-
Fundamental Analysis of Selected FMCG Companies in India
R. Amsaveni and S. Gomathi
Investment decision is a part of our economic life. Everybody
takes such decision at different context. Investment decisions are
to be made in a systematic manner with two approaches such as
technical and fundamental analysis. The present study aims to
analyse the fundamental analysis of BSE listed FMCG companies in
India with a sample size of six companies for a period from 2006?07
to 2011?12. The objectives of the study are to conduct Fundamental
analysis for BSE listed FMCG companies and the SWOT analysis for
the FMCG industry. The Economic, Industry and company analysis have
been made to attain the objectives of the study. From the Economic
analysis, it is found that Gross National Product, Inflation,
Interest rates, Exchange rate, Foreign exchange reserves,
Agricultural production, Government Receipts and Expenditure has a
positive growth rate during the study period. Gross Domestic
Product, Gross Domestic Capital Formation, Gross Domestic Savings
and Balance of Payments have a negative growth rate during the
study period. The industry analysis found that Indias FMCG sector
is the 4th largest sector with the total market size of US$ 13
billion during the year 2012. This sector is expected to grow to
US$ 33.1 billion by 2015. Hence, it has great potential in rural as
well as urban market and it provides more employment
opportunities.
Abstract
Dr R. Amsaveni, Professor, Hindusthan College of Arts and
Science, Coimbatore, Tamil Nadu. E-mail:
[email protected] S. Gomathi, Assistant Professor, Dr.
N.G.P Arts and Science College, Coimbatore, Tamil Nadu. E-mail:
[email protected]
Keywords fundamental analysis, economic, FMCG industry,
india
biggest economy in Asia in terms of gross domestic
Introductionproduct. All these make investment in India a
India is one of the top five economies in the world in lucrative
option for the investors across the world. terms of market
potential and ranked as the third The capital market of India forms
an important part
Asia-Pacific Finance and Accounting Review Vol. 1, No. 3, April
June 2013pp. 3755, ISSN: 2278-1838www.asiapacific.edu/far
-
of the development of the nation. Nowadays people for more than
three million people in downstream are showing more interest to
invest in shares or activities. It grew at an average of 11 per
cent over derivatives. Investors are more conscious about the the
last decade and the annual growth accelerated to
2fluctuations in the stock market. In order to 17 per cent . In
India, both urban and rural areas have minimize the risk, the
investors should know about been contributing a highest percentage
of income for the past performance of the company, market the
consuming of FMCG goods which persists to fluctuations, reason for
fluctuation, economic policy strong growth of this sector. In rural
India consists of and inflation etc., before making an investment
in more than 700 million consumers and provides 40 securities.
Otherwise, the investors can be applied per cent of the total FMCG
market. The sector has security analysis. There are two alternative
tremendous growth opportunities in the future, with approaches for
security analysis such as technical a growing population, the
rising incomes, education and fundamental analysis. Technical
analysis is a and urbanization, and the growth of modern retail
method of evaluating securities by analyzing the sector. At this
juncture, it is worthwhile to analyze statistics generated by
market activity, such as past the stocks of FMCG companies and for
this purpose prices and volume. BSE FMCG INDEX companies were
selected.
The objective of Fundamental analysis is to Literature
Reviewappraise intrinsic value of a security. The intrinsic
A brief review of literature would help the value is the true
economic worth of a financial asset. researcher, reader and other
research scholars in The fundamental analyst has to estimate the
intrinsic gaining an insight into the studies, which were made
worth of a security by considering key economic and in areas
related to the subject of this study. The financial variables and
see whether the actual price findings of some of the studies are
briefly is above or below its intrinsic value. Finally, the
summarized as follows.investors take buy or sell decision depending
upon
the result drawn from those analyses. The main Jeffery
Abarbanell and Brain Bushee (1977)purpose of this analysis is for
long-term perspective Fundamental Analysis, Future Earnings and
Stock in nature. Prices, in their study examined the
relationship
between accounting based fundamental signals and FMCG Sector: An
Overviewfuture earnings of security prices. They applied The fast
moving consumer goods sector plays a vital multiple regression
analysis to analyse the data. The role in Indian economy. FMCG
goods are all study found that investors are not completely relying
essential consumable items that consume at regular on the
information given by the analyst. They also interval. It can be
classified into three divisions such found that the variables such
as Gross Domestic as household items, personal care items and food
and Product, inflation, firm specific variables are prior
beverages. Global leaders are Nestle, ITC, earnings, expected
earnings growth, relation Hindustan Unilever Limited, Reckitt
Benckiser, between fundamental signal and future earnings,
Unilever, Procter & Gamble, Coca-Cola, Carlsberg, revisions and
forecast errors are most influencing Kleenex, General Mills, Pepsi,
Gillette, etc.factors in fundamental analysis.
Indias FMCG sector is the fourth largest sector with Sandip
Mukherji, Manjeet, and Kim (1997),the total market size of US$ 13
billion during the A Fundamental Analysis of Korean Stock Returns
year 2012. This sector is expected to grow to US$ in their article
examined about the relation between 133.1 billion by 2015 and it
also creates employment stock return and fundamental variables in
Korean
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
38 R. Amsaveni and S. Gomathi
-
firms annual stock returns during the period of of a firm.
