27 10.42
Gross Profit 317.51 495.5 553.34 687.17 731.51
Depreciation+ 31.31 35.18 52.53 51.67 59.74
Tax+ 84.4 162.52 150.34 217.28 252.26
Deferred Tax+ -1.42 -4.22 4.33 -4.28 -13.22
Extraordinary Items + -4.08 -1.3 -7.68 -1.65 -6.28
Adjst. below Net Profit + 0 0 -2.18 -21.31 -270.82
P & L Balance brought forward 407.27 495.22 662.59 970.32 1,231.00
Appropriations + 115.27 134.65 152.79 140.51 1,291.94
P & L Balance carried down 495.22 662.59 853.76 1,231.00 100.97
Dividend 81.15 89.27 98.19 0 1,175.08
32 | P a g e
Equity Dividend % 250 275 302.5 360 3,890.00
Dividend Per Share(Rs) 25 27.5 30.25 36 389
Earnings Per Share-Unit Curr 58.36 88.37 100.48 130.16 133.31
Earnings Per Share(Adj)-Unit Curr 58.36 88.37 100.48 130.16 133.31
Book Value-Unit Curr 248.1 308.96 378.52 508.87 162.08
Book Value(Adj)-Unit Curr 248.1 308.96 378.52 508.87 162.08
Cash Flow
1. J&J
Johnson & Johnson Pvt Ltd

Year Mar 15 Mar 16 Mar 17
Cash Flow Summary
Cash and Cash Equivalents at Beginning of the
year 341.14 587.65 816.73
Net Cash from Operating Activities 356.67 750.29 504.92

Cash Flow From Operating Activities
Net Profit before Tax & Extraordinary Items 715.63 911.76 868.66
Adjustment For
Depreciation 327.05 185.28 141.12
Interest (Net) 0 0 0
Dividend Received 0 0 0
P/L on Sales of Assets 0 0 0
-
P/L on Sales of Invest 276.97 -187.18 0
Prov. & W/O (Net) 0 0 30.42
P/L in Forex 0 0 0
Fin. Lease & Rental Chrgs 0 0 0
Others 22.99 -4.18 0
Total Adjustments (PBT & Extraordinary Items) 73.07 -6.08 171.54
Op. Profit before Working Capital Changes 788.7 905.68 1,040.20
Adjustment For
Trade & 0th receivables -77.72 -139.55 -162.55
-
Inventories 126.19 46.38 -18.01
Trade Payables 24.73 280.46 -36.02
Loans & Advances 0 0 0
Investments 0 0 0
Net Stock on Hire 0 0 0
Leased Assets Net of Sale 0 0 0
Trade Bill(s) Purchased 0 0 0
33 | P a g e
Change in Borrowing 0 0 0
Change in Deposits 0 0 0
Others 0 0 53.44
-
Total (OP before Working Capital Changes) 179.18 187.29 -163.14
Cash Generated from/(used in) Operations 609.52 1,092.97 877.06
Interest Paid(Net) 0 0 0
-
Direct Taxes Paid 252.85 -342.68 -372.14
Advance Tax Paid 0 0 0
Others 0 0 0
-
Total-others 252.85 -342.68 -372.14
Cash Flow before Extraordinary Items 356.67 750.29 504.92
Extraordinary Items
Excess Depreciation W/b 0 0 0
Premium on Lease of land 0 0 0
Payment Towards VRS 0 0 0
Prior Year 's Taxation 0 0 0
Gain on Forex Exch. Tran 0 0 0
Others 0 0 0
-
Net Cash Used in Investing Activities -14.12 138.55 -78.2
Cash Flow from Investing Activities
Investment in Assets :
-
Purchased of Fixed Assets 292.95 -364.04 -174.01
Sale of Fixed Assets 248.4 49.86 57.84
capital WIP 0 0 0
Capital Subsidy Recd 0 0 0
Financial/Capital Investment :
Purchase of Investments 0 0 0
Sale of Investments 0 0 0
Investment Income 0 0 0
Interest Received 30.43 39.16 37.97
Invest.In Subsidiaires 0 0 0
Loans to Subsidiaires 0 0 0
Investment in Group Cos 0 0 0
Issue of Sh. on Acqu. of Cos 0 0 0
Canc. of Invest. in Cos Acq. 0 0 0
Acquisition of Companies 0 0 0
Inter Corporate Deposits 0 0 0
Others 0 136.47 0
- - -
Net Cash Used in Financing Activities 270.08 382.66 783.07
Cash Flow From Financing Activities
34 | P a g e
Proceeds:
Proceeds from Issue of shares (incl share
premium) 0 0 0
Proceed from Issue of Debentures 0 0 0
Proceed from 0ther Long Term Borrowings 0 0 0
Proceed from Bank Borrowings 0 0 0
Proceed from Short Tem Borrowings 0 0 0
Proceed from Deposits 0 0 0
Share Application Money 0 0 0
Cash/Capital Investment Subsidy 0 0 0
Loans from a Corporate Body 0 0 0
Payments:
Share Application Money Refund 0 0 0
On Redemption of Debenture 0 0 0
Of the Long Tem Borrowings 0 0 0
Of the short term Borrowings 0 0 0
Of financial Liabilities 0 0 0
-
Dividend Paid 225.08 -317.93 -650.62
Shelter Assistance Reserve 0 0 0
Interest Paid 0 0 0
Others -45 -64.73 -132.45
-
Net Cash Used in Financing Activities 270.08 -382.66 -783.07
-
Net Inc/(Dec) in Cash and Cash Equivalent 72.47 229.08 356.35
Cash and Cash Equivalents at End of the year 413.61 816.73 460.38
Colgate-Palmolive (India) Ltd

