project on dabur

DABUR INDIA LTD. KHALID H. SAIYAD

A PROJECT REPORT

UNDERGONE

AT

DABUR INDIA LIMITED

GUJARAT

ON

“FINANCIAL ANALYSIS OF ANNUAL REPORT”

ACADAMIC YEAR

2011-2012

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT FOR M.B.A.OF M.B.A DEPARTMENT

SUBMITTED BY: - SUBMITTED TO:-

KHALID H. SAIYAD UTKARSH TRIVEDI

ROLL NO: - 11 FACULTY (LECTURER)

SAHAJANAND INSTITUTE OF MANAGEMENT

M .B.A. SEM-1

SHREE SAHAJANAND INSTITUT OF MANAGEMENT1


PREFACE

Practical studies are the part of a M.B.A.

Programme.During this practical training student learns and gets practical knowledge which is not given in classroom. The aim of this programmed is to develop not only theoretical knowledge but also to give practical knowledge and by this study one can improve own marketing skills which is helpful to every field of marketing.

Being a student of M.B.A.

Programmed, I have the honor of having a practical training in the “DABUR INDIA LIMITED"

In respect to the requirement of the course prescribed by SIM College. I have finished my assignment to undertake the practical study of marketing.

This report is prepared for the purpose of the study and not theoretical matter but practical matter.

Sincerely, I have tried my level best for precise and meaningful report construction.



Acknowledgement

While writing this project every effort has been made to keep in

view the objective set out in the MBA programme. I am feeling

great to present our experience of studying the DABUR INDIA

LIMITED.

My sincerely thanks to our Principal for providing me this opportunity. I am also thankful to my professors for the support given to me during the preparation of my report.

Finally, I am also thankful to “DABUR INDIA LIMITED” for permitting me to carry out the study bearing the object to fulfill the social responsibility.

Last but not list I owe to my respected and dear parents family members, friends professors, senior students, project partners, concerned officers and directors of the company without their blessings and moral support this study of mine might not be possible.

This project report has been prepared under the subject, practical study for the academic year 2011-2012 M.B.A.



DECLARATION

KHALID H. SAIYAD

Student of S.I.M.Collage (BHAVNAGAR) and studying in M.B.A.I am thankful to my principal and my guide Utkarsh who had given me nice guidance and co-operation preparing this project report.

I am also thankful to DABUR INDIA LIMITED for providing me the opportunity to prepare this project report and to giving all the information of the company and guiding me through this research by the supervisor and the concerned officer of DABUR INDIA LIMITED.

DATE: -

PLACE: - BHAVNAGAR

Signature

(KHALID H. SAIYAD)

INDEX

CHAPTER PARTICULARS PAGE NO.



NO.

PREFACE 2

AKNOWLEDGEMENT 3

DECLARATION 4

1. CHAPTER-1 7

Introduction

2. CHAPTER-2 9

Enclosure on the Operating Performance of the

Company

3. CHAPTER-3 15

Financial Analysis I: Analysis of Balance Sheet and Profit And Loss Account

4. CHAPTER-4 24

Financial Analysis II: Analysis of Profitability

5. CHAPTER-5 30

Financial Analysis III: Ratio Analysis

6. CHAPTER-6 43

Financial Analysis IV: Analysis of Crucial Notes to

Accounts

7. CHAPTER-7 48

Financial Analysis V: Analysis of Auditors’ Report

CHAPTER-8



Financial Analysis VI: Analysis of Dividend Policy

49

9. CHAPTER-9 50

Financial Analysis VII: Analysis of Cash Flow Statement

10. CHAPTER - 10 54

Financial Analysis VIII: Analysis of Capital Market Valuation

11. CHAPTER-11 57

Analysis of Corporate Governance Report

12. CHAPTER-12 59

Analysis of Directors’ Report

13. CHAPTER -13 64

Brief Write-Up on the Sector and Future prospects of the Company

Chapter 1



IntroductionDr. S.K. Burman set up Dabur India Limited in 1884 to produce and dispense Ayurvedic

medicines. In 1956 Dabur India (Dr. S.K. Burman) Pvt. Ltd became a full fledged

company. It is s a leading consumer goods company in India with a turnover of Rs.

2834.11 Crores (FY09) which markets its products in over 60 countries.

It has many major products like the Dabur Chyawanprash which enjoys 65% market

share, Hajmola tablets which enjoys 75% market share, Dabur honey occupying 75%

market share. It has many product lines and many famous brands in each product line.

The company’s roots in the traditional Ayurvedic medicines give it a very Indian flavor in

terms of the products that it launches.

The major groups and subsidiaries of Dabur are:

Major strategic business units (SBU)

Subsidiary Group companies Step down subsidiaries

Consumer Care Division (CCD)Consumer Health Division (CHD)International Business Division (IBD)

Dabur International

Fem Care Pharma

Newu

Dabur Nepal Pvt Ltd (Nepal)Dabur Egypt Ltd (Egypt)Asian Consumer Care (Pakistan)African Consumer Care (Nigeria)Naturelle LLC (Ras Al Khaimah-UAE)Weikfield International (UAE) Jaquline Inc. (USA)Asian Consumer Care (Bangladesh)

Timeline of major milestones in the history of Dabur

1884 Dr. Burman set up Dabur in 1884 to produce and dispense Ayurvedic medicines.

1936 Dabur India (Dr. S.K. Burman) Pvt. Ltd. : It became a full fledged company

1986 Public Limited Company

1996 3 separate divisions

2000 Turnover of Rs.1,000 crore

2008 Acquires Fem Care Pharma



Key Product Lines

Health Care Personal Care Oral CareDabur Chyawanprash Dabur ChyawanPrakash Dabur Chyawan Junior Dabur Honey Dabur Glucose-D

Hair Care Oil Amla Hair Oil Amla Flower Magic Vatika Enriched Coconut Hair Oil Vatika Enriched Almond Hair OilHair Care Shampoo Vatika Smooth and Silky Shampoo Vatika Root Strengthening Shampoo Vatica Black Shine Shampoo Vatika Dandruff Control Shampoo Dabur Total Protect Shampoo Vatika Smooth & Silky Conditioner Vatika Root Strengthening Conditioner

Dabur Red Toothpaste Babool Toothpaste Meswak Toothpaste Promise ToothpasteBabool Mint Fresh Gel

Skin Care Consumer Health Foods Home CareUveda Complete Fairness CreamUveda Moisturising Face WashUveda Clarifying Face WashGulabari Rose WaterGulabari Face FreshenerGulabari Moisturising CreamGulabari Moisturising Lotion

Pudin HaraActive AntacidHonitus Cough SyrupHonitus LozengesDabur Badam OilSuper Thanda OilShilajit Gold Dabur Lal TailDabur Janma GhuntiDabur Gripe WaterActive Blood PurifierDabur Balm Strong

RealReal ActivBurrstHommadeLemoneezCapsico

DazzlSanifresh ShineOdomosOdonil Odopic

List of people in board of directors

Chairman: Dr. Anand Burman

Vice Chairman: Mr. Amit Burman Whole Time Directors Mr. P.D. Narang, Mr. Sunil Duggal and Mr. Pradip Burman

Independent Directors Mr. Bert Paterson, Mr. P. N. Vijay, Mr. R C Bhargava, Dr. S. Narayan and Mr. Analjit Singh

Non Whole Time Promoters, directors Mr. Mohit Burman



Shareholding Pattern

The Details of the shareholding pattern are as under:As on March 31, 2009

Particulars No. of share Holders

% of Share Holders

No. of Shares Held

% ofShare Holding

Directors, promoters and family members

28 0.03% 611834473 70.73%

FIIs 118 0.11% 74278471 8.59%Mutual Funds 64 0.06% 31121682 3.60%Insurance companies 27 0.03% 88968460 10.28%NRIs 2764 2.64% 4260203 0.49%Corporates 1303 1.24% 5011529 0.58%Individuals 100492 95.89% 49601431 5.73%Total 104796 100% 865076249 100.00%

Chapter 2

Enclosure on the Operating Performance of the Company

Market Share

The below mentioned brands contribute a value close to $8Bn to Dabur.

Brands Market Share

Honey 75%

Chyawanprash 65%

Hajmola 75%

Real 40%

Vatika hair Oil 8.5%

herbal Digestives 90%



Vatika Shampoo has been the fastest selling shampoo brand in India for three

years in a row.

About 2.5 crore Hajmola tablets are consumed in India every day

Key Raw Materials

Raw material 2008-2009 2007-2008 2006-2007 2005-2006

Sugar & Molasses 31.1 23.88 28.21 26.11

Herbs,Jari Booti & Raw Madhu 140.17 111.12 72.69 71.45

Vegetables Oils 122.52 95.95 83.88 52.94

Chemicals & Perfumery

Compounds 164.2 149.56 110.51 84.79

Key raw materials being used are Herbs, Jari booti and Raw Madhu that signifies the fact

that most of the Dabur products are naturally made and are good for skin and health.

Chemicals and perfumeries also form a vital part of the raw materials. The consumption

of raw material has increased over the past four years signifying the increased sales and

hence the increased profits of the products and the company.

Sales Mix

Segment 2009 2008 2007 2006

Hair Oils 504.84 375.7 306.76 268.1

Tooth Powders & Paste 329.7 300.73 195.75 63.19

Chywanprash 194.3 179.47 171.91 150.07

Honey. 116.88 106.61 85.56 78.14

Hajmola. 90.51 71.49 78.08 72.65

Fruits/Nector/Drinks 76.13 66.34 Nil Nil

Asava-Arishta 56.4 48.97 46.95 53.16

Vegetable Pastes 6 5.15 Nil Nil



Important Inferences:

All the segments have been showing constant growth over the past 4 years.

The main highlight has been the Tooth Powder and paste segment which has

shown a growth of 422% in the past 4 years. This has been the mainstay of the

Overall sales.

Major Contributor to Dabur sales has been Hair Oils.

Real Juice and vegetable pastes- These have been the newest ventures wherein

the company has invested and the segment has been doing well since its

formation.

