PROJECT REPORT ON

“FUNDAMENTAL ANALYSIS OF FMCG SECTOR”

A Project Submitted To

University of Mumbai for partial Completion of the degree of

Bachelor in Commerce (Accounting & Finance)
Under the Faculty of Commerce

Submitted By

RISHI PATEL

TYBAF 29

Under The Guidance Of

CA RUBY PAREKH

BHAVANS COLLEGE (AUTONOMOUS)

JP ROAD, OLD D.N NAGAR, MUNSHI NAGAR, ANDHERI WEST MUMBAI,

MAHARASHTRA - 400058.

ACADEMIC YEAR 2022-23

 PROJECT REPORT ON
“FUNDAMENTAL ANALYSIS OF FMCG SECTOR”
A Project Submitted To

University of Mumbai for partial Completion of the degree of

Bachelor in Commerce (Accounting & Finance)
Under the Faculty of Commerce

Submitted By

RISHI PATEL

TYBAF 29

Under The Guidance Of

CA RUBY PAREKH

BHAVANS COLLEGE (AUTONOMOUS)

JP ROAD, OLD D.N NAGAR, MUNSHI NAGAR, ANDHERI WEST MUMBAI,

MAHARASHTRA - 400058.

ACADEMIC YEAR 2022-23

 BHARTIYA VIDYA BHAVAN’S

BHAVAN’S COLLEGE ANDHERI AUTONOMOUS

J P RO A D, O LD DN NA GA R, M U NS H I NA GA R, A NDHE RI (W E ST ), M U M BAI , M A HA RA S HT RA 4 0005 8 .

CERTIFICATE

This is to certify that mr./miss. RISHI PATEL OF Third year of

bachelor of COMMERCE IN ACCOUNTING & FINANCE, semester vI has
undertaken and completed the project work titled
“’FUNDAMENTAL ANALYSIS OF FMCG SECTOR” during the academic
year 2022-2023 under the guidance of CA RUBy Parekh submitted
on 8th march 2023 to this college in fulfilment of the curriculum
of Third year of bachelor Of commerce (accounting and finance),
University of Mumbai.

This is a bonafide project work and the information presented is

true and original to the best of our knowledge and belief.

PROJECT GUIDE External Examiner HOD (BAF)

(CA RUBY PAREKH ) (CA RUBY PAREKH)

PRINCIPAL
(PROF. DR. Z. P. BHATHENA)
 DECLARATION

I the undersigned Mr./Ms. Rishi Patel hereby declare that the work
embodied in this project work titled “Fundamental Analysis Of Fmcg
Sector”, forms my own contribution to the research work carried out
under the guidance of CA Ruby Parekh is a result of my own research
work and has not been previously submitted to any other University for
any other Degree/ Diploma to this or any other University.

Whenever references has been made to previous works of others, it has

been clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

Name of the learner – Rishi Patel

Signature of the learner - ___________

Name of the Project Guide: CA Ruby Parekh

Signature of the project Guide:

 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels

and fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Prof. (Dr). Z. P. Bhathena for

providing the necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator CA Ruby Parekh for

her moral support and guidance.

I would also like to express my sincere gratitude towards my project

guide CA Ruby Parekh whose guidance and care made the project
successful.

I would like to thank my College Library, for having various reference

books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project specially my
Parents and Peers who supported me throughout my project.
 Executive summary

FUNDAMENTALS ANALYSIS OF F.M.C.G

This project is all about the fundamental analysis of FMCG companies, which
speak about the objective and literature review details of how the FMCG
company works and their fundamentals i.e Balance sheet, Profit and loss,
shareholders pattern, Cash flows statement Etc.

Investment decision is a very important decision of everyone’s life. Some people

often get confused as in which sector to invest or which company will give best
returns in future. To solve this problem to an extent I have done the
Fundamental Analysis of FMCG Sector. To carry out this research, I have
chosen top FMCG companies based on their market capitalization and analyzed
them over their past year data, and interpreted whether the company is
fundamentally strong or which company or a set of companies is best to invest
your money.
 INDEX

Chapter No. Title Of The Chapter Page No.

