COMPANY ANALYSIS-HINDUSTAN UNILEVER LTD

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COMPANY ANALYSIS
INTRODUCTION TO COMPANY ANALYSIS:
Fundamental analysis involves determining the intrinsic value of an equity share.
To determine the intrinsic value, the analyst must forecast the earnings and
expected dividends from the stock and choose a discount rate which reflects the
risk of the stock. It is the examination of various factors such as earnings of the
company, growth rate and risk exposure that affects the value of shares of a
company.
Fundamental analysis consists of: -
 Economic analysis: Impact 30-35 %
 Industry analysis: Impact 15- 20 %
 Company analysis: Impact 30-35 %
Company analysis is a process carried out by investors to evaluate securities,
collecting info related to the company’s profile, products and services as well as
profitability. It is a part of ‘fundamental analysis’ which analyses an economy,
Industry and Company. A company analysis incorporates basic info about the
company, like the mission statement and apparition and the goals and values.
During the process of company analysis, an investor also considers the company’s
history, focusing on events which have contributed in shaping the company.
Also, a company analysis looks into the goods and services proffered by the
company. If the company is involved in manufacturing activities, the analysis
studies the products produced by the company and analyses the demand and
quality of these products. Conversely, if it is a service business, the investor
studies the services put forward.
TYPES OF COMPANY ANALYSIS:
Company analysis requires analysis of both the qualitative and quantitative factors
of the company.
Qualitative Factors:
The qualitative factors are analysed to know about the business profile, product
profile, price profile, the base of its competitive advantage quality and
effectiveness of its management; how far is the shareholder's interests are
safeguarded.
 Business Model:
The way in which a company makes money. It describes company’s
operations, mode of revenue generation, nature of expenses, organization
structure and its sales and marketing effort.
 Management:

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Good and capable management teams generate profits. Management should
attain the stated objectives of the company and create value for all the stake
holders. The criterion used for management analysis is management
discussion and analysis, management ownership of equity stake.
 Corporate Governance:
It refers to the set of systems and practices put in place by the company to
ensure accountability, transparency and fairness in order to safeguard the
interest of the stake holders. Areas of corporate governance are a) Structure
of board of directors b) Financial and information transparency c) Stake
holders rights.
 Corporate Culture:
It refers to the collective beliefs, values, systems and processes of the
company. Every company has set of values and goals that helps to define
what the business is about. The basis of corporate culture is expressed in
terms of the policies and procedures adopted in the company’s functioning.
Quantitative Factors:
The quantitative factors are analysed to know about the growth prospects, level of
competition size of the customers and the financial statements regarding the past
performance.
 Earnings of the company:
Earnings decide its stock value in the market. Growing earnings result in
high valuation of the stock. Earnings are operating profits. Earnings are
generated from operating sources and non-operating sources.
The following factors influence the earnings of a company: -
a) Change in sales
b) Change in cost
c) Depreciation method
d) Depletion of resources
e) Inventory accounting method
f) Replacement cost of inventory
g) Wages, salaries
h) Income tax and other taxes
 Measurement of earnings:
a) Gross Profit= Sales – Cost of Goods Sold (COGS)
b) EBITDA = Gross profit- Operating Expenses
c) EBIT = EBITDA – (Depreciation and Amortization)
d) EBT= EBIT – Interest
e) EAT= EBT – Tax
f) EPS (Earnings per share): EPS gives the overall picture of the performance
of the company.

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g) P/E Multiple (Price earnings multiple):
The price earnings ratio reflects the price investors are willing to pay for
every rupee of earning per share. It is calculated in retrospective or
prospective manner. A high P/E ratio indicates high Expectations of the
market regarding the growth of the company’s future earnings. Investors
compare the P/E ratio of company to that of the industry and market.
 Financial Leverage:
The degree of utilization of Borrowed money in a business is known as the
financial leverage. It involves the selection of appropriate financing mix,
proportion of long-term debt and equity capital (Net worth) i.e., capital
structure of a company. A high degree of financial leverage results in high
interest payments. This will affect the net profits to equity holders.
 Operating Leverage:
The extent to which an organization uses fixed costs in its cost structure is
called operating leverage. The operating leverage is greatest in firms with a
large proportion of fixed costs, low proportion of variable costs, and the
resulting high contribution-margin ratio. A high degree of operating leverage
implies other factors being constant, a relatively small change in sales
results in a large change in return on equity.
EPS = Net Income – Dividends on Preference Shares
Average Outstanding Shares
P/E Ratio = Market Price Per Share
Earnings Per Share
Degree of Financial Leverage (DFL) = % Change in EPS
% Change in EBIT
Earnings Per Share
Financial Leverage (DFL) = EBIT
EBIT- Interest (EBT)
Degree of Operating Leverage (DFL) = % Change in Operating Income
% Change in Sales
Earnings Per Share
DOL = Total Contribution (Sales – Variable Cost) = Total Contribution
Operating Income Total Contribution - FC

