Karuna Equity (1)

8/10/2019 Karuna Equity (1)

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1.1 INTRODUCTION TO SHAREKHAN LTD.

Sharekhan Ltd. is one of the leading retail stock broking house of SSKI Group which is

running successfully since 1922 in the country. It is the retail broking arm of the Mumbai

based SSKI Group! which has o"er eight decades ofe#perience in the stock broking business.

Sharekhan offers its customers awide range of e$uity related ser"ices including trade

e#ecution on %S&! 'S&!(eri"ati"es! depository ser"ices! online trading! in"estment ad"ice

etc.)he firm*s online trading and in"estment site www.sharekhan.com waslaunched on

+eb ,! 2---. )he site gi"es access to superior content and transaction facility to retail

customers across the country. Known for its argonfree! in"estor friendly language and high

$uality research! the site has a registered base of o"er ten lakh customers. )he contentrich

and research oriented portal has stood out among its contemporaries because of its steadfast

dedication to offering customers bestofbreed technology and superior market information.

)he obecti"e has been to let customers make informed decisions and to simplify the process

of in"esting in stocks.

/n 0pril 1! 2--2 Sharekhan launched Speed )rade! a netbased e#ecutable application that

emulates the broker terminals along with host of other information rele"ant to the (ay

)raders. )his was for the first time that a netbased trading station of this caliber was offered

to the traders. In the last si# months Speed )rade has become a de factostandard for the (ay

)rading community o"er the net.


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Sharekhan*s ground network includes o"er 3- centers in 2,- cities in India which pro"ide a

host of trading related ser"ices. Sharekhan has always belie"ed in in"esting in technology to

build its business. )he company has used some of the bestknown names in the I) industry!

like Sun Microsystems! /racle! Microsoft! 4ambridge )echnologies! 'e#geni#! 5ignette!

5erisign +inancial )echnologies India 6td! Spider Software 7"t 6td. to build its trading

engine and content. )he Morakhiya family holds a maority stake in the company. 8S%4!

Intel 4arlyle are the other in"estors.

:ith a legacy of more than ,- years in the stock markets! the SSKI group "entured into

institutional broking and corporate finance 1, years ago. 7resently SSKI is one of the leading

players in institutional broking and corporate finance acti"ities. SSKI holds a si;eable portion

of the market in each of these segments. SSKI*s institutional broking arm accounts for < of

the market for +oreign Institutional portfolio in"estment and =< of all (omestic Institutional

portfolio in"estment in the country. It has - institutional clients spread o"er India! +ar &ast!

>K and >S. +oreign Institutional In"estors generate about =< of the organi;ation*s re"enue!

with a daily turno"er of o"er >S? 2 million. )he 4orporate +inance section has a list

of "ery prestigious clients and has many @firsts* to its credit! in terms of the si;e of deal!

sector tapped etc. )he group has placed o"er >S? 1 billion in pri"ate e$uity deals. Some of

the clients include %76 4ellular 8olding! Guarat 7ipa"a"! &ssar! 8utchison! 7lanetasia! and

Shopper*s Stop.

TYPES OF ACCOUNT IN SHAREKHAN LIMITED


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Sharekhan offers two types of trading account for its clients

4lassic 0ccount Awhich include a feature known as +ast )rade 0d"anced 4lassic 0ccount

for the online usersB

Speed )rade 0ccount

CLASSIC ACCOUNT

)his is a >ser +riendly 7roduct which allows the client to trade through website

www.sharekhan.com and is suitable for the retail in"estor who is riska"erse and hence

prefers to in"est in stocks or who does not trade too fre$uently. )his account allow in"estors

to buy and sell stocks online along with the following features like multiple watch lists!


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Integrated %anking! (emat and digital contracts! Cealtime portfolio tracking with price

alerts and Instant credit transfer.

)his account comes with the following featuresD

a. /nline trading account for in"esting in &$uities and (eri"ati"es

b. +ree trading through 7hone A(ialn)radeB

c. Integration ofD /nline )rading ESa"ing %ank E (emat 0ccount.

d. Instant cash transfer facility against purchase sale of shares.

e. I7/ in"estments.

f. Instant order and trade confirmations by email.

g. Single screen interface for cash and deri"ati"es.

Servie!

I. )wo dedicated numbers A1,--22=-- and F9-=--B for placing the orders using cell

phones or landline phones

II. 0utomatic funds transfer with phone banking facilities Afor 4itibank and 8(+4 bank

customersB

III. Simple and Secure Interacti"e 5oice Cesponse based system for authentication

I5. Get the trusted! professional ad"ice of Sharekhan limited*s )ele %rokers

5. 0fter hours order placement facility between ,.-- am and 9.F- am

SPEED TRADE ACCOUNT

)his is an internetbased software application! which enables one to buy and sell in an instant.It is ideal for acti"e traders and obbers who transact fre$uently during day*s session to

capitali;e on intraday price mo"ement.

)his account comes with the following featuresD

a. Instant order ecution and 4onfirmation.

b. Single screen trading terminal for 'S& 4ash! 'S& +/ %S&.

c. )echnical Studies.

d. Multiple 4harting.

e. Cealtime streaming $uotes! ticbytic charts.


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f. Market summary A4ost traded scrip! highest "alue etc.B

g. 8ot keys similar to broker*s terminal.

h. 0lerts and reminders.

i. %ackup facility to place trades on (irect 7hone lines.

. 6i"e market debts.

CHAR"E STRUCTURE

+ee structure for General Indi"idualD

Char#e C$a!!i A%&nt S'eed Trade A%&nt

A%&nt O'enin# Cs =- Cs 1---

(r%kera#e Intraday -.1-nlike the >.S. market for fast mo"ing consumer goods A+M4GB! which is dominated by a

handful of global players! IndiaQs Cs.3- billion +M4G market remains highly fragmented

with roughly half the market going to unbranded! unpackaged home made products. )his

presents a tremendous opportunity for makers of branded products who can con"ert

consumers to branded products. 8owe"er! successfully launching and growing market share

around a branded product in India presents tremendous challenges. )ake distribution as an

e#ample. India is home to si# million retail outlets and super markets "irtually do not e#ist.

)his makes logistics particularly for new players e#tremely difficult. /ther challenges of

similar magnitude e#ist across the +M4G supply chain. )he fact is that +M4G is a

structurally unattracti"e industry in which to participate. &"en so! the opportunity keeps

+M4G makers trying.

)he +M4G sector in India is e#pected to grow at a compounded annual growth rate A40GCB

of 9< to a si;e of Cs 1!3F!--- crore by 2-1-

S%'e %- the Set%r

)he Indian +M4G sector with a market si;e of >S?1F.1 billion is the fourth largest sector in

the economy. 0 wellestablished distribution network! intense competition between the

organi;ed and unorgani;ed segments characteri;es the sector. +M4G Sector is e#pected to

grow by o"er -< by 2-1-. )hat will translate into an annual growth of 1-< o"er a =year

period. It has been estimated that +M4G sector will rise from around Cs =!=-- crores in

2--= to Cs 92!1-- crores in 2-1-. 8air care! household care! male grooming! female

hygiene! and the chocolates and confectionery categories are estimated to be the fastest

growing segments! says an 8S%4 report. )hough the sector witnessed a slower growth in


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2--22--3! it has been able to make a fine reco"ery since then. +or e#ample! 8industan

6e"ers 6imited A866B has shown a healthy growth in the last $uarter. 0n estimated

doubledigit growth o"er the ne#t few years shows that the good times are likely to continue.


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1. Indian FMC" Market Si/e

AIn >S ? %illionB

ASourceD I%&+ +M4G 0nalysisB


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0ccording to estimates based on 4hinaQs current per capita consumption! the Indian +M4G

market is set to treble from >S? 11. billion in 2--F to >S? FF.3 billion in 2-1=. )he

dominance of Indian markets by unbranded products! change in eating habits and the


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increased affordability of the growing Indian population presents an opportunity to makers of

branded products! who can con"ert consumers to branded products.

/ur country has a "aried agroclimatic condition which enables to offer e#tended raw

material base suitable for many +M4G sub sections like food processing industries etc. India

is the one of the maor producer of li"estock! milk! sugarcane! coconut! spices and cashew

and is the second largest producer of rice! wheat and fruits "egetables. Similarly! India has

an abundant supply of caustic soda and soda ash! the chief raw materials re$uired in the

production of soaps and detergents! which enables the household section of the industry to

e#cel and grow. )he accessibility of these raw materials gi"es India the locational ad"antage.

Fat%r -av%&rin# India t% "et C%0'etitive Ed#e

)he following factors make India a competiti"e player in +M4G sectorD

AiB Avai$ai$it) %- ra2 0ateria$!D %ecause of the di"erse agroclimatic conditions in India!

there is a large raw material base suitable for food processing industries. India is the largest

producer of li"estock! milk! sugarcane! coconut! spices and cashew and is the second largest

producer of rice! wheat and fruits "egetables. India also produces caustic soda and soda

ash! which are re$uired for the production of soaps and detergents. )he a"ailability of these

raw materials gi"es India the location ad"antage.

AiiB La%r %!t %0'ari!%nD

6ow cost labor gi"es India a competiti"e ad"antage. IndiaQs labor cost is amongst the lowest

in the world! after 4hina Indonesia. 6ow labor costs gi"e the ad"antage of low cost of

production. Many M'4Qs ha"e established their plants in India to outsource for domestic

and e#port markets.

