financial statement analysis of dabur

Financial Management

Project On

Financial statement analysis

of

DABUR INDIA LIMITED

Submitted by:

Dr. P.R. Wilson Nimisha.M.N

Professor MBA (FT), S2

SMS, CUSAT Roll no.:23

DABUR INDIA LIMITED

Table of Contents

1. INTRODUCTION.................................................................................................................................3

1.2 ABOUT DABUR INDIA LIMITED ...................................................................................................4

1.3 FINANCIAL ANALYSIS..................................................................................................................... 6

I. SWOT ANALYSIS..................................................................................................................................16

CASH FLOW AND FUND FLOW 27

II. WORKING CAPITAL ANALYSIS......................................................................................................28

III. BREAK- EVEN ANALYSIS................................................................................................................29

IV. INVESTMENT DECISION ANALYSIS……………………………………………….…………….31

1.5 CONCLUSION………………………………………………………………………………………. 33

1.4 REFERENCES…………………………………………………………………………………………………………………………….. 35

DABUR INDIA LIMITED

1. INTRODUCTIONFinancial management is that management activity which is concerned with the planning

and controlling of the firm’s financial resources. Finance is the lifeblood of business. Wealth maximization is the objective of financial management in the new era. Other objective of financial management is to arrange sufficient finances for meeting short-term and long-term needs, these funds are procured at minimum cost and so that profitability of the business is maximized.

The functional areas covered by financial management are:

1. Determining financial needs2. Selecting the sources of funds3. Financial analysis and interpretation.4. Cost-volume profit analysis.5. Capital budgeting.6. Working capital management7. Profit planning and control, and8. Dividend policy.

In addition to raising funds, financial management is directly concerned with production, marketing and other functions within an organization whenever decisions are made about the acquisition or distribution of assets.

Objective :

The objective of this project is to analyze the financial statement of DABUR INDIA LIMITED for the five consecutive years (2007-2011) and find out whether there was shareholders wealth maximization. Here the balance sheet and profit and loss account of the firm has been analyzed by computing various financial ratios, working capital, break-even analysis and the investment decision .So the study has been conducted in four phases.

DABUR INDIA LIMITED

1.2 About Dabur India Limited

Dabur India Limited is a leading Indian consumer goods company with interests in health care, Personal care and foods. Over more than 100 years we have been dedicated to providing nature-based solutions for a healthy and holistic lifestyle. The original logo of the company was the Banyan Tree.

The new Dabur identity modernizes the 100-year old equity of the Dabur brand by subtly transforming the tree. While it retains the essence of the banyan tree, it now projects a contemporary image, in consonance with today's lifestyle. The tree, a symbol of nature, is indelibly regarded as a provider of shelter, food and protection. If you observe closely, you will see that the tree trunk mirrors the form for three people with their arms raised conveying exultation in achievement. The broad trunk represents stability and its multiple branches represent growth.

Dabur At-a-Glance

Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. Our story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to our partners and stakeholders. The results of our policies and initiatives speak for themselves.

Leading consumer goods company in India with a turnover of Rs. 2834.11 Crore (FY09)

3 major strategic business units (SBU) - Consumer Care Division (CCD), Consumer Health Division (CHD) and International Business Division (IBD)

3 Subsidiary Group companies - Dabur International, Fem Care Pharma and newu and 8 step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria), Naturelle LLC (Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc. (USA).

DABUR INDIA LIMITED

17 ultra-modern manufacturing units spread around the globe

Products marketed in over 60 countries

Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over2.8 million retail outlets all over India

Dabur India Ltd. - Corporate Profile

Dabur India Ltd is one of India’s leading FMCG Companies with Revenues of US$1 Billion (over Rs 5,000 Crore) & Market Capitalisation of US$4 Billion (Rs 20,000 Crore). Building on a legacy of quality and experience of over 127 years, Dabur is today India’s most trusted name and the world’s largest Ayurvedic and Natural Health Care Company.

Dabur India is also a world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur's FMCG portfolio today includes five flagship brands with distinct brand identities -- 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.

Dabur today operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The company has a wide distribution network, covering over 2.8 million retail outlets with a high penetration in both urban and rural markets.

Dabur's products also have a huge presence in the overseas markets and are today available in over 60 countries across the globe. Its brands are highly popular in the Middle East, SAARC countries, Africa, US, Europe and Russia. Dabur's overseas revenue today accounts for over 30% of the total turnover..

The 125-year-old company, promoted by the Barman family, had started operations in 1884 as an Ayurvedic medicines company. From its humble beginnings in the by lanes of Calcutta, Dabur India Ltd has come a long way today to become one of the biggest Indian-owned consumer goods companies with the largest herbal and natural product portfolio in the world. Overall, Dabur has successfully transformed itself from being a family-run business to become a professionally managed enterprise. What sets Dabur apart from the crowd is its ability to change ahead of others and to always set new standards in corporate governance & innovation.

WORKING CAPITAL AND COST MANAGEMENT:

After running as a family business for over 100 years, when in late 1990s, the management of the Dabur was handed over to a team of professional managers, the new management faced a gigantic task of improving performance in several critical areas. In particular, working capital and cost management required urgent attention as the company's performance in these areas had been far from satisfactory. The then prevailing current ratio of 3:2 and quick ratio of 2:4 were considered too high and indicative of heavy unnecessary investments in working capital that would have a negative effect on company's profitability.