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 Competitive Edge:
The competitiveness of a company can be assessed by looking at the
following aspects,
 Market share:
The market share of annual sales helps determine a company’s relative
position within the industry. If market share is high the company will be
able to meet the competition successfully. While assessing the market
share the size of the company should also be considered.
 Growth of sales:
A company with rapid growth in sales is better for shareholders than one
with stagnant growth rate. Investors prefer a large company because it
can withstand the business cycle. Growth in sales results in growth in
profits.
 Stability of Sales:
A company with stable sales revenue will have more stable earnings.
Wide variation in sales lead to variation in capacity utilization. The fall in
market share indicates a declining trend for the company even if the
sales are stable. Stability of shares should be compared to market share.
 Production Efficiency:
Production efficiency means producing the maximum output at minimum
cost per unit of output. This measures how well the production process
is performing. Increasing efficiency boosts the capacity of the business
without any change in number of inputs employed. Production efficiency
enables the firm to produce goods at a lower cost than competitors and
generate more profits. Production efficiency results in Increase in
profitability, Low operational costs, Optimum use of company resources,
Enhanced competitiveness and market share and superior return to the
investor.
 Financial Analysis:
It involves analysing the financial statements of the company from various
viewpoints. The financial statements give the historical and current
information of the company’s operations. Historical financial statements
help to predict the future.
The financial statements of the company include:
 Balance sheet:
It shows the status of a company’s financial position at the end of the year.
It is snapshot of company’s Assets, Liabilities and Equity
 Profit and loss account:
It shows the profit and loss made by the company during a period. It shows
the Sales, expenses, and taxes incurred to operate
 Fund flow and Cash Flow Statement:
It shows the sources and application of funds

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Analysis of Financial Statements It helps the investor in determining the financial
position and progress of the company. The various simple analyses that are
performed to ascertain the financial position of the company are:
 Comparative financial statement:
Here data from the current year’s financial statements is compared with
similar data from the previous year’s financial statements.
 Trend analysis:
It shows the growth and decline of sale or profit over the years.
 Common size statement:
Common size balance sheet shows each item in balance sheet as a
percentage of total assets for assets and each item as a percentage of total
liabilities. Common size income statement shows each item of expense as a
percentage of net sales. With common size statements comparisons can be
made between firms of different sizes.
 Fund flow analysis:
It is a statement of the sources and application of funds.
 Cash flow analysis:
It shows cash inflow and outflow of a company during the year.
 Ratio analysis:
Ratios summarize the data for easy understanding, comparisons and
interpretations.
 Financial Ratio Analysis:
 Liquidity Ratios:
It is the ability of a company to meet its financial Obligations. It measures
the ability to pay maturing obligations.
Current Ratio = Current Assets
Current Liabilities
Acid test Ratio or Quick Ratio = Current Assets – Inventories
Current Liabilities

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 Leverage Ratios:
It measures the extent to which the firm uses debt to finance asset
investment (risk attribute).
 Turn over Ratios:
It is also called as efficiency ratio. It measures the effectiveness of asset
management.
Interest Coverage Ratio = EBIT
Interest
Debt to asset Ratio = Current Liabilities +Long term Debt
Total Assets
Debt- Equity Ratio = Total Debt
Equity (Net Worth)
Inventory turnover (times per year) = Net Sales
Average Inventory
Total Asset Turnover = Sales Average
Total Assets
Debtor Turnover Ratio = Net Credit Sales
Average Debtors
Fixed Turnover Ratio = Sales Average
Net Fixed Assets

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 Profitability Ratios:
It Reflects the profitability of a company. It measures the profit relative to
sales. (Profit margin Ratios).
 Valuation Ratios:
Gross Profit Margin = Gross profit (Sales-COGS)
Sales
Operating Profit Margin = Operating Profit (Gross Profit-Operating Expenses)
Sales
Net Profit Margin = Sales
Net Profit
Return on assets = Net Profit
Total Assets
Return on Equity = Net Profit
Stockholder Equity (excludes Preferred Stock
Balances)
Dividend Yield = Annual Dividend
Price Per Share
Dividend Payout = Dividends Per share (DPS)
Earnings Per Share (EPS)
Book Value Per Share = Net worth
Number of Shares
Market Price to Book Value (P/B Ratio) = Market price per share
Book Value Per share

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 Growth in earnings:
Growth Rate = Retention Ratio* ROE
Retention Ratio = Retained Earnings
Net Income