1982?83. The study found that stock returns are Viyyanna Rao and
Nirmala Daita (2012) positively related to book-market ratio,
sales-price Fundamental Factors Influencing Investments in ratio
and debt-equity ratio. It is also found that return Mutual Funds
the EIC Approach: A Case Study of is negatively related to firm
size and not RCAMI the study focused on fundamental analysis
significantly related to earnings price ratio. They of mutual funds
in India. The macro economic suggested that book-market and
sales-price ratios variables taken for this study, viz., RBI Bank
Rate, are more efficient indicators than the earnings-price
Domestic savings, Gross Domestic Capital and the debt-equity ratio.
Formation, Money Supply, Gross National Product,
Wholesale Price Index, and Forex Reserves. Jiang Xia (2000)
Fundamental Analysis of Price Descriptive Statistics, Correlation,
Regression, on Chinese Steel Products in his paper considered
Augmented Dickey Fuller test and Granger test has five fundamental
factors such as price index of steel been applied. The economic
analysis results found product, Gross National Product, exchange
rates, that all the variables were positively correlated with
interest rates, imports and exports are influencing each other
except bank rate and Wholesale price over the price of steel
products. A hedonic function index. The industry analysis shows
that Reliance, model was applied which reflects the relation HDFC,
ICICI Prudential, UTI and Birla Sun Life between prices of
varieties of heterogeneous goods stood in the top five positions
and its contribution as and empirical tests applied by using
Chinese annual 57.02 per cent of the total assets. The remaining
33
data for the year 1978?98. The study found that the players
shared the rest of the 42.98 per cent of the above said variables
are influencing at 62 per cent industry. The company analysis
results reveal that over the steel price. The price index and Gross
price earning ratio and price to book ratio, fund size, Domestic
Product have positive significant relation market capitalization
and Net assets value were which depicts that higher the price index
and Gross found to be having a significant influence on the
Domestic Product, higher the steel price. The return of the funds.
exchange rate have negative impact over the steel
Hence, the present study focused to fill the research price, the
interest rate does not have influence over gap of the previous
study and attempt to make a the steel price and finally it is found
that import and fundamental analysis on FMCG sector in India.
export influence the steel price of the product.Research Design and
MethodologyMehmet Sarac (2007) Does Fundamental Methodology is the
science of dealings with Analysis Matter for Foreign Investors? An
principles of procedure in research study. Empirical Analysis of
Foreign Investment in the
Istanbul Stock Exchange The paper analyzed about Research Design
and Period of the Studythe buy and sell decisions of foreign
investors are This study is based on analytical nature and covers a
related to financial indicators of the firms listed on
period of six years from 2006?07 to 2011?12.the Istanbul Stock
Exchange. Based on the monthly Sources of Datadata from January
2000 to April 2006, the study
found that the operating leverage, profitability and The data
has been collected from various secondary solvency are the most
important factors while sources like indiastat.com, PROWESS
database of investing in the manufacturing stocks. Foreign Centre
for Monitoring Indian Economy Private investors consider solvency
is a major factor Limited (CMIE), RBI bulletins, BSE websites
Money control.com, Books and Magazines.whereas, local investors
considers the profitability
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
39Fundamental Analysis of Selected FMCG Companies in India
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Figure 1: Conceptual Framework
GNP, GDP, GDCF, GDS, SAVINGS RATE INFLATION RATE INTEREST RATE
EXCHANGE RATE FOREX RESERVES AGRI PRODUCTION GOVT. RECEIPTS GOVT.
EXPENDITURE BOP
GROWTH RATE AND SWOT ANALYSIS
EPS, DPS, DP RATIO, PE RATIO, ROE EARNINGS YIELD RATIO DIVIDEND
YIELD RATIO PRICE TO BOOK VALUE RATIO INTRINSIC VALUE
COMPANY ANALYSIS
INDUSTRY ANALYSIS
ECONOMIC ANALYSIS
FUNDAMENTAL ANALYSIS
Sample Selection Criteria Tools Applied for the Study
The study is based on the secondary data. The The financial
tools such as ratio analysis and audited financial statements of
the companies are the fundamental analysis were applied to analyse
the main source of data. The FMCG companies which collected data.
The statistical tools, viz., Mean, satisfied the following criteria
have been selected. Skewness and Kurtosis was applied to study the
The criteria are: variations in ratios and Compound Annual
Growth
Rate was used to find how much an investment FMCG companies
listed in BSEyields on an annually compounded basis.
Availability of data for a period of six yearsConceptual
Framework
Accounting year must be from April to MarchFundamental analysis
was done based on past six
Companies that satisfy the above conditions are: years data
available and the ratios used are as (i) Colgate Palmolive (ii)
Dabur India (iii) Godrej follows:Consumer Products Limited (iv)
Hindustan
A conceptual framework for the study is proposed Unilever
Limited (v) ITC Limited and (vi) Marico and is presented in the
Figure 1.Limited.
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
40 R. Amsaveni and S. Gomathi
Source: Compiled by Authors.
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Earnings per Share (EPS) Earnings Yield Ratio = Earnings per
share / Market price per share.This ratio indicates the profits
available to equity
share holders per share, this helps to determine the Dividend
Yield Ratio = Dividend per share/Market market price of equity
shares. price of share.