1 Introduction 01-41
2 Theoretical Framework 42-43
3 Objective Of The Study 44
4 Literature Review 45-46

5 Reasearch Methodology 47-48

6 Data Analysis And Interpretation 49-69

7 Conclusion And Suggestions 70
Recommendations 71

Bibliography 72
 INTRODUCTION

Fast-moving consumer goods (FMCG) sector is the 4th largest sector in

the Indian economy with Household and Personal Care accounts for 50%
of FMCG sales in India. The main growth driver for this sector is rising
awareness and change in lifestyle of consumers.

The urban segment is the largest contributor to the overall revenue

generated by the FMCG sector in India (accounts for 55% revenue
share)However, in the last few years, the FMCG market has grown at a
faster pace in rural India compared with urban India, Each household
person spends majorly on FMCG products monthly

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The volume of money that flows against FMCG products in the economy is very high
as the number of consumers of FMCG products are huge in number and also there
are large number of competition in the market which makes it impossible to earn
abnormal profit.

FMCG heavily works on distribution network, because they want their products to
reach every where in the corner of the country. If any new players wishes to enter in
this sector have to heavily spend on distribution and promotion brands as there are
many others players set in the Market.

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 FMCG MARKET SIZE

The FMCG (Fast-Moving Consumer Goods) market is a vast and diverse industry that
includes products such as food and beverages, personal care items, household goods,
and more. According to a report by Grand View Research, the global FMCG market
size was valued at USD 6.3 trillion in 2020 and is expected to grow at a CAGR of
5.3% from 2021 to 2028. The growth of the FMCG market is driven by several
factors, including increasing population, rising disposable income, changing
consumer lifestyles and preferences, and increasing urbanization. The FMCG market
size varies by region and country, with some of the largest markets being China, the
United States, India, and Brazil.

The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from
US$840 billion in 2017, with modern trade expected to grow at 20 per cent – 25
percent per annum, which is likely to boost revenues of FMCG companies. Revenues
of FMCG sector reached Rs 3.4 lakh crore (US$ 52.75 billion) in FY18 and are
estimated to reach US$ 103.7 billion in 2020.

The sector witnessed growth of 16.5per cent in value terms between July-
September 2018; supported by moderate inflation, increase in private consumption
and rural income. Penetration level as well as per capita consumption in most
product categories like jams, toothpaste, skin care, hair wash etc in India is low
indicating the untapped market potential. Burgeoning Indian population, particularly
the middle class and the rural segments, presents an opportunity to makers of branded
products to convert consumers to branded products.

Growth is also likely to come from consumer ‘upgrading’ in the matured product
categories. With 200 million people have shifted to processed and packaged food by
2010, India needs around US$ 28 billion of investment in the food- processing
industry. At present, urban India accounts for 66% of total FMCG consumption, with
rural India accounting for the remaining 34%.

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 FMCG: INDIA JOURNEY

The Fast-Moving Consumer Goods (FMCG) sector in India has undergone a

significant transformation in the last few decades. The FMCG sector in India has seen
rapid growth due to various factors such as rising income levels, urbanization,
increasing awareness, and changing lifestyles.

In the 1990s, the Indian FMCG market was dominated by a few large players such as
Hindustan Unilever Limited (HUL), Procter & Gamble (P&G), Nestle, and Colgate-
Palmolive. These companies focused mainly on urban areas and premium segments.
However, with the liberalization of the Indian economy in the early 1990s, the FMCG
sector opened up to foreign players, which led to increased competition and a wider
range of products.

The Indian FMCG market has also seen a shift in consumer preferences towards
healthier and natural products. Companies have responded to this trend by launching
products with natural ingredients and positioning them as healthier alternatives.

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E-commerce has also played a significant role in the growth of the FMCG sector in
India. With the widespread use of smartphones and the internet, consumers are
increasingly shopping online for FMCG products. E-commerce platforms have made
it easier for small and medium-sized FMCG companies to reach a wider audience and
expand their business.

According to a report by Nielsen, the FMCG market in India is expected to reach

USD 103.7 billion by 2025, growing at a CAGR of 9-10% from 2020 to 2025. The
report also suggests that the rural FMCG market in India is growing faster than the
urban market, driven by factors such as increasing rural incomes, improved
infrastructure, and rising literacy rates.