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HINDUSTAN UNILEVER LIMITED
Hindustan Unilever Limited (HUL) is a British-Dutch manufacturing company which
is headquartered in Mumbai, India. HUL is a Subsidiary of Unilever and it holds 67%
of shares in HUL.
Based on the popularity and revenues into consideration it is the best and the
fastest moving FMCG company with over 80 years in India.
HUL was established in 1933 as Lever Brothers and in 1956 it was renamed as
Hindustan Lever Limited and later in the year 2007, June it was further renamed as
Hindustan Unilever Limited.
VISION:
HUL’s vision is to make sustainable living commonplace. We work to create a better
future every day, with brands and services that help people feel good, look good,
and get more out of life.
MISSION:
Hindustan’s Unilever’s mission is to add “Vitality to life”. It meets everyday needs
for nutrition, hygiene and personal care with brands that help people feel good, look
good and get more out of life.
STANDARD OF CONDUCT:
The company conducts its operations with honesty, integrity and openness, and
with respect for the human rights and interest of its employees.
CULTURE AND VALUES:
 The company’s deep roots in local cultures and markets around the world
give them the strong relationship with its consumers and are the foundation
for the future growth of the company. The company will bring the wealth and
knowledge along with international expertise to the service of local
consumers - a truly multi-local multinational. Our long-term success requires
a total commitment to exceptional standards of performance and

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productivity, to working together effectively, and to a willingness to embrace
new ideas and learn continuously.
 To succeed it requires the highest standards of corporate behavior towards
everyone the company works with, the communities they touch, and the
environment on which they have an impact. This is what the company
believes in its road to sustainable, profitable growth, creating long-term
value for our shareholders, our people, and our business partners.
 The company recognizes that its employees are the primary source of
success in its operations and is committed to training and providing them
the necessary tools and techniques.
 The company will maintain an open communication channel with its
consumers and customers and will carefully monitor the feedback to
continuously improve its products and services and set quality standards to
fulfill them.
QUALITATIVE ANALYSIS OF THE COMPANY:
BUSINESS MODEL:
Hindustan Unilever mainly focuses on ‘Sustainable Growth’ in their way to do
business. The model has three key inputs: brands, operations and people. One of
their key differentiators is the Unilever Sustainable Living Plan. However, the
outputs of the model are threefold: sustained growth, lower environmental impact
and positive social impact. HUL envisions to increase the size of their business
while they attempt to reduce environmental footprint and increase positive social
impact. They aim to inspire people to take small steps every day to make a bigger
positive impact on the society, gradually. The figure given below describes their
Virtuous Circle of Growth. It aptly describes how HUL derives profits from the
application of their Sustainable Growth Business Model.

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 SUSTAINABLE LIVING:
HUL believes in business being regenerative force in the system in which it grows.
Sustainable growth is their only accepted business model. They always strive to
look for sustainable ways of sourcing, manufacturing and developing products that
gives them opportunities to innovate while they also improve the livelihoods of their
suppliers and workers.
The Unilever Sustainable Living Plan (USLP) has three global goals for 2020 as
follows:
1. Help more than a billion people to improve their living
2. Halve their environmental footprint of their products
3. Enhance the livelihoods of people across their value chain by sourcing 100% of
their raw materials sustainably.
 HUL BRANDS:
Hindustan Unilever Limited is a market leader in consumer products and its
portfolio covers 35 product brands in 20 categories. The company has a distribution
channel of 6.3 million outlets and owns 35 major Indian brands. Its products include
foods, beverages, cleaning agents, personal care products, water purifiers and
consumer goods. HUL employs more than 18000 employees with a turnover of more
than 37000 crores. According to a survey, two out of three consumers products
sold in India are of HUL brands. HUL is a multi-category direct selling business
offering a wide range of high quality, high-performance products for its customers
and also exciting business and personal development opportunities for its
consultants. It has its umbrella of network spread to 1500 towns and cities, backed
by 28 offices and over 130 service centers' across the country.