DABUR INDIA LIMITED

Efforts to improve the working capital efficiency were met with stiff resistance from various quarters, but finally yielded results. The case study discusses the measures taken to improve the working capital and cost management performance, and how with concerted efforts the management turned around a highly inefficient working capital management into one of the most efficient in the FMCG sector of the Indian industry. In fact, the company seemed to have taken the matter to the other extreme of negative working capital, with the current ratio declining to 0:8 and the quick ratio to just 0.4 in 2008–09.

In 2010- 2011 as the company was ready to launch itself into the next phase of fast growth, several critical issues related to the liquidity and solvency of the company.

Financial Analysis

Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. The nature of the analysis differ depending on the purpose of the analyst.

Trade creditors are interested in firm’s ability to meet their claims over a very short period of time .They are interested in evaluating the firms' liquidity position.

Suppliers of the long term debt are concerned with the firm’s long term solvency and survival. They analyze the firm’s profitability over time, its ability to generate cash to be able to pay interest and repay principal and relationship between various sources of fund. The firm’s future profitability and the solvency are the prime concern.

Investors are more concerned about the firm’s earnings. Management of the firm is interested in every aspect of the financial analysis. They see

that the resources of the firm are most effectively and efficiently utilized and that the firm’s financial condition is sound.

Dabur India Limited (Dabur) is a consumer care and health care products company. Product portfolio offered by the company includes personal care products, health care products, home care products and foods. Dabur also offers ayurveda-based healthcare products. It markets its products in India as well as in International markets as Middle East, South-East Asia, Africa, the European Union and America.

TEN YEAR HIGHLIGHTSin Rs. Crores FY02* FY03 FY04** FY05 FY06# FY07^ FY08 FY09 FY10 FY11^^

Operating Results:

DABUR INDIA LIMITED

Sales 1,200 1,285 1,236 1,417 1,757 2,080 2,396 2,834 3,416 4,110

Other Income 12 7 9 9 13 26 34 47 48 65

EBITDA 144 162 164 217 300 376 443 517 667 820

EBITDA Margins (%) 12.0 12.6 13.3 15.3 17.1 18.1 18.5 18.3 19.8 19.9

Profit Before Tax (PBT) 82 106 124 176 257 319 384 445 601 708

Taxes 14 14 15 19 30 39 52 54 100 139

Tax Rate (%) 16.6 13.3 12.0 10.8 11.7 12.1 13.4 12.1 16.7 19.6

Profit After Tax (PAT) 64 85 107 156 214 282 333 391 501 569

PAT Margins (%) 5.4 6.6 8.6 11 12.2 13.5 13.9 13.8 14.7 13.8

Financial Position:

Fixed Assets (Net) 371 257 250 295 512 379 465 559 677 1542

Current Assets, Loans

& Advances504 522 340 408 471 640 774 951 1106 1853

Current Liabilities &

Provisions183 241 294 400 436 452 732 805 920 1458

Net Working Capital 322 281 46 8 35 189 42 146 186 395

Total Assets 705 640 433 543 624 670 749 1060 1129 2465

Share Capital 29 29 29 29 57 86 86 87 87 174

Reserves & Surplus 365 388 257 335 440 393 531 732 848 1217

Shareholders Funds 393 417 286 364 497 480 618 819 935 1391

Loan Funds 304 964 132 164 121 160 99 230 179 1051

Total Capital

Employed705 640 433 543 624 670 749 1060 1129 2465

Return Ratios:

ROCE (%) 12.6 16.1 28.6 31.3 39 45.7 47.6 39.4 45.7 33.2

RONW (%) 16.6 20.6 38.1 43.5 46.1 61.3 55.3 47.7 53.5 48.9

Equity Share Data:

Earnings Per Share

(Rs)2.3 3 3.7 5.4 3.7 3.3 3.9 4.5 5.8 3.3

Dividend Per Share

(Rs)0.5 1.4 2 2.5 1.8 1.4 1.5 1.8 2 1.3

No of Shares (In Crs) 28.6 28.6 28.6 28.6 57.3 86.3 86.4 86.5 86.9 174.1

DABUR INDIA LIMITED

FINANCIAL RATIO ANALYSIS

Ratio analysis is a powerful tool of financial analysis. In financial analysis, a ratio is used as a bench mark for evaluating the financial position and performance of a firm. The relationship between the two accounting figures, expressed mathematically, is known as a financial ratio .they help summarize large quantities of financial data and to make qualitative judgments about the firm’s financial performance.

Types of ratios:

A. Liquidity ratio: Liquidity ratios are used to measure the liquidity position or the short term financial position of a firm. They measure the ability of the firm to meet its current obligation .The failure to meet its current obligation will result in poor credit-worthiness, loss of creditors, confidence etc.

1. Current ratio

Current ratio = current asset

Current liabilities

The ratio is used to assess the short term financial position of the business concern. It is an indicator of the firm’s ability to meet its short-term obligations. As a conventional, rule a current ratio of 2:1 is considered ideal. The company don’t have a sufficient funds to pay its liabilities on time and meet other day to day expenses

Year Current asset in crores

Current liability in crores

Currentratios

2008 774 732 1.057

2009 1106 920 1.181

2010 951 805 1.202

DABUR INDIA LIMITED

2011 1853 1458 1.270

2.Quick ratio Quick ratio = quick asset current liabilities

Where, Quick assets = Current assets – Inventory

Year Quick asset in crores Current liability in

crores

Quick ratio

2008 570.96 732 .78

2009 547.4 805 .68

2010 533.6 920 .58

2011 918.54 1458 .63

A quick ratio of 1:1 is considered to be satisfied. Here, in this company it is not possible to meet the current liabilities with the quick assets. The values indicate that the inventories of the firm do not sell. None of the years indicate a satisfactory quick ratio except 2008 which shows a ratio of 0.78:1.The liquidity position of the company is not satisfactory.Debt equity ratio= Debt / Equity

Year Debt equity Debt-equity ratio

2008 342.41 396.89 .23

2009 312 412.77 .14

2010 204 262.06 .19

2011 284 332.26 03

.