In conclusion, the FMCG sector in India has come a long way and is expected to
continue growing rapidly in the coming years, driven by changing consumer
preferences, increasing income levels, and the expanding reach of e-commerce.

The FMCG sector In India is standing like Mammoth at fourth largest sector in the
Indian economy. This sector includes global businesses, well established
distribution network and intense competition between organized and unorganized
players. As the sector is this big in India, the availability of raw material is easy and
cheap labor in India is like the cherry on the cake for Indian FMCG industry. But this
sector did not evolve overnight. It took many years to reach it to this position.

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As we know, India is always been one of the most populated countries thus giving
huge customer base to FMCG companies. So India is the best place for FMCG
companies to grow. Now let’s take a look to the history of FMCG sector. The period
from 1950’s to 1980’s did not see a lot of a development in this segment attributable
to the low purchasing power of Indians and the government pushing for small scale
sector. HUL and Amul were one of the main organizations that stuck around and
advanced as market players. Amul metamorphosis the dairy part in India. Built up in
1946, Amul brought white revolution in India. They pioneered items like milk powder
and baby food from buffalo milk. The brand keeps on becoming stronger
continuously and sells around 3960 tons of milk item

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Another major company at that time was HUL which was then more
focused on urban sector. But then there was one more company
emerged ‘NIRMA’ that focused on giving cheap products to the
consumer. For e.g., surf Excel at that time was costly product for most of
the people and not everyone was ready to spend that much amount on
washing powder.

So NIRMA found this as an opportunity and started making cheap

washing powder which then became success

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 LIBERAL CONSUMER GOODS

Liberal consumer goods generally refer to products that align with liberal values and
principles, such as social justice, individual rights and freedoms, environmental
sustainability, and equality. These products may be produced by companies that have
policies and practices that align with these values, or they may have attributes that
make them environmentally friendly, socially responsible, or fair trade.

Examples of liberal consumer goods may include products made from sustainable
materials, such as bamboo or organic cotton, fair trade coffee, chocolate or tea,
cruelty-free and vegan cosmetics, environmentally friendly cleaning products, and
products that support social causes.

1) Eco-friendly products: Products that are made with sustainable materials or

that promote environmentally friendly practices.
2) Fair trade products: Products that are produced using fair labor practices,
ensuring that workers are paid a living wage and have safe working
conditions.
3) Health and wellness products: Products that promote healthy lifestyles, such as
natural supplements, organic foods, or exercise equipment.
4) Ethical and socially responsible products: Products that are produced using
ethical business practices, such as using renewable energy, sourcing materials
locally, or supporting minority-owned businesses.
5) Media and entertainment products: Products that promote liberal or
progressive values through books, movies, or music, such as documentaries on
social justice issues, or music that addresses political or social themes.

Overall, liberal consumer goods are products that appeal to consumers who are
committed to progressive values and who want to support businesses that share those
values.

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 LIBERALIZATION OF CONSUMER GOODS IMPORTED

Liberalization of consumer goods imported refers to the reduction or elimination of

government regulations, restrictions, or tariffs on the import of consumer goods from
other countries. This means that companies can import goods from other countries
with fewer or no barriers, allowing for more competition in the market, potentially
leading to lower prices and increased product diversity for consumers.

Liberalization of consumer goods imported can have both positive and negative
effects on a country’s economy. On the one hand, it can lead to increased competition,
which can drive innovation and lower prices, benefiting consumers. It can also open
up new markets for domestic businesses, as they can export their products to other
countries with fewer barriers.

On the other hand, liberalization of consumer goods imported can also lead to job
losses in industries that cannot compete with cheaper imported goods. It can also lead
to the loss of domestic industries, as companies move their operations to countries
with lower labor costs and fewer regulations.

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Overall, liberalization of consumer goods imported is a complex issue that involves
weighing the benefits of increased competition and access to new markets against the
potential negative effects on domestic industries and employment. Countries must
carefully consider their policies regarding the importation of consumer goods to strike
a balance between promoting economic growth and protecting their domestic
industries and workers.