Sales- Domestic or Export

Year Domestic Sales Export Sales

2006 132,454.64 4,513.65

2007 170,549.27 7,253.16

2008 201,293.09 10,485.77

2009 230,162.64 12,205.25

Most of the consumption of Dabur is in-house, that is Domestic and only around 4.3% of

the produce is exported.

The average growth rate over the four years is more for exports (41%) as compared to

domestic (20%). So the company is steadily increasing its exports but there is still a long

way to go before Dabur can make a name for itself in the international market.

The domestic growth rate of sales has reduced from 29% in FY2006 to 14% in FY2008.

This may be due to the tough competition in the domestic market and the economic

downturn.

Peer Comparison

RONW

RONW



2009 2008 2007 2006Dabur 51.2% 61.6% 65.8% 45.4%HUL 116.7% 115.5% 56.5% 58.7%ITC 25.9% 25.9% 25.2% 23.3%

Nestle 112.8% 98.9% 81.0% 87.4%

The net worth of Dabur is increasing at a faster rate as compared to the net profit and therefore

the decline in the past few years. That is, the company is giving lesser returns with the increase

in capital investment by the owners of the company.

Profit Margins

Profit Margins 2009 2008 2007 2006

Dabur 15.6% 15.2% 14.2% 13.8%HUL 12.2% 12.6% 12.7% 12.2%ITC 22.4% 22.2% 23.3% 24.0%

Nestle 12.4% 11.8% 11.2% 12.5%

Dabur is doing better than most peers as far as the Profit margins are concerned. Dabur

has shown a steady upward trend in the past 4 years where its peers have shown a

reduction in at least one of the four years.

Return on Assets

Return on Assets

2009 2008 2007 2006Dabur 41.2% 55.3% 56.5% 38.9%HUL 96.7% 107.8% 55.1% 57.3%ITC 24.3% 24.3% 24.0% 21.6%

Nestle 104.5% 92.0% 77.8% 84.0%

The figures may be misleading. It shows a downward trend over the years.

That is because the company is investing more in the long term assets



rather than going for short term investment. It can be said that the results

will reflect the same in the next few yearTrend Analysis

Yearly figures at a Glance (2000-2006)

2000 2001 2002 2003 2004 2005 2006

Sales & Other Income1044.4

8 1130.431119.3

21168.5

41094.3

11238.2

01365.1

3Index 1.00 1.08 1.07 1.12 1.05 1.19 1.31PBDT 102.59 107.62 96.50 117.58 129.19 182.11 233.91Index 1.00 1.05 0.94 1.15 1.26 1.78 2.28PBT 81.29 85.16 75.51 95.54 113.44 165.01 214.86Index 1.00 1.05 0.93 1.18 1.40 2.03 2.64PAT 77.66 77.63 65.03 84.92 101.20 148.01 189.08Index 1.00 1.00 0.84 1.09 1.30 1.91 2.43Equity Paid-Up 28.52 28.52 28.56 28.52 28.52 28.51 28.51Index 1.00 1.00 1.00 1.00 1.00 1.00 1.00Gross Block 359.21 362.12 376.50 297.18 268.16 317.46 328.23Index 1.00 1.01 1.05 0.83 0.75 0.88 0.91Net Working Capital ( Incl. Def. Tax) 304.01 235.32 242.32 190.31 -24.30 -81.66 -38.35Index 1.00 0.77 0.80 0.63 -0.08 -0.27 -0.13Current Assets ( Incl. Def. Tax) 412.23 392.85 407.67 406.45 219.89 253.35 285.68Index 1.00 0.95 0.99 0.99 0.53 0.61 0.69Current Liabilities and Provisions ( Incl. Def. Tax) 108.22 157.53 165.35 216.14 244.19 335.01 324.03Index 1.00 1.46 1.53 2.00 2.26 3.10 2.99Total Assets/Liabilities (excl Reval & W.off) 710.24 708.45 775.41 734.85 546.06 715.90 759.60Index 1.00 1.00 1.09 1.03 0.77 1.01 1.07Net Worth 320.04 362.20 400.37 411.10 268.65 338.07 447.87Index 1.00 1.13 1.25 1.28 0.84 1.06 1.40Capital Employed 609.06 558.30 613.54 521.11 308.46 386.70 468.44Index 1.00 0.92 1.01 0.86 0.51 0.63 0.77Book Value (Unit Curr) 11.22 12.70 14.02 14.38 9.39 11.80 7.81Index 1.00 1.13 1.25 1.28 0.84 1.05 0.70

Market Capitalisation2336.5

0 1736.871587.9

41026.0

22251.7

53179.0

47106.0

5Index 1.00 0.74 0.68 0.44 0.96 1.36 3.04EPS (annualised) (Unit Curr) 2.61 2.62 2.23 2.86 3.28 4.83 3.05Index 1.00 1.00 0.85 1.09 1.26 1.85 1.17

Dividend (annualised%) 100.00 100.00 50.00 140.00 200.00 250.00 250.00Payout (%) 38.26 38.17 22.45 49.01 60.99 51.79 57.32



Payout (%) 60.99 49.01 22.45 38.17 38.26 29.31 23.00ROG-Net Worth (%) 22.38 13.17 10.54 2.68 -34.65 25.84 32.48

Year 2000 2001 2002 2003 2004 2005 2006 2007

Sales 982 1100 1200 1285 1236 1417 1757 2080

PBT (Profit before Tax)

PBT has shown an upward growth over the past 10 years. It has grown by almost 450%,

much more than compared to sales growth. So we can infer that there are major sources

of non-operating income.

PAT (Profit after Tax)

PAT has also shown an upward trend as it directly follows the PBT figures.

EPS and Dividend

We can see in the figure that the dividend is dependent on the earnings per share (EPS)

of the company. i.e. when EPS increases, the company pays a higher dividend and vice-

versa. Initially from 2000 to 2002 the dividend decreased. This was due to a share split in

2000. Then there was an increase till 2005, when it again started to decline. This was

because the earnings per share had reduced. This year both EPS and Dividend increased.

The dividend paid this year was 175% as compared to 150% paid last year.



Chapter 3

Financial Analysis I: Analysis of Balance Sheet and Profit And Loss Account

Analysis of Balance Sheet

Horizontal Balance Sheet (Comparison 2008 and 2009)

2009 2008

Increase/Decrease over 2008

(Rs. In lakhs) (Rs. In lakhs) (Rs. In lakhs) %ageSOURCES OF FUNDS : Shareholder's Funds Share Capital 8,650.76 8,640.23 10.53 0.12 Reserves Total 65,168.91 44,192.11 20,976.80 47.47Total Shareholder's Funds 73,819.67 52,832.34 20,987.33 39.72Loan Funds: Secured Loans 825.56 1,644.72 (819.16) (49.81)

Unsecured Loans 13,071.69 88.97 12,982.7214,592.2

4Deferred tax Liability 3,048.50 2,727.97 320.53 11.75Total Liabilities 90,765.42 57,294.00 33,471.42 58.42 APPLICATION OF FUNDS : Fixed Assets Gross Block 57,048.09 48,419.78 8,628.31 17.82 Less : Accumulated Depreciation 21,044.98 18,976.77 2,068.21 10.90 Net Block 36,003.11 29,443.01 6,560.10 22.28Investments 43,689.59 27,037.13 16,652.46 61.59Deferred Tax Assets 2,353.09 2,400.74 (47.65) (1.98)Current Assets, Loans and Advances: Inventories 26,171.64 20,114.69 6,056.95 30.11 Sundry Debtors 11,236.01 10,046.43 1,189.58 11.84 Cash and Bank 14,368.48 6,826.46 7,542.02 110.48 Loans and Advances 22,728.33 18,293.75 4,434.58 24.24Total Current Assets 74,504.46 55,281.33 19,223.13 34.77Less : Current Liabilities and Provisions Current Liabilities 35,138.71 31,722.51 3,416.20 10.77 Provisions 31,510.20 26,540.97 4,969.23 18.72



Total Current Liabilities 66,648.91 58,263.48 8,385.43 14.39Net Current Assets 7,855.55 (2,982.15) 10,837.70 (363.42)Miscellaneous Expenses not written off 864.08 1,395.27 (531.19) (38.07)TOTAL 90,765.42 57,294.00 33,471.42 58.42

Application of Funds

Fixed assets of DaburDabur owns fixed assets worth 360.03 crores at depreciated value compared to last

year’s 294.43 crores . Within the fixed assets plant and machinery, that is, assets directly

needed for production stands at 133.75 crores i.e. 37% of the total fixed assets. Next is

the amount invested in buildings i.e. 117.17 crores. The company has invested

substantially higher in buildings.

The advance against capital goods worth 591.77 lakhs has been included in the total

fixed assets. However this have not been received yet. It may be observed that no

depreciation has been provided on freehold land and livestock. The company has almost

negligibly increased leasehold land while substantially increasing the freehold land from

last year.

Investments FY 08- 270 crores, FY 09- 437 Crores

Dabur’s investments are more than its fixed assets by almost 76 crores totaling to 436

crores. The total investment is a substantial figure compared to the total asset size. It has

invested almost 117 crores in mutual funds while it has invested 21.5 crores in

government bonds. Thus it can be said that the co. carries surplus cash in business which

it utilizes in investing. The co. believes in investments. The co has also invested almost 87

crores in its subsidiaries.

Finally the main reason for the 62% increase in its investments from last year is the

advance paid against the equity shares of Fem Care Pharma Ltd which Dabur has

proposed to acquire. It totals to almost 205 cores. Thus the company has taken a

significant step towards expanding its business by taking the decision to acquire to FEM.



Current Assets, loans and advancesThe company has reported debtors of 236 cores while the total sales are around 2400

cores. So comparatively it is a smaller picture. Also the debts which are considered

doubtful is around 12 cores, which is a small figure compared to total debtors. Also it can

be seen that the co. has invested around 100 cores in fixed deposits.

Dabur has around 31.5 cores in cash balances. They constitute an insignificant part of

the current assets, although they play a crucial role in operations.