Year Mar 15 Mar 16 Mar 17
Cash Flow Summary
year 150.64 132.57 193.25
Net Cash from Operating Activities 638.15 688.73 688

Adjustment For
Depreciation 75.02 111.41 133.24
Interest (Net) -26.39 -26.11 -29.71
P/L on Sales of Assets 0.7 0.99 -0.01
35 | P a g e
P/L on Sales of Invest 0 0 0
Prov. & W/O (Net) 10.27 -6.49 -1.11
P/L in Forex -0.17 2.26 -2.39
Fin. Lease & Rental Chrgs -1.06 -1.98 -1.98
Others 0 10.08 8.86
Total Adjustments (PBT & Extraordinary Items) 58.37 90.16 106.9
Op. Profit before Working Capital Changes 838.76 956.78 958.33
Adjustment For
Trade & 0th receivables -21.54 -28.65 -27.36
Inventories -26.48 -39.3 -1.02
Trade Payables 52.92 0 0
Loans & Advances 0 0 0
Investments 0 0 0
Others 0 83.52 59.44
Total (OP before Working Capital Changes) 4.89 15.56 31.06
Cash Generated from/(used in) Operations 843.66 972.34 989.39
- -
Direct Taxes Paid -205.5 252.36 301.38
Others 0 0 0
- -
Total-others -205.5 252.36 301.38
Cash Flow before Extraordinary Items 638.15 719.99 688
Extraordinary Items
Others 0 -31.26 0
- -
Net Cash Used in Investing Activities 271.63 236.61 -342.1
- - -
Purchased of Fixed Assets 300.01 272.69 321.25
capital WIP 0 0 0
36 | P a g e
Inter Corporate Deposits 0.29 1.06 -50.57
Others 1.06 1.98 1.98
- - -
Proceeds:
premium) 0 0 0
Payments:
- - -
Dividend Paid 338.75 298.66 271.71
Interest Paid 0 0 0
Others -46.04 -92.79 -68.88
- - -
Net Inc/(Dec) in Cash and Cash Equivalent -18.27 60.67 5.32
Cash and Cash Equivalents at End of the year 132.37 193.25 198.56
3. P&G
37 | P a g e
Procter & Gamble Hygiene and Health Care Ltd
Year Jun 15 Jun 16 Jun 17
Cash Flow Summary
year 266.4 614.78 1,066.59
Net Cash from Operating Activities 425.57 352.46 445.26