Then there was the phase of Liberalization, which led to increase in choices of
Indian consumers as well as their demand.

Liberalization also encouraged various MNCs to invest in one of the most populated
country on Earth. With this living standard of Indian consumers was also rising
and to cater this MNCs started producing high end and good quality products.
Their strategy became two-pronged over the last decade—   One, invest in expanding
the distribution reach far and wide across India to enable market expansion. And two,
upgrade existing consumers to value added premium products and increase usage of
existing product ranges.

So following these strategies, most of the companies fought with each other to
mark their presence in rural segment of India. Those who succeeded capturing the
share of rural market reaped more profits than other companies.

1) ISSUE

The Indian trade regime has undergone a significant reorientation due to the far
reaching policy changes since 1991-92. No doubt, the reforms have had a
significant impact on the external sector of the Indian economy. The foreign
exchange reserves, largely due to the inflow of foreign investment, have exceeded 6
months of imports since 1994. Exports and imports have showed robust growth
from 1992-93 to 1995-96 but recently (1996-97 and the first quarter of 1997-98)
there has been a slow down in their growth. However, the external account
position has remained strong, with current account deficit estimated to be 1.1% of
GDP in 1996-97. If we are to realize the full benefits of the changes already made,
further reforms are obviously needed. In the area of import policy, one major task,

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namely liberalization of consumer goods, is yet to be done. Though the
liberalization of consumer goods imports is the controversial issue, the case for it
now is impeccable.

2) DEBATE

The researchers opposing it argue that consumer goods imports will benefit the
rich who will divert resources from investment to conspicuous consumption. This
may lead to lowering of savings rate. Also, they argue that liberalizing
consumer goods imports will create a balance of payments crisis because
imports will then increase greatly owing to speculation, on the self-fulfilling
assumption that the import liberalization cannot be sustained and will be
reversed. This argument is wrong on several account. Firstly, the objective of
restraining luxury consumption will not be served by banning, consumer goods
imports if such import-competing products are available from domestic
production. In the later case, the effect of such import curbs will be largely to
substitute domestically produced ‘luxuries’ for imported ones.

Secondly, faced with the ban on consumers goods imports, the rich may go
for excessive spending on other non-tradeable, such as housing or for foreign
consumer goods obtained through illegal channels. There are enough evidence
available in the indian metros on both these counts.

Thirdly, luxuries are to some extent a misinterpreted concept. For refrigeration,

radios, television fell into this category. Today, with the growth of the middle
class to over 100 million, most of these goods are now part of widespread
consumption. Moreover, some of these goods such as personal computers also
have productive aspects-- restraining their imports can be harmful to
productivity and to a growth-oriented modernization of the economy. Apart from
these considerations, the protection of consumer goods production is harmful, from
the usual efficiency consideration. The protection implies that Indian consumers
have to pay higher prices for consumer goods.

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Often, this is synonymous with consumers paying for substandard goods (the
examples on this count are numerous). On top of it, they have access to lesser
variety of consumer goods. The economic theory says both these factors lead to
welfare losses for Indian consumers.

The liberalisation of consumer goods imports will also make the consumers more
choosy and force domestic producers to upgrade the quality of their products.

The classic example of this can be found in the Indian car industry. Before the
advent of Maruti cars in the 1980s, Ambassador cars used to sell same models of
these cars as those in the 1950s.

Now, the consumers preference for Maruti because of its better quality/fuel
efficiency, have forced the makers of Ambassadors to upgrade their products.

The ‘opposer-- to liberalisation’ often argues that domestic consumer goods

industries will not be able to stand in the face of foreign competition and will have
a natural death leading to large scale employment loss in India. This argument,
however, does not stand to close scrutiny. It is likely that liberalisation will
change the composition of the consumer goods industry but will not cause the latter
to shrink. Under the anti-trade bias in the pre-reform era, a larger proportion of our
resources were employed in the capital gods sectors than countries like China, South
Korea, etc.

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 EVOLUTION IN SACHET

One of the biggest evolution in the FMCG Indian sector was the
introduction of ‘Sachet’.