DABUR INDIA LIMITED

B) Leverage ratio:

These are calculated to judge the long term financial position of the firm. These ratios indicate the extent

to which the firm has relation on debt in financing assets. These help measure the financial risk and the

firm’s ability of using debt to shareholders advantage. These are also calculated from profit and loss

items. A company can finance its assets either with equity or debt.

1. Debt ratio:

The debt ratio shows the amount the lenders have financed in the company. It measures the long term

solvency of the firm the amount of the funded debt in the capital structure. It is given by:

Debt ratio = Total Debt

Capital employed

Long term debt = Secured loans + Unsecured loans and

Capital employed =Share capital + Reserve and Surplus+ Secured loan + Unsecured loan

Debt –Equity Ratio: The debt-equity ratio is an important tool of finance analysis to appraise the financial structure of the firm. It has important from the viewpoint of creditors, owner and the firm itself. The rat io re f lects the re la t ive contr ibut ion o f c red i tors and owners o f the bus iness in i t sfinancing.A high ratio shows a large share of financing by the creditors of the firm; a low ratioimplies a small claim of creditors. The debt-equity ratio indicates the margin of safety to the creditors. The shareholders of the firm would, however stand to gain in two ways: (i) with a limited s take, they would be ab le to reta in contro l o f the f i rm and ( i i ) the return to them would be magnified. With a larger proportion of debt in the financial structure, the earnings available to the owner would increase more than proportionately with the increase in the operating profits of the firm.

Debt equity ratio = Total Debt

Net worth

2. Capital Employed to Net Worth:

3. Proprietary ratio:

Proprietary ratio= Share holders equity

DABUR INDIA LIMITED

Total assets

C) Activity / turnover ratios

These ratios are employed to evaluate the efficiency with which the firm manages and utilizes its

assets. They are so called because they indicate the speed with which assets are being converted or

turned over into sales.A proper balance indicate that the assets are being managed well. It also ties into

the ability of a company to meet both its short term and long term obligations. It measures how well

assets are used. The greater the turnover, the more effectively the company is at producing a benefit

from its investment in assets.

a) Inventory turnover ratio is regarded as a test of efficiency and indicates efficiency of the firm in

producing and selling its product. This is given by:

Inventory turnover ratio = Cost of the goods sold

Average Inventory

Average Inventory= opening +closing stock of finished goods

2

Days of inventory holding= 365/inventory turnover ratio

Inventory turnover ratio = Sales / Avg. stock

Year Sales Avg. stock Ratio

2008 1163.19 148.89 7.81

2009 1370.85 168.59 7.30

2010 1147.97 145.07 7.91

2011 1268.71 118.77 10.68

b) Debtors turnover ratio indicates how many times in the period credit sales have been credited and

collected on.

DABUR INDIA LIMITED

Debtors turnover ratio = Credit sales

Average Debtors

Collection period = 365/ Debtors turnover ratio

c) Current asset turnover ratio indicates the extent that the investment in current assets result in sales.

Current Asset turnover ratio = Sales

Current asset

d) Fixed asset turnover ratio indicates the ability of the company’s management to put the fixed assets

to work to generate sales.

Fixed asset turnover ratio = Sales/ fixed asset

Year Inventory

turnover ratio

Debtors turnover

ratio

Investment

turnover ratio

Asset turnover

ratio

2008 11.31 23.62 11.31 4.31

2009 10.94 22.63 10.94 4.84

2010 12.52 25.94 12.52 4.67

2011 11.11 39.70 13.44 4.50

Cost ratios

Cost ratios are computed to indicate the trend of the cost elements. It is calculated by dividing any

item of expenditures from trading and profit and loss account by net sales of the company. Different

cost ratios include:

DABUR INDIA LIMITED

a)Material cost to sales ratio = Materials consumed x 100

Net Sales

It measures the material usage efficiency. If ratio is computed it would indicate the material cost

part in sales of the company.

b)Labour cost to sales ratio = Labour cost x 100

Net sales

This ratio show the trend in labour efficiency if it is computed over a period of time from this ratio

the extent of the labour cost in the total cost could be assessed.

c)Factory Overheads to sales ratio = Factory overhead x 100

Net sales

This ratio show the extent of factory overhead in sales and its total efficiency. Factory overhead is

directly related to production and hence due weightage should be given to the quantity produced.

Administration overhead seldom forms a major cost element. Ratio computed over a period of time

show the efficiency level and the extent of its dominance in cost elements.

GROSS PROFIT RATIO:

DABUR INDIA LIMITED

Change in the gross margin can be brought about by changes in any of these factors. The gross margin represents the limit beyond which fall in sales prices are

outside the tolerance limit. Further, the gross profit ratio can also be used to determining the extent of loss caused by theft, spoilage,damage, and so on in the

case of those firms which follow the policy of fixed gross profit ratio in pricing their products.A v e r y h i g h a n d r i s i n g g r o s s m a r g i n m a y b e t h e r e s u l t o f u n

s a t i s f a c t o r y b a s i s o f evaluation of stock, that is, overvalued of closing stock and undervalued of opening stock. But a low gross margin is also a danger signal,

warranting a careful, detailed analysis of the factors responsible For it.