Earnings per Share = Profit after Tax/No. of equity Price to
Book Value Ratioshares. The book value of a share provides a floor
below Dividend per Share (DPS) which the market price of a share is
not expected to
fall. Shares which have lower PB Ratio may be The amount of
profits distributed to shareholders per considered as a safer
investment and vice versa.share is known as DPS and may be
calculated as
follows: Price to Book Ratio = Market price per share/Book value
per share.Dividend per Share = Amount declared as
dividend/No. of equity shares. Intrinsic ValueDividend Payout
Ratio (DP Ratio) The actual value of a company or an asset based
on
an underlying perception of its true value including The DP
ratio is the ratio between the DPS and EPS of all aspects of
business in terms of both tangible and the firm, i.e., it refers to
the proportion of the EPS intangible factors. The value may or may
not be which has been distributed by the company as same as the
current market value. The true economic dividends. Dividend payout
ratio may be calculated worth of the share is its intrinsic value.
The as follows:fundamental analyst finds out intrinsic value of
a
Dividend Payout Ratio = Dividend per share by using the
formula:share/Earnings per share x 100
Intrinsic Value = Earnings per share x Price to Price to
Earnings Ratio (PE Ratio) Earnings ratio.The PE Ratio indicates the
expectations of the equity Fundamental analysis consists of three
stages such investors about the earnings of the firm. The PE ratio
as economic analysis, industry analysis and is one of the most
widely used measures of financial company analysis. Economic
analysis helps to analysis in practice and is calculated as
follows. analyze the performance of economic status of the Price to
Earnings ratio = Market price of country. Industry analysis
examines the growth of share/Earnings per Share. the particular
industry and demand of the product in
the market. Company analysis considers the Return on Equity
(RoE)financial performance of the company and the The RoE examines
profitability from the perspective earnings and dividend paying
capacity of the of the equity investors by relating profits
available company. These are all presented in the chart for the
equity share holders with the book value of mentioned below. This
may assist to the investor in the equity investment.choosing the
security based on these factors.
Return on Equity = Profit after Tax/Net Worth x 100Statement of
the Problem
YieldAny person who invests his hard earned money in The yield
is defined as the rate of return on the shares and security must
possess adequate amount invested. With the reference to equity
knowledge about securities market and securities shares, the yield
may be defined as the rate of return price. Investors should be
very careful and should on the market piece of equity shares.
exercise his skills, knowledge and experience for
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
41Fundamental Analysis of Selected FMCG Companies in India
-
choosing investment opportunity. Otherwise the The present study
uses ratios as an important whole of the investment may go waste.
They must tool of analysis which itself has a number of identify
the under-priced and overpriced securities. limitations on its
applicability.The mispricing of securities provides an opportunity
to the investor to acquire the share or dispose of the
Results and Discussionsshare profitably. Therefore the study of
the securities market and reasons for the movement of securities is
Fundamental analysisessential for any investors who invest his
money in Fundamental analysis covers various financial and shares.
In this context, the present study becomes non-financial aspects
such as evaluation of the highly essential on the following
grounds. economy and industry scenario, company a) Is the
investment in BSE FMCG companies is management and company
financial position and so
more rewarding or not? on.b) Are FMCGs shares floating steadily?
Three phase of the fundamental analysis:
A. Understanding of the Macro Economic Objectives of the
Studyenvironment and developments (Economic To conduct Fundamental
analysis for BSE listed analysis)FMCG companies and the SWOT
analysis for the
B. Analysing the prospectus of the industry to FMCG
industry.which the firm belongs (Industry analysis)Scope of the
Study
C. Assessing the performance of the company This study provides
a precise presentation of data (Company analysis)and guidelines
that will help a fresh investor as well
Economic Analysisas a venture investor to know vital aspects of
Economic analysis deals with the analysis of investing. This study
helps to the investors to choose operating in the overall economy.
In security a safe investment and to identify the growth analysis,
the expected course of the economy must opportunities in the
future. FMCG industry is one of be inquired into because overall
economic the major and important industries in the world.
conditions and economic activities affect corporate Large numbers
of foreign investors are coming and profits and investors
expectations and thereby investing in Indian FMCG sector due to its
large affect the security prices in decisions. Investors potential
growth in future. The scope of the study is consider those
variables of the economy, which limited to analyzing the financial
statements and affect the performance of the company in which they
periodical reports published by the company and the tend to invest.
The economic variables used in this information from the journals
and websites.study such as, Gross National Product, Gross
Limitations of the Study Domestic Product, Gross domestic
capital
The study is confined only to the FMCG formation, Gross domestic
savings, Inflation Rates, companies in Bombay Stock Exchange.
Interest Rates, Exchange rate, Foreign exchange
reserves, Agricultural Production, Government External factors
may adversely affect the Receipts and Expenditure and Balance of
payments. industry as well as its share price. E.g.
Government policies, competition, tax The following Table
represents the economic factors imposition, global market, FDI/FII
etc. Hence, of the country:the movement of stock price is not 100
per cent predictable.
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
42 R. Amsaveni and S. Gomathi
-
Tabl
e 1
Eco
nom
ic F
acto
rs
Not
es: #
ww
w.c
mie
.com
, Mon
thly
Rev
iew
of I
ndia
n Ec
onom
y, C
MIE
Dat
abas
e, In
dia,
Janu
ary
2013
.
@ w
ww
.rbi.o
rg.in
, Han
dboo
k of
Sta
tistic
s of I
ndia
n Ec
onom
y, 1
4th,
Sep
t., 2
012.