Loans and advances of Dabur is around 227 crores which includes security deposits with

various authorities and advance payment of tax as a major constituent. The debtors

which are outstanding for a period exceeding six months are mostly considered

doubtful, hence a provision has been made for them. No provision has been made for

the debtors for a period of less than six months. In the notes to accounts it has also been

stated that In the opinion of Board, the Current Assets, Loans and Advances have

realizable value at least equal to the amount at which they are stated. It has also been

stated that the Debts due from director/officer of the company is nil.

Miscellaneous ExpenditureIt has come down from 13.95 crores to 8.64 crores on account of writing off. The

technical knowhow fees has been fully amortised, while the deferred employee

compensation under ESOP has also been amortised substantially, therefore bringing

down the misc. expenditure.

Current Liabilities and ProvisionsIn current liabilities, out of 351 crores the sundry creditors for expense forms a major

part of 194 crores. The sundry creditors for goods is 108 crores which is very minimum

figure compared to purchases and is almost half the amount of debtors. Hence it can be

said that the co. likes to make payments to the creditors at the earliest.



Out of 315 crores of provisions, 159 crores is for taxation while 86.5 crores is for the

dividend proposed. The co also has provisions for corporate tax on proposed dividend,

liabilities disputed, Gratuity, Leave Salary.

Thus the company has a net asset or net working capital of 78.5 crores which means the

company can continue its day to day functions in an efficient manner.

Deferred tax assets and liabilitiesThe company has shown the deferred tax liability as an independent figure in the

sources of funds which amounts to 30.48 crores while it has shown the deferred tax

assets in the application of funds which amounts to 23.53 crores. The net deferred tax

liability is 6.95 crores.

Sources of Funds

Share Capital(in lacs)

The authorized share capital of the company was 12500 lack equity shares@1 each till

2007. During the year 2007 the authorized share capital of the company has been

increased by Rs. 2000 lakhs, pursuant to merger of Dabur Foods Limited. Thereafter the

authorized share capital of the company continues to be 14500 lakhs @1each.

Change in Capital Structure and Listing of sharesThe equity share capital has gone up in the year 2007 because of the following reasons.

2472137 equity shares allotted under Employees Stock Option Scheme

63,336 shares allotted under Merger scheme with erstwhile Balsara Hygiene

Products

28,70,45,551 equity shares allotted on 12th February, 2007 as bonus shares by

way of capitalization of the free reserves (469066351 shares) and from share

premium account (286651392 shares)

The issuance of bonus shares had an impact on the Reserve and surplus which has come

down from last year .one of the reasons was because of the issue.

In the year FY07 and FY08 there has not a significant change in share capital.



Reserve and Surplus: (in lakhs)

The increase in reserves and surplus in 2009 is mainly because of the increase in general

reserves and profit and loss account balance.

Capital reserves: The Company has kept on increasing the capital reserves throughout

the 4 years and has not utilized any amount from it. The increase has come mainly from

transfer from P/L acc, while in 2007 the company has transferred some amount from the

merged Entities.

Share premium Account: Has come down significantly in 07 from 06 because of

utilization in merger. In 08 and 09 the account has increased slightly because of premium

on issue of shares.

General Reserve: Large amount has been utilized for merger and also for the issuance of

bonus shares. So it has come down in 07 and has been rising thereafter because there

has not been anymore issue of bonus shares or merger. It is also seen that the company

has steadily increased the transfer from P/L acc to general reserve throughout the years.

Profit and loss acc: The transfer of the remaining profits from the P/L account has risen

steadily over the years. This indicates that the profit of the company has been rising over

the years.

Secured LoansSecured loans of Dabur have come down from 16.44 crores to 8.25 crores. The company

has taken term loans and short term loans from banks. The company has repaid almost

half of the loans in the year, thus the figure for secured loans has come down. The

proportion of secured loans to other sources of funds is very small, suggesting that the

company does not depend much on loan funds. However this year the co has taken

some unsecured loans which we will analyze in the next heading

Unsecured Loans The company’s unsecured loans have risen from less than 1 crores to 130.7 crores. The

co has taken short term loan from bank to the tune of 110 crores and that the company




Horizontal Profit & Loss Account (Comparison 2008

and 2009)

2009 2008

Increase/Decrease over

2008 (Rs. In lakhs) (Rs. In lakhs) (Rs. In lakhs) %age Less Excise Duty 2,751.50 3,439.26 (687.76) (20.00) Net Sales 239,616.39 208,339.60 31,276.79 15.01 Other Income 4,306.04 2,790.86 1,515.18 54.29 Total Income 243,922.43 211,130.46 32,791.97 15.53 EXPENDITURE : Cost of Materials 122,243.11 102,833.54 19,409.57 18.87 Manufacturing Expenses 7,076.13 6,985.57 90.56 1.30 Payments to and Provisions for Employees 16,732.46 14,969.23 1,763.23 11.78 Selling and Administrative Expenses 50,901.37 45,827.98 5,073.39 11.07 Financial Expenses 1,333.55 854.50 479.05 56.06 Miscellaneous Expenditure Written Off 394.18 566.79 (172.61) (30.45) Depreciation 2,742.04 2,575.26 166.78 6.48 Total Expenditure 201,422.84 174,612.87 26,809.97 15.35 Balance being Operating Net Profit before Taxation 42,499.59 36,517.59 5,982.00 16.38 Provision for Taxation : Current 4,748.45 4,057.25 691.20 17.04

Deferred (255.09) 75.32 (330.41)(438.67

) Fringe Benefit 650.97 707.81 (56.84) (8.03) Net Profit after Taxation and before Extraordinary Items 37,355.26 31,677.21 5,678.05 17.92 Credit Balance Transferred from Merged Entity 0.00 18.58 (18.58)

(100.00)

Net Profit after Taxation and Extraordinary Item 37,355.26 31,695.79 5,659.47 17.86 Balance Brought Forward 32,322.99 22,915.65 9,407.34 41.05 Provision for Taxation of earlier years written back 0.11 68.55 (68.44) (99.84) Provision for Taxation for earlier year 71.68 154.19 (82.51) (53.51) 69,606.68 54,525.80 15,080.88 27.66Appropriations Interim Dividend 6,488.07 6,480.05 8.02 0.12 Proposed Final Dividend 8,650.76 6,480.17 2,170.59 33.50 Corporate Tax on Interim Dividend 1,102.65 1,101.28 1.37 0.12 Corporate Tax on Proposed Dividend 1,470.20 1,101.31 368.89 33.50 Transferred to Capital Reserve 0.95 40.00 (39.05) (97.63) Transferred to General Reserve 9,000.00 7,000.00 2,000.00 28.57 Balance carried over to Balance Sheet 42,894.05 32,322.99 10,571.06 32.70 69,606.68 54,525.80 15,080.88 27.66 Earning per share (in Rs.) (Face


has taken almost negligible unsecured loans. The company might be looking to fund

some project so it has taken an unsecured loan this time.

Overall Comment

If we look at the balance sheet we will find that the company is not highly leveraged. It depends more on internal sources of funds than external sources. The reserves and sur-plus of the co has become very high as compared to share cap, thus there is a possibility of bonus shares.



Analysis of Profit and Loss Account

Sales and other income

The sales figure of the company has risen from 201,293.09 lacs to 230,162.64 lacs,

thereby registering a growth rate of 14%. Also the exports of the company has risen

from 10,485.77 to 12,205.25 lacs thereby registering a growth rate of 16%.

The other income of the company has increased from 2,790.86 lacs to 4,306.04 lacs. The

other income of the company includes Export Subsidy, Rent Realised, Sale of Scrap,

Royalty, Miscellaneous Receipts, Profit on sale of long term investment, Profit on sale of

current investments, Profit on sale of Fixed Assets.

If we look at the figures of the sales and other incomes we find that the figure of other

incomes is very less compared to the sales figure which indicates that the company is

completely dependent on the operational activities and does not derive much income

from other sources.

Expenditure

The cost of materials has risen from 102,833.54 lacs to 122,243.11 lacs . The cost of

materials includes Raw Materials Consumed, Packing Materials Consumed, purchase of

Finished Products and Adjustment of Stocks in process and Finished Goods. The Raw

Materials Consumed contributes to almost 45 % to the cost of materials. The packaging

materials also constitute a significant portion which shows that FMCG companies spend

more on packaging than other sector companies. There has been a good growth rate in

the purchases of raw materials and packaging materials.

The manufacturing and other expenses have risen from 6,985.57 lacs to 7,076.13 lacs.

The manufacturing and other expenses of the company as compared to the sales figure

is not significant

The next item is Payments to and Provisions for Employees. It has also gone up slightly

from last year. It includes Salaries, Wages and Bonus, Contribution to Provident and

other Funds , Workmen and Staff Welfare, Directors’ remuneration.



The next item is the selling and administration expenses. Rent, advertising and publicity,

freight are some of the components of the it. It includes director’s fees and also freight

expenses and some research and development.

The financial expenses of the company have also risen from last year. It includes interest

paid on fixed loans, bank charges etc.

The company has charged depreciation to the tune of 2742 lacs.

Thus the total expenditure of the company is 201422 lacs, thereby giving Operating Net

Profit before Taxation at 42499 lacs. After providing for taxation the PAT figure has been

obtained. The PAT of the company has risen from 31695 lacs to 37,355 lakhs. The profit

which has been brought from last year has been added. Thereby giving a total amount

available for appropriation as 69,606 lacs.

The company paid an interim dividend @ 75% and Final dividend @ 100% and

transferred 9000 lacs to general reserve. Thus the remaining is carried over to the

balance sheet.

The EPS of the company is 4.32 increasing from 3.66 last year.

The company has not paid a huge amount as dividend, instead it has kept back the

profits. This is an indication that the company wants to take some expansion project in

future.