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The various products of HUL are:
 Soaps: Lux, Liril, Lifebuoy, Pond’s, Pears, Hamam, Rexona, Dove, Breeze,
etc.
 Deodorants: Axe, Rexona
 Haircare: Sunsilk, Dove, Clinic plus, Tresemme
 Handwash and Bodywash: Lux, Dove, Lifebuoy, Axe (Soaps, Bodywash and
Deodorants), Pond’s
 Cosmetics: Vaseline, Lakme, Ponds, Clinic, Sunsilk Naturals, Fair and lovely,
Denim (Shaving products)
 Food: Annapurna Atta, Brooke Bond Tea (Red Label, yellow label, green
label, Taj Mahal, Taaza, Lipton), Kissan (Ketchup, Jam and Squashes), Bru
coffee, Knorr soup, Kwality Wall’s frozen Dessert, Magnum Ice cream.
 Home Care: Vim (Dishwash bar), Rin, Surf (detergent), Wheel, Domex (floor
cleaner and disinfectant), comfort (fabric conditioner)
 Oral Care: Closeup, Pepsodent
 Other than these products, company has also launched a range of ayurvedic
products under brand name Lever Ayush which has, skin care soaps,
haircare and toothpaste products. Company also sells water purifier under
brand name Pureit.
 OPERATIONS:
On any given day, millions of consumers use HUL products and they strive hard to
increase their consumer base by developing innovative products that cater to
different consumer tastes and preferences at different price ranges. They utilize
their global distribution channel to deliver sustainable, profitable and innovative
products striving to enhance the service quality and add value at every step of the
value chain. Increasing the direct coverage channel is one of their key areas. Their
direct coverage consists of more than 2 million outlets and more than 2500 re-
distribution stockists. HUL’s flagship rural distribution programme, Project Shakti
helped them reach the remotest areas of the country, over the last few years. With
around 48,000 entrepreneurs across 15 states, they serve about
135,000 villages and 3.3 million households in rural areas.
 PEOPLE:
HUL believes in having the right mix of culture and values, achieved by right people
working in a place that is fit to win. They follow agile and diverse business with
highly motivated employees striving to achieve sustainability through innovation.
They nurture capabilities and leadership and choose the best talent in
the market places. They hire the best minds of the world from the most prestigious
business schools across the world. Twice in a row, they have been recognized as
the No. 1 Employer of Choice and fourth time in a row, B-school students selected
HUL as their Dream Employer. HUL has over 16,500 employees including over 1,500
managers.
 DISTRIBUTION NETWORK:
Rural Geographic Regions of India the product which should be made by the
manufactures can be delivered through by C & F unit and these unit provide
stock in the hand of the merchant wholesalers. Wholesaler delivers the product or
stock to the different retailers (who sales stock in breaking bulk) through by

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agents. The main difference in urban and rural areas distribution networks are the
agent who made relation between merchant wholesalers to retailers. Retailers can
sell stock in small quantity to the ultimate consumers.
SWOT ANALYSISOF THE COMPANY:
 STRENGTHS:
HUL has a strong presence in Indian market. Here are a list of factors which add to
its strength as top FMCG player in Indian market:
1) BRAND VISIBILITY: – From soap to mineral water, HUL is shaping the life of 1.3
billion people daily. Being in consumer goods market with its 20 consumer
categories such as soap, tea, detergents, shampoo etc. & each having large
assortments, helped HUL in occupying the large shelf space of Grocery
/departmental stores which itself explains the acceptance/demand of
their products in the market.
2) MARKET LEADER IN CONSUMER GOODS: According to Nielsen data 2 out of
three Indian consumers use HUL products.HUL used selective targeting strategy to
emerge as a market leader in the Indian market.
3)INNOVATIVE FMCG COMPANY: Hindustan Unilever Research centre
(HURC),Mumbai & Unilever Research India, Bangalore ,both research facilities
were bought together in a single site in Bangalore in 2006.Employees in this facility
continuously working & developing innovations in products & manufacturing
processes which is helping the HUL to set it as front-runner in the consumer goods
market.

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4) EXTENSIVE & INTEGRATED DISTRIBUTION SYSTEM: HUL’s brands are now
household name which is only possible due to its 4 tier distribution system namely
a) Direct Coverage through common stockist within a town of population
under 50000 people.
b) Indirect coverage: Villages closer to larger urban markets have been
targeted.
c) Streamline: Leveraging the rural wholesale market to reach markets
inaccessible by road.
d) Project SHATKI AMMA: It targeted the very small villages (2000 population)
& tapped into pre-existing women’s SHG (self-help groups). Markets have
been segmented based on their accessibility & business potential.
5) HIGH BRAND AWARENESS: By signing popular celebrities for the advertisements
of their products HUL has created positive word of mouth over the ages which
helped them in social acceptance of their products intelligently targeted & meant
for different income groups.
6) PRODUCT LINE: It offers product categories namely oral care, personal care,
household surface, fabric care and pet nutrition etc. having deep assortments
across the product categories.
7) FINANCIAL POSITION: Having more than 80 years of experience in the consumer
goods market & backed by Unilever who owns 67% controlling share in HUL, It is
financially strong.
8) MARKET SHARE: Through high penetration in the market, HUL had managed to
hold their high market share in different product categories.
9) SHARE OF WALLET: Whether one buys surf /wheel /Rin detergent it will go to
HUL’s pockets. HUL strategy to offer different products for different income groups
(selective targeting) has been successful in having share of wallet of a consumer.
 WEAKNESSES:
Despite its strong presence in the Indian market, HUL is combating with a few
weaknesses.
1. HUL products are experiencing stiff competition from international,
domestic and local brands.
2. Low pricing strategy of competitors is causing HUL to lose market for some
of its products. Ex: Strong competition to Kwality Walls by Amul.
3. Competitors with specialization in a particular product are eating up HUL’s
share, like Nirma focusing on soaps and detergents.
4. Unfavourable raw material prices due to inflation, reducing profitability.