Year
GN
P (R
s. B
ln)
#
GD
P #G
DC
F (%
) #
GD
S (%
) #
Savi
ng
depo
sits
with
co
mm
erci
al
bank
(B
illio
n) @
Infla
tion
(%)
#
Inte
rest
R
ates
#Ex
chan
ge
Rat
e (R
s /
Dol
lar)
#
Fore
x R
eser
ves
($
Mill
ion)
@
Agr
icul
tura
l Pr
oduc
tion
(Mill
ion
tone
s)
@
Com
poun
d A
nnua
l G
row
th
Rate
(%)
2006?0
7
2007?0
8
2008?0
9
2009?1
0
2010?1
1
2011?1
2
42,6
15
49,6
66
55,9
71
64,3
98
77,1
35
88,9
81
9.6
9.3
6.7
8.4
8.4
6.5
35.7
38.1
34.3
36.5
36.8
35.0
34.6
36.8
32.0
33.7
34.0
30.8
6714
.25
7722
.82
9009
.67
1136
6.76
1377
2.88
1539
1.77
6.5
4.7
8.1
3.8
9.6
8.9
9.0
9.0
8.8
7.5
9.5
9.3
45.2
8
40.2
4
45.9
2
47.4
2
45.5
7
47.9
5
1,99
,179
3,09
,723
2,51
,985
2,79
,057
3,04
,818
2,94
,398
217.
28
230.
78
234.
47
218.
11
244.
78
257.
44
Gov
t. R
ecei
pts
(Bill
ion)
@
Govt.
Ex
pend
iture
(Bill
ion)
@
Bala
nce
of P
aym
ent
($ M
illio
n)
@
1125
2.52
1329
6.54
1608
4.94
1844
5.98
2221
6.54
2421
2.03
1109
1.74
1316
2.46
1599
5.33
1852
2.95
2253
3.39
2414
0.27
3660
6
9216
4
?200
79
1344
1
1305
0
?128
32
13.0
5?6
.49?0
.33?1
.92
14.8
31.
671.
082.
666.
732.
8713
.62
13.8
4?1
6.03
Sour
ce: C
ompu
ted
data
.
-
7The Table 1 represents the economic indicators of 2009?10 to
2010?11 . During the year 2008?09 our country which helps to the
investors to make inflation rate shows as 8.1 per cent which was
economic analysis towards investments. Gross increased due to the
shortfall of domestic production National Product represents the
aggregate value of vis--vis demand and hardening of international
goods and a service produced in a country which prices, prices of
primary commodities, especially shows an increasing trend at the
growth rate of 13.05 rise in prices of food products. per cent, it
represents the economic condition of a Interest rates on deposits
growth rate was 1.08 per country which is going upward. Gross
Domestic cent which shows the fluctuating trend from 7.5 to Product
indicates the rate of growth of the economy. 89.5 during the study
period . The Interest rate is The highest growth rate is more
favorable to the increased which helps to encourage the saving
habit stock market. Agriculture is the major source of of an
individual. The exchange rate indicates the income in India but it
has contributed only 11.01 per stability of economic growth of a
country. The
3cent of total Gross Domestic Product . The fall in the exchange
rate shows fluctuating trend from 40.24 to 9agricultural production
and the consequent fall in 47.95 . Foreign exchange reserve helps
to preserve
agricultural incomes are expected to have an impact currency
stability and reduce economic distresses. on the demand for
industrial sector. The service Foreign exchange reserve shows high
trend in the sector contributes 58.9 per cent and the industrial
year 2007?08 and 2010?11 and the Compound sector accounts for 27.0
per cent of Gross Domestic 10Annual Growth Rate of 6.73 per cent .
Agricultural Product. Manufacturing and electricity have played
production increased over the years, it is clear that a major role
in the Indian industrial sector. the growth of the agricultural
sector is in a Especially the manufacturing industry contributes a
11satisfactory position . The government expenditure huge
percentage of shares in total Gross Domestic exceeds over the
receipts, the receipts and Product and makes it evident that the
manufacturing expenditure growth rate shows that 13.62 and sector
is performing excellently. During the year 1213.84 , there is a
small difference in between these 2008?09 and 2011?12 the growth
was declined by two; in future it can be controllable due to
effective 4.3 per cent and 2.5 per cent, respectively. The economic
policy. The government spent more overall Gross Domestic Product is
also reduced in money to develop our infrastructural activities the
same year due to the global liquidity crisis. Our because; once the
infrastructure is developed it leads real Gross Domestic Product
forecast for 2012?13 is to potential economic growth. The Balance
of
46 per cent . payments shows a negative balance of payments
during the year 2008?09 and 2011?12 which depicts Gross Domestic
Capital Formation and Gross that the value of imports exceeds over
the export of Domestic Savings indicate savings of individuals
in
13various sectors, viz., household, private and public our
country . It is one of the major indicators of a countrys
international trade. Hence, our countries sector. The growth rate
shows at ?0.33 and ?1.92 have to improve the production of goods
and which represents the individual saving habits services and try
to increase the export in future decreased due to high inflation
trend and high cost of
5 period. living . The savings deposits with commercial bank
shows a compound annual growth rate of 14.83 per Industry Analysis
cent indicating a positive and safe growth of the
6 An industry described as a homogeneous group of commercial
banks . Inflation rate refers to a general companies. It may be
