Ratio Analysis and Risk and Return of Fmcg Industry Essay Sample

Companies – ITC. HUL. Nestle India. Dabur. Godrej Consumer Products The Indian FMCG sector is the 4th largest sector in the economic system with an estimated size of Rs. 1. 300 billion. The sector has shown an mean one-year growing of about 11 % per annum over the last decennary. Unlike the developed markets. which are conspicuously dominated by few big participants. India’s FMCG market is extremely disconnected and a considerable portion of the market comprises of unorganised participants selling unbranded and unpackaged merchandises. There are about 12-13 million retail shops in India. out of which 9 million are FMCG kirana shops.

Index concentration degree:

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The index is mostly driven by ITC and HUL. as they contribute about 75 % to the entire index. Both companies have posted good consequences. therefore assisting the index to turn despite weak domestic market. If both these companies are excluded so the index comes out to be overvalued by merely 7. 82 % . Therefore. the index has high dependence on these two companies.

The Union Budget 2012-13 proved to a assorted bag for the FMCG industry. On one manus. minor addition in the revenue enhancement freedom bounds and some inducements on equity investings were positives as this would increase the disposable income degrees. But on the other manus. the addition in excise responsibility more or less offset the above consequence. We feel that smaller participants would happen it hard to go through on the responsibility hikes to stop consumers and will take to take the brunt of this hiking in a command to keep and turn market portion. On the other manus. deep-pocket participants like Nestle. ITC and HUL with their leading place and strong trade names will be able to go through on the hiking to consumers. Traveling frontward. the moderation of natural stuff monetary values and grasp of rupee against dollar would assist the FMCG companies to keep their borders in future. With addition in disposable income and favorable authorities policies. net gross revenues growing is expected to stay robust in coming quarters.

Sing ongoing economic uncertainness. we expect that FMCG industry will stay an attractive industry for investing. being a safe oasis for investors. FMCG industry. as an investing: FMCG index has systematically given good return to investors over the old ages. Infact. FMCG index has given a return of 12 % in 2011 despite negative returns from Sensex. Traveling frontward. HUL and ITC are expected to enter good public presentation. which could take to positive impact on the rating of the overall FMCG index. In FY-11. HUL has changed its concern scheme and started concentrating on rural market through addition in ad-spends. new launches and spread outing distribution web. As a consequence. it posted good consequences so far and is expected to present good consequences in coming quarters every bit good.

ITC. market leader in coffin nails. has benefitted by favorable proclamation in the Union Budget-13 wherein the Government increased the excise responsibility on bidi and other baccy merchandises which could take to consumers switching to coffin nails. With favorable authorities policies and its focal point on turning nutrient processing class. ITC is expected to post good consequences in approaching old ages. Therefore. FMCG index. being a defensive sector. will stay a safe stake for investors. But. as the [ electronic mail protected ]figure indicates. most of the companies are merchandising at a premium to their MRPs. Despite this. there are a few basically sound companies in FMCG industry. which are presently available at a good price reduction from their MRPs ( intrinsic value ) . With the overall economic state of affairs non expected to alter much in the coming quarters. investors would be well-advised to:

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Current Ratio for all the houses is below the criterion ratio 2:1. All the houses are following the same tendency as they have proportionally same difference between current ratio and speedy ratio. Companies have a immense stock list base that holds a major portion of current assets.

GCP performed better than wholly as there is a net addition in hard currency flow. increasing the company’s liquidness to run into its short term liability.

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ITC and Nestle India has a really low hard currency ratio. As Nestle has negative hard currency flow -44 Crores. although ITC performed good this twelvemonth with a net hard currency flow of Rs 55 Crores but they invested in fixed assets and other investings resulted in really low hard currency.

HUL and Dabur besides has a positive hard currency flow of Rs 694 Crores and Rs 98 Crores severally. But HUL made investings and dabur has shown an addition over the old old ages but non good as compared to its rivals.

Quick ratio of Dabur and GCP has increased over the old twelvemonth. GCP’s hard currency ratio is increased from. 05 to. 4 besides the current ratio is improved over old twelvemonth.

Employee turnover Ratios

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2012-12 2010-11

Inventory Turnover Ratio
Fixed Asset Turnover Ratio
Entire Assets Turnover Ratio
Debtor Turnover Ratio

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