Gross profit ratio = Gross profit / sales *100

Year Gross profit Sales Ratio

2008 560.05 1163.19 48.1%

2009 682.01 1370.85 49.7%

2010 553.91 1147.97 48.2%

2011 653.39 1268.71 51.5%

EARNING PER SHARE:

Earning per share = Profit after tax / Number of shares

Year Profit after Tax Number of shares EPS

DABUR INDIA LIMITED

2008 64.4 285366429 2.25

2009 93.03 285662514 3.25

2010 101.20 285987220 3.53

2011 148.01 286336927 5.16

Every business needs adequate liquid resources in order to maintain day to day cash flows. It needs enough cash to by wages and salaries as they fall due and to pay creditors if it is to keep its workforce and ensure its supplies. Maintaining adequate working capital; is not just important in the short term .Sufficient liquidity must be maintained in order to ensure the

survival of business in the long term as well. Even a profitable business may fail if it does not have adequate cash flows to

meet its liabilities as they fall a due. Therefore when business make investment decisions they must not only consider the financial outlay involved with acquiring the new machine or the new building etc, but must also take account of the additional current assets that

are usually involved with any expansion of activity .Increase production tends to engender a need to hold additional stocks of raw material & work in progress.Increased sales usually mean that the level of debtor will increase. A general increase in thefirm’s scales

of operation tends to imply a need for greater level of cash.

.

D) Profitability ratios

These are calculated to measure the operating efficiency of the firm.

DABUR INDIA LIMITED

Profitability ratios related to sales:

a) Gross profit margin:

The gross profit indicates the efficiency by which the management produces each unit of product. This

given by:

Gross profit margin = Sales – cost of the goods sold

Sales

b) Net profit margin is the ratio of net profit to sales, and indicates how much of each rupee of sales is

left over after all expenses. It indicates managements efficiency in manufacturing, administering and

selling the products. Its an overall measure of the firm’s ability to turn each rupee sales into net

profit. If net margin is inadequate, the firm will fail to achieve satisfactory return on shareholder’s

funds.

Net profit ratio = Net profit x 100

Sales

Profitability ratios in relation to the investment:

c) Return on Equity (ROE) is calculated to see the profitability of owners investment. It indicates how

well the firm has used the resources of the owners.

ROE = Net profit x 100

Equity

Where , Equity = Share capital + Reserves & surplus

d) Return on Investment (ROI) analysis is one of several commonly used approaches for evaluating

the financial consequences of business investments, decisions, or actions. ROI analysis compares

the magnitude and timing of investment gains directly with the magnitude and timing of investment

costs. A high ROI means that investment gains compare favorably to investment costs.

ROI = Net profit x 100

DABUR INDIA LIMITED

Capital employed

Where , Capital employed = Total liabilities

e) Earning per share (EPS) indicate whether or not the firm’s earnings power on per share basis has

changed over that period.

EPS = Profit after tax

Number of common shares outstanding

f) Dividend per share(DPS) indicates whether or not to declare dividend after making profit.

2008-09 09-10 10-11

Gross profit ratio 11.25 14.35 15.64

Net profit 8.82 11.67 13.80

Return on capital

employed

29.50 49.79 49.47

Return on net worth 29.78 48.79 82.47

Debts turnover ratio 14.46 27.78 50.83

Fixed asset turnover 4.06 4.33 6.88

DABUR INDIA LIMITED

SWOT Analysis of Dabur India

SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is an important tool often used to highlight where a business or organisation is, and where it could be in the future. It looks at internal factors, the strengths and weaknesses of a business, and external factors, the opportunities and threats facing the business. The process can give you on overview of where the business, and the environment it operates in, is strategically. This is an important, yet to simple to understand, tool used by many students, businesses and organisations for analysis . The SWOT analysis will give you a clear picture of the business environment Dabur india is operating in at the present time . Strengths :The strengths of a business or organisation are positive elements, something they do well and is under their control . The strengths of a company or group and value to it, and can be what gives itthe edge in some areas over the competitors.

STRENGTH

Having alliances with other strong and popular businesses is a major plus point for Dabur india as it helps bring in new customers and make business more effective.

Being a market leader, as Dabur india is, is key to their success as it boosts reputation, profit and market share.

competitive pricing is a vital element of Dabur india’s overall success, as this keeps the minimum line with their rivals, if not above them.

Riding high in the niche market in FMCG industry has helped boost Dabur india and raise dreputation and turnover.

Keeping costs lower than their competitors and keeping the cost advantages helps Dabur india pass on some of the benefits to consumers.

DABUR INDIA LIMITED

The services/products offered by Dabur india are original, meaning many people will return to Dabur india to obtain them.

Dabur india’s marketing strategy has proved to be effective, helping to raise profiles and profits and standing out as a major strength.

Dabur india’s innovation keeps it a front-runner in FMCG as it is regularly turning out new patents/proprietary technology.

Experienced employees are key to the success of Dabur india helping to drive them forward with expertise and knowledge.

High quality machinery, staff, offices and equipment ensure the job is done to the utmost standard, and is a strength of Dabur india.