defined as a group of firms rise in prices measured against a
standard level of producing reasonably similar products that serve
the purchasing power. It shows the fluctuating trend same need of a
common set of buyers. The from 3.8 per cent to 9.6 per cent in
during the year profitability of an industry depends upon its stage
of
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
44 R. Amsaveni and S. Gomathi
-
growth. These externalities depend on the expenditure which
represents the sector is growing constantly, sales and profit also
shows in increasing availabilities of inputs power and
interrelations trend it is evident that the sector has earned high
between the economy and industry. In India, returns on their
investments. Hence, the investor can companies like HUL, ITC,
Colgate, Dabur have invest their money in this sector which helps
to been a dominant force in the FMCG sector well obtain more
return. supported by relatively less competition and high
entry barriers (import duty was high). SWOT Analysis of FMCG
IndustryStrengths Growth of FMCG Industry in India1. Lower
operational costsIndias FMCG sector reported steady sales
Compound Annual Growth Rate of 11.2 per cent 2. Existence of
recognised distribution networks in both urban and rural areas over
the financial year 2000?11 on the back of strong
annual volume growth of 8.5 per cent. Growth is 3. Existence of
eminent brands in FMCG sectorbeing driven by increasing consumption
led by a rise 4. Favorable Government policy and Foreign in
incomes, changing lifestyles and favourable Direct Investment is
permitted. demographics. The industry is poised to grow at
WeaknessesCompound Annual Growth Rate between 10 to 12 1. Lower
scope of investing in technology of small per cent annually. The
annual profit of FMCG sector
scale sectors$14.74 billion. Total market size in excess of US
$30 billion in the year 2011. The market growth rate of 2. Low
export levelsFMCG industry in rural and urban areas is 40 per 3.
Illegal duplicate labels of the established brands cent and 25 per
cent, respectively. Average Indian of FMCG product reduced the
scope in rural and spending on groceries and personal care is 48
per semi-urban market.cent. (Groceries 40 per cent and personal
care 8 per
Opportunitiescent). According to FICCI-Technopark report, the 1.
Untapped rural marketimplementation of the proposed GST and opening
of
FDI is expected to fuel growth of industry size to $47 2.
Increasing income levels which lead to increase billion (` 2,25,000
crore) by 2013 and $95 billion (` in purchasing power of
consumers
144,56,000 crore) by 2018 . The growth of the FMCG 3. Huge
domestic marketa population of over sector is presented in the
Table 2 represents the total one billion income, expenditure, sales
and Profit earned after
4. Export potentialtax. Sales and Profit indicate the growth of
the sector. 5. High consumer goods spending FMCG industry shows
that total income and sales
has increased over the years except during the last 6. Lower
price and smaller packs which increases year. The profit after tax
is also showing an the trading volume.increasing trend which
represents the industry has Threats attained maximum profit during
the study period.
1. Removal of import restrictions resulting in Hence, the FMCG
sector has high potential growth; replacing of domestic brandsthe
investors have also attained a high rate of return
2. Slowdown in rural demand and mostly depends on their
investments. upon monsoonTable 2 indicates that the growth of FMCG
sector in
3. Tax and regulatory structure.India. It is clear that the
income exceeds over the
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
45Fundamental Analysis of Selected FMCG Companies in India
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Source: Companies Annual Reports from 2006?07 to 2011?12.
Company Analysis Table 3Earnings per Share
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive15.53
16.06
21.22
30.13
29.13
32.83
24.15
?0.14
2.47
13.29%
Dabur
1.39
1.77
2.04
2.41
2.65
2.66
2.15
?0.52
?1.24
11.42%
Godrej Consumer
3.68
4.85
5.01
7.59
12.46
17.76
8.55
1.13
0.13
30.00%
HUL
6.99
7.76
10.87
9.74
9.84
12.45
9.60
0.03
?0.72
10.10%
ITC
3.44
3.83
4.11
5.12
6.24
7.88
5.10
0.94
?0.12
14.81%
Marico
1.88
2.40
2.95
4.02
4.07
5.47
3.47
0.42
?0.57
19.48%Compound annual
growth rate
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
46 R. Amsaveni and S. Gomathi
Table 2Growth of FMCG Sector
Year Total Income Total Expenditure Total Sales PAT
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Compound Annual Growth
Rate (%)
2,669,124.40
3,196,801.50
3,837,415.60
4,264,310.10
4,904,398.20
4,840,471.60
10.43
2,597,034.30
3,117,734
3,715,446
4,160,620
4,801,506.70
4,711,692.10
10.44
2,598,591.30
3,115,253.70
3,743,104.20
4,179,643.40
4,813,662.80
4,737,063.50
10.53
123,510
140,402.80
159,328.90
194,354.30
199,320.80
222,934.70
10.34
Source: Monthly Review of Indian Economy, CMIE Database, India,
January 2013.