Due to its introduction in the market, now even poor people or lower-class people
have access to costly shampoos, detergents and hair oil. These sachets were also
purchased by middle class people and because of this now these things were easily
portable now. This innovation helped FMCG companies gain more customers
form Tier11 and Tier111 cities. These trends have tremendously evolved this sector.

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 EVOLUTION IN ADVERTISEMENT

Offline marketing, also known as traditional marketing, involves using traditional

media channels such as television, radio, billboards, print ads, and direct mail to reach
consumers. Offline marketing has the advantage of being able to reach a large
audience, especially those who may not be very tech-savvy or who live in areas with
limited internet access. Offline marketing can also be more effective for creating a
strong brand image and brand loyalty, as it allows consumers to physically interact
with the product.

On the other hand, online marketing, also known as digital marketing, involves using
online channels such as social media, search engine marketing, email marketing, and
influencer marketing to reach consumers. Online marketing has the advantage of

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being more cost-effective than offline marketing, as it allows for more targeted
advertising and can be tracked more easily. Online marketing can also provide FMCG
companies with valuable data on consumer behavior and preferences, which can be
used to create more targeted marketing campaigns.

In conclusion, both online and offline marketing have their own benefits for FMCG
companies. While offline marketing can be effective for creating a strong brand image
and reaching a large audience, online marketing can provide valuable data on
consumer behavior and preferences and can be more cost-effective. A balanced mix
of both methods is often the best approach for FMCG companies looking to
effectively reach their target audience.

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 Michael’s porter 5 Force Models

Who is Michael’s porter?

Michael Eugene Porter (born May 23, 1947)[2] is an American academic known for
his theories on economics, business strategy, and social causes

Michael Porter is an economist, researcher, author, advisor, speaker and teacher.

Throughout his career at Harvard Business School, he has brought economic theory
and strategy concepts to bear on many of the most challenging problems facing
corporations, economies and societies, including market competition and company
strategy, economic development, the environment, and health care.

Porter’s theory is that power lead to profits. The wider the most, the greater the
market share, the greater a company’s ability to squeeze profit from competitor,
suppliers, and customers.

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 Michael’s porter 5 Force Models

Intensity of Existing Rivalry

Government policies and regulations can dictate the level of competition within the
industry. When they limit competition, it has a positive impact on the FMCG for the
short period.

When storage costs are low, competitors have a lower risk of having to unload their
inventory all at once. Low storage costs are a positive for FMCG.

Large industries allow multiple firms and produces to prosper without having to steal
market share from each other. Large industry size has a positive impact.

Few competitors mean fewer firms are competing for the same customers and
resources, which is a positive sign in this industry.

When exit barriers are low, weak firms are more likely to leave the market, which will
increase the profits for the remaining firms.

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Threat of Substitutes

There is large pool of products present FMCG industry with different brands. Hence,
there is large threat of substitutes.

Substantial product differentiation. When products and services are very different,
customers are less likely to find comparable product or services that meet their needs.

Bargaining Power of Suppliers

FMCG sector has diverse distribution channels. The more diverse distribution
channels become the less bargaining power a single distributor will have.

Large number of substitute inputs. When there are a large number of substitute inputs,
suppliers have less bargaining leverage over producers. This is due to competition
among substitutes.

1) There are low switching costs of supplier.

2) Inputs have little impact on costs. When inputs are not a big component of
costs, suppliers of those inputs have less bargaining power.

3) Volume plays critical role. When suppliers are reliant on high volumes, they
have less bargaining power, because a producer can threaten to cut volumes
and hurt the supplier’s profits.

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Bargaining Power of Customer

The bargaining power of customers refers to the degree of influence that customers
have on the pricing and terms of sale of products or services. In general, customers
with high bargaining power are able to negotiate lower prices, better terms, and higher
quality products or services, while those with low bargaining power have less
influence on the market

There are number of subsequent products with different brands. Hence, customers
have large pool of variety to pick from.

High price sensitivity. Products with a slight increase in price will lose its market
share as a non-brand loyal customer would switch to another brand which offers
similar benefits at the same prices.

Large number of customers. When there are large numbers of customers, no one
customer tends to have bargaining leverage. Limited bargaining leverage helps
FMCG.