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 OPPORTUNITIES:
Changing dynamics of the Indian market has offered multitude of opportunities for
all FMCG companies including HUL.
1. Increase in consumer income levels and addition of new customers has
increased the size of pie for all FMCG firms.
2. Changing consumer tastes is opening up new opportunities.
3. Opportunities in food sector and popularity of Ayurvedic products.
4. Opportunity to expand to other Asian markets through increase of exports.
5. Large part of rural market is still relatively untapped.
6. By penetrating more in the rural markets through its project Shakti AMMA
and transition of unorganized business to organized one will lead to further
expansion of the consumer goods market.
7. People getting more aware and conscious about the usage may be through
advertising /word of mouth /doctor prescription, is resulting in increase in
usage rate of the products.
8. Due to stable political scenario, improved literacy rate & controlled inflation,
disposable income of the people is increasing thereby resulting into upsurge
in demand & changing their lifestyle.
 THREATS:
In changing scenario, HUL is facing some new threats to its status of top FMCG
Company:
1. Aggressive attack from competition in core business activities especially
from players like ITC has resulted in deterioration of market share.
2. Increase in advertising to combat competition.
3. Introduction of spurious/counterfeit products by local manufacturers in rural
areas.
4. Sustained high inflation rates have adverse effect on HUL’s business.
5. The increasing prices of the commodities will result in further increase in
the price. Further increase in the price will result in decrease in sales,
margins and brand switching.
6. With highly diversified consumer goods market where there are lots of
brands claiming different sorts of benefits, it’s very difficult for consumers
to stick to a particular brand & hence results into brand switching where
consumer got power to select a brand based on several factors like
availability, reference group recommendation, preference & price.
MANAGEMENT AND ITS STRUCTURE:
For any organization, the fundamental principle in determining an organizational
structure is to encourage speed and flexibility in implementation and decision-
making process. HUL aims to achieve this with empowered managers across
nationwide operations and sectors. The Board of Directors includes a panel of 8
Directors and the day to day management affairs responsibility lies with the
Management Committee which works under the supervision of the Board.

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 Hindustan Unilever Limited is India's largest Fast-Moving Consumer Goods
(FMCG) company. HUL and Group companies have about 15,000 employees,
including 1200 managers.
 The fundamental principle determining the organization structure is to infuse
speed and flexibility in decision-making and implementation, with
empowered managers across the company’s nationwide operations.
 For this, HUL is organized into two self-sufficient divisions - Home & Personal
Care and Foods & Beverages - supported by certain central functions and
resources to leverage economies of scale wherever relevant.
 Board At the apex is the Board, headed by the Chairman, and comprising 5
whole time Directors and 5 independent non-executive Directors. The day to
day operations are supervised by the National Management comprising the
Vice Chairman, Managing Director (HPC), Managing Director (Foods) and the
Finance Director.
 Divisions Each division is self-sufficient with dedicated resources and assets
in sales, marketing, commercial, and manufacturing. The two divisions are
further reorganized into categories.
 Typically, each category and each function - Sales, Commercial,
Manufacturing - is headed by a Vice President. They with their respective
Managing Director, comprise that Division's Management Committee.
 For managing sales operations, HUL divides the country into four regions,
with regional branches in Delhi, Kolkata, Chennai and Mumbai. Headed by a
Regional Manager, they comprise Regional Sales Managers and Area Sales
Managers, assisted by dedicated field forces, comprising Sales Officers and
Territory Sales In charges.

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 In Marketing, each category has a Marketing Manager who heads a team of
Brand Managers dedicated to each or a group of brands.
 The commercial team of a Division is responsible for its supply chain
management. There are teams dedicated to sourcing, planning and logistics.
 Each Division has a nationwide manufacturing base, with each factory
peopled by teams of Production, Engineering, Quality Assurance,
Commercial and Personnel Managers.

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MANAGEMENT COMMITTEE:
CORPORATE GOVERNANCE:
Maintaining high standards of Corporate Governance has been fundamental to the
business of your Company since its inception. A separate report on Corporate
Governance is provided together with a Certificate from the Statutory Auditors of
the Company regarding compliance of conditions of Corporate Governance as
stipulated under Listing Regulations. A Certificate of the CEO and CFO of the
Company in terms of Listing Regulations, inter alia, confirming the correctness of
the financial statements and cash flow statements, adequacy of the internal
control measures and reporting of matters to the Audit Committee, is also annexed.
The principles of Corporate Governance are based on transparency, accountability
and focus on the sustainable success of the Company over the long-term. At
Hindustan Unilever Limited, we feel proud to belong to a Company whose visionary
founders laid the foundation stone for good governance long back and made it an
integral principle of the business, as demonstrated in the words above.
Responsible corporate conduct is integral to the way we do our business. Our
actions are governed by our values and principles, which are reinforced at all levels
within the Company. At Hindustan Unilever, we are committed to doing things the