Aiii3 Pre!ene ar%!! va$&e hainD Indian companies ha"e their presence across the "alue

chain of +M4G sector! right from the supply of raw materials to packaged goods in the

foodprocessing sector. )his brings India a more cost competiti"e ad"antage. +or e#ample!

0mul supplies milk as well as dairy products like cheese! butter! etc.


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AeB "r%2th Trend!

0ccording to a &conomic )imes report! the pace of growth recorded by thhe +M4G industry

in the fiscal year 2--3-= is e#pected to be the highest at =


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0utomatic in"estment appro"al Aincluding foreign technology agreements

within specified normsB! up to 1-- per cent foreign e$uity or 1-- per cent for

'CI and /"erseas 4orporate %odies A/4%sB in"estment! is allowed for most of

the food processing sector e#cept malted food! alcoholic be"erages and those

reser"ed for small scale industries ASSIB.

)here is a continuous growth in net +(I Inflow. )here is an increase of about

1=- per cent in 'et Inflow for 5egetable /ils 5anaspati for the year 2--,.

Market O''%rt&nitie!

5ast Cural Market

Cural India accounts for more than -- Million consumers! or - per cent of the Indian

population and accounts for =- per cent of the total +M4G market. )he working rural

population is appro#imately 3-- Millions. 0nd an a"erage citi;en in rural India has less then

half of the purchasing power as compare to his urban counterpart. Still there is an untapped

market and most of the +M4G 4ompanies are taking different steps to capture rural market

share. )he market for +M4G products in rural India is estimated =2 per cent and is

proected to touch - per cent within a year. 8industan >nile"er 6td is the largest player in

the industry and has the widest market co"erage.

E6'%rt 7 8Levera#in# the C%!t Advanta#eL

4heap labor and $uality product ser"ices ha"e helped India to represent as a cost ad

"antage o"er other 4ountries. &"en the Go"ernment has offered ;ero import duty on capital

goods and raw material for 1--< e#port oriented units. Multi 'ational 4ompanies outsource

its product re$uirements from its Indian company to ha"e a cost ad"antage. India is the

largest producer of li"estock! milk! sugarcane! coconut! spices and cashew apart from being

the second largest producer of rice! wheat! fruits "egetables. It adds a cost ad"antage as

well as easily a"ailable raw materials.

Set%ra$ O''%rt&nitie!

Maor Key Sectoral opportunities for Indian +M4G Sector are mentioned

belowD


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Dair) (a!ed Pr%d&t!

India is the largest milk producer in the world! yet only around 1= per cent of

the milk is processed. )he organi;ed li$uid milk business is in its infancy and

also has large longterm growth potential. &"en in"estment opportunities e#ist

in "alueadded products like desserts! puddings etc.

Paka#ed F%%d

/nly about 1-12 per cent of output is processed and consumed in packaged

form! thus highlighting the huge potential for e#pansion of this industry.

Ora$ Care

)he oral care industry! especially toothpastes! remains under penetrated in

India with penetration rates around =- per cent. :ith rise in per capita

incomes and awareness of oral hygiene! the growth potential is huge. 6ower

price and smaller packs are also likely to dri"e potential up trading.

(evera#e!

Indian tea market is dominated by unorgani;ed players. More than =-< of the

market share is capture by unorgani;ed players highlighting high potential for

organi;ed players .


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.1 Ind&!tr) Overvie2

7roducts which ha"e a $uick turno"er! and relati"ely low cost are known as +ast Mo"ing

4onsumer Goods A+M4GB.)he +M4G sector seems to ha"e finally oined India IncQs growth

party by posting surprising doubledigit growth in sales in the past couple of years. :ith

annual re"enues of Cs 2!--- crore! it is the one of the largest sectors in the Indian economy.

)he industryQs future prospects look bright! considering rising household incomes and the

spread of modern retail. 8owe"er! the per capita income le"el in India is still "ery low

compared to the de"eloped world. %esides! the penetration le"el of many products is also

relati"ely low and se"eral categories remain fairly unbranded.

+astmo"ing consumer goodsA+M4GB companies are using speed as a competiti"e weapon

to win in the market place! especially when talks of a slowdown bring the possibility of

downgrading into sharp focus.Growth in the +M4G industry has not lost steam e"en as other

sectors ha"e slowed down! but there is concern about a possible impact considering a

deficient monsoon this year. )he industry belie"es there is one weapon which can help

companies win! and that is speed.

0 %oston 4onsulting GroupA%4GB report! QSpeed )o :inQ ! says increased agility can solidify

a competiti"e position ! boost profitability and reduce risk. It says for standard new product

de"elopment! a se"en months time to market can separate the best in class from a"erage

players. %ut would it also work in a slowdown In slowdown situation it is e"en more

important as the consumers typically start to change their consumption patterns and it is
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important to refine the offerings Ain terms of price pack architecture! composition and

packagingB to ensure alignment with the consumer re$uirements.

0ll these factors pro"ide a huge untapped potential for the industry.

In contrast to other manufacturing sectors! +M4G is relati"ely less capitalintensi"e! but

demands immense skills and e#penditure on branding and distribution. Most companies in

the sector create "alue through product differentiation! package inno"ation! differential

pricing and highlighting the functional aspect of foods. :hile inflation restricts the industryQs

growth! many companies in the sector thri"e under inflationary pressures. Most companies

pass on the cost inflation to consumers! "ia a udicious blend of price hikes! packaged si;e

reduction and change in product mi#. +ew consumers react by downtrading to lower priced

products! but most hang on to their preferred brands.

)he top fi"e +M4G companies constitute nearly -< of the total re"enues generated by this

sector. Multinational +M4G companies like 8industan >nile"er! I)4! 'estle! 7rocter

Gamble! (abur India and Gla#oSmithKline 4onsumer 8ealthcare traditionally comprise the

first category of +M4G companies. )hey tend to spend nearly 1-< of their re"enues on an

a"erage on ad"ertising and promoting their products! which is the highest ad spend figure in

the industry. Rustifying their high product pricing! these companies largely tend to capture

"alue by addressing a felt need.

+M4G products are those that get replaced within a year. ample of +M4G generally

include a wide range of fre$uently purchased consumer products such as toiletries! soap!

cosmetics! tooth cleaning products! sha"ing products and detergents! as well as other non

durables such as glassware! bulbs! batteries! paper product! and plastic good. +M4G may also

include pharmaceuticals! consumer electronics! packaged food products! soft drinks! tissue

paper! and chocolate bars.

Subsets of +M4Gs are +ast Mo"ing 4onsumer &lectronics which include inno"ati"e

electronic products such as mobile phones! M7F players! digital cameras! G7S Systems and

6aptops. )hese are replaced more fre$uently than other electronic products.


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. Str&t&ra$ Ana$)!i! %- FMC" Ind&!tr)

)ypically! a consumer buys these goods at least once a month. )he sector co"ers a wide

gamut of products such as detergents! toilet soaps! toothpaste! shampoos! creams! powders!

food products! confectioneries! be"erages! and cigarettes. )ypical characteristics of +M4G

products areD

1. )he products often cater to F "ery distinct but usually wanted for aspects necessity!

comfort! lu#ury. )hey meet the demands of the entire cross section of population.

7rice and income elasticity of demand "aries across products and consumers.

2. Indi"idual items are of small "alue Asmall SK>QsB although all +M4G products put

together account for a significant part of the consumerQs budget.

F. )he consumer spends little time on the purchase decision. 8e seldom e"er looks at the

technical specifications. %rand loyalties or recommendations of reliable retailerHdealer dri"e purchase decisions.

3. 6imited in"entory of these products Amany of which are perishableB are kept by

consumer and prefers to purchase them fre$uently! as and when re$uired.

=. %rand switching is often induced by hea"y ad"ertisement! recommendation of the

retailer or word of mouth.


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5a3 Pe!t Ana$)!i!

7est analysis of +M4G sector in India is carried out on political! economical! socal and

technological aspects. It is e#plained belowD

AiB 7oliticalD

J )a# e#emption in sales and e#cise duty for small scale industiers.

J Cestrictions in import policies.

J 8elp for agricultural sector.

J )ransportation and infrastructure de"elopment in rural areas helps in distribution network

5ii3 E%n%0ia$9

J )he G(7 rate of Indian economy is increasing e"ery year. It is e#pected in future it would

be better only in comparison with other countirs.

J Inflation rate is increasing across the world and India is also no e#ception. )he

go"ernemtn and Ceser"e %ank of India both are trying to control the inflation rate with the

help of different measures.


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J Increase in disposable income has taken place due to higher G(7 rate. )he per capita

income is increasing so the customers are ha"ing more income to spent for "arious reasons.

J Indian +M4G sector recorded 1< sales growth in last fiscal year and it is e#pected it

would further impro"e in the forthcoming years.

J )he +M4G sector is a 3

th

largest sector of Indian economy with market si;e of more than

-!--- crore. )he Indian )erritory is "ery large and number of customers is also "ery high.

AiiiB S%ia$D

J (emographical analysis

J )he Indian culture! social life styles are changing drastically. )he total population is

nearly 11= crores and population includes rich! poor! middle class! male! female! located in

rural! urban and sub urban areas! different le"el of education etc.

Ai"B Tehn%$%#)9

J )echnology has been simplified and a"ailable in the industry.:here technology is not

a"ailable then it is brought from foreigh countries to meet +M4G sector re$uirements.

J +oreign players help in high technological de"elopment. :ith research and

de"elopment facilities the new technologies are de"eloped alone or with the help of

foreign players.