Dabur india has an extensive customer base, which is a major strength regarding sales and profit.

Dabur india’s reputation is strong and popular, meaning people view it with respect and believe in it.

Being financially strong helps Dabur India deal with any problems, ride any dip in profit sand out perform their rivals.

A strong brand is an essential strength of Dabur India as it is recognized and respected.

Dabur India has a high percentage of the market share, meaning it is ahead of many competitors

Dabur India’s distribution chain can be listed as one of their strengths and links to success.

High quality products/services is a vital strength, helping to ensure customers return to Dabur India.

Dabur India’s international operations mean a wider customer base, a stronger brand and a bigger chunk of the global market.

DABUR INDIA LIMITED

Development and innovation are high at Dabur India with regard to their products/services, which is a sure strength in its overall performance.

Dabur India’s position in the market is high and strong – a major strength in this industry’s they are ahead of many rivals.

Having little competition, being one of very few companies providing thisservice/product is a major factor in Dabur India’s performance.

The online presence of Dabur India is strong, meaning it is ahead of many competitors.

The lucrative location of Dabur India adds to its strengths due to its accessibility (road, rail, air etc).

Supplier relationships are strong at dabur india, which can only be seen as strength intheir overall performance.

WEAKNESS

Weaknesses of a company or organization are things that need to be improved or perform better, which are under their control. Weaknesses are also things that place you behind competitors, or stop you being able to meet objectives.

Reputation is important, and a damaged one like Dabur India’s is a major weakness as consumers will not trust the firm enough to spend money with them.

A serious weakness for Dabur India is the fact their products/services are of low quality, meaning people will have better-quality substitutes.

Not reducing costs in the same way as their competitors means Dabur india is outlaying more of their profits. Having higher costs than competitors is a major weakness.

Dabur India’s R&D work is low and insignificant, which is a major weakness in FMCG as it is constantly creating new products.

DABUR INDIA LIMITED

The lack of staff experience is a major downfall for Dabur india as it could lead to mistakes or negligence.

Old and outdated technologies hold Dabur india back and limits success, as other firm sare making use of better and more reliable technologies.

Not having an effective marketing strategy seriously hampers the success of dabur india.

Over pricing, setting too high prices for dabur india products/services makes themuncompetitive, which is a major weakness.

The lack of business alliances is a major weakness for Dabur india, as they will struggle to get deals, favours and partnerships.

Dabur india is in a poor financial position which makes it weaker than its competitors.

Dabur india’s lack of innovation limits its success, as there is no forward thinking.

Good companies need loyal employees, but Dabur India has a poor relationship with staff which affects performance.

Dabur India does not function internationally, which has an effect on success, as they do not reach consumers in overseas markets.

Problems with stock are a weakness for Dabur India as they need to keep up with demand.

Online presence is vital for success these days, and lack of one is a limitation for Dabur India.

Dabur India underdeveloped distribution chain has a marked effect on performance as it affects the distribution of their products/services.

The lack of original products/services is a major flaw in Dabur India’s

future success, as it shows a blinkered outlook.

DABUR INDIA LIMITED

Dabur India's location is weakness for the firm, as it means they miss out on many opportunities.

Dabur India’s lack of patents proprietary technology puts it behind its rivals and is deemed as one of their weaknesses.

The weak brand name compromises success for Dabur India as it doesn't inspire people to buy their products/services.

A limited customer base is a major weakness for Dabur

India as it means they have less people to sell or market to.

The weak market position of Dabur India is a limitation to their overall success, as they are well behind their rivals.

Dabur India’s limited product line is a major weakness.

Dabur India’s weak supplier relationships also have an adverse effect on success, as it cut stability to negotiate.

Dabur India is behind its competitors with a low share of the market, which in turn leads to lower turnover.

Opportunities are external changes, trends or needs that could enhance the business or organization’s strategic position, or which could be of a benefit to them.

OPPORTUNITIES

Dabur India could benefit from Governmental support, in the form of grants, allowances, training etc.

Looking at export opportunities is a way for Dabur India to raise profits.

DABUR INDIA LIMITED

Changes in technology could give Dabur India an opportunity to bolster future success.

Dabur India could benefit from expanding their online presence and making more money from online shoppers/internet users.

The changes in the way consumers spend and what they buy provides a big opportunity for Dabur India to explore.

Dabur India is in good financial position, which is an opportunity for them to explore in terms of investment in new projects.

Decrease in taxation gives an opportunity for Dabur India to reduce prices or increase profits.

The growth of the FMCG industry is an opportunity for Dabur India to grasp.

New market opportunities could be a way to push Dabur India forward.

As the economic climate improves, so do the opportunities for Dabur India.

Dabur India has the opportunity to enter a niche market, gain leading position and therefore boost financial performance.

Reaching out into other markets is a possibility for Dabur India, and a big opportunity.

Grasping the opportunity to expand the customer base is something Dabur India can aim for, either geographically or through new products.

Takeover and merger opportunities could be explored for Dabur India and used to acquire new customers, new resources and enter new markets.

DABUR INDIA LIMITED

Expanding the product/service lines by Dabur India could help them raise sales and increase their product portfolio.

Reduction in interest rates could benefit Dabur India as business costs would come down.

Expanding into other markets could be a possibility for Dabur India.

Forming strategic alliances and joint ventures is an opportunity for Dabur India to maximize profit and gain new business.