-
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 4Dividend per Share
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive9.50
13.00
15.00
20.00
22.00
25.00
17.42
?.07
?1.50
17.50%
Dabur
0.70
0.74
0.87
1.00
1.15
1.30
0.96
0.40
?1.33
10.87%
Godrej Consumer
2.62
2.87
3.18
3.89
5.04
4.75
3.73
0.36
?2.00
10.42%
HUL
6.14
9.15
7.57
6.57
6.53
7.50
7.24
1.14
1.16
3.39%
ITC
1.51
1.70
1.80
4.93
4.45
4.50
3.15
0.03
?3.16
19.96%
Marico
0.64
0.65
0.65
0.65
0.66
0.70
0.66
1.98
4.29
1.50%Compound annual
growth rate
The Table 3 indicates the value of EPS for the sample Dabur
companies limited. All the companies shows companies. Among the
sample companies, the mean Platykurtic distribution, i.e., which
are all less than value of Colgate Palmolive Limited has highest 3.
The Compound Annual Growth Rate of EPS is EPS; HUL shows moderate
EPS and Dabur shows higher for Godrej Consumer products Limited low
EPS level. All Sample companies are positively followed by Marico.
skewed distribution except Colgate Palmolive and
The Table 4 reveals the value of DPS for the sample Colgate
Palmolive limited. All the companies shows companies. The Colgate
Palmolive limited have a Platykurtic distribution, i.e., kurtosis
values are less highest mean value of DPS as 17.42 and Dabur have
than 3 except Marico. The Compound Annual a lowest mean value of
0.96 during the study period. Growth Rate of DPS is higher for ITC
followed by All the companies are positively skewed except Colgate
Palmolive Limited.
From the Table 5 it can be inferred that Hindustan All the
sample companies show Platykurtic Unilever Limited has made a
highest mean value of distribution. ITC shows highest compound
annual DPR as 78.24 per cent during the study period. growth rate
followed by Colgate Palmolive other Maricos has a lowest mean value
of DPR as 21.37. companies shows negative value of compound All the
companies are positively skewed except annual growth rate.Colgate
Palmolive and Godrej Consumer products.
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
47Fundamental Analysis of Selected FMCG Companies in India
-
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 5Dividend Payout Ratio
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive61.16
80.94
70.68
66.38
75.52
76.14
71.80
?0.38
?0.76
3.72%
Dabur
50.31
41.99
42.65
41.31
43.48
48.87
44.77
0.88
?1.53
-0.48%
Godrej Consumer
71.13
59.17
63.56
51.28
40.50
26.75
52.07
?0.63
?0.43
?15.04%
HUL
87.81
117.92
69.66
67.43
66.40
60.24
78.24
1.62
2.30
?6.09%
ITC
43.81
44.47
43.88
96.32
71.37
57.11
59.49
1.30
0.97
4.52%
Marico
33.83
27.09
22.02
16.26
16.23
12.80
21.37
0.74
?0.59
?14.95%Compound annual
growth rate
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 6Price to Earnings Ratio
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive24.01
26.83
26.27
27.33
31.14
34.06
28.27
0.78
?0.22
6.00%
Dabur
93.11
52.74
62.51
64.15
39.45
40.08
58.67
1.04
1.17
?13.11%
Godrej Consumer
40.18
24.79
41.5
46.4
31.66
27.03
35.26
?0.01
?2.04
?6.39%
HUL
28.35
28.16
23.78
27.67
31.05
32.94
28.66
?0.24
0.53
2.53%
ITC
51.19
48.45
51.91
45.36
28.97
28.79
42.45
?0.78
?1.91
?9.15%
Marico
32.02
27.08
28.08
30.95
35.03
32.04
30.87
?0.01
?0.64
0.01%Compound annual
growth rate
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
48 R. Amsaveni and S. Gomathi
-
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 7Return on Equity
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive75.30
134.65
133.44
125.64
103.15
102.54
112.45
?0.74
?0.39
5.28%
Dabur
60.21
58.41
48.09
56.09
41.81
35.54
50.03
?0.53
?1.50
?8.41%
Godrej Consumer
107.36
104.17
30.18
29.66
26.27
23.95
53.60
0.96
?1.86
?22.12%
HUL
55.44
116.49
113.85
81.41
80.67
76.61
87.41
0.20
?1.06
5.54%
ITC
25.64
24.71
23.26
28.30
30.35
32.79
27.51
0.41
?1.25
4.18%
Marico
62.92
52.55
49.27
43.27
28.62
29.94
44.43
?0.54
?1.23
?11.64%Compound annual growth rate
The Table 6 shows the Price to earnings ratio it positively
skewed and the rest of the companies are indicates that, the Dabur
had a highest mean value of negatively skewed. All companies show
Platykurtic the P/E ratio during the study period followed by
distribution. Compound Annual Growth Rate value ITC. The Colgate
Palmolive and Dabur are is highest for Colgate Palmolive.
The Table 7 shows that Colgate Palmolive and positively skewed
whereas, other companies are Hindustan Unilever had a higher mean
value of negatively skewed. All the companies show Return on
Equity. ITC had a lowest mean value of Platykurtic distribution.
HUL had a highest growth ROE as 27.51 percent. Godrej, HUL and ITC
are rate of return on equity during the study period.