Chapter 4

Financial Analysis II: Analysis of Profitability

Multi-Step Profit Margin to Sales Ratios of Dabur India Ltd (common sized)

MULTISTEP PROFIT MARGIN

TO SALES RATIOS OF

DABUR INDIA LTD

Particulars

Year ended March 31,

2009

Year ended

March 31, 2008

Year ended

March 31, 2007

Year ended

March 31, 2006

Indian Rupees in lacs Ratio




Domestic Sales Less Returns 230,162.64 96.05

201,293.09

96.62

196,537.05

89.47

171,140.50

91.72

Exports 12,205.25 5.09 10,485.77

5.03 26,834.73

12.22 18,816.50

10.08

Gross Sales Less Returns 242,367.89

101.15 211,778.86

101.65

223,371.78

101.69

189,957.00 101.81

Less: Excise Duty 2,751.50 1.15 3,439.26 1.65 3,711.03 1.69 3,372.14 1.81

Net Sales 239,616.39100.0

0208,339.6

0100.0

0219,660.7

5100.0

0186,584.8

6 100.00

Cost of Materials 122,243.11 51.02101,391.5

4 48.67 97,108.28 44.21 80,772.30 43.29

Manufacturing Expenses 7,076.13 2.95 6,985.57100.0

0 7,425.54 3.38 5,711.24 3.06Cost of Goods Sold(COGS) 129,319.24 53.97 108,377.11 52.02

104,533.82 47.59 86,483.54 46.35

Gross Profit 110,297.15 46.03 99,962.49 47.98 115,126.93 52.41100,101.3

2 53.65Payments to and Provisions for Employees 16,732.46 6.98 14,969.23 7.19 16,666.83 7.59 14,495.75 7.77Selling and Administrative Expenses 50,901.37 21.24 47,269.98 22.69 63,486.20 28.90 56,522.85 30.29Miscellaneous Expenditure Written Off 394.18 0.16 566.79 0.27 649.36 0.30 426.24 0.23

Other Income 4,306.04 1.80 2,790.86 1.34 2,591.23 1.18 1,336.68 0.72Profit before Depreciation, interest and tax- PBDIT 46,575.18 19.44 39,947.35 19.17 36,915.77 16.81 29,993.16 16.07

Depreciation 2,742.04 1.14 2,575.26 1.24 3,429.05 1.56 2,692.46 1.44Operating Profit -OP/PBIT 43,833.14 18.29 37,372.09 17.94 33,486.72 15.24 27,300.70 14.63

Financial Expenses 1,333.55 0.56 854.50 0.41 1,537.50 0.70 1,638.73 0.88Profit before tax and

extraordinary items – PBTEOT 42,499.59 17.74 36,517.59 17.53 31,949.22 14.54 25,661.97 13.75



Extraordinary Expenses : 0.00 0.00 0.00 0.00Credit Balance Transferred from Merged Entity 0.00 0.00 18.58 0.01 0.00 0.00 0.00 0.00Extraordinary Item (Profit/(Loss) on Long Term Trades Investments 0.00 0.00 0.00 0.00 0.00 0.00 -1,274.05 -0.68Profit before Tax for the year 42,499.59 17.74 36,499.01 17.52 31,949.22 14.54 26,936.02 14.44Provision for Taxation : Current 4,748.45 1.98 4,057.25 1.95 3,494.04 1.59 2,185.80 1.17 Deferred -255.09 -0.11 75.32 0.04 -136.86 -0.06 353.04 0.19 Fringe Benefit 650.97 0.27 707.81 0.34 374.68 0.17 463.31 0.25Provision for Taxation of earlier years written back 0.11 0.00 68.55 0.03 22.82 0.01 148.53 0.08Provision for Taxation for earlier year 71.68 0.03 154.19 0.07 -155.37 -0.07 -51.83 -0.03

Total tax 5,216.12 2.18 5,063.12 2.43 3,599.31 1.64 3,098.85 1.66

Common-Sized Statement Showing Ratio of Expenses to Net Sales

COMMON SIZED STATEMENT SHOWING RATIO OF EXPENSES TO NET SALES

Particulars 2008 2007

Figures(Rs lacs) % Figures(Rs lacs) %

Net Sales 239616.39 100 208339.60 100

Materials Cost

Raw Materials Consumed :

i)Opening Stock 5,749.47 2.40 4,692.06 2.25

ii) Add : Purchases 58,172.12 24.28 46,372.97 22.26

Total 63,921.59 26.68 51,065.03 24.51

iii) Less : Closing Stock 7,126.96 2.97 5,749.47 2.76

Total Raw material Consumed 56,794.63 23.70 45,315.56 21.75

Packing Materials Consumed

i)Opening Stock 3,120.33 1.30 3,074.17 1.48

ii) Add : Purchases 33,199.91 13.86 28,450.87 13.66

Total 36,320.24 15.16 31,525.04 15.13

iii) Less : Closing Stock 3,901.49 1.63 3,120.33 1.50

Total packaging material Consumed 32,418.75 13.53 28,404.71 13.63

Purchase of Finished Products 36,918.57 15.41 29,417.23 14.12Adjustment of Stocks in process and Finished Goods

Opening Stock :



Stock in Process 3,350.14 1.40 3,173.25 1.52

Finished Products 7,891.94 3.29 7,764.87 3.73

Total 11,242.08 4.69 10,938.12 5.25

Closing Stock :

Stock-in-process 5,311.26 2.22 3,350.14 1.61

Finished Products 9,819.66 4.10 7,891.94 3.79

Total 15,130.92 6.31 11,242.08 5.40Increase(-)/Decrease in Stock in Process and Finished Goods -3,888.84 -1.62 -303.96 -0.15

Total Material Cost 122243.11 51.02 102833.54 49.36

Manufacturing and Other Expenses

Manufacturing and Operating Expenses

Power and Fuel 3,662.56 1.53 3,842.27 1.84

Stores & Spares Consumed 1,041.82 0.43 1,002.37 0.48

Repairs & Maintenance

— Building 223.94 0.09 219.90 0.11

— Plant & Machinery 373.81 0.16 387.51 0.19

— Others 388.76 0.16 361.65 0.17

Processing Charges 1,385.24 0.58 1,171.87 0.56Total Manufacturing and Operating Expenses 7,076.13 2.95 6,985.57 3.35Payments to and Provisions for Employees

Salaries, Wages and Bonus 13,253.51 5.53 12,071.12 5.79

Contribution to Provident and other Funds 1,690.69 0.71 1,262.36 0.61

Workmen and Staff Welfare 525.85 0.22 482.63 0.23Directors’ remuneration (including perquisites Rs. 287.12, Previous year Rs. 297.31 under ESOP) 1,262.41 0.53 1,153.12 0.55Total Payments to and Provisions for Employees 16,732.46 6.98 14,969.23 7.19

Selling and Adminstrative Expenses

Rent 1,409.78 0.59 1,067.30 0.51

Rates and Taxes 266.72 0.11 184.93 0.09

Insurance 228.08 0.10 272.74 0.13

Sales Tax 101.01 0.04 135.79 0.07

Freight and Forwarding Charges 5,007.01 2.09 5,241.76 2.52

Commission, Discount and Rebate 2,274.61 0.95 2,139.73 1.03

Advertising and Publicity 28,492.76 11.89 24,809.68 11.91

Travel & Conveyance 2,082.48 0.87 1,919.92 0.92

Legal & Professional 977.88 0.41 1,429.18 0.69



Telephone, Fax Expenses 291.93 0.12 307.28 0.15

Security Expenses 299.53 0.13 268.01 0.13

General Expenses 7,853.37 3.28 6,896.20 3.31

Directors’ Fees 10.20 0.00 11.13 0.01

Auditors’ Remuneration:

- Audit Fee 21.51 0.01 18.53 0.01

- Branch Auditors’ Fee 0.00 0.00 0.00 0.00

- Reimbursement of Expenses 13.45 0.01 13.41 0.01

- Provident Fund and Certificates 19.09 0.01 19.14 0.01

Total Audit Fee 54.05 0.02 51.08 0.02

Donation 363.01 0.15 458.29 0.22

Contribution for Scientific Research Expenses 165.98 0.07 75.00 0.04

Bad Debts Written Off - 39.30 0.02

Provision for Doubtful Debts (Net of Excess Provision written Back Rs 19.63, Previous year Nil) 737.82 0.31 257.71 0.12

Loss on Sale of Fixed Assets 13.67 0.01 165.77 0.08

Provision for Contingent Liability 13.22 0.01 73.38 0.04

Fixed Assets Written Down 258.26 0.11 23.80 0.01

Total Selling and Adminstrative Expenses 50,901.37 21.24 45,827.98 22.00

Financial Expenses

Interest paid on : 666.58 0.28 336.74 0.16

Fixed Period Loan 318.15 0.13 211.61 0.10

Others (Net of Int. received Rs. 112.97 TDS thereon Rs. 7.74 Previous year Rs. 237.94 TDS thereon Rs 12.90) 984.73 0.41 548.35 0.26

Bank Charges 348.82 0.15 306.15 0.15

Total Financial Expenses 1,333.55 0.56 854.50 0.41

Total Manufacturing and other expense 76,043.51 31.74 68,637.28 32.94

Comparative Analysis of Profitability

Growth in sales value :

Domestic Sales : 14.34 %

Export Sales : 16.39 %

Total Sales : 14,44 %



Net Sales : 15.01%

Volume of all the products groups except chyawanprash and Hajmola has

increased in absolute terms.

Total value growth is 15.21 whereas total volume growth is 13.49 only . This

shows an overall higher selling price realization. Tooth powder & paste and

Fruits, Nectar & Drinks registered a negative volume-value growth. A particularly

sharp decline of 25.03% in the price realization of Fruits, Nectar & Drinks is

accounted for 3.79% of sales value in 2008.

Average selling price of all the products put together is up by 1.51% which

basically comes due to the rise in selling price of Hajmola , which in turn

compensate the loss in average selling price of Fruits, Nectar & Drinks

Materials Cost and Manufacturing and Other Expenses

Manufacturing and Other Expenses have decreased from 32.94% to 31.74 % of

net sales, i.e an increase in growth rate of 10.79%.

Within the material cost, packing materials consumed has come down from

13.63 % to 13.53%, whereas cost of raw materials consumed has increased

from21.75% to 23.70%.