Dabur India has a number of highly skilled staff, which is an opportunity for them to explore as expertise of their staff can help Dabur India to bring the business forward.

Structural changes in the industry open other doors and opportunities for dabur india.

THREATSThreats are factors which may restrict, damage or put areas of the business or organization at risk. They are factors which are outside of the company's control. Being aware of the threats and being able to prepare for them makes this section valuable when considering contingency plans and strategies. This section will outline main threats Dabur India is currently facing.

Consumer lifestyle changes could lead to less of a demand for Dabur India products/services.

Tax increases placing additional financial burdens on Dabur India could be a threat.

The financial burden of increasing interest rates could be a threat to Dabur India.

Regulations requiring money to be spent or measures to be taken could put financial or other pressure on Dabur India.

DABUR INDIA LIMITED

New products/services from rival firms could lead to Dabur India's products/services being less in demand.

Changes in the way consumers shop and spend and other changing consumer patterns could be a threat to dabur India’s performance.

Being undercut by low-cost imports is a major threat for dabur India.

Not keeping up with changes in technology could be detrimental to the future of dabur india as they could slip behind their rivals.

Slow growth and decline of the fmcg market is a threat to dabur India.

Increased competition from overseas is another threat to dabur India as it could lead to lack of interest in their products/services.

Extra competition and new competitors entering the market could unsteady dabur India and be a threat.

The actions of a competitor could be a major threat against dabur India, for instance, if they bring in new technology or increase their workforce to meet demand.

Price wars between competitors, price cuts and so on could damage profits for dabur India.

A slow economy or financial slowdown could have a major impact on dabur India business and profits.

A decline in demand for dabur India products, with no likelihood of resurgence could pose a threat.

The rise and/or fall of the foreign exchange rate could threaten dabur India with regard to importing and exporting.

DABUR INDIA LIMITED

Rising costs could be a major downfall for dabur India as it would eat into profit.

Dabur India could be threatened by the growing power customers have to set the price of their products/services.

Structural changes in the industry could be a threat for dabur india

Dabur India could be threatened by the growing power their suppliers have to set their prices.

Substitute products available on the market present a major threat to dabur india

2011 2010 2009 2008 2007

Profitability ratio

Operating Profit Margin(%) 19.0

619.1

718.3

3 18.6 17.45

Profit Before Interest And Tax Margin(%)

17.76

17.97

17.11

17.29 16.16

Gross Profit Margin(%)

17.91

18.06

17.19

17.37 17.49

Cash Profit Margin(%)

15.58

15.88

15.97

16.16 15.67

Adjusted Cash Margin(%)

15.58

15.88

15.97

16.16 15.51

Net Profit Margin(%)

14.27

15.03

15.44

15.06 14.41

Adjusted Net Profit Margin(%)

14.27

15.03

15.44

15.06 13.88

Return On Capital Employed(%)

44.16

61.62

47.98

67.51 66.07

Return On Net Worth(%)

46.29

58.04 51.2

61.58 62.52

DABUR INDIA LIMITED

Adjusted Return on Net Worth(%)

45.21

56.29

48.65

59.99 63.32

Return on Assets Excluding Revaluations 5.85 8.6 8.43 5.95 4.44

Return on Assets Including Revaluations 5.85 8.6 8.43 5.95 4.44

Return on Long Term Funds(%)

53.79

68.96

55.29

68.93 68.63

Liquidity And Solvency Ratios

Current Ratio 0.99 0.93 1.19 0.91 0.97

Quick Ratio 0.78 0.68 0.99 0.58 0.63

Debt Equity Ratio 0.23 0.14 0.19 0.03 0.05

Long Term Debt Equity Ratio 0.01 0.02 0.03 0.01 0.01 Debt Coverage Ratios

Interest Cover56.0

652.3

538.3

446.7

9140.6

9

Total Debt to Owners Fund 0.23 0.14 0.19 0.03 0.05

Financial Charges Coverage Ratio

50.47

42.53

31.26

36.56 69.48

Financial Charges Coverage Ratio Post Tax

41.66

36.46

28.99

32.87 64.33

Management Efficiency Ratios

Inventory 8.65 11.3 10.9 12.5 11.11

DABUR INDIA LIMITED

Turnover Ratio 1 4 2

Debtors Turnover Ratio

19.67

23.62

22.63

25.94 39.7

Investments Turnover Ratio 8.65

11.31

10.94

12.52 13.44

Fixed Assets Turnover Ratio 4.39 4.31 4.84 4.67 8.51

Total Assets Turnover Ratio 2.46 3.44 2.81 3.98 4.3

Asset Turnover Ratio 4.39 4.31 4.84 4.67 4.5

Average Raw Material Holding

63.26

52.96

45.18

45.68 40.91

Average Finished Goods Held

29.32

22.08

21.28

20.13 22.21

Number of Days In Working Capital 26.7 3.76

41.32 -5.8 3.82

Profit & Loss Account Ratios

Material Cost Composition

53.15

48.61 52.8

49.05 45.86

Imported Composition of Raw Materials Consumed 0.93 1.22 1.06 0.97 1.22

DABUR INDIA LIMITED

Selling Distribution Cost Composition

14.89

16.55

14.89

16.12 23.11

Expenses as Composition of Total Sales 4.09 4.31 4.56 4.49 3.96 Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit

49.42

46.86

47.41

47.86 55.24

Dividend Payout Ratio Cash Profit

44.32

43.13

43.74

43.54 49.63

Earning Retention Ratio 49.4

51.67

50.11

50.87 42.64

Cash Earning Retention Ratio

54.74

55.64

54.16

55.41 48.66

AdjustedCash Flow Times 0.49 0.23 0.36 0.05 0.07

Mar '11

Mar '10

Mar '09

Mar '08

Mar '07

Earnings Per Share 2.71 4.99 4.32 3.67 2.92

Book Value 6.33 8.64 8.53 6.11 4.67

(Rs crore)

Cash flow and fund flow

In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement is

a financial statement that shows how changes in balance sheet accounts and income affect cash and cash

equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow

statement is concerned with the flow of cash in and cash out of the business. The statement captures both the

DABUR INDIA LIMITED

current operating results and the accompanying changes in the balance sheet.[As an analytical tool, the statement of

cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills.