Adjustment For
Depreciation 52.53 51.67 59.74
Interest (Net) -65.84 -78.48 -64.36
P/L on Sales of Assets 11.07 2.51 10.05
P/L on Sales of Invest 0 0 0
Prov. & W/O (Net) 10.44 0.78 0.21
P/L in Forex -0.36 0.22 -0.06
Fin. Lease & Rental Chrgs 0 0 0
Others 0 3.06 4.37
Total Adjustments (PBT & Extraordinary Items) 7.84 -20.24 9.95
Op. Profit before Working Capital Changes 508.65 615.26 681.72
Adjustment For
Trade & 0th receivables -28.89 -36.59 16.72
Inventories -0.55 -8.41 -49.87
Trade Payables 142.59 -44.37 60.04
Loans & Advances 11.58 0 0
Investments 0 0 0
Others -2.2 27.9 -13.35
Total (OP before Working Capital Changes) 122.53 -61.47 13.54
Cash Generated from/(used in) Operations 631.18 553.79 695.26
- -
Direct Taxes Paid 205.61 201.33 -250
Others 0 0 0
- -
Total-others 205.61 201.33 -250
Cash Flow before Extraordinary Items 425.57 352.46 445.26
Extraordinary Items
38 | P a g e
Others 0 0 0
Net Cash Used in Investing Activities 28.37 221.05 149.29

Purchased of Fixed Assets 0 -52.65 -44.13
capital WIP 0 0 0
Inter Corporate Deposits 0 0 0
Others -47.47 209.38 102.2
- -
Net Cash Used in Financing Activities 105.29 -121.7 1,558.70
Proceeds:
premium) 0 0 0
Payments:
39 | P a g e
- -
Dividend Paid -89.27 118.18 1,554.98
Interest Paid -0.85 -3.52 -3.72
Others -15.17 0 0
- -
Net Cash Used in Financing Activities 105.29 -121.7 1,558.70
Net Inc/(Dec) in Cash and Cash Equivalent 348.65 451.81 -964.15
Cash and Cash Equivalents at End of the year 615.05 1,066.59 102.44
40 | P a g e

Financial Analysis of FMCG

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Financial Analysis of FMCG

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Management Accounting

Financial Analysis of Indian FMCG Market

Submitted to: Prof. Prakash Singh

Aishwarya Jain – IPMX11003

Kunal Jhamb – IPMX11012

Shivang Sharma – IPMX11033

Shivani Dutta – IPMX11034

Shreyas Cashyap – IPMX11035

Introduction, Overview and Market Size

Macroeconomic factors affecting FMCG industry

Household and Personal

Focus of the Study

Brief Overview of the Major Players

Hindustan Unilever Limited

Dabur India Limited

Johnson & Johnson

Procter & Gamble

Value-Creation Model for FMCG companies

Major costs involved in the FMCG sector include:

Value Value Value

Raw Materials Power & Fuel Cost

Porters 5-Force Model for the FMCG Industry

Threat of New Entrants Power of Suppliers :

Recently in the NEWS

Entrance of Patanjali – Disruption in the Indian FMCG Sector.

International Financial Reporting Standards

The new standards

Fundamental difference between existing and new standards

Under existing standards New standards Impact

Financial Ratio Analysis

Current Ratio = (Current Assets / Current Liability)

Quick Ratio/ Acid Test Ratio

Quick Ratio = (Current Asset – Inventory)/ Current Liability

Debt Equity Ratio

Debt Equity Ratio (DER) = (Total Liabilities / Shareholder's Equity)

Fixed Asset Turnover Ratio = Sales Revenue / Total Fixed Assets

Inventory Turnover Ratio

Inventory Turnover = COGS/Inventory

Debtors Turnover Ratio

Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables

Gross Margin: Profit before Interest, Depreciation and Tax

Return on Equity Ratio

Return on Equity = Net Income/Shareholders’ Equity

Return on Assets = Net Income/ Total Assets

Detailed Balance Sheets:

Company : Johnson & Johnson Pvt Ltd

Company : Colgate-Palmolive (India) Ltd

Company : Procter & Gamble Hygiene and Health Care Ltd

Detailed P&L Statements

Company : Johnson & Johnson Pvt Ltd

Company : Colgate-Palmolive (India) Ltd

Company : Procter & Gamble Hygiene and Health Care Ltd

Johnson & Johnson Pvt Ltd

Net Cash from Operating Activities 356.67 750.29 504.92

Colgate-Palmolive (India) Ltd

Net Cash from Operating Activities 638.15 688.73 688

Net Cash from Operating Activities 425.57 352.46 445.26

Net Cash Used in Investing Activities 28.37 221.05 149.29

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Inventory Turnover = COGS/Inventory 