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E6'eted F&t&re Trend! 9

+ollowing trends are e#pected in futureD

8uge in"estments in promoting brands! setting up distribution networks and intense

competition are what +M4G companies face. 4reating strong brands is important for

+M4G companies and they will ha"e to de"ote considerable money and effort in de"eloping

brands.

Gi"en the fragmented nature of the Indian retailing industry and the problems of

infrastructure! +M4G companies also need to de"elop e#tensi"e distribution networks to

achie"e a high le"el of penetration in both the urban and rural markets. )his will re$uire a

lot of resources. )he unorganised sector has a presence in most product categories of the

+M4G sector. Small companies from this sector ha"e used their locational ad"antages and

regional presence to reach out to remote areas where large consumer products ha"e only

limited presence. )heir low cost structure also gi"es them an ad"antage. 0nd this will only

lead to price wars! which! though good for consumers! will affect the bottomlines of

companies.

Ne2 '$a)er! P$anned t% :ent&re

)he following new players ha"e plannedD

Mangalorebased 40M74/ has announced plans to enter the +M4G sector by marketing!


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and promoting &ffermint toothpaste. +or 40M74/ this marks its maiden entry into the

+M4G sector! while for )hrissurbased &ffermint India! this is the second time that it is

entering in to a marketing tieup with a large player. It had on an earlier occasion partnered

with )/M4/!

Godre 4onsumer 7roducts 6td AG476B has launched a new brand of soap! 'imin! on the

germicide platform. 7egged on a par with 6ifebuoyQs "ariant in the subpopular category!

'imin is priced at Cs , for = gm and Cs 1F for 12= gm.

G476 has also decided to enter the hair oil market with a brand under its company name.

)he company is already test marketing a thanda tel under the Godre brand in >7. 'ow!

players such as Marico ha"e entered the category with Shanti )handa )el.


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.+ FMC" Market Revie2

FY 11 Re!&$t Hi#h$i#ht!


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0 company can outpace its ri"als by increasing its market share! boosting its negotiating

le"erage towards trade and positioning itself as an inno"ator and the mantra isD

standardi;e! prioriti;e and mechani;e. )ake the case of'i"ealipcare. Speed helped the

company redefine this category with the trade in terms of merchandising and distribution.

)he category was treated like an Timpulse confectioneryT and not like a traditionalskincare category. T/ur actions ha"e followed out thoughts and results are there to be

seen. :e ha"e been $uicker than most of competition in de"eloping the premium lipcare

category for 'i"ea . 0ll the initiati"es of the company ha"e hit before competition! be it

"arietyHprice pointsHdistribution .

Some other e#amples are brands from midsi;ed companies like 7aras and &mami whichwere successful in gaining share as their product de"elopment times were shorter than
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others in the sector. :hen &mami concei"ed the idea of a menQs fairness cream! it knew it

had a winning concept. :hat was important ! howe"er! was to ensure that it was put into

market at a speed before others . Tthe idea went to floor within ust under a year from the

time the idea was concei"ed. )his re$uires great agility. It took the established

competitors by surprise as elements of marketing were in place within the short time. 0s a

result ! &mami enoys market leadership in the category.

., *h) FMC" Set%r i! Ana$)/ed


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)0)0 In"estment 4orporation 6imited! non nonbanking financial company registered with

Ceser"e %ank of India under the Q In"estment 4ompanyQ category. )he companyQs acti"ities

comprise primarily of in"esting in longterm in"estments in e$uity shares and other securities

of companies in a wide range of industries.

)I46 in"ested in almost all the sectors. )I46*s portfolio pro"ed to be a "ery successful

portfolio. )hey had got a "ery good return from all the sectors. 0mong these sectors! +ast

Mo"ing 4onsumer Goods A+M4GB pro"ed to be a "ery successful sector. It has a "ery good

potentiality in long term in India. )he o"erall cost of in"estment in +M4G sector was Cs.

1F.9 crores on May 2-! 2--,! this in"estment "alued Cs. F-.2 crores i.e. the cost of "alue

of in"estment in +M4G sector was =< of the o"erall in"estment that was increased in 2--,

to 1=< of the o"erall in"estment. )hus from this! we can conclude that! there is a 213-.3S? FF.3 billion in 2-1=.

:ith growing incomes at both the rural and the urban le"el! the market potential is e#pected

to e#pand further.


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.< India 7 a $ar#e %n!&0er #%%d! !'ender

THE TOP 1= COMPANIES IN FMC"

SECTOR

1. 8industan >nile"er 6td. . 0sian 7aints AIndiaB

2. I)4 AIndian )obacco 4ompanyB . 4adbury India

F. 'estlU India ,. %ritannia Industries

3. G4MM+ A0M>6B 9. 7rocter Gamble 8ygiene and 8ealth 4are

=. (abur India 1-. Marico Industries

0n a"erage Indian spends around 3- per cent of his income on grocery and , per cent on

personal care products. )he large share of fast mo"ing consumer goods A+M4GB in total

indi"idual spending along with the large population base is another factor that makes India

one of the largest +M4G markets.


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5S%&re9 KSA Tehn%'ak C%n!&0er O&t$%%k ==,.3


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.> C%n!&0er e6'endit&re %n -%%d at Internati%na$ $eve$

&"en on an international scale! total consumer e#penditure on foodin India at >S? 12- billion is amongst the largest in the emerging

Markets! ne#t only to 4hina.


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+.1 FMC" !et%r Pr%d&t 4 Cate#%r)

Cate#%r) Pr%d&t

8ousehold 4are

+abric wash Alaundry soaps and synthetic detergentsBV household

cleaners AdishHutensil cleaners! floor cleaners! toilet cleaners! airfresheners! insecticides and mos$uito repellents! metal polish

and furniture polishB.

+ood and %e"erages

8ealth be"eragesV soft drinksV staplesHcerealsV bakery products

Abiscuits! bread! cakesBV snack foodV chocolatesV ice creamV teaV

coffeeV soft drinksV processed fruits! "egetablesV dairy productsV

bottled waterV branded flourV branded riceV branded sugarV uices

etc.

7ersonal 4are

/ral care! hair care! skin care! personal wash AsoapsBV cosmetics

and toiletriesV deodorantsV perfumesV feminine hygieneV paper

products.

LO* PER CAPITA CONSUMPTION IN INDIA COMPARED TO *ORLD?S OTHER

COUNTRIES 99 HU"E UNTAPPED OPPRTUNITY A(ata for the year 2--1


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,.1 S*OT Ana$)!i!9 *h%$e Ind&!tr).


40/86

S*OT ANALYSIS9

Stren#th!9

J 6ow operational costs

J 7resence of established distribution networks in

both urban and rural areas

J 7resence of wellknown brands in +M4G sector

J +a"orable go"ernmental 7olicyD

Indian Go"ernment has passed the policies aimed at

attaining international competiti"eness through lifting

of the $uantitati"e restrictions! reducing e#cise duties!

1-- per cent e#port oriented units can be set up by

go"ernment appro"al and use of foreign brand names

etc.

J +oreign (irect In"estment A+(IBD 0utomatic

in"estment appro"al up to 1-- per cent foreign e$uity

or 1-- per cent for 'CI and /"erseas 4orporate

%odies in"estment is allowed for most of the food

processing sector e#cept malted food! alcoholic

be"erages and those reser"ed for small scale

industries ASSIB.

O''%rt&nitie!9

J >ntapped rural market! changing life style

J Cising income le"els! i.e. increase in purchasing

power of consumers

J 6arge domestic market with more population ofmedian age 2=

J 8igh consumer goods spending

J India is the largest milk producer in the world! yet

only around 1= per cent of the milk is processed. )he

organi;ed li$uid milk business is in its infancy and

also has large longterm growth potential. &"en

in"estment opportunities e#ist in "alueadded

products like desserts! puddings etc.


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J /nly about 1-12 per cent of output is processed

and consumed in packaged form! thus highlighting

the huge potential.

J India is under penetrated in many +M4G categories

as shown in below diagram. :ith rise in per capita

incomes and awareness! the growth potential is huge.

J 6ower price and smaller packs are also likely to

dri"e potential up trading for maor +M4G products

J Cural demand etc.

*eakne!!e!9 J 6ower scope of in"esting in technology and achie"ing economies of scale!

especially in small sectors J 6ow e#ports le"els

Threat!9

J Cemo"al of import restrictions resulting in replacing of domestic brands

J )a# and regulatory structure

J Cural demand is cyclical in nature and also depends upon

;.1 Hind&!tan Uni$ever Ltd


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8industan >nile"er 6imited! erstwhile 8industan 6e"er 6imited Aalso called 866B!8ead

$uartered in Mumbai! is IndiaQs largest consumer products company! formed in 19FF as 6e"er

%rothers India 6imited. Its 31!--- employees are headed by Mr. 8arish Manwani! the non

e#ecuti"e chairman of the board. 8>6 is the market leader in Indian products such as tea!

soaps! detergents! as its products ha"e become daily household name in India. )he 0nglo

(utch company >nile"er owns a maority stake A=26. Its

products include foods! be"erages!cleaning agents and 7ersonal care 7roducts.

8>6 was formed in 19FF as 6e"er %rothers India 6imited and came into being in 19= as8industan 6e"er 6imited through a merger of 6e"er %rothers! 8industan 5anaspati Mfg. 4o.

6td. and >nited )raders 6td. It is head$uartered in Mumbai! India and has an employee

strength of o"er 1!=-- employees and contributes to indirect employment of o"er =!---

people. )he company was renamed in Rune 2-- as 8industan >nile"er 6imitedL.