International Accounting Standard 7 (IAS 7), is the International Accounting Standard that deals with cash flow

statements.

People and groups interested in cash flow statements include:

Accounting personnel, who need to know whether the organization will be able to cover payroll and other

immediate expenses

Potential lenders or creditors, who want a clear picture of a company's ability to repay

Potential investors, who need to judge whether the company is financially sound

Potential employees or contractors, who need to know whether the company will be able to afford

compensation

Shareholders of the business.

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Profit before tax 596.26 527.03 425.00 365.18 284.22

Net cash flow-operating activity 338.61 481.49 323.57 313.29 234.43

Net cash used in investing activity -222.22 -267.54 -238.38 -179.77 -60.57

Net cash used in fin. activity -87.89 -201.88 -9.77 -119.30 -168.06

Net inc/dec in cash and equivalent 28.50 12.07 75.42 14.22 5.79

Cash and equivalent begin of year 163.91 151.84 68.26 54.04 44.45

Cash and equivalent end of year 192.41 163.91 143.68 68.26 50.25

DABUR INDIA LIMITED

WORKING CAPITAL ANALYSISWorking capital is the difference between the current assets and the current liabilities.net working capital may be positive or negative. When the current asset exceed the current liabilities there will be positive net working capital. A negative value occurs when the current liabilities exceed the current asset and liability.

YearWORKING CAPITAL CURRENT RATIO

2008 42 1.051

2009 146 1.181

2010 186 1.202

2011 395 1.270

As working capital increases current ratio also increases.

III . BREAK- EVEN ANALYSIS

This is a specific way of presenting the relationship between the cost, volume and profit. As an

ultimate objective it helps management to seek the most profitable combination of cost and volume.

The break even indicates the level of the sales at which the cost and revenues in equilibrium. The

equilibrium point is called the breakeven point. It is a no profit no loss point. Total variable and fixed

costs are compared with sales revenue in order to determine the level of sales volume, sales value or

production at which the business makes neither a profit nor a loss (the "break-even point").

Dabur India expects its loss-making retail business to break even in the next fiscal as it aims to cut costs through a revenue-sharing model under which it would give a percentage of its revenues to landowners, instead of rent.

DABUR INDIA LIMITED

“Increasingly we are going for a revenue-sharing model in retail. So, instead of giving rent, we give a percentage of our revenues,” chief executive officer Sunil Duggal said.That model ensures faster break-even and is less risky, he said, adding some landlords have already begun to accept the new model.“Even this year the loss would be less than half of last year,” Duggal said. The retail arm had posted a loss of around Rs 24 crore in FY09.

Dabur operates its retail business through its subsidiary H&B Stores Ltd and and operates a chain of beauty, health & wellness retail outlets under the brand name ‘’newu’’.

The personal care and food products maker currently has 12 retail outlets across India. Any further expansion plans in retail would depend on the sucess of the revenue-sharing model, he said.

Dabur is not keen on a price hike though it is concerned about rising material costs.

Break even point can be calculated by the following formula:

BEP = Fixed cost

P/V ratio

Where P/V ratio = (Contribution / Sales) x 100

Contribution = Sales – Variable cost

Margin of safety = Actual sales – Break even sales

Assumption of Break-Even Analysis;

1. All cost can be classified into fixed and variable costs.

2. Selling price does not change with the sales volume.

3. There is only one product or one constant sales mix.

4. All units produced are sold

DABUR INDIA LIMITED

The company had been confronting with huge accumulated losses so the break even point is hard to find. Due to the high cost of the material, firm was not able to meet the cost for the sales made so it was not able to make a profit out of it. And, thus to the firm more turnover will only incur more and more loss. The company is making a huge loss so it is better to abandon it. Dabur Foods Ltd, a fully owned subsidiary of Dabur India Ltd, will break even by the end of the current financial year. The company had reported a loss of Rs 8.3 crore on a turnover of Rs 37.12 crore in 2000-01. The company has projected to wipe out its accumulated losses in another three years' time.

IV. INVESTMENT DECISION ANALYSISThe investment decisions of a firm can also be called as the capital budgeting, or capital expenditure decisions. It is a decision defined as the firm’s decision to invest its current funds most efficiently in the long-term assets in anticipation of an expected flow of benefits over a series of years. This is the most important decision to be made by the management in planning as it involves a high risk of the uncertainty in gaining the profit in the future. Ones made it cannot be reversed. The company, which signed an agreement with the Board of Investment of Sri Lanka for this venture, said in a statement that the investment marks its entry into the island nation.

Dabur has set up Dabur Lanka Pvt Ltd, to be incorporated under its wholly-owned unit Dabur International, which handles overseas operations.