The Table 8 shows the relationship between positively skewed for
all companies except Colgate Earnings per share and market price of
the share, Palmolive limited. All sample companies are HUL and
Colgate Palmolive had a highest mean Platykurtic distribution. The
Compound Annual value of the earnings yield ratio as 0.04 and Dabur
Growth Rate is highest for Dabur.had a lowest mean value. Earnings
yield ratio is
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
49Fundamental Analysis of Selected FMCG Companies in India
-
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 8Earnings Yield Ratio
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive0.0416
0.0373
0.0381
0.0366
0.0321
0.0294
0.04
?0.41
?0.51
?11.64%
Dabur
0.0107
0.0190
0.0160
0.0156
0.0253
0.0250
0.02
0.04
?1.24
15.19%
Godrej Consumer
0.0250
0.0403
0.0242
0.0215
0.0316
0.0370
0.03
0.39
?1.88
6.75%
HUL
0.0353
0.0355
0.0421
0.0361
0.0322
0.0304
0.04
0.81
0.04
?2.46%
ITC
0.0195
0.0206
0.0193
0.0220
0.0345
0.0347
0.03
0.90
?1.88
10.08%
Marico
0.0312
0.0369
0.0356
0.0323
0.0285
0.0313
0.03
0.28
?0.88
0.05%Compound annual
growth rate
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 9Dividend Yield Ratio
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive0.0255
0.0302
0.0269
0.0243
0.0243
0.0224
0.03
0.95
1.13
?0.07%
Dabur
0.0054
0.0080
0.0068
0.0064
0.0110
0.0122
0.01
0.66
?1.44
14.55%
Godrej Consumer
0.0178
0.0238
0.0154
0.0110
0.0128
0.0099
0.02
0.99
0.55
?9.31%
HUL
0.0310
0.0419
0.0293
0.0244
0.0214
0.0183
0.03
0.89
0.75
?8.41%
ITC
0.0086
0.0092
0.0085
0.0212
0.0246
0.0198
0.02
0.19
?2.74
14.91%
Marico
0.0019
0.0100
0.0078
0.0053
0.0046
0.0040
0.01
0.50
?0.23
13.21%Compound annual
growth rate
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
50 R. Amsaveni and S. Gomathi
-
The Table 11 indicates the intrinsic value of sample flatter
than a normal distribution. The Compound companies, Colgate
Palmolive had a highest mean Annual Growth Rate is higher for
Godrej Consumer, value of intrinsic value and Dabur has a lowest
mean Colgate Palmolive and Marico, whereas rest of the value. All
the companies are positively skewed. The companies shows moderate
compound annual skewness values of all the sample companies are
less growth rate.than 3, which indicate a Platykurtic
distribution,
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 10Price to Book Ratio
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive18.08
36.13
35.06
34.34
32.12
34.92
31.78
?2.25
5.20
11.60%
Dabur
27.81
15.30
14.94
17.93
16.48
14.25
17.79
2.11
4.65
?10.55%
Godrej Consumer
30.00
18.39
9.92
13.12
8.32
6.47
14.37
1.39
1.66
?22.56%
HUL
16.06
33.06
27.34
22.75
25.06
25.23
24.92
?0.26
1.43
7.82%
ITC
6.38
5.83
5.89
6.33
8.79
9.46
7.11
0.96
?1.43
6.79%
Marico
19.98
14.10
13.70
13.28
10.02
9.59
13.45
1.05
1.58
?11.51%Compound annual
growth rate
The Table 10 shows the price to book ratio, the companies are
positively skewed. Colgate, Dabur Colgate Palmolive had a higher
mean value of P/B are Leptokurtic and Godrej, HUL, ITC and Marico
and ITC showed lower Price to Book Ratio. HUL are Platykurtic
distributions. The compound annual and Colgate are negatively
skewed rest of the growth rate is highest for Colgate
Palmolive.
The Table 9 reveals the dividend yield ratio of for Dabur and
Marico. All the companies are selected sample companies. It depicts
that HUL and positively skewed and show Platykurtic distribution.
Colgate shows highest mean value of dividend The Compound Annual
Growth Rate is highest for during the study period and the mean
value is lowest ITC.
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
51Fundamental Analysis of Selected FMCG Companies in India
-
budget with a view point that, once the infrastructure is
Findings of the Studydeveloped, other sectors will automatically
develop
Economic Analysis which leads to economic development of our
country.
Gross National Product, Savings Deposits with Industry
Analysiscommercial bank, Inflation, Interest rates, Exchange
The Indias FMCG sector reported a high growth rate, Foreign
exchange reserves, Agricultural rate during the study period. The
total income shows production, Government Receipts and Expenditure
a growth rate of 10.43 per cent, total sales and profit has a
positive growth rate during the study period. after tax shows a
growth rate of 10.53 and 10.34 per Hence, the above said economic
indicators are cent during the study period. Unlike other sectors,
representing the economic growth of our country is the FMCG
industry registered a healthy growth in favorable to the investors.
Gross Domestic Product, 2009 despite the economic downturn; the
industry Gross Domestic Capital Formation, Gross Domestic did not
slowdown since 2008. The profit and sales of Savings and Balance Of
Payments have a negative this industry also show an increasing
trend. Hence, growth rate during the study period. It shows an
investor could obtain more benefit from investing decreasing trend
during the year 2011?12, because in the FMCG sector. The SWOT
analysis discloses of economic policy and fall in production of
crude that the strength of FMCG sector in India is the low oil and
natural gas. The Government spends more operating cost when
compared to other countries. money to the infrastructural
activities. The Lower scope of investing in technology especially
of infrastructure has played a major role in the present small
scale sectors is the major weakness of this
Source: Companies Annual Reports from 2006?07 to 2011?12.