6e"er %rothers started its actual operations in India in the summer of 1,,,! when crates full

of Sunlight soap bars! embossed with the words TMade in &ngland by 6e"er %rothersT were

shipped to the Kolkata harbour and it began an era of marketing branded +ast Mo"ing

4onsumer Goods A+M4GB.

8industan >nile"erQs distribution co"ers o"er 2 million retail outlets across India directly and

its products are a"ailable in o"er .3 million outlets in the country. 0s per 'ielsen market

research data! two out of three Indians use 8>6 products.

Cecently in +ebruary 2--! the company has been renamed to T8industan >nile"er 6imitedT

to pro"ide the optimum balance between maintaining the heritage of the 4ompany and the

future benefits and synergies of global alignment with the corporate name of T>nile"erT.


43/86

8industan >nile"er distribution co"er o"er 1 million retail outlets across India directly and its

products are a"ailable in o"er .F million outlets in India! i.e. nearly ,-< of the retail outlet

in India. It has F9 factories in the country. )wo out of three use the company*s products and

8>6 product ha"e the largest consumer reach being a"ailable in o"er ,- percent of consumer

homes across India.


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>nile"er mission is to add 5itality to life. :e meet e"eryday needs for nutrition! hygiene! and

personal care with brands that help people feel good! look good and get more out of life.

8>6 was one of the eight Indian companies to be featured on the +orbes list of :orld*s Most

Ceputed companies in 2--.

In Ruly! 2-12 8industan >nile"er 6imited won the Golden 7eacock /ccupational 8ealth and

Safety 0ward for 2-12 in the +M4G category for its safety and health initiati"es and

continuous impro"ement on key metrics.

7ond*s )alcum 7owder*s packaging inno"ation has bagged a Sil"er 0ward at the prestigious23th (u7ont Global 7ackaging 0ward! in May 2-12.)he brand was recognised for cost and

waste reduction.

In May 2-12! 8>6 Star %a;aar bagged the sil"er award for @4reating 4onsumer 5alue

through Roint 7romotional and &"ent +orecasting* at the 1Fth &4C &fficient 4onsumer

Cesponse0sia 7acific 4onference.

In 2-11! 8>6 was named the most inno"ati"e company in India by +orbes and ranked th in

the top 1- list of most inno"ati"e companies in the world.
http://en.wikipedia.org/wiki/Efficient_Consumer_Responsehttp://en.wikipedia.org/wiki/Efficient_Consumer_Responsehttp://en.wikipedia.org/wiki/Efficient_Consumer_Responsehttp://en.wikipedia.org/wiki/Efficient_Consumer_Response


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8industan >nile"er 6td recei"ed the 'ational 0ward for cellence in 4orporate Go"ernance

2-11 of the Institute of 4ompany Secretaries of India AI4SIB for e#cellence in corporate

go"ernance

In 2-12! 8industan >nile"er emerged as the 'o. 1 employer of choice for %School students

who will graduate in 2-12. In addition! 8>6 also retained the Q(ream &mployerQ status for

the Frd year running

8industan >nile"er ranked 'o. 2 in +ortune IndiaQs Most 0dmired 4ompanies list! which was

released by +ortune India in partnership with the 8ay Group. )he company recei"ed the

highest scores for endurance and financial soundness

8>6 was ranked F9th in )he %rand )rust Ceport A2-11B published by )rust Cesearch

0d"isory. Se"en 8>6 brands also featured in the listD 6u#! 7ond*s! (o"e! 6akme! 0#e!

Sunsilk and 7epsodent.

C%0'an) Pr%!'et!

J >nile"er is lowering its e#penditure on packaging across its portfolio

of food brands as part of a wider costcutting dri"e. 8>6 has pared

down the colour palette used for printing across many products. )he

system has been used to reduce printed packaging costs for >nile"er s

products. It is also ecofriendly because it reduces waste in the printing

process. 8>6 is taking different steps to reduce the cost and increase

the margin.J 8industan >nile"er*s product 7ureit Aa water purifierB has recei"ed

the >'&S4/ :ater (igest :ater 0ward 2--,2--9 in the category of

best domestic nonelectric water purifier. 7ureit recei"ed the award

for outstanding contribution in the field of water in India. )he product

is a"ailable across 21 Indian states and has reached more than 1 million

homes in India gi"ing them access to microbiologically safe drinking

water. 7ureit*s performance has been tested by leading international

national medical! scientific public health institutions and meets the
http://en.wikipedia.org/wiki/The_Brand_Trust_Reporthttp://en.wikipedia.org/wiki/The_Brand_Trust_Report


46/86

germkill criteria of the &n"ironmental 7rotection 0gency! the

drinking water regulatory agency in the >S0.

Mana#e0ent Str&t&re

8industan >nile"er 6imited is IndiaQs largest +ast Mo"ing 4onsumer Goods A+M4GB

4ompany. It is present in 8ome 7ersonal 4are and +oods %e"erages categories.

(%ard

4hairman 8arish Manwani

Managing (irector 4&/ 'itin 7aranpe

5ice 4hairman ( Sundaram

(irector

( S 7arekh

4 K 7rahalad

0 'arayan

S Camadorai

C 0 Mashelkar

ecuti"e (irector (ha"al %uch

ecuti"e (irector Gopal 5ittal

ecuti"e (irector 4S 0shok Gupta


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Li!tin# Detai$! %- E@&it) Share!

Na0e %- the St%k E6han#e St%k C%de

%ombay Stock change 6imited =--9

'ational Stock change of India 6imited 8I'(>'I65C

Share holding pattern

15%

15%

3%

51%

16%

Foreign

Institutions

Non Promoter

Promoters

Public & Others


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;. Pr%d&t! %- HUL

H%0e 4 Per!%na$ Care

Per!%na$ 2a!h La&ndr)

6u#

6ifebuoy

6iril

%ree;e

7ears and Ce#ona

8amam

Surf cel

Cin

:heel

0la bleech

(ea&t) Pr%d&t! Hair7Care

+air 6o"ely

6akme

7onds

Sunsilk naturals

4linic

(o"e

De% !'ra) (ea&t) Pr%d&t!

0#e

Ce#ona

7epsodent

4loseup

F%%d!

Ie7rea0 F%%d!

Kwality :allQs 0nnapurnaA0ata and saltB

KissanARam!Ketchup!S$uashesB

Knorr Soups

Tea C%--ee

%rooke bond

6ipton

%rooke bond

%ru


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;.+ Di!tri&ti%n Net2%rk

8industan >nile"erQs distribution network is recognised as one of its key strengths. Its focus

is not only to enable easy access to their brands! but also to touch consumers with a threeway

con"ergence of

product a"ailability!

brand communication!

higher le"els of brand e#perience.

8>6Qs products! manufactured across the country! are distributed through a network of about

!--- redistribution stockists co"ering about one million retail outlets. )he distribution

network directly co"ers the entire urban population.

)he general trade comprises grocery stores! chemists! wholesale! kiosks and general stores.

8industan >nile"er ser"ices each with a tailormade mi# of ser"ices. )he emphasis is e$ually

on using stores for direct contact with consumers! as much as is possible through instore

facilitators.

)he distribution network in general trade is as followsD

FACTORY

UST IN TIME DEPOT

REDISTRI(UTION STOCKIST

MARKET 5 CHANNEL *ISE 3

CONSUMER


51/86

)he products that are manufactured are first brought to the RI) ARust In )imeB (epot from the

factory. )hen these products are deli"ered to the Cedistribution Stockiest according to the

order placed by them! this is done through 7ermanent (ispatch 7lan. )hen this stock is send

to either retailers or wholesalers! according to the channel followed by them. +rom there it

reaches to the consumers.

At the !&'er0arket!

Selfser"ice stores and supermarkets are fast emerging in metros and large towns. )o ser"ice

modern retailing outlets in the metros! 8>6 has set up a fullscale sales organisation!

e#clusi"ely for this channel. )he business system deli"ers e#cellent customer ser"ice! while

dri"ing growth for the company and the store. 0t the same time! inno"ati"e marketing

initiati"es are taken to pro"ide consumers with e#perience of our brands at the store itself!

through product tests and instore sampling.

)his is termed as Modern )rade. It has got different distribution network and work

differently. It is fast gaining pace as more and more people are turning to malls for shopping.

)oday shoppers don*t ust want to buy their daily groceries but they also want a shopping

e#perience. )hey want to spend time in air conditioned store! no more they are ready to sweat

for spending money. )hese big bo# retailers pro"ide them a platform where they can roam

around! pick! compare and choose their products. )hese stores pro"ide them a whole new

e#perience of shopping without shedding any drop of sweat.

Di!tri&ti%n Net2%rk

FACTORY

UST IN TIME DEPOTCUSTOMER SER:ICE PRO:IDER (I" (OB RETAILER CONSUMER


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C%r'%rate S%ia$Re!'%n!ii$it)

8>6 shows more interest in 4SC also as

+rom 2--3 to 2--, it has reduced the emission of 4arbon dio#ide by more than 2=< in themanufacturing.8>6 follows = C strategies to deal with the Green 8ouse Gases AG8GBD

Ceduce

Ce>se

Cecycle

Ceco"er

Cenew


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8>6 uses 0griculture wastages as the fuel AGround nut shells! ! sawdust! 4oconut shells!cashew etcB

(/M&O! a product of 8>6 is planning to sponsor the world toilet dayL on the 19

/f 'o"ember e"ery year.