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right way which means taking business decisions and acting in a way that is ethical
and is in compliance with applicable legislation. Our Code of Business Principles
(the Code) is an extension of our values and reflects our continued commitment to
ethical business practices across our operations. We acknowledge our individual
and collective responsibilities to manage our business activities with integrity. Our
Code inspires us to set standards which not only meet applicable legislation but go
beyond in many areas of our functioning.
To succeed, we believe, requires highest standards of corporate behaviour towards
everyone we work with, the communities we touch and the environment on which
we have an impact. This is our road to consistent, competitive, profitable and
responsible growth and creating long-term value for our shareholders, our people
and our business partners. The above principles have been the guiding force for
whatever we do and shall continue to be so in the years to come.
The Board of Directors (‘the Board’) are responsible for and committed to sound
principles of Corporate Governance in the Company. The Board plays a crucial role
in overseeing how the management serves the short and long-term interests of
shareholders and other stakeholders. This belief is reflected in our governance
practices, under which we strive to maintain an effective, informed and
independent Board. We keep our governance practices under continuous review
and benchmark ourselves to best practices across the globe.
In recognition of its governance practices, your Company was conferred upon a
Certificate of Recognition at the ICSI National Awards for Excellence in Corporate
Governance for the year 2017 and 2018 by the Institute of Company Secretaries of
India. In the year 2011, the Company had been bestowed with the National Award
for Excellence in Corporate Governance.
CORPORATE CULTURE:
To succeed, the company requires the highest standards of corporate behaviour
towards everyone we work with, the communities we touch, and the environment
on which we have an impact. This is our road to sustainable, profitable growth
and creating long-term value for our shareholders, our people, and our business
partners.
Unilever has an organizational culture of performance, which emphasizes the
significance of employee output. This corporate culture also points to the
importance of criteria or measures used to determine required output and
adequacy of output. Unilever’s organizational culture of performance has the
following characteristics:
1. Focus on performance – individual performance and organizational performance
2. Focus on quality – quality of output in all areas
3. Efficiency – efficient work through technology and other tools

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Unilever’s organizational culture is focused on performance and quality. This
corporate culture is observable in the long history of the company. The business
has grown from a small firm to a global powerhouse. Such success is significantly
based on the ability of Unilever’s organizational culture to instil high performance
and quality in employees’ work ethic to maximize business output. For example,
because of high quality, the company’s consumer goods remain competitive in the
global market despite tough competition. This emphasis on quality is also a
reflection of the emphasis on product effectiveness in the firm’s mission statement
Unilever has also mastered efficiency through technology and innovation in its
internal business processes, including human resource development.
QUANTITATIVE ANALYSIS OF THE COMPANY:
EARNINGS OF THE COMPANY:
Earnings are important to any business. The earnings of a business are the same
as its net income or profit. Earnings are usually calculated as all revenues(sales)
minus the cost of sales, operating expenses and taxes over a given period of time.
Earnings are an important measure for companies because the investors base their
investment decisions on earnings and the stock prices are also based on the
earnings of a company. Earnings are important to shareholders because dividends
are paid based on the earnings.
Earnings are expressed in different ways for purpose of investing.
 Earnings per share (EPS):
(Net Profit divided by the number of shares) is the used for companies that
have actively traded stock. It is calculated as follows:
The market performance of the company according to EPS was on a stable
note over a period of 10 years (2010 to 2019).
 Earnings before interest and taxes, depreciation and Amortization (EBITDA):
This earnings calculation includes only sales minus the cost of goods sold
and general and administrative expenses. EBITDA is a description of the
profit of the company would have had if it didn’t have to pay interest
expenses and any taxes and before any calculations for depreciation and
amortization.
The market performance of the company according to EBITDA increased
year after year.
 Price – to – Earnings (P/E Ratio):

P. SAI.PRATHYUSHA
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It is defined as the
ratio for valuing a
company that
measures its current share price relative to its Per share earnings. It is also
commonly used in relative valuation measures such as the P/E ratio. It is
calculated as follows:
A
company with a high P/E ratio relative to its industry peers is considered
overvalued. Likewise, a company with a low P/E ratio compared with its
earnings makes it undervalued.
The market performance of the company according to P/E ratio was observed
to be stable over the period of study. (2010 – 2019).

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FINANCIAL LEVERAGE:
Financial Leverage is the use of borrowed money(debt) to finance the purchase of
assets with the expectation that the income gain from the new asset will exceed
the cost of borrowing. Financial leverage is the extent to which the fixed income
securities and preferred stock are used in the company’s capital structure.
The financial leverage in the recent years (2010 – 2019) has been on the positive
side here which means the company has a lower debt load on the assets of the
company than shareholders and the value of the firm decreases with the decreased
usage of debt.
OPERATING LEVERAGE:
The Operating leverage is positive for the company which means that the company
operates above the breakeven level and with the increase in operating leverage the
Earning Per Share (EPS) of the company increases directly in proportion with the
EBIT. companies with high operating leverage ratios are poised to reap more
benefits from good marketing, economic pickups, or other conditions that tend to
boost sales.
The Operating leverage in the recent years (2010 – 2019) has been increasing, ie;
The increase is at a slow pace.