Cost of raw materials has increased in all types of raw materials.

Within the various raw materials Herbs, Jari Booti & Raw Madhu and Chemicals

& Perfumery Compounds together account for maximum share both in quantity

as well as value. And it is here major cost efficiencies have been achieved.

PBITD



PBITD thus registered a decline of 27 basis points having increased from 19.17% of net

sales in 2007-2008 to 19.44% in 2008-2009.

PBIT

PBIT or operating profit has registered a growth of 35 basis points from 17.94 % of net

sales in 2007-2008 to 18.29% in 2008-2009.

Interest

Interest cost increases signifying that debt has increased this year.

Other Income

In comparison to net sales being just 1.80 % and 1.34% for 2008-2009 and 2007-2008

respectively. As a percentage of PBT also, it is less signifying that most of the income of

Dabur is from main recurring and productive operations.

PBT

There is an overall improvement of basis points in PBT during 2008-2009. It has risen

from 17.52 % of net sales to 17.54 %.

PAT

Ultimately PAT improved from 15.09 % of net sales against 15.56% in 2007-2008,

registering a growth of 47 basis points. In absolute terms PAT has risen by 18.6 %.



Chapter 5

Financial Analysis III: Ratio Analysis

Ratio analysis helps to measure and establish cause and affect relationship between either two

items of balance sheet or of profit and loss account or both balance sheet and profit and loss

account. Ratio analysis is a relative and more focused analysis of financial statements.

Ratios are classified according to their functions and objectives. We have classified the ratios

under the following categories:

Solvency Ratios

Liquidity Ratios

Profitability Ratios

Du Pont Analysis

Capital Market Ratios

Solvency Ratios

We have analyzed the following solvency ratios

Proprietary Ratio

Debt Equity Ratio or External-Internal Equity Ratio

Long-Term Debt Equity Ratio or Gearing Ratio

Interest Coverage Ratio

Proprietary Ratio

This ratio relates the share holders’ fund to total assets.

The formula for calculating the proprietary ratio is given by:

Proprietary Ratio = Shareholders’ Funds

Total Assets



The higher the proprietary ratio, the better is the long term solvency of the company

and the more satisfied the creditors will be. Here, we see that the proprietary ratio of

Dabur India limited has been showing a decreasing trend over the years.

Debt Equity Ratio

This ratio tells how much does the company depend upon its borrowings. A smaller ratio

is better as it indicates that the company can raise large sums as borrowings.

The formula for calculating the debt-equity ratio is given by:

Debt Equity Ratio = Total Debts

Shareholders’ Funds

Debt-Equity Ratio or External-Internal Equity

Ratio

Year 2005-2006 2006-2007 2007-2008 2008-2009

Total Debt 2057.52 2007.99 1733.69 13898.25

Net Worth 96386.87 40318.92 52832.34 73819.67

Debt-Equity Ratio 0.021346476 0.049803 0.032815 0.188273

This ratio is very small which shows that in future, the company can do a high leveraging.

It presently relies mostly on owners’ funds and very less on the loans. As such, financial

institutions and lenders will be ready to give loans to the company. The ratio has been


Proprietary Ratio

Year 2005-2006 2006-2007 2007-2008 2008-2009

Total Shareholders Equity 96386.87 40318.92 52832.34 73819.67

Total Assets 45234.31 42608.98 55898.73 89901.7

Proprietary Ratio 2.130835421 0.946254 0.945144 0.8211154


increasing over the years showing that Dabur India Limited has now started taking loans

– both secured and unsecured, but the proportion of these loans is very less as

compared to its proprietors’ funds.

Long Term Debt to Equity Ratio or Gearing Ratio

This ratio measures the extent of assets financed through long term borrowings. A high

ratio indicates that the company is highly leveraged and creditors will not be very sure in

lending to the company.

The formula for calculating the long term debt-to-equity ratio is given by:

Long Term Debt to Equity Ratio or Gearing Ratio = Long term Debts

Net Worth

This ratio tells whether the company is relying more on its debts or on its capital in order to

finance its operations. We see that this ratio is declining over the years and is very less. This

shows that the company as a policy, doesnot goes for loans and is a very cash rich company. It

also has high reserves and surplus. When we see the trend over the past few years, we see that

the company has now started taking loans but Is still dependent on capital only. Thus, the

company can raise huge sums as loans in the future.Interest Coverage Ratio

This ratio measures the capacity of a company to py the interest liability it has incurred

on its long term borrowings, out of its cash profits.

The formula for calculating the interest coverage ratio is given by:

Interest Coverage Ratio = PAT + Interest on Long Term Debt + Depreciation


Long Term Debt to Equity Ratio or Gearing Ratio

Year 2005-2006 2006-2007 2007-2008 2008-2009

Total Long term Loans 764.22 433.9 611.29 288.94

Net Worth 96386.87 40318.92 52832.34 73819.67

Long-Term Debt-Equity Ratio 0.007928673 0.010762 0.01157 0.003914


Interest on Long Term Debt

Interest Coverage Ratio

Year 2005-2006 2006-2007 2007-2008 2008-2009

Interest On Long Term Debt 565.87 443.01 845.5 1333.55

PAT + Interest on Long Term Debt + Depreciation 21379.29 27848.44 35097.97 41430.86

Interest Coverage Ratio 37.78127485 62.86188 41.5115 31.0681

This ratio measures the capacity of a company to pay off its interest liability in long term

debts out of its profits. As we see from the above, this ratio, although decreasing over

the years, is quite high. Thus, we can say that Dabur India limited is making sufficient

operating profits in order to be able to cover its interest costs.

Overall Analysis of Solvency Ratios

Over-all Analysis (Solvency Ratios)

Year 2005-2006 2006-2007 2007-2008 2008-2009

Proprietary Ratio 2.130835421 0.946254 0.945144 0.8211154

Debt-Equity Ratio 0.021346476 0.049803 0.032815 0.188273

Long-Term Debt-Equity Ratio 0.007928673 0.010762 0.01157 0.003914

Interest Coverage Ratio 37.78127485 62.86188 41.5115 31.0681

From all these ratios, we see that Dabur India Limited mainly depends upon its

proprietary funds. It has very small amount of debts, both long term and short term, as

compared to its capital. As such, the company is highly solvent and can do a very good

leveraging in future.



Liquidity Ratios

We have analyzed the following Liquidity ratios

Current Ratio

Liquid/Quick Ratio

Net Working Capital

Operating cash Flow Ratios

Current Ratios

A Current ratio measures the ability of a company to discharge its day-to-day bills, or

current liabilities as and when they fall due, out of the cash or near cash, or current

assets that it possesses. It is an important indicator of a company’s current and

prospective liquidity position.

Formula for calculation of current ratio is given by:

Current Ratio = Current Assets

Current Liabilities

Current Ratio

Year 2008-2009 2007-2008 2006-2007 2005-2006

Current Assets, loans and

advances 74,504.46 55,281.33 39,641.22 28,436.22

Current Liabilities and

Provisions 66,648.91 58,263.48 35,608.47 30,731.00

Current Ratio 1.12 0.95 1.11 0.93

Generally, a low current ratio indicates the potential for a strained liquidity position.

However FMCG companies normally do not have a high current ratio because of the

ready and fast conversion of ready and fast conversion of inventory into cash. Therefore

the Current Ratio of Dabur is less than normal.



Another reason for the low ratios is that the company is very conservative and has high

provisions (almost 50% of the liabilities) hence increasing the liabilities and decreasing

the ratio. The company has also invested in long term ventures and mutual funds rather

than going for short term investments. Infact, over the past 10 years, it has invested in

27 different mutual funds.

Liquid Ratio

It measures as to how quick is the ability of a company to discharge its current liabilities

net of working limits, as and when they fall due,out of cash or current assets net of

inventories that it possesses.

Formula for calculation of liquid ratio is given by:

Liquid Ratio = Current Assets – Inventories – Prepaid Expenses

Current Liabilities

Liquid Ratio

Year 2009 2008 2007 2006

Liquid Assets 25,604.49 16,872.89 11,122.62 6,498.66

Current Liabilities and Provisions 66,648.91 58,263.48 35,608.47 30,731.00

Liquid ratio 0.38 0.29 0.31 0.21

Inventory in case of Dabur forms a significant part of current Assets, hence quick ratio is

low. A low liquid ratio indicates the potential for a strained liquidity position.

However, a low liquid ratio does not necessarily mean a bad liquidity position as

inventories are not absolutely non-liquid.

Net Working Capital

Formula for calculation of net working capital is given by:

Net Working Capital = Current Assets – Current Liabilities



Net Working Capital

Year 2009 2008 2007 2006

Current Assets, loans and advances 74,504.46 55,281.33 39,641.22 28,436.22


Net Working Capital 7,855.55 -2,982.15 4,032.75 -2,294.78

Net working capital has been up and down in the past 4 years. This is because of the

varied bank balance of the company. However, the low net working capital is also

because of the high provisions the company has created.

Operating cash Flow Ratio

This ratio signifies how well a company can cover its liabilities though the cash generated

from operations.

Formula for calculation of operating cash flow ratio is given by:

Operating Cash Flow Ratio = Cash Flow from Operations

Current Liabilities

Operating Cash Flow Ratio

Year 2009 2008 2007 2006

Cash Flow to Operations 32,357.31 31,329.01 23,442.75 19,434.49


Operating Cash Flow Ratio 0.49 0.54 0.66 0.63

We can again see a downward trend again due to the perishable inventory and high

provisions

Overall Analysis of Liquidity Ratios

Over-all Analysis (Liquidity Ratios)



Year 2009 2008 2007 2006

Current Ratio 1.12 0.95 1.11 0.93

Liquid ratio 0.38 0.29 0.31 0.21

Net Working Capital 7,855.55 -2,982.15 4,032.75 -2,294.78

Operating Cash Flow Ratio 0.49 0.54 0.66 0.63

A major parameter for all the liquidity ratios is the Liabilities that the company has. We

can see above that all the ratios are coming out to be less than normal. This is because

the company has high provisions hence increasing the total liability for the company.