PROJECT SHAKTI

ICICI ank i! the -inania$ 'artner %- HUL in the 'r%et Shakti

0s competition is increasing day byday! it*s difficult to maintain the leader position tofurther strengthen the distribution network 8>6 made a proect called proect S80K)Iwhich will ser"e the following purposeD0B

Small! scattered settlements and poor infrastructure make distribution difficult.)o CeachD

/"er =--!--- "illages not reached directly by 8>6.%B

6ow literacy hampers effecti"eness of print media .)o 4ommunicateD

7oor mediareachD =-- million Indians lack )5 radio.4B

6ow category penetration !consumption.)o InfluenceD4B

7er capita consumption in >nile"er categories is FF< of urban le"el .0warenessD

7roect Shakti8>6 soon reali;ed that although it wasenoying a greater penetration in the

ruralmarket when compared with its competitor such as 'irma and I)4! itsdirect reach was

restricted to only 16 saw itsdream fulfillment in the "ast Indian rural market.)he company was already engaged inrural

de"elopment with the launch of the Integrated Cural (e"elopment 7rogramme in 19 in the

&tah district of >ttar

;., F&nda0enta$ Ana$)!i!


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Li@&idit) 4 Levera#e Rati%!

March

12

March -9 (ec - (ec - (ec -=

4urrent Catio -.,F -.92 -., -.F -.-

Wuick Catio -.3= -.=1 -.2= -.F3 -.FF

)otal (ebtH&$uity .- -.2- -.- -.-F -.-2

Interest 4o"erage

Catio

11,.- ,F.-9 11.2 ,F.2

4urrent Catio of 8>6 has been less than 1 for all the 3 years taken for analysis. 0s the

standard of current ratio is 1D1 for +M4G industry. )his implies that working capital of 8>6

is always negati"e. )his is generally considered an aggressi"e strategy i.e. to financing its

long term asset by short term sources that increases profitability because current liabilities are

non interest bearing items. )here is significant difference between 4C and 6C which

indicates that the current asset of 8>6 consists of good amount of in"entory. 5alue of sundry

debtors is $uite low. )he li$uidity ratios ha"e increase from pre"ious year which shows that

8>6 has increase its li$uidity further.

)he loans taken by 8>6 is high in 2--9 which is indicated by high debt to total source ratio

and this is why its I4C ratio gone up as compared to pre"ious year Aas compared to I4C in

2--B. It has increased its loan as it currently operating the business through loan money.

(ebt to e$uity ratio was between -.-2 to -.- for pre"ious F year as taken to comparision but

all of sudden in current year it has increase to almost F times as compared to -.- in the year

2-- this means that the company has taken huge amount of loan to finance it business.

Interest 4o"erage Catio show that how 6e"erage the company is the higher the ratio the less

le"erage.

Mana#e0ent E--ien) Rati%!

March March -9 (ec - (ec - (ec -=


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12

(ebtor)urno"er Catio 2.2 31.,F F1.31 2=.32 22.12

0sset )urno"er Catio .2 .,1 =.3 =.F= =.11

Management &fficency Catio is also called as an 0cti"ity Catio.

In"entory turno"er ratio show that how many times in a year ha"e the company con"erted its

In"entory into debtor. 0s the In"entory turno"er ratio is high this year as compared to the

pre"ious F year this indicate the production and sales efficiency and show how fast the goods

are mo"ing in the market. 0s greater the in"entory turno"er ratio is in times more beneficial

to the company. (ebtor turno"er ratio show how that how many times company can con"ert

debtors into cash in a year.()C has increased for all the four year taken in to comparison this

indicate that company is getting the cash from debtor late in the year 2--= ()C was 22.12 it

get increased to 31.,F in current financial year. It can be happened because company has

increased its policy or (ebtor are paying late to company this should be low as possible.

0sset turno"er ratio is net salesHnet asset has 0)C is increasing for the four year taken in to

comparison indicating that net sales of the company is increasing year on year.

Pr%-itai$it) Rati%!

March

12


/perating Margin A


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7%I) as percentage of sales is moderately good and there has been significant change in it

during last three years. )here has not been any significant change in operating Margin in

comparison with the last three years. )he profit distributing ability of the firm is e#cellent

with return on net worth AC/':B being around 121.F3< and more for last two year. )he

profit generating ability similar to the profit distributing ability is pretty good with C/4&

o"er 121.-< during the year 2--9. C/4& in year 2-- has increased from the figure of

2--! perhaps because of the decrease in debt Achange in capital structureB and increase in

current liability Anon interest bearing itemB. )he face "alue of &$uity Share of 8>6 is Cs. 1.

0naly;ing the &7S and (7S! which are profit distributing ability ratios! for 8>6 we can see

that it has been generating more than =--< times profit for its shareholders o"er the years.

)he &7S increased o"er the years from Cs..3- in year 2--= to Cs. 11.3 in year 2--9. It has

been generous in distributing the profit in form of di"idend with (7S Cs. =.-- in year 2--=

and Cs. .=- in year 2--9.

Market (a!ed Ret&rn

March

12


7rice to &arning Catio F=.= 29.2 29. 2,.1 F3.9

Market 4apitali;ation 2.3- F.1 F. F.F

7rice to book "alue F2.12 2=.21 F2.F 1.== 1,.,3

7& ratio for 8>6 is not so good with "alues o"er F-. In the year 2--9! 2-- and 2-- and

somewhat better with "alue around F-. It means an in"estor will get return around 1HF- times

on his actual in"estment. If you multiply &7S 7&C of 2--9 you get Cs FF and the current

market share of 8ul is Cs 22 this means that the company is under"alued. Market

capitali;ation of 8>6 has increased after 2--=! but there is a small decrease in the year 2--!

and now it is 2.3- in current financial year it has decreased o"er here management shouldplay a "ital role to increase market capitali;ation.


57/86

;.; Tehnia$ Ana$)!i!

Mo"ing 0"erage 4rosso"er 4hart

)his is the Mo"ing 0"erage 4rosso"er 4hart where!

7rice 6in

=- days mo"ing a"erage


58/86

2- days mo"ing a"erage

+rom the abo"e Mo"ing 0"erage 4rosso"er 4hart we can see that in the month of Ranuary

8>6 stock was "ery "olatile we cannot predict what is going to happen because price line is

not able to cut 2- days mo"ing a"erage nor it is able to cut =- days mo"ing a"erage from

down or from up as it can be see from the chart that at the end of Ranuary price line has cut 2-

days mo"ing a"erage from down so price has raise little bit but in march 2- days mo"ing

a"erage has cut =- days mo"ing a"erage from up this is the clear indication that price is going

to fall and this is the time to sell the stock and we can see that in march price has gone down

to the low as compared from Ranuary to une and for F month Amarch! april! mayB price line

and 2- days mo"ing a"erage was below =- days mo"ing a"erage so price was low for that

period but in the start of une price line and 2- days mo"ing a"erage has cut =- days mo"ing

a"erage from down so this is clear indication that price is going to go up and this is the right

time to buy the stock.

M04( 4hart

)his is M04( 4hart

7rice 6ine

9 days signal line

M04( line


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Mo"ing 0"erage 4on"ergence (i"ergence chart means that when as M04( falls below the

signal line! it is a bearish signal.

:hen the M04( rises abo"e the signal line! the indicator gi"es a bullish signal.

+rom the abo"e M04( chart we can make out that in the month of Ranuary M04( was

abo"e the signal line that means the price will also go up and till end of +ebruary the stock

price that was indicated in the chart is more or less up. 0t the start of march M04( line has

touch signal line and then it has gone down this is a signal to come out if you ha"e a stock

because the price is going to go down and till the end of march M04( was below the signal

line in 0pril it has try to cut signal line but it was not able to cut it so it is ad"ice not to enter

in this market we need to wait. 0s seen from the chart that at the start of Rune M04( line has

cut signal line and gone up so stock price has also gone up and till now it is showing upward

trend this is a good time to enter in the market.

Re%00ended t% H%$d

%y going through )echnical chart i.e. the Mo"ing 0"erage 4rosso"er 4hart and M04( chart

of 8>6 it clearly state that the stock price is going to go up and this time you need to hold the

stock or if you don*t ha"e the stock right time to in"est in the stock. Nou can book your profit

if you are and in"estor or a trader i.e if you are a short term player or a long term player you

can book your profit.


60/86


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(abur consists of large array of products and it had to maintain the operational efficiency. )o

make sure it adusted to the business en"ironment it became public limited company in 19,

followed by di"ersification in Spain in 1992 A5akhariya! 2--32--9B.

A(abur India 6td.B is IndiaQs largest 0yur"edicmedicine manufacturer. 0nd is the fourth largest

+M4G 4ompany in India with Ce"enues of >S?1 %illion Ao"er Cs =!F-- 4roreB Market 4apitalisation of

>S?3 %illion ACs 2-!--- 4roreB. %uilding on a legacy of $uality and e#perience of o"er 12= years! (abur

operates in key consumer products categories like 8air 4are! /ral 4are! 8ealth 4are! Skin 4are! 8ome 4are

+oods.(aburQs 0yur"edic Specialities (i"ision has o"er 2- medicines for treating a range of

ailments and body conditionsfrom common cold to chronic paralysis.(abur International! a

fully owned subsidairy of (abur India! has sold its stake in >0& based :eikfield

International on 2= Rune 2-12.

(abur has been in the forefront of popularising this alternati"e way of life! marketing its

products in more than - countries all o"er the world.