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0.996
0.998
1
1.002
1.004
1.006
1.008
1.01
3/31/2010 3/31/20113/31/2012 3/31/2013 3/31/2014 3/31/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019
FINANCIAL LEVERAGE
0
0.2
0.4
0.6
0.8
1
1.2
3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019
OPERATING LEVERAGE

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COMPETITIVE EDGE:
The competitive edge of the company refers to the performance of the
company with regards to the industrial performance which can be used for
comparison with the other firms. The competitive edge includes the sales
growth of the company, market share and the production efficiency of the
company.
The company is seeing a growth or an increasing trend in the sales of the
company and it is due to the increase in the market share of the company in
the FMCG sector and the reduced market share of the Peers.
0
0.2
0.4
0.6
0.8
1
1.2
3/31/20103/31/20113/31/20123/31/20133/31/20143/31/20153/31/20163/31/20173/31/20183/31/2019
COMBINED LEVERAGE
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014 3/31/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019
Sales Growth %

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The company has a very favourable market share and the market position and tops
the industry with a share of 34% with still growing customers.
The company maintains a production efficiency level of around 1.15% for the whole
period of study. This indicates that the company uses its resources well.

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FINANCIAL ANALYSIS:
 The sales of the company have increased over the years from 17000 to 39000
having an increase in the growth rate of the company. Over the past 10 years,
the company sales have increased to 15%.
 The Profitability ratio is increasing in the present period. The major market
share of the company could be a reason for the increase in the profitability
ratio.
 Cash flow is the net amount of cash and cash equivalents being transferred
into and out of a business. A company’s ability to create value for
shareholders is determined by its ability to generate positive cash flows.
Positive cash flow indicates that the company is adding to its cash reserves,
allowing it to reinvest in the company, pay out money to shareholders or to settle
future debt payments.
In some financial years there are negative cash flows and it could be because of
the expenses overriding the incomes of the company in those financial years. And

P. SAI.PRATHYUSHA
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this may be caused by the dip in the sales, stagnant inventory or dismal debt
collection.
Operating cash flow includes all purchases of capital assets and investments in
other business ventures.
Financial cash flow includes all proceeds gained from issuing debt and equity as
well as payments made by the company.
The cash flow over the period of last 10 years has been affected by steep
fluctuations and has some negative values during some financial years.
RATIO ANALYSIS:
 LIQUIDITY RATIOS:
CURRENT RATIO: The current ratio is that which measures the
company’s ability to pay the short-term obligations or those due within
a year. It tells the investors and the analysts how a company can
maximise the
current assets on its
balance sheet to satisfy
its current debt and
other payables. The formula used to calculate the current ratio is as
follows
The ideal ratio of current ratio is 2 and most of the financial years the
current ratio is observed to be less than 1 which means that it is not
able to meet its short-term obligations most of the years.

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QUICK RATIO: Also known as acid test ratio which measures the
ability of the company to use its near cash or quick assets to
extinguish its current liabilities. Ideal ratio is 1. The higher the ratio,
the better it is. The formula used to calculate ratio is as follows
CASH RATIO: Also known as the cash asset ratio, it indicates the
company’s capacity to pay off the short-term debt obligations with its
cash and cash equivalents. The formula used to calculate the cash
ratio is as follows
The current ratio indicates to the creditors, analysts and the investors
the percentage of a company’s current liabilities that the cash and
cash equivalents will cover.
Here all the cash ratios are less than 1 which indicates that the
company usually does not keep much of cash and cash equivalents in
hand.
 ACTIVITY RATIOS:
The activity ratios measures how efficiently the business is running ie; how
efficiently the assets of the company is being used by the management to
generate maximum possible revenue.
RECEIVABLES TURNOVER RATIO: It measures how effectively the
company is in extending credit as well as collecting debts and
measures how efficiently the firm uses its assets. A high ratio

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indicates that the company operates on a cash basis or that its
extension of credit and collection of accounts receivable is efficient.
The formula used to calculate the receivables turnover ratio is as
follows

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TOTAL ASSETS TURNOVER RATIO: It measures the efficiency of the
firm in utilizing its assets. A high ratio represents efficient utilization
of total assets in generating sales as observed in the calculations
below. The formula used to calculate the total assets turnover ratio
is as follows
FIXED ASSETS TURNOVER RATIO: It measures the efficiency of the
firm in utilizing its fixed assets. A high ratio represents efficient
utilization of fixed assets in generating sales. The formula used to
calculate the fixed assets turnover ratio is as follows
WORKING CAPITAL TURNOVER RATIO: It measures the efficiency of
the firm in utilizing its working capital. A high ratio represents
efficient utilization of working capital in generating sales. The formula
used to calculate the working capital turnover ratio is as follows
INVENTORIES TURNOVER RATIO: It describes the relationship
between the cost of goods sold and the inventory held in the business.
It indicates how fast the inventory or stock is being sold. A high ratio
is good indicating that the sales of the company are good and the
stock is not kept for a long time in the warehouse. The formula used
to calculate the inventories turnover ratio is as follows