DABUR INDIA LIMITED

"The demand for fruit-based juices and beverages under the Real brand has been reporting strong growth month-on-month. Dabur's food business had reported an over 28 percent growth in 2010/11 despite supply constraints," Chief Executive Sunil Duggal said.

"As continued high growth is expected in the future too, we are setting up this new facility to augment our production capacity for fruit-based beverages and meet the growing demand." Duggal added.

The new plant, which will be set up at Gampaha, north of Colombo, will have a monthly capacity of 280,000 cases and will be commissioned in Aug-Sept 2012.

Dabur has manufacturing plants in Nepal, Bangladesh, Dubai, Nigeria, Egypt and Turkey among others.

About 22 per cent of Dabur's sales come from international markets, including African nations, Nepal and Bangladesh.

"Building manufacturing facility in Sri Lanka was an important strategic decision for Dabur as manufacturing presence here gives us a competitive edge that we intend to utilize in full," Duggal said.

shares of the company were up 0.94 percent at 102.55 rupees in a firm Mumbai market.

($1=49.195 rupees)

Net Present Value (NPV) method is an economic method of evaluating the investment

Proposals. It recognizes the time value of money.

NPV = Present value of cash inflow – Present value of cash outflow

Table 1.9

Profitability index (PI)= present value of the cash inflow / outflow

Calculation of the weighted average:

Cost of Debt = Interest and financial charges x 100

DABUR INDIA LIMITED

Long term debts

In the table above the weights are given and the weighted average is calculated . The sum of the Debt and equity weighted average is taken and the this is found to be (3.07+.051= 3.12%). The PV values at 3% are taken for the five years and the inflow is discounted with the respective values\ as shown in the table

Thus, NPV= -513199060 - 996777770.8

= -609976831.7

Here, the NPV is negative so it is not feasible to invest in the project.

PI= PV of cash inflow = -0.529

Outflow

Average rate of return= Average profit after tax = - 0.533

Average b/v of investment

CONCLUSION AND RECOMMENDATION

The financial statements of the firm for the five consecutive years(2010-2011) were analyzed

and various ratios and analysis were done.

Through the ratio analysis of seven admired companies in the same sector. The various positive and negative results came out, on the basis of these results I would like to recommend that-

The company should try to increase the duration of the average collection period to compete with its competitors, by offering the customer high cost in credit sales.

DABUR INDIA LIMITED

The company should try to maintain its net worth for having satisfactory fund for equity share holders.

The company should give more emphasis to sufficient utilization of the resources and funds.

The company should improve the return on capital employed, as a source of long term fund.

The company should reduce its var iable cost to increase gross prof it marginwhich is very low relatively other FMCG

FINDINGS On the basis of data and available information. Certain findings arrived that relates

the Ratio Analysis of the company.

It is observe that the Dabur India Ltd. has good profit margin and company’s l iqu id i ty i s a lso good. I t has important f rom the v iewpoint

o f c red i tors and shareholders’ that company have sufficient fund to pay them.

In the comparison of profitability ratio in Dabur India Ltd. the gross profit ratio14.35% and net profit ratio 11.67% both are increases in the year 2010-2011 in compare to

last two year.

The current ratio 1.47% is also increase in the year 2010-2011 in compare to last two year. It shows that current assets increase over current liabilities.

The debt equity ratio 0.45% is also increase in the year 2010-20011 in compare to l a s t t w o y e a r . I t s h o w s t h a t a l a r g e s h a r e o f f i n a n c i n g b y

c r e d i t o r s i n t h e company, which is positive sign for the company.

The return on capital employed 49.47% is having little bit of decrease in 2005-2006 in compare to last year. But then also its better than some other FMCG companies. It shows that Dabur India Ltd. have sufficient sources of the

long term funds.

The fixed assets turnover ratio 6.88% has increases in 2010-2011 compare to last two years. It shows the efficiency of Dabur India Ltd. in utilizing the fixed

assets of the company, comparing with the previous period. It also shows that company has increases its investment in fixed assets.

The debtors’ turnover ratio 50.83% has increases in 2010-2011 in compare to last two years, which shows that Dabur India Ltd. is managing its credit very well.

DABUR INDIA LIMITED

The average collection period is decreases to 10.16% in compare to last two years. This low average collection period shows a low cost in extending credit to

LIMITATIONS

Although it has been my endeavor to take all necessary precautions to ensure that the in format ion gathered i s authent ic and maximum facts are

presented but I faced cer ta in constraints while doing so. The constraints and limitations faced are as mentioned below:

1. Time: The nature of the report required detailed and meticulous information gathering. In

this sense time was a limiting factor and a major constraint to accomplish the given task. Also sometimes the information was not available on time. This caused a lot of

pilferage of time unnecessary of duplication of effort.

2.Human error: The feedback provided by the company executives, consumers and others

approached has been assumed to be correct. But there might have been wrong and biased facts given. The opinion of few cannot be generalized in any manner.

3.Non cooperation: While by and large the people approached were helpful some people were

non-cooperative. Also a lot of information was withheld due to its sensitive nature.4.Calculation error:

The report required calculation of figures and at last have to analysis them also, so mistake can be arises during calculations.

REFERENCES

Financial Management BY Pandey , Vikas Publishing House Pvt. Ltd, New Delhi.

Financial Management theory and practice by Prasanna Chandra

DABUR INDIA LIMITED

www.dabur.com

www.google.com

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http://www.dabur.com/

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