fundamental analysis of itc

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


39Fundamental Analysis of Selected FMCG Companies in India

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.



Source: Compiled by Authors.

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



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.



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



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



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



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.


Table 4Dividend per Share

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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


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.




Table 5Dividend Payout Ratio

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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


Table 6Price to Earnings Ratio

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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


growth rate




Table 7Return on Equity

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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




Table 8Earnings Yield Ratio

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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


growth rate


Table 9Dividend Yield Ratio

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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


growth rate



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,


Table 10Price to Book Ratio

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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.



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


Table 11Intrinsic Value

2006?07

2007?08

2008?09

2009?10

2010?11

2011?12

Mean

Skewness

Kurtosis


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


growth rate



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



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 exchange Matter for Foreign Investors? An Empirical reserves, 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

1. FMCG industry related data retrieved from especially of small scale sectors is the major ht tp : / /www. in fo . sh ine .com, Indus t ry weakness and major threats are tax and regulatory Information FMCG industry an Overview structure of our country. The company analysis done retrieved on Sept. 15, 2012.with the help of ratio analysis indicates that Colgate

Palmolive Limited and Hindustan Unilever limited 2. FMCG industry related data retrieved from companies are financially in satisfactory position http://www.dinodiacapital.com, The Indian during the study period. FMCG Industry retrieved on Sept. 15, 2012.

3. http://www.cmie.com, National Income Statistics, India, Sept. 2012 issue retrieved on Jan. 18, 2013.References

4. h t tp : / /www. in fo . sh ine . com, I ndus t ry Jeffery S. Abarbanell and Brain J. Bushee (1977) Information FMCG industry an Overview Fundamental Analysis, Future Earnings and retrieved on Sept. 15, 2012. Stock Prices Journal of Accounting Research,

Vol. 35, No.1, pp 1?24. 5. http://www.cmie.com, Monthly Review of Indian Economy, National Accounts, India, Sandip Mukherji, Manjeet and Kim (1997) A January 2013 issue retrieved on Feb. 12, 2013.Fundamental Analysis of Korean Stock

Returns Financial Analyst Journal, Vol 53, 6. http://www.rbi.org.in, Table No. 50 titled No. 3, pp. 75. Savings deposits with Commercial Bank,

Handbook of Statistics of Indian Economy, Jiang Xia (2000) Fundamental Analysis of Price on India, retrieved on Sept. 14, 2012.Chinese Steel Products Doctoral Dissertation



7. http://www.cmie.com, Monthly Review of 11. http://www.rbi.org.in, Table No.17 titled Indian Economy, Inflation, India, January 2013 Agricultural Production-Food grains, issue retrieved on Feb. 12, 2013. Handbook of Statistics of Indian Economy,

India, retrieved on Sept. 14, 2012.8. http://www.cmie.com, Monthly Review of Indian Economy, Money and Banking, Interest 12. http://www.rbi.org.in, Table No.115 titled rates, India, January 2013 issue retrieved on Receipts and Disbursement of Central and Feb. 12, 2013. State Governments, Handbook of Statistics of

Indian Economy, India, retrieved on Sept. 14, 9. http://www.cmie.com, Monthly Review of 2012.Indian Economy, Foreign Trade, India, January

2013 issue retrieved on Feb. 12, 2013. 13. http://www.rbi.org.in, Table No.142 titled Key Components of Indias balance of payments, 10. http://www.rbi.org.in, Table No.156 titled Handbook of Statistics of Indian Economy, foreign exchange reserve, Handbook of India, retrieved on Sept. 14, 2012.Statistics of Indian Economy, India, retrieved

on Sept. 14, 2012. 14. http://www.slideshare.net FMCG-India-Industry-Analysis? retrieved on Sept. 15, 2012.



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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