Also the Liquid ratios above are extremely low when compared to the Current ratios.

This is because the inventory forms a significant part of the current assets and we know

that the inventories are not as liquid. Low net-working capital follows the low current

ratios.

Also, the low operating cash flow ratios doesn’t mean that there isn’t enough cash

flowing through operations. It is because of the high value of the denominator i.e.

Liabilities.

These unusually low ratios are not just confined to Dabur. This is a general trend all

across the FMCG sector.

TURNOVER RATIOS

Financial ratios related to sales or volume, i.e, those ratios which signifies the resources

efficiency comes under Turnover Ratios. For example, accounts receivable turnover, also

known as efficiency ratios and assets turnover, conversion of receivables into cash comes

under this category. These measure efficiency of converting assets into cash. The

efficiency with which the assets and resources of a company are utilized in generating

operational revenue has a direct bearing on the top line. It is therefore important for

analysts to study the turnover ratios. Five major ratios under this category are:

Fixed Asset Turnover Ratio

Net worth Turnover Ratio



Inventory Turnover Ratio

Debtors Turnover Ratio

Creditors Turnover Ratio


The Ratio measures the extent of turnover or volume of gross income generated by the

fixed assets of a company or in other words the efficiency in their utilization.

Formula for calculation of fixed asset turnover ratio is given by:

Fixed Asset Turnover Ratio = Net Sales

Net Block of Fixed Assets


Year 2008-2009 2007-2008 2006-2007 2005-2006

Net Sales 2,39,616.39 2,08,339.60 1,60,042.90 1,34,278.81

Net Block of Fixed Assets 36,003.11 29,443.01 23,904.05 19,883.68

Fixed Asset Turnover Ratio 6.65 7.08 6.70 6.75

The ratio has come down marginally from the last year due to a larger increase in the net

block of fixed assets compared to the increase in the net sales. This indicates that the

company is not utilizing its fixed assets well. This is an area of concern for the company

as the growth is not very significant.

Net Worth Turnover Ratio

The ratio measures the extend of turn over or volume of gross income generated by the

net worth of a company. In other words, it is the efficiency in the resource utilization

from the angle of the residual interest, ie. the equity shareholders.

Sales to receivables (or turnover ratio): Net Sales / Accounts Receivable—measure the

annual turnover of accounts receivable. A high number reflects a short lapse of time

between sales and the collection of cash, while a low number means collections take

longer. It is best to use average

Accounts receivable to avoid seasonality effects.

Formula for calculation of net worth turnover ratio is given by:

Net Worth Turnover Ratio = Net Sales



Equity Shareholders’ Funds

Net Worth Turnover Ratio

Year 2008-2009 2007-2008 2006-2007 2005-2006

Net Sales 2,39,616.39 2,08,339.60 1,60,042.90 1,34,278.81

Equity Shareholders fund or Net

Worth 72,955.59 51,437.07 38,337 41,499.39

Net Worth Turnover Ratio 3.28 4.05 4.17 3.23

There is a decrease in net asset turnover ratio this year compared to last year which shows

that the company has not been able to utilize all its net worth appropriately. This is again

an area of concern for the company as overall profitability can be increased by utilizing

net worth properly.

Inventory Turnover Ratio

Formula for calculation of fixed asset turnover ratio is given by:Inventory Holding Period=Inventory Cost of goods sold*365Inventory holding period: 365 / Annual Inventory Turnover—calculate the number of

days, on average, that elapse between finished goods production and sale of product.

Inventory Holding Period

Year 2009 2008 2007 2006

Inventory 26,171.64 20,114.69

15,736.9

4

11,560.9

0

Cost of goods sold 1,29,319.24 1,09,819.11

82,192.3

8

61,256.7

7

Inventory Holding Period 73.86 66.85 69.88 68.88



Inventory holding period has increased by 7 during the last year. This shows poor

inventory management during this period. Also the holding period is increasing over the

years from the past data. So the company has to take care its inventory operation.

Collection Period and Credit Period

Debtors Turnover Ratio

Sometimes referred to as a collection ratio, the average collection period has to do with

the relationship between Accounts Receivable and the time frame in which those

outstanding payments are received. Essentially, the average collection period is a

calculation of the average

Period it takes for outstanding invoices to be paid in full after issuance the advantage of

understanding average collection periods is that the information allows the company to

anticipate cash flow generated by services rendered.

Formula for calculation of debtor’s turnover ratio is given by:Collection Period=RecievablesTotal Sales*365Collection Period

Year 2008-2009 2007-2008 2006-2007

2005-

2006

Recievables 11,236.01 10,046.43 6,097.87

2,694.2

5

Total Sales 2,42,367.89 2,11,778.86 1,63,736.12

1,36,96

8.29

Collection period allowed to

Customers 16.92 17.31 13.60 7.17

Though there was a considerable increase in the Collection period allowed to the

customers for the past years, the trend changed in the present year and collection



period has decreased from 17.31 days last year to 16.92 days. Still the ratio is low which

suggests that the company has managed its debtors well.

Creditors Turnover Ratio

Creditors turnover ratio gives the funding requirements for imports of machinery/ stocks

covered by Letters of Credits arranged for up to 180 days.

Formula for calculation of credit period is given by:

Credit Period=PayablesPurchases*365Creditors Turnover Ratio

Year 2009 2008 2007 2006

Payables 35,138.71 31,722.51 27,770.31 19,342.06

Purchases 1,22,243.11 1,02,833.54 76,798.44 57,511.22

Supplier’s Credit Period 104.91 112.60 131.98 122.75

Supplier’s credit days has increased from 112.60 days last year to 104.91 days this year.

The collection period is less as compared to the credit period enjoyed by the company

which is in favor of the company. This means that the company has managed its debtors

well and the suppliers are having a high degree of faith in it, it also enjoys a good

reputation with the creditors.

Moreover, taking a general trend, collection period is on an increase except for the present year

whereas credit period has decreased as compared to the last year. But since there is a larger

difference between both the periods, the company will only have to take care of it in the long-

run.



Du Pont Analysis With Reference To Return on Net Worth

Du Pont Analysis with Reference to RONW

Year 2007-2008 2008-2009

Net Profit Margin 15.20% 15.58%

Net Worth Turnover 4.61 times 3.83 times

RONW 70.10% 59.79%

The RONW has worsened from last year. The reason is because of the worsened Net

worth Turnover. Reserves and Surplus have gone up substantially but the profit has not

grown with the same proportion. Thus the company has to focus more on improving the

Resource Efficiency than the operating margin.

With Reference To Return on Total Assets

Du Pont Analysis with Reference to ROTA

Year 2007-2008 2008-2009

Net Profit Margin 15.20% 15.58%

Total Asset Turnover 4.61 times 3.63 times

ROTA 55.28% 41.15%

The ROTA has worsened from last year. The reason is because of the worsened Total

Assets Turnover. Total Assets have gone up substantially but the profit has not grown

with the same proportion. Thus the company has to focus more on improving the

Efficiency of assets than the operating margin. They have made a major investment in

assets that are yet to generate sales. Thus in the coming years ROTA is expected to

increase.



Chapter 6

Financial Analysis IV: Analysis of Crucial Notes to Accounts

Note 16 regarding Earnings per Share under Accounting Standard 20

Earnings per Share has been computed as under 2008-2009 2007-2008Profit after Tax 37355.27 31677.21Weighted average number of shares outstandingBasic 864907642 863635509Diluted 869156259 869063210Earning per Share (face value Re. 1 per share)Basic 4.32 3.66Diluted 4.3 3.64

Disclosure of BEPS and DEPS on the face of the profit and loss account with equal

prominence for both the years is presented in accordance with para 8 of the AS-

20.

BEPS is calculated by dividing the net profit for the year attributable to equity

shareholders by the weighted average number of equity shares outstanding

during the year in accordance with para 10 and 11.

DEPS is calculated after adjusting all the effects of all dilutive potential equity

shares in accordance with para 26 and 29.

Analysis of EPS Information Disclosed

In case of Dabur, as the weighted average number of shares outstanding is different for

both dilute and basic, therefore we are having different value of BEPS and DEPS even

after having the same net profit figure.



Notes 12 and 8 regarding Related Party Disclosures under Accounting Standard 18

Managerial Remuneration under section 198 of the Companies Act, 1956 paid or payable during the year, to the Directors: 31.03.2009 31.03.2008Salary 232.9 219.2Commission (as computed below) 0 27.79Contribution to Provident Fund 27.95 29.66Residential Accommodation 139.74 131.55Medical & Leave Travel Benefit 3.47 4.19Contribution to Superannuation Fund 34.95 43.41Others (Including Rs. 287.12 Previous year Rs. 297.31 under stock option Scheme) 780.14 683.07 1219.15 1138.87Computation of net profit in accordance with Section 198 and section 309 (5) of the Companies Act,1956 and calculation of Director’s commission Profit for the year before tax as per Profit & Loss Account 42499.59 36517.59Add: Managerial remuneration 1219.15 1138.87Directors fees 10.2 11.12Provision for doubt full debts 737.82 257.71Less: Capital Profit 0.95 40Adjusted net profit 44465.81 37885.29Maximum permissible remuneration 4891.23 4167.38Maximum commission payable: 444.65 378.85Actual commission (To one non whole-time Director) NIL 27.79

Analysis of Disclosures and Managerial Remuneration

The operating results and financial position of a company may be affected by a

related party relationship, such as holding, subsidiary company, associates, joint

ventures etc as related parties may enter into transactions which unrelated

parties would not.

Disclosure of the names of holding companies and fellow subsidiaries in

accordance with para 3(a) and 21 of As-18

Disclosure of the names of whole-time directors in accordance with para 3(d),14

and 21 of AS-18



Disclosure of the nature of transactions separately with holding companies and

with fellow subsidiaries as per details furnished in the note in accordance with

para 23.

1.3% of Total Sales to fellow subsidiaries is quite a material-related party

transaction.

An equity contribution of Rs. 1,950 lacs is stuck with the subsidiaries.