/"er the years! (aburQs o"erseas business has successfully transformed from being a small

operation into a multilocation business spreading through the Middle &ast! 'orth 0frica!

:est 0frica and South 0sia.

(abur further di"ided its business into three separate groupsD

8ealth 4are 7roducts (i"ision

+amily 7roducts (i"ision

(abur 0yur"edic Specialties 6imited A4apitaline! 2--,B

Successful implementation of procedure! and adapt with the changing time and maintaining

its essence (abur achie"ed its highest e"er sales figure of Cs 11.= crores in 2----1.

0s +M4G sector was struggling with the slow growth in the Indian economy! (abur decided

to take numerous strategic initiati"es! reorgani;e operations and impro"e on its brand

architecture beginning 2--2. It decided to concentrate its marketing efforts on (abur! 5atika!

0mla! Ceal and 8amola to strengthen their brand e$uity! create differentiation and emerge as

a pure +M4G player recogni;ed as an herbal brand. )his was chosen after a study with
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Ayurvedahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Ayurveda


62/86

0ccenture! which re"ealed that (abur was mainly percei"ed as an 8erbal brand and

connected more with the age group abo"e F= A'aukrihub! 2--B.

+M4G is a highly competiti"e industry where a company*s top line may be high and its

bottom line can be rather low. (abur! one of the largest +M4G players in the country! has

consistently deli"ered good financial results o"er the past fi"e years with a 40GC of 1,

percent in net re"enue and FF percent in 70). (espite this robust growth! the (abur

management belie"ed there is potential to deri"e incremental growth through supply chain

efficiencies.

:ith compressed product life cycles! especially in some of the newer categories! being

$uicker to the market is a great ad"antage. TSpeed to market is important! not ust with new

product de"elopment but also with reaching out to the consumer and ensuring that e"en the

remotest of corners of the country get the products in a short period of time!T this has been

dabur*s strategy.

(abur integrated its consumer care and consumer health businesses and this was the genesis

of Q7roect SpeedQ ! which was designed to help the firm cope up with challenges by

le"eraging the power of its combined product portfolio through a unified sales distribution

structure. (abur has also put in place an initiati"e to double its rural reach. )he company is

hopeful that this would enable it to ha"e a direct access to F!---population "illages across 1-

states that account for 2< of the rural +M4G potential.

6arge retailers were fighting for their market share in this lucrati"e +M4G sector. 0part from

8>6! 7G! Marico and 8imalaya! I)4 was also posing a challenge. %ecause of the large

number of products! supply chain was became comple#.

C%0'an) Pr%!'et

J (abur has entered into the malted food drink market with the launch

of a new health drink (abur 4hyawan RuniorL. 0ccording to the

company! they e#pect to capture a market share of 1- per cent of the

Cs. 1!9-- 4rores malted food drink market o"er the ne#t two years.

J (abur has ac$uired 2.1= per cent of +em 4are 7harma 6td A+476B! a

leading player in the women*s skin care products market! for Cs 2-F.

4rores in an allcash deal. )he 4ompany is e#pected to create synergy


63/86

by this deal.

J (abur got appro"al from Go"ernment of 8imachal 7radesh to set up

another medicine manufacturing unit. )he proect has an e#pected

in"estment of Cs. 1F- 4rores.

Mana#e0ent Str&t&re

(abur IndiaQs +ast Mo"ing 4onsumer Goods A+M4GB 4ompany. It is present in 8ome

7ersonal 4are +ood categories.

(%ard

4hairman 0nand %urman

5ice 4hairman 0mit %urman

ecuti"e (irector 7radip %urman

0dditional (irector Mohit %urman

(irector

7('arang

Sunil(uggal

C4%harga"a

7'5iay

S'arayan0lbert:iseman7aterson

0nalit Singh

4ompany Secretary 0shok Kumar Rain


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Li!tin# Detai$! %- E@&it) Share!

Na0e %- the St%k E6han#e St%k C%de%ombay Stock change 6imited =---9

'ational Stock change of India 6imited (0%>C

Share holding pattern

9%

14%

1%

70%

6%

Foreign

Institutions

Non Promoter

Promoters

Public & other


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s to 1-!--- stockists

countrywide. )he company needed a system to accurately control distribution and sales

forecasting to reduce in"entory in the pipeline.

(abur went ahead and built a system using 5isual %asic and 0S7 with SW6 Ser"er 2--- as

the database. It decided not to use a packaged S4M solution due to the high cost and relati"e

lack of complications in its supply chain.

The initiative

0n inhouse de"eloped! easytouse! Intranet based datawarehouse displays asofyesterday

sales! stock! recei"ables! banking! and other MIS. /"er =!--- 0S7 pages meet almost all

reporting re$uirements and make this a single source of MIS for all le"els of decision makers.

)his success pa"ed the ground for the companyQs supply chain initiati"e. +iftyfi"e Ku %and

)(M0 5S0)s were used to link primary distributors to the system. +actories were hooked up

using 70M0 A7ermanent 0ssigned Multiple 0ccessB 5S0)s. 0t some locations 57's had to

be used because it was not possible to set up a dish. )he ;onal offices in Mumbai were

hooked up in a similar manner.

)he hardware is mostly owned by the primary 4+0 A4arry and +orward 0gentB e#cept for the

networking e$uipment! which is owned by (abur. In the case of the secondary systems!

stockists wholly own the hardware.

)he primary rollout began in 0pril 2--1 and took 1 months. )he first si# months were used

to create a business model common to all di"isions Afamily products! healthcare! ayur"edic

products! and pharmaceuticalsB! and testing and piloting the same.

The Inn%vati%n


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)he integrated primary and secondary system has a number of uni$ue features. )he features

like tight integration of schemes! stockists credit limit control! automated banking of che$ues!

and online che$ue reconciliation ha"e ob"ious ad"antages in the primary distribution. )hese

are basically e#tensions to the M+GH7C/ &C7 system and not core customi;ations.

(aburQs stockists supply to 1.= million retailers. Se"enty percent of the sales are accounted

for by the top =-- stockists. )he incorporation of these top stockists into its supply chain is a

first for any +M4G company in India. )he a"erage sale of each stockist and the current stock

are the two parameters.

0 QMy 7ageQ allows the stockist to see the QasofyesterdayQ details pertaining to the intransit

shipments! transporter details! backorders! account statement! che$ue status! credit notes! andclaim settlements.

(etails are collected from stockists on a weekly basis. In case of primary distribution points!

an incremental backup is sent to the central location when the 4+0 closes operations for the

day. )hese are computed at night in a process called @cubing*. 0nd when managers come into

office in the morning the information is ready for them.

)he integrated system allows each 0rea Manager to plan for the monthQs sales forecasts!

stockists performance! and sales officersQ performance. )he integration allows better control

on pipelines in primaries and secondaries! brings down in"entories! and offers better control

on production and sales against a confirmed forecast.

)he company has added an SMS interface that lets authori;ed phones $uery the system for

aspects like stock status! credit limits! current outstanding and di"isionwide sales. 0n control

list of mobile phone numbers is used to restrict access to the system. Salespeople can get

responses to their $ueries in a minute with this system!T said Gopal Shukla! 4hief

Information /fficer! (abur India 6imited.

CSR

Makin# A Di--erene

'What is that life worth which cannot bring comfort to others'

Dr. S K (&r0an -%&nder Da&r India Ltd.


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F%r #r%2th t% e re!'%n!i$e it !h%&$d #% e)%nd n&0er!... It !h%&$d d% #%%d t% the

!%iet) reate a etter 2%r$d. )hatQs the kind of growth that (abur India 6td. belie"es in!

and constantly stri"es for.

0t (abur! their commitment to good go"ernance!

ethical conduct and social responsibility is core to

their way of doing business! and is strongly aligned

with thier dri"e to create and increase "alue for all

stakeholders. )hey define 4SC as conducting

business in ways that pro"ide social! en"ironmental

and economic benefits for the communities and

geographies where we operate.

(abur*s 4SC initiati"es are dri"en through Sustainable (e"elopment Society or S>'(&S8!

an outcome of the "ision of (abur India 6td founder (r. S.K %urman.

SUNDESH

Sustainable (e"elopment Society AS>'(&S8B is

sworn to the mission of ensuring o"erall socio7

economic de"elopment of the rural urban poor on a

sustainable basis! through different participatory and

needbased initiati"es. It aims to reach out to the

weaker and more "ulnerable sections such as

women and children! illiterate and unemployed X ofthe society.

)oday! S>'(&S8 operates in Gha;iabadand Gautam %udha 'agar districtof >ttar 7radesh!

and has more recently X established presence in Cudrapur district of >ttrakhand. /"er the

years! it has contributed to many worthy causes! addressing children*s literacy! impro"ing

healthcare ser"ices! skill de"elopment! and en"ironment! to name a few.

Mediina$ P$ant Pr%et An initiative ) Da&r Ne'a$ Pvt. Ltd.

@ehi me !a!ami te* A0s you gi"e me! I gi"e you in returnB. )his $uote from an ancient te#t

sums up (abur*s commitment towards nature. :ith a strong foundation in the 8imlayan

Kingdom! 'epal! (abur has taken many strong but$uiet initiati"es in last one and half

decade towards corporate social responsibility.