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THREAT OF NEW ENTRANCE

The threat of new entrants is a competitive force that refers to the potential of new
competitors entering a market and challenging existing companies. In general, a
higher threat of new entrants can make an industry more competitive, while a lower
threat can make it less competitive.

Some factors that can increase the threat of new entrants include:

Low barriers to entry: If it is easy for new companies to enter a market, such as low
capital requirements, low economies of scale, or few regulatory barriers, then the
threat of new entrants is higher.

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Lack of differentiation: If existing companies do not have strong brand recognition,
patents, or other unique selling points, then it is easier for new entrants to compete.
Strong brand name has a huge impact in this industry. If strong brands are critical to
compete, then new competitors will have to improve their brand value in order to
effectively compete.

Low switching costs: If customers can easily switch to new companies without
significant costs or hassles, then new entrants are more likely to be successful.

Access to distribution channels: If new entrants can easily access distribution

channels such as retail stores or online marketplaces, then they are more likely to
succeed. Strong distribution network is required. Weak distribution networks mean
goods are more expensive to move around and some goods don’t get to the end

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customer. The expense of building a strong distribution network plays a positive role
by making it costly for new entrants thus, positively affecting FMCG sector.

Economies of scale: If economies of scale are low in a particular industry, then new
entrants can more easily compete with existing companies on cost. Geographic factor
limits the competition. If existing competitors have the best geographical locations,
new competitors will have a competitive disadvantage.

Overall, the threat of new entrants is an important factor to consider when analyzing a
market or industry, as it can affect the level of competition and profitability.
Companies in industries with a high threat of new entrants may need to focus on
differentiation, building brand loyalty, and other strategies to stay competitive.

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IMPACT OF COVID-19 ON THE FMCG SECTOR IN INDIA

The world had seen pandemics like the Spanish, Asian and many more in the past
decades. Pandemic all over the world creates varied impact in terms of socially,
economically, and psychologically. The case here is COVID-19 which has locked the
world for nearly a year, started from Asia, and it affected most of the countries. A
country like India in its developing phase reaction is even higher.

Many sectors have gone through severe changes like loss of jobs in the tourism sector
due to travel restrictions, and decreased demand for travel has affected the aviation
industry. Like most of the sector.

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The COVID-19 pandemic has had a significant impact on the Fast Moving Consumer
Goods (FMCG) sector in India. Here are some of the ways in which the sector has
been affected:

Changes in consumer behavior: The pandemic has led to a shift in consumer behavior,
with people stocking up on essential items like groceries and household goods. This
has led to a surge in demand for FMCG products, particularly those that are
considered essential.

Disruptions in the supply chain: The lockdowns and restrictions on movement put in
place to control the spread of the virus have disrupted the supply chain for FMCG
products. Manufacturers have had to deal with disruptions in raw material supply,
transportation, and logistics, leading to delays in production and distribution.

Changes in distribution channels: The pandemic has led to a shift in distribution

channels, with a greater emphasis on online sales and home delivery. FMCG
companies have had to adapt quickly to this new reality, investing in e-commerce
platforms and last-mile delivery capabilities.

Impact on sales and revenue: The pandemic has had a mixed impact on the sales and
revenue of FMCG companies. While the demand for essential products has surged,
the demand for non-essential products has declined. The closure of retail stores and
shopping malls has also had an impact on sales.

Increased focus on hygiene and safety: The pandemic has led to an increased focus on
hygiene and safety, which has created opportunities for FMCG companies that
produce products like hand sanitizers, disinfectants, and soaps.

Overall, the FMCG sector in India has had to adapt quickly to the challenges posed by
the pandemic. While there have been some negative impacts on sales and revenue, the
sector has also seen some opportunities emerge, particularly in the areas of e-
commerce and hygiene products.

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Fast Moving Consumer Goods (FMCG) has also faced a sudden change and adversely
affected. FMCG is a dynamic sector in the Indian economy with high consumer
demand; due to its consumer demand, it is often purchased and consumed rapidly.
The growth of the industry is increasing day by day with varied forms. The urban
sector is the largest contributor, but in the recent phase, the rural sector contribution is
increasing rapidly.

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In this pandemic recession, it