In comparison to last year loan repayment of Rs. (2,272.28 lacs this year there is

nil repayment.

Guarantees & collateral given to subsidiaries is increased by 48.57% to Rs.

5,860.35 this year.

Employee stock option scheme has increased by 35.41% to Rs. 44.24 lacs this

year.

The idea is to prevent excessive withdrawal by way of remuneration to whole-

time directors, out of the profits generated by the company.

AS 18 also requires a specific disclosure of transactions with the key

management personnel which includes disclosure of the amount of managerial

remuneration as well.

The users of financial statements, by reviewing this amount may reach a

conclusion regarding its reasonableness in regard to net profits earned by the

company.

The total remuneration paid by Dabur as per note 8 is a figure of 1219.15 lacs

against a huge net profit figure of Rs. 42499.59 lacs after charging such

remuneration. This is less than reasonable withdrawal out of the net profits.

Mr. Pradip Burman, a whole time director, voluntarily has foregone his salary and

part of service benefits w.e.f. 1st October 2008. Amount foregone on account of

salary and service benefits work out to Rs.37.60 and Rs.7.49 respectively.



Note 22 regarding Segment Reporting under Accounting Standard 17

Based on the guiding principles given in Accounting Standard on Segment Reporting, the company’s primary business segment is Consumer Care Division(CCD). It addresses consumer needs across the entire FMCG spectrum through four distinct business portfolios of Personal Care, Health Care, Home Care & Foods.

Disclosure of types of products in the CCD segment is in conformity with para 58 of the AS.

Disclosure of segment revenue, result assets, liabilities, capital, expenditure, depreciation and other non cash charges on account of provision for pension and gratuity in conformity with para 40 of the AS.

Segment liabilities disclosed include net deferred tax liabilities despite the requirement of specific exclusion as per the definition of segment liabilities as given in para 5 of the AS.

The company’s corporate strategy aims at creating multiple drivers of growth anchored on its core competencies. The company is currently focused on following business ie Consumer Care business, Consumer Health business and food.

Segment Analysis for the year ended 31-03-09

Segments Capital Employed PAT

Rs. in lacs % of Total Rs. in lacs % of Total

1 Consumer Care Business 33,451.00 45.85 52,099.00 139.472 Consumer Health

Business6,295.00 8.63 5,593.00 14.97

3 Food 8,840.00 12.12 5,326.00 14.264 Others 3,298.00 4.52 131.00 0.355 Unallocated 21,071.00 28.88 -25,793.00 -69.05 Company as a whole 72,955.00 100.00 37,356.00 100.00

45.85% of capital employed in ‘Consumer Care Business’ segment

contributing an astronomically high 139.47% of PBT. The performance of this

segment is affected badly by ‘Unallocated’ segment, which has returned a

loss on 28.88% of capital employed therein.



As against this, a high 28.88% of capital employed in ‘Unallocated’ segment,

higher than the ‘Consumer Health Business’ segment, but it contributes a loss

of 69.05% of PBT.

8.63% of capital employed in ‘Consumer health Business’ segment is

contributing a good figure of 14.97% to PBT.

Reasons are very clear – both in terms of capital turnover efficiency as well as

profitability on capital employed – all other segments analyzed are lagging far

behind the ‘Consumer Care Business’ segment.



Chapter 7

Financial Analysis V: Analysis of Auditors’ Report

Analysis of the Auditors’ Report is a Comment on how the auditors’ report acts as a

catalyst towards ensuring a better quality of financial performance and position and

reporting thereof and financial discipline. The auditors’ report is divided into 2 parts:

first part expressing the auditors’ view on true and fairness or otherwise of the

state of affairs of the company in the case of the balance sheet and profit in the

case of profit and loss account.

Second part comments on fixed assets, inventories, related party transactions,

internal audit and control system and outstanding undisputed statutory

liabilities.

The examination of the issues mentioned in these 2 parts and their implications for

determining a true and fair profitability and state of affairs of the company clearly reveal

that the auditors’ report acts as a catalyst towards ensuring a better quality of financial

performance reporting. Let us look at each one of them in detail:

First part:

Obtaining information and explanation necessary for audit.

Opinion on maintaining proper books of account.

Assertion about agreement of financial statements with the books of account.

Opinion on the compliance of mandatory accounting standards.

Comment on whether any director of the company is disqualified from being

appointed as such as per the norms of the Companies Act.

Second part:

Fixed assets:

Comment on records of fixed assets.



Comment on fixed assets’ adjustments between physical verification and

records in the accounts and extent thereof.

Comment on fixed assets disposed off during the year.

Inventories:

Comment on inventories’ adjustments between physical verification and

records in the accounts and extent thereof.

Comment on the procedures used for the verification of inventories.

Comment on records of inventories.

Related party transactions

Comment on loans granted to/taken from companies, firms or other

parties in which directors are interested to determine whether they are

prejudicial to the interests of the company or not.

Comment on the internal control system commensurate with the size of

the company and nature of business.

Comment on contracts or arrangements in the register maintained under

section 301 of the Act 1956.

Comment on the deposits accepted from public.

Comment on the documents and records maintained for the loans and

advances granted.

Comment on the preferential allotment of shares.

Comment on creation of securities / charges in respect of debentures

issued and outstanding.

Comments on the company’s regularity in repayment of dues to any

financial institution, bank or debenture holder.

Comments on the absence of disputed due on account of wealth tax and

cess.

Comment on money raised by public issues.

Comment on the preferential allotment of shares under their ESOP

Scheme.



Internal audit:

Comment on the internal control system commensurate with the size of

the company and nature of business.

Outstanding undisputed statutory liabilities

Comment on the deposits undisputed statutory dues including provident

fund, fund, investor education and protection fund, service tax etc. with

appropriate authorities.



Chapter 8

Financial Analysis VI: Analysis of Dividend Policy

The company has been very non-uniform and inconsistent in paying dividends to its

stakeholders. The Dividend ranges from 50% in 2002 to 250% in 2005. From 2003

onwards Dabur has been paying a dividend over 100% consistently. In 2009, the

company paid an interim dividend of 75% (Re. 0.75 per share) on February 10, 2009 and

has recommended a final dividend of 100% (Re. 1 per share). So the aggregate dividend

for the year comes our to be 175%, an improvement over the previous financial year

(150%).



Chapter 9

Financial Analysis VII: Analysis of Cash Flow Statement

Compliance with Accounting Standards

The given cash flow statement is for the year ended 31-Mar-09. AS-3 deals with the cash

flow statement. The following disclosures for the same are met by Dabur India Limited:

The cash flow statement is presented for the same period for which the balance

sheet is given. (as at 31-Mar-09)

The cash flow statement clearly classifies the cash flow from operating, investing

and financing activities.

The disclosure of cash flow from operating activity is done through indirect

method.

All Accounting Policies followed by the company abide by the GAAP and thus are

permissible.

Features of Cash Flow Statement

Features of the Cash Flow Statement as presented by the Dabur India Limited are:

The cash flow statement has been prepared for the year ended 31-Mar-09 and

thus it covers the effects of all cash transactions of the previous accounting year.

Comparative Statement –Dabur India Limited has disclosed a comparative

position of each element of cash flow statement.

Vertical form of cash flow statement has been used by Dabur India Limited. This

model provides following benefits:

Disclosures for cash inflows and outflows for the different activities:

operating, investing and financing at one place.

Information is available at a glance, enabling quick review and analysis

Dabur India Limited has used indirect method for working out the cash flow from

operating activities. The statement starts with ‘Net profit before tax and



extraordinary items’ which has been adjusted for non-cash charges and interest

received to arrive at ‘Operating profit before working capital changes’. This is

adjusted with ‘Working capital changes’ to obtain ‘Cash generated from

operating activities’. After deducting interest paid, tax paid and corporate tax on

dividend, ‘Net Cash from Operating Activities’ is obtained. The ‘Net Cash from

Investing Activities’ is obtained by analyzing the Sale and Purchase of Assets and

purchase and sale of investments in subsidiaries. The cash flow from financing

activities includes proceeds of share capital and premium, repayment/proceeds

of loans and liabilities, dividend to arrive at ‘Net Cash generated in Financing

Activities’. The summation of ‘Net Cash from Operating Activities’(A), ‘Net Cash

from Investing Activities’(B) and ‘Net Cash generated in Financial Activities’(C)

with the opening balance gives the closing balance of cash and cash equivalents.

At the bottom of the cash flow statement it has been mentioned that the report

is prepared as per our (the Board of Director’s) report of event date attached.

The names of Chairman, two Whole Time Directors, GM (Finance) and Company

Secretary are also written.

Activity Wise Analysis

Operating Activities

All of the cash inflows of Dabur India Limited during 2009 have been contributed

by operating activities indicating a strong cash position.

Dabur India Limited had a net cash outflow in respect of working capital which is

an indicator of inefficient management of working capital.

Net cash from operation up by 3 % indicating strong operational financial

performance.



Investing Activities

Dabur India Limited has spent huge sums on purchase of fixed assets which

indicate that the company is undergoing expansion and is likely to produce

higher future revenues

It also shows considerable amount of inflow form the sale of fixed assets

compared to last year indicating that the company is disposing off it’s worn out

fixed assets.

Dabur India Limited had significant increase in outflow towards investments in its

subsidiaries (up by 34%) indicating that the company’s future prospects are

expected to grow.

For investing activities Dabur India Limited has had a net cash outflow indicating

a favorable cash position.

Financial Activities

There has been a decrease in money generated by issuance of shares as compared to

last year to the extent of 7.5%

Dabur India Limited has had substantial net outflow in respect of repayment of

borrowings indicating its strong cash position.

It has also shown huge sums of borrowings and keeping in account the strong financial

position if the company, it is not clear why the company has engaged into borrowings.

Dividend payment has increased by 95% in the year indicating a very strong desire to

maintain the goodwill of the company in the market. It also shows that the company is

making huge profits.

Quality of Cash Position

The information provided by the cash flow statements of Dabur India Limited appears to

indicate a high quality of cash position. The reasons are simple and more than clear. It

has been generating cash from operating activities and utilizing this money in expanding

its business and in paying dividends.