(abur 'epal 7"t. 6td. is a oint "enture company

established in the year 19,9 when probably "ery few

in"estors had their roots in 0yur"eda. )hanks to the

fa"ourable climatic conditions here! 'epal has been amaor source for the herbal plants which are


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e#tensi"ely used in )ibetan! 4hinese! 'epalese and Indian medicines. 8owe"er! due to

indiscriminate use! o"er e#ploitations! poor collection methods! early har"esting and lack of

the post har"est technology! these natural reser"es are depleting speedily. :hat*s worse! there

are no systematic efforts to replenish these natural resources of medicinal plants in the

8imalayan region.

(abur 'epal has started the proect on medicinal plants in 'epal to pro"ide the modern

technology for culti"ation of the re$uired medicinal herbs of 8imalayas to the farmers. )he

only ecofriendly proect of 4SC nature in 'epal! this initiati"e is fully integrated with the

company*s business "ision.

0 stateoftheart Greenhouse facility has been set up at %anepa! which has the capability to

produce = million saplings of medicinal plants per annum. 0ll the re$uired climatic

parameters for uniform growth of saplings of the medicinal plants like temperature! humidity

etc. are controlled by automatic computer systems. %esides helping preser"e naturalresources! this initiati"e has also gone a long way in generating employment and income for

local people and impro"ing the socioeconomic conditions of local populace in the

8imalayan Kingdom.


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(ebtH&$uity ratio means the ratio of finance coming from (ebts compared to shareholders. 0

ratio e#ceeding 1 may be cause for concern. 0s it can be seen that the (ebtH&$uity ratio is

near to -.-F -.-= for the last three year this means that company operate the business

mainly through owner funds but this financial year (ebtH&$uity ratio has increased from -.-F

to -.19 this indicate that company has taken loan from market to finance the business with

(ebtH&$uity ratio we can say that in this financial year 2--9 company is in"esting Cs 1 from

there pocket and 19 paisa from out side. 0s they ha"e taken loan from market then there

Interest co"erage ratio has decreased. Interest 4o"erage Catio show that how 6e"erage the

company is the higher the ratio the less le"erage

Mana#e0ent E--iien) Rati%

March 12 March -9 March -, March - March -

In"entory turno"er .19 1-.93 12.=2 11.11 11.=

(ebtor turno"er 1.2 22.F 2=.93 F9.- F=.F-

0sset turno"er 2.3F 3.,3 3. 3.=- 3.23

Management &fficiency Catio is also called as an 0cti"ity Catio.

In"entory turno"er ratio show that how many times in a year ha"e the company con"erted

its In"entory into debtor. 0s the In"entory turno"er ratio has decreased as compared to the

pre"ious F year this show how slow the goods are mo"ing in the market of (abur this also

indicate the production and sales efficiency of the company. 0s greater the in"entory turno"er

ratio is in times more beneficial to the company. %ut in case of (abur In"entory )urno"er

Catio has decreased this Is a cost of concern to the company they ha"e the in"entory but it is

not turning in to debtor. (ebtor turno"er ratio show how that how many times company cancon"ert debtors into cash in a year.()C has decreased as compared to the pre"ious F year


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which is good on behalf of the company because they are reco"ering money faster from

debtor. 0sset turno"er ratio is net salesHnet asset has 0)C is increasing marginally for all the

3 year this show that company net sales is increasing year on year which is good from

company point of "iew.

Pr%-itai$it) Rati%!

March

12

March -9 March -, March - March -

/perating Margin A


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.=1< in 2--,. C/4& in year 2--9 has decreased from the figure of 2--,! perhaps because

of the increased in debt Achange in capital structureB and decreased in current liability Anon

interest bearing itemB. )he face "alue of &$uity Share of (abur is Cs. 1. 0naly;ing the &7S

and (7S! which are profit distributing ability ratios. )he &7S increased o"er the years from

Cs.F.F- in year 2-- to Cs. 3.F2 in year 2--9. It has been not so generous in distributing the

profit in form of di"idend with (7S Cs. 2.=- in year 2-- and Cs. 1.= in year 2--9.

Market (a!ed Ret&rn

March 12 March -9 March -, March - March -

7rice &arnings

Catio

3F.2 23.== F2.2F F3.91 3-.3

Market

4apitali;ation

F.=2 3.3, =.-- =.19

7rice to book "alue 1.3 11.= 1.99 2-.FF 1=.,

7&C ratio for (abur is not so good with "alues o"er F- In the year 2--! 2-- and 2--,. %ut

for this financial year it is 23.== that means it is decreasing the 7&C should be as low as

possible. )his means that the market is "aluing the company 23.== times then its &7S if you

multiply &7S 7&C for 2--9 you get Cs 1- and the current market share of (abur is Cs

123 this means that the company is o"er"alued. Market capitali;ation of (abur is decreasing

from 2-- which was =.19 and for 2--9 it is F.=2 e"ery year it is decreasing Management

need to look forward to increased their market capitali;ation.


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)his is the Mo"ing 0"erage 4rosso"er 4hart where!

7rice 6ine



+rom the abo"e Mo"ing 0"erage 4rosso"er 4hart we can see that in the month of Ranuary to

Rune (abur price line has shown upward trend as the price was mo"ing along with 2- days

mo"ing a"erage and =- days mo"ing a"erage. In the mid of march 2- days mo"ing a"erage is

suppose to cut =- days mo"ing a"erage but it does not happen if suppose it has cut the =-

days mo"ing a"erage then the price should ha"e fall. 0s from 0pril the gap between 2- days

mo"ing a"erage and =- days mo"ing a"erage goes on increasing so from 0pril to Rune price

of (abur stock has also gone up it can be seen that the stock price of (abur is going to raise

further and it is seems that it will go further up so if you ha"e the stock you hold and if you

don*t you buy it.

M04( 4hart

)his is M04( 4hart

7rice 6ine



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Mo"ing 0"erage 4on"ergence (i"ergence chart means that when as M04( falls below the

signal line! it is a bearish signal.

:hen the M04( rises abo"e the signal line! the indicator gi"es a bullish signal.

:hen the security price di"erge from the M04(. It signals the end of the current trend.

+rom the abo"e M04( chart we can make out that from Ranuary to Rune M04( was abo"e

the signal line that means the price will also go up and the price line has gone up if you see

the price line chart In the start of March M04( was almost e$ual to signal line at this point

we can*t predict any think because it may go up or also it can come down but as in the mid of

march M04( goes on increasing and gone abo"e the signal line the price goes on increasing

and the price is showing the upward trend.

Re%00ended t% H%$d

%y going through the )echnical chart i.e. Mo"ing 0"erage 4rosso"er 4hart and M04( chart

of (abur India it clearly state that the stock price is going to go up and this time you need to

hold the stock or if you don*t ha"e the stock right time to in"est in the stock with the point of

"iew of trader if you are an in"estor this stock would not be the right decision to make as in

the Mo"ing 0"erage 4rosso"er 4hart 2- days mo"ing a"erage line is bit closer to =- days

mo"ing a"erage line and at any time 2- days mo"ing a"erage may cut =- days mo"ing

a"erage from up so the stock price will fall and e"en stock price is showing a little bit

downward trend it would be not safe for a long term in"estor to enter in this stock but trader

can book profit.


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>.1 Set%ra$ %''%rt&nitie!

0ccording to the Ministry of +ood 7rocessing! with 2-- million people e#pected to shift to

processed and packaged food by 2-1-! India needs around >S? 2, billion of in"estment to

raise food processing le"els by ,1- per cent. In the personal care segment! the lower

penetration rates also presents an untapped potential. Key sectoral opportunities are

mentioned belowD

J Sta'$eD branded and unbrandedD :hile the e#penditure on massbased! high "olume! low

margin basic foods such as wheat! wheat flour and homogenised milk is e#pected to increase

substantially with the rise in population! there is also a market for branded staples is also

e#pected to emerge. In"estment in branded staples is likely to rise with the popularity of

branded rice and flour among urban population.

Dair) a!ed 'r%d&t!D India is the largest milk producer in the world! yet only 1= per cent

of the milk is processed. )he >S? 2.3 billion organi;ed dairy industry re$uires huge

in"estment for con"ersion and growth. In"estment opportunities e#ist in "alueadded

products like desserts! puddings etc. )he organi;ed li$uid milk business is in its infancy and

also has large longterm growth potential.

J Paka#ed -%%dD /nly about ,1- per cent of output is processed and consumed in packaged

form! thus highlighting the huge potential for e#pansion of this industry. 4urrently! the semi

processed and ready to eat packaged food segment has a si;e of o"er >S? - billion and is

growing at 1= per cent per annum. Growth of dual income households! where both spouses

are earning! has gi"en rise to demand for instant foods! especially in urban areas. Increased


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health consciousness and abundant production of $uality soyabean also indicates a growing

demand for soya food segment.

Per!%na$ are and h)#ieneD )he oral care industry! especially toothpastes! remains under

penetrated in India with penetration rates below 3= per cent. :ith rise in per capita incomes

and awareness of oral hygiene! the growth potential is huge. 6ower price and smaller packs

are also likely to dri"e potential up trading. In the personal care segment! according to

forecasts made by the 4entre for Industrial and &conomic Cesearch A4I&CB! detergent

demand is likely to rise to 3!1,-! --- metric tonnes by 2-1112 with an annual growth rate of

per cent between 2-- and 2-12. )he demand for toilet soap is e#pected to grow at an

annual rate of 3 per cent between 2--12 to ,-!--- metric tones by 2-1112. Capid

urbani;ation is e#pected to propel the demand for cosmetics to 1--!--- metric tonnes by

2-1112! with an annual growth rate of 1- per cent.