Table 11Intrinsic Value
2006?07
2007?08
2008?09
2009?10
2010?11
2011?12
Mean
Skewness
Kurtosis
Year Colgate Palmolive372.92
430.93
557.56
823.42
907.13
1118.19
701.69
0.29
?1.61
20.08%
Dabur
129.85
93.50
127.48
154.88
104.35
106.61
119.45
0.62
?0.27
?3.23%
Godrej Consumer
147.88
120.13
207.85
352.02
394.33
480.05
283.71
0.19
?2.00
21.68%
HUL
198.20
218.50
258.35
269.40
305.50
410.10
276.68
1.19
1.62
12.88%
ITC
176.10
185.73
213.53
232.40
180.68
226.87
202.55
0.17
?2.60
4.31%
Marico
60.15
64.88
82.75
124.55
142.40
175.26
108.33
0.40
?1.59
19.51%Compound annual
growth rate
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
52 R. Amsaveni and S. Gomathi
-
sector. The FMCG sectors have a great domestic Suggestions and
Recommendationsmarket opportunity because of the huge population.
The Government could regulate inflation rate The major threats are
tax and regulatory structure of which creates the path to the
economic our country. development. Once the inflation rate is
controlled the people have sufficient money and Company
Analysisthey have a chance to invest their money in the
Highest mean value of earnings per share had been securities
market.achieved by Colgate Palmolive Limited, HUL and
The FMCG sector could improve the R&D Godrej Consumer
limited during the study period. department and implement new
technology The Compound Annual Growth Rate of Godrej which helps to
meet domestic as well as foreign Consumer limited shows the highest
value. Colgate competition. The government could provide tax
Palmolive has paid average dividend per share of concession for
rural marketers. ` 17.42 per share and Hindustan Unilever
Limited
has paid average dividend per share of ` 7.24 per An investor
should be aware about economic share, which are the highest
dividend paying condition, market condition, government companies
among the sample companies. The policy and industrial policy, etc.,
they should Compound Annual Growth Rate of ITC shows the analyse
both internal as well as external factors highest value. The mean
value of dividend payout before going to invest in particular
securities. ratio of HUL is highest and Marico shows the lowest
The prior analysis will help to the investor to mean value of
dividend payout ratio during the study
minimise risk and maximise their return.period. Price to
Earnings Ratio of Dabur India Limited and ITC limited shows highest
mean value Conclusionwhich indicates that the stocks were more
expensive, investors are expecting higher earnings growth in
Fundamental analysis aims at finding the true worth the future and
it is treated as fundamentally strong of a security by analysing
macroeconomic, industry companies during the study period. Highest
Return scenario and company financial position and so on. on Equity
had been earned by Colgate Palmolive An investor can make safest as
well as lucrative followed by Hindustan Unilever limited; it
indicates investment by analysing the related variables and the
efficient utilization of funds by the owners of the ensure for
optimum return. Fundamental analysis firm. Price to Book ratio is
highest for Colgate suggests that no investor should buy or sell a
share Palmolive Limited it shows the market is willing to on the
basis of the advices of market intermediaries pay for the company
above its durable assets. ITC or tips given by the stock dealers,
websites, etc., the shows lower P/B ratio it may be considered a
safer fundamental analysis calls upon the investor to make
investment. The study shows that share prices of all his buy or
sell decisions based on the detailed the sample companies are below
the intrinsic value analysis of the information available. This
study and the highest increase in share price is recorded by
focuses on fundamental analysis using various tools Colgate
Palmolive and Godrej Consumer Products
which help in trading strategies for risk reduction Limited. All
companies shares are floating steadily
and maximisation of return. The objective of the during the
study period. study is to conduct Fundamental analysis for BSE
Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
53Fundamental Analysis of Selected FMCG Companies in India
-
listed FMCG companies and the SWOT analysis for submitted to
West Virginia University, the FMCG industry. The study revealed
that through Retrieved from http://www.Proquest.com, economic
analysis the Gross National Product, UMI No. 1402126. Savings
Deposits with commercial bank, Inflation, Mehmet Sarac (2007) Does
Fundamental Analysis Interest rates, Exchange rate, Foreign
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Agricultural production, Government Analysis of Foreign Investment
in the Istanbul Receipts and Expenditure has a positive growth rate
Stock Exchange Journal of Economic and during the study period.
Hence, investors may
Social Research, Vol 9, No. 2, pp. 37?59.consider these factors
before going to make
Viyyanna Rao and Nirmala Daita (2012) investment. From the
industry analysis found that Fundamental Factors Influencing
Investments the Indias FMCG sector reported a high growth rate in
Mutual Funds the EIC Approach: A Case and its profit and sales also
shows increasing trend Study of RCAMI Indian Journal of finance,
during the study period. The SWOT analysis Vol 6, No.6, pp.
4?13.discloses that the strength of FMCG sector in India is
the low operating cost, huge population is the Notesopportunity,
Lower scope of investing in technology
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Asia-Pacific Finance and Accounting Review 1.3 (2013): 37?55
55Fundamental Analysis of Selected FMCG Companies in India
-
Estd: 1996
Asia-Pacific Institute of ManagementNew Delhi
-
Asia-Pacific Institute of Management, New Delhi3 & 4
Institutional Area, Jasola, (Opp. Sarita Vihar), New Delhi
-110025
Telephone: (011) 42094800 Mobile : 9711694689 Fax: (011)
26951541E-mail: [email protected] Website :
www.asiapacific.edu
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