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 PROFITABILITY RATIOS:
Profitability ratios are the financial metrics used by analysts and investors
to measure and evaluate the ability of a company to generate income (profit)
relative to revenue, balance sheet assets, operating costs, and shareholders’
equity during a specific period of time. They show how well a company
utilizes its assets to produce profit and value to shareholders.
OPERATING PROFIT RATIO: This ratio looks at the earnings as a
percentage of sales before interest expense and income taxes are
deduced. Operating profit margin is frequently used to assess the
strength of a company’s management since good management can
substantially improve the profitability of a company by managing its
operating costs.
Here
we

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can see that the operating profit ratio is increasing over the past 10
years.
GROSS PROFIT MARGIN: This ratio compares the gross profit to sales
revenue. This shows how much a business is earning, taking into
account the needed costs to produce its goods and services. A high
gross profit margin ratio reflects a higher efficiency of core
operations, meaning it can still cover operating expenses, fixed costs,
dividends, and depreciation, while also providing net earnings to the
business.
NET PROFIT MARGIN: It looks at a company’s net income and divides
it into total revenue. It provides the final picture of how profitable a
company is after all expenses, including interest and taxes, have been
taken into account. It measures the profitability and it takes
everything into account. Here we can see that the net profit margin
has increased over the years.

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RETURN ON ASSETS: It shows the percentage of net earnings relative
to the company’s total assets. The ROA ratio specifically reveals how
much after-tax profit a company generates for every one dollar of
assets it holds. It also measures the asset intensity of a
business. Here we can see that the return on assets is increasing over
the years.
RETURN ON EQUITY: It expresses the percentage of net income
relative to stockholder’s equity, or the rate of return on the money
that equity investors have put into the business. The ROE ratio is one
that is particularly watched by stock analysts and investors. A
favourably high ROE ratio is often cited as a reason to purchase a
company’s stock. Companies with a high return on equity are usually
more capable of generating cash internally, and therefore less
dependent on debt financing.

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 LEVERAGE/ SOLVENCY RATIOS:
Solvency ratios, also called leverage ratios, measure a company’s ability to sustain
operations indefinitely by comparing debt levels with equity, assets, and earnings.
In other words, solvency ratios identify going concern issues and a firm’s ability to
pay its bills in the long term. solvency ratios focus more on the long-term
sustainability of a company instead of the current liability payments. Solvency
ratios show a company’s ability to make payments and pay off its long-term
obligations to creditors, bondholders, and banks. Better solvency ratios indicate a
more creditworthy and financially sound company in the long-term.
 VALUATION RATIOS: These ratios are used to identify the value component
of securities investment vehicles behind companies. These are most often
used by people who participate in the securities markets (stock market and
equity sales). From this perspective, a range of users would include those
employed in the industry such as portfolio managers or investment analysts,
down to smaller participants like individual investors. In general, these users
are looking to make either investment decisions or recommendations.
Valuation is an important concept mostly because its serves as a
foundational component for determining the actual cost or price of an
investment. It provides a way to measure the relative value of an investment
against alternative options.
DIVIDEND YIELD RATIO: It calculates the ratio between dividends
received relative to a company’s stock price. The objective is to
illustrate what relative percentage an investor can expect to receive
from dividends, compared to the stock’s purchase price. This metric
is important to equity investors that prefer income producing stocks
(as opposed to growth-oriented equity investors). The formula used to
calculate the dividend yield is as follows.

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DIVIDEND PAYOUT RATIO: It shows the relationship between
dividends paid and net income for a given reporting period. The ratio
can be evaluated relative to historical dividend pay-out rates,
management’s stated goals regarding dividends, peer results, and
dividend related decisions.
CONCLUSION:
Hindustan Unilever ltd. is a leading FMCG (Fast Moving Consumer Goods) company
in India and for the last 10 years i.e.; 2010 – 2019, has seen growth from every
financial and ratios point of view. This sector will continue to see growth as it
depends on an ever-increasing internal market for consumption, and demand for
these goods remains more or less constant, irrespective of recession or inflation.
Availability of key raw materials, cheaper labour costs and presence across the
entire value chain gives Indian FMCG industry a competitive advantage. Increasing
Indian population, particularly the middle class and the rural segments, presents
an opportunity to makers of branded products to convert consumers to branded
products.

COMPANY ANALYSIS-HINDUSTAN UNILEVER LTD

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