J (evera#e!D )he >S? 2 billion Indian tea market has been growing at 1.= to 2 per cent

annually and is likely to see a further rise as Indian consumers con"ert from loose tea to

branded tea products. In the aerated drinks segment! the per capita consumption of soft drinks

in India is bottles compared to 7akistanQs 1 bottles! Sri 6ankaQs 21! )hailandQs F! the

7hilippines 1F and Me#icoQs -=. )he demand for soft drink in India is e#pected to grow at

an annual rate of 1- per cent per annum between 2--12 with demand at ,-= million cases

by 2-1112. 7er capita coffee consumption in India is being promoted by the coffee chains

and by the emergence of instant cold coffee. 0ccording to 4I&C! demand for coffee is

e#pected to rise to =F=!--- metric tonnes by 2-12! with an annual growth rate of = per cent

between 2--12.

J Edi$e %i$D )he demand for edible oil in India! according to 4I&C! is e#pected to rise to 21

million tonnes by 2-1112 with an annual growth rate of per cent

per annum.

J C%n-eti%nar)D )he e#plosion of the young age population in India will trigger a spurt in

confectionary products. In the long run the industry is slated to grow at , to 1- per cent

annually to ,-!--- metric tonnes by 2-1112.


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G.1 P%$i) i!!&e!

Ta6 re-%r0!

)he go"ernment has gradually remo"ed the restrictions on imports of consumer goods in the

country and also significantly reduced custom duties. )he domestic ta# structure of these

products! howe"er! has not been rationali;ed to pro"ide le"el playing field for competition.

)his is ad"ersely affecting the growth of the +M4G industry and could ha"e far reaching

ad"erse impact. )he following ta#ation issues need urgent attention of the go"ernmentD

13 E6tre0e$) hi#h inidene %- ta6 %n ertain 'r%d&t ate#%rie!

Some +M4G products such as shampoos! processed food! soft drinks and toiletries

containing alcohol attract high rates of e#cise duty and sales ta#. )he total ta# incidence in

some cases is more than - per cent of the cost or more than F- per cent of MC7. Such high

ta# incidence hampers growth of these product categories besides encouraging manufacture

of spurious products and smuggling.

It is recommended that the total e#cise incidence of +M4G products should not e#ceed 1

per cent in the case of non food items and eight per cent in the case of processed foods.

Similarly! the marginal rates of sales ta#! which is currently in the range of 1- to 2= per cent!

should not e#ceed 12 per cent.

3 Irrati%na$ d%0e!ti ta6 !tr&t&re en%&ra#in# i0'%rt!

Significant reduction in custom duty rates of consumer goods has made imported product

cheaper as compared to indigenously manufactured products! due to irrational domestic ta#structure. +or instance! goods manufactured in India suffer from cascading effects of ta#es on

inputs as additional cost compared to imports.


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)he cascading effect of sales ta# and local le"ies on inputs used in domestic manufacture

should be eliminated by pro"iding either M/(50) credit or by introducing notional 50)

co"ering both central and state ta#es on an urgent basis.

Moreo"er! MC7based e#cise duty is le"ied on a large number of +M4G products.

4ounter"ailing duty on the same product when imported is charged on 4I+ "alue. )he MC7

based assessable "alue for e#cise duty does not allow abatement for post manufacturing costs

such as ad"ertising and selling e#penses whereas 4I+ "alue considered for the purpose of

import duty does not include costs of these elements incurred subse$uently by importers.

)his differential basis creates unfair competition as ta# incidence on domestic manufacture

could be considerably higher in case of those products which incur significant marketing anddistribution cost. )here is a need to bring parity in ta# incidence between domestic

manufacture and imports by including all such elements of post manufacturing costs while

deciding the abatement percentage of MC7 based duty.

+3 Inverted D&t) !tr&t&re -%r !e$eted in'&t!

(uty on certain raw materials is higher or the same as compared to finished products in

which these materials are used. Such raw materials include oils and chemicals like Soda ash!

caustic soda and 60%. In addition to customs duty! raw materials are also subect to

S0(Hsales ta# and octroi and therefore total ta# incidence and cost of indigenous

manufacture goes up. )he import duty on raw materials needs to be rationali;ed so that it

does not e#ceed - to - per cent of the duty on finished goods.

,3 Need -%r rati%na$i/ati%n %- ta6e! %n 'r%e!!ed -%%d!

7rocessed food industry! with its "ertical integration with the agricultural sector has

significant potential for employment generation and economic growth. )he e#isting ta#

structure and its high o"erall incidence! howe"er! has been hampering the growth of the

processed industry.

)he increase in e#cise duty in last year*s budget from eight per cent to 1 per cent has

ad"ersely affected the growth of processed foods industry. It is recommended that marginal

rate of e#cise duty on processed foods should not be more than eight per cent and the sales

ta# should be le"ied at four per cent.


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;3 Ca!adin# e--et %- S'eia$ E6i!e D&t)

)he special e#cise duty introduced last year is not Tcen"atable** e#cept in the case of selected

products. Most +M4G products co"ered by tariff such as shampoos! ice creams and

cosmetics are subect to S&(. )his tariff also contains "ery wide definition of the term

Tmanufacture** which includes labeling! relabeling or con"ersion of large packs into small

packs. )he le"y of S&( on such products therefore leads to double ta#ation when goods are

labeled or con"erted into small packs after manufacture. It is recommended that S&( should

be made Tcen"atable**V alternati"ely the term Tmanufacture** needs modification ! atleast for

the purpose of S&( by e#cluding labeling! relabeling or con"ersioninto small packs.

FDI P%$i)

0utomatic in"estment appro"al Aincluding foreign technology agreements within specified

normsB! up to 1-- per cent foreign e$uity or 1-- per cent for 'CI and /"erseas 4orporate

%odies A/4%sB in"estment! is allowed for most of the food processing sector e#cept malted

food! alcoholic be"erages and those reser"ed for small scale industries ASSIB. 23 per cent

foreign e$uity is permitted in the smallscale sector. )emporary appro"als for imports for test

marketing can also be obtained from the (irector General of +oreign )rade. )he e"olution of

a more liberal +(I policy en"ironment in India is clearly supported by the successful

operation of some of the global maors like 7epsi4o in India.


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.1 Di!tin#&i!hin# -eat&re! %- Indian FMC" (&!ine!!

+M4G companies sell their products directly to consumers. Maor features that distinguish

this sector from the others include the followingD

1. De!i#n and Man&-at&rin#

1. L%2 Ca'ita$ Inten!it) 7Most product categories in +M4G re$uire relati"ely minor

in"estment in plan and machinery and other fi#ed assets. 0lso! the business has low

working capital intensity as bulk of sales from manufacturing take place on a cash

basis.

2. Tehn%$%#) 7 %asic technology for manufacturing is easily a"ailable. 0lso!

technology for most products has been fairly stable. Modifications and impro"ements

rarely change the basic process.


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F. Third7'art) Man&-at&rin# 7Manufacturing of products by third party "endors is

$uite common. %enefits associated with third party manufacturing include A1B

fle#ibility in production and in"entory planningV A2B fle#ibility in controlling labor

costsV and AFB logistics sometimes its essential to get certain products manufactured

near the market.

. Marketin# and Di!tri&ti%n

Marketing function is sacrosanct in case of +M4G companies. Maor features of the

marketing function include the followingD

1. Hi#h Initia$ La&nh C%!t 7 'ew products re$uire a large frontended in"estment in

product de"elopment! market research! test marketing and launch. 4reating awareness

and de"elop franchise for a new brand re$uires enormous initial e#penditure on

launch ad"ertisements! free samples and product promotions. 6aunch costs are as high

as =-1--< of re"enue in the first year. +or established brands! ad"ertisement

e#penditure "aries from = 12< depending on the categories.

2. Li0ited Ma!! Media O'ti%n! 7)he challenge associated with the launch andHor

brandbuilding initiati"es is that few no mass media options. )5 reaches < of

urban consumers and F=< of rural consumers. 0lternati"es like wall paintings!

theatres! "ideo "ehicles! special packaging and consumer promotions become an

e#pensi"e but re$uired acti"ity associated with a successful +M4G.

F. He Di!tri&ti%n Net2%rk 7India is home to si# million retail outlets! including 2

million in =!1- towns and four million in 2!--- "illages. Super markets "irtually

do not e#ist in India. )his makes logistics particularly for new players e#tremely

difficult. It also makes new product launches difficult since retailers are reluctant toallocate resources and time to slow mo"ing products. 4ritical factors for success are

the ability to build! de"elop! and maintain a robust distribution network

+. C%0'etiti%n

1. Significant 7resence of >norgani;ed Sector +actors that enable small! unorgani;ed

players with local presence to flourish include the followingD

2. %asic technology for most products is fairly simple and easily a"ailable.


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F. )he smallscale sector in India enoys e#emptionH lower rates of e#cise duty! sales ta#

etc. )his makes them more price competiti"e "isY"is the organi;ed sector.

3. 0 highly scattered market and poor transport infrastructure limits the ability of M'4s

and national players to reach out to remote rural areas and small towns.

=. 6ow brand awareness enables local players to market their spurious lookalike brands.

. 6ower o"erheads due to limited geography! family management! focused product

lines and minimal e#penditure on marketing.

1=.1 Other !#e!ti%n!

1. 0 oint industry Xgo"ernment initiati"e for building a TMade in India** brand for

+M4G products is r

Karuna Equity (1)

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Transcript of Karuna Equity (1)