However, nearly 50% of the cash flow from operations is as a result of profit from sale of

fixed assets and FCCB currency fluctuation profits which is unsustainable income.

Dependence on this income can prove detrimental for the company.

Ability to Generate Positive Cash Flows from Operations in Future

Dabur India Limited has generated cash from operations in both the years. The amount,

though increased this year, is marginally higher than last year. Information provided by

its profit and loss account establishes that almost all of the cash flow form operations in

the current year is as a result of sale of finished goods. This indicates that the company

has a good ability to generate cash in the future also. Given the huge amounts of money

spend on expanding the business, its revenues are only expected to increase in future.



Chapter 10

Financial Analysis VIII: Analysis of Capital Market Valuation

To analyze the capital market valuation of Dabur India Limited, we have considered the following

ratios:

Earnings Per Share(EPS)

Price Earnings Ratio(P/E Ratio)

Market Capitalization

Earnings per Share (EPS)

In the FY 07 the PAT has gone from 18,908.37 lacs to 25,207.63 lacs. But the EPS has

gone down because there has been an issue of bonus shares by the company. The

company issued bonus shares in the ratio 1:2, thus the no of Equity shares of the co has

increased from 573302784 to 862883808 in FY07. Thus the Reserves and Surplus have

also gone down. The bonus issue also resulted in the market price of a Dabur India

Limited share come down during that year from 140 to 95(appx). The company wanted

to boost the confidence of the investors towards the company and indicating to the

market that the company has strong fundamentals. However even after one year in Dec

07 the share price of the company could reach 110, even when the markets were in a

bullish run. One of the reasons of the damp reaction by the market could be the

stagnant dividend the co. issued to the shareholders compared to its peers like HUL. The

EPS for 2009 shows that the EPS of Colgate is very high compared to Dabur and HUL. But

the PAT of Dabur is more than Colgate. One of the main reasons is that the no of issued

shares of Colgate is very less compared to Dabur.

Price Earnings Ratio (P/E Ratio)

PE ratio of these companies is dated 25th Aug, 09. The PE ratio changes every day as the

stock price fluctuates. PE is a much better comparison of the value of a stock than the

price. For example P & G has a stock price of 1170 while Dabur has a stock price of 140.



However since the PE of Dabur is more than P & G it can be considered a more

expensive stock. Since Dabur has a higher PE than P&G it can be expected to grow and

have higher earnings in the future. Dabur’s PE is larger than HUL which is a bigger

company by market Cap, Pat etc but the PE indicates that comparatively investors

confidence in Dabur is no less than HUL.

The industry PE is 26.70. This means Dabur is outperforming the industry PE and is a

higher valued stock than most of the other companies in the same industry.

The PE ratio of a company may also become low if it reports higher earnings. However in

the long run the PE ratio will rise as the higher earnings will increase the market

sentiment, thereby increasing the market share eventually.

Market Capitalization

Market capitalization is an important indicator because it may happen that the share

price of a company is low compared to its peers. However it might so happen that the

company has issued a very large number of equity shares compared to the other

company. Thus market capitalization gives us an idea of the size of the company which is

decided by the public trust and investments in the company. The share price of Dabur is

around 140 while the share price of colgate is around 600. But the no of shares issued of

Dabur is 8650.76 lacs and the no of shares issued of colgate is 1360 lacs, thus we see

that there is a huge difference in the no of shares issued by both the company. Therefore

market capitalization gives a more realistic idea of comparison of the companies rather

than only share price. HUL has issued around 21800 lacs equity shares and its share

price is around 280, thus it has a very high market capitalization. It comes in large caps

companies while Dabur is comparatively a smaller company.

Yield to Investors

Following is the formula used to calculate the yield to investors:

Yield to investors = Divident Per Share + Market Appreciation



Initial Investment

Yield to investors

Year 2008-2009

Divident Per Share 1.75

Market Appreciation 8.50

Yield to Investors 6.83%

Thus we see that there has been a negative yield to investors. The main reason is

because of the crash in the stock markets due to the global recession. Dabur’s share has

fallen almost by 9%. . During the same period the sensex has fallen from 15626 points

to 9708 points which means it has fallen almost 38%. Therefore we can conclude that

the Dabur Share has shown strong resilience even when the markets were not

performing well.



Chapter 11

Analysis of Corporate Governance Report

Compliance with clause 49 of the Listing agreement

It Dabur India has technically complied with all the requirements mentioned in

the clause. Its adherence to the standard practices and following of the laid down

rules is welcome and desirable for a company which is 150 years old.

The company should have furnished more information about the qualifications of

the board of directors. Should have given more information about the

management principles that are followed by company management apart from

the code of conduct. The key skill area needed for the directors have been

mentioned which gives an idea of the desired qualification but the company

should have mentioned the qualifications as well.

The roles and scope of the board of directors and various committees are clearly

spelt out.

Analysis of the Management Discussion and Analysis Report requirements

The company has given clear data of the related party transactions and for the last 3

years complied with the all the disclosure norms as needed by SEBI

The Section on Management Discussion and Analysis could have been precise

giving point to point information in the same or in a separate section.

A separate heading mentioning the noncompliance of the company has been

given which shows the company’s intent to openly accept the short falls if any.

The company has adequate internal control system wherein the compliance of

various standards can be enforced effectively. This is reflected in the roles

assigned to various board committees and its risk management structure.



Analysis of the implications of the information provided

Bringing transparency in the corporate affairs particularly at the board level.

There are zero shareholders grievances in 2009 which indicates the fast

resolution of complaints by the company.

Shareholders are kept updated about company’s performance and related

matters regularly and the necessary data is available easily.

The company’s sincerity towards ethics is reflected clearly in the section where

whistle blower policy and the policy for prevention of insider trading have been

mentioned. It shows company’s low tolerance for malpractices.

The company has strived to be a responsible citizen as mentioned in the section

for the policy for environment control and reduction of pollution, and policy for

occupational health & safety.

The frequency of the AGM which in this case if 1per year, is a good indication of

the company’s overall health.

The company has given a section I the report where it specifically points out the

point tot point compliance with the requirements of the clause 49.

The company strives to boost investor confidence.

Recommendations to the management n the strategic issues

The company must enforce all the non-mandatory requirements apart from the

mandatory ones.



Chapter 12

Analysis of Directors’ Report

The report’s content are summarized hereunder:

Financial Results

Dividend

Acquisitions

Corporate Governance

Directors

Director’s Responsibility Statement

Change in capital structure and listing of shares

Auditors and their report

Cost auditors

Consolidated financial statements

Internal control system

Fixed Deposits

Nature of business

Subsidiaries

Employee Stock option plan

Conservation of Energy, Technology, Absorption, Foreign Exchange Earnings and Outgo

Group for interse transfer of shares Health Safety and Environmental Review Quality Review Awards & Recognitions Industrial Relations

Acknowledgements



Dabur has complied with all the requirements under section 217 of the companies

act. Some useful additional information, for example, ‘Health Safety and

Environmental Review’ and ‘Quality Review’ has also been provided.

SWOT ANALYSIS

Strengths

Financials: Turnover increased 15.5%, PAT increased by 18%, dividend raised to 175% to 150% last year, proposed acquisition of FEM Care Pharma Limited (FEM), a FMCG Company listed on Bombay Stock Exchange, well placed, proper and adequate internal control system.

Successful introduction of a host of a new product.

Good communication strategies with a host of brand ambassadors.

40% increase in revenue in international business.

Good rate of growth of health division.

20% growth rate in consumer health division.

Dabur red toothpaste became a 100 cr. Brand

Weakness

Loss on newly launched retail venture NEWU

Oral care segment reported a growth rate of only 4.8%

Opportunities

High demand growth in FMCG sector

Increased penetration of FMCG products in rural market

New opportunities in overseas market

Threats

Slowdown in economy

Mounting cost pressure



Sharp currency fluctuations

Chapter 13

Brief Write-Up on the Sector and Future prospects of the Company

The Indian FMCG sector is the fourth largest sector in the economy with a total market

size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a

well established distribution network, intense competition between the organized and

unorganized segments and low operational cost. Availability of key raw materials,

cheaper labor costs and presence across the entire value chain gives India a competitive

advantage.

There is a huge growth opportunities for companies like Dabur, HUL. Indian rural

markets present huge opportunities. The rising rural and semi-urban income levels

coupled with massive advertisement of FMCG products in the electronic media will

spread so much of awakening in the rural and semi-urban folks towards fast moving

consumer goods products so much that these will enlarge their affordability for them.

However, apart from all the opportunities there are various risk involved in the sector.

Dabur must foresee all the risks and plan its operations accordingly. The rural and semi-

urban demand of FMCG products will grow larger and higher, it will put a severe

pressure on the margins of manufacturers of FMCG products because of cut-throat

competition.

One of the risks faced by companies in FMCG is continued economic slowdown and

worsening of macro economic indicators which can impact the spending power of

consumers and put pressure on their incomes and consumption. A poor monsoon if it

happens can impact rural incomes and dampen rural consumption and spends. Increase

of imitation/fake product can hamper Dabur’s growth. Any unexpected change in



regulatory framework which may impact parts of the business of Dabur is also one of the

risks faced by the company.

In view of the Swot analysis done we conclude that Dabur has managed its operations

very efficiently and has shown high growth rate despite of being faced an economic slow

down situation. The company’s new products have shown immense potential to do well

in the market while the Dabur’s management is also committed to pursue higher growth

rates in future. The company has maintained a Risk register which is reviewed

periodically by senior management. Thus the risks can be minimized if action is taken

immediately. The companies segments like consumer care division, health division, and

international division are also showing good signs of growth. The company is also

marketing its products in the rural sector which gives the company an added advantage.

However the company needs to shell out more dividends or issue bonus shares to make

the share more attractive for investors. This along with the improving Indian consumer

market also presents immense opportunities to Dabur to increase its operations and

compete wit HuL and try to bridge the gap between them.


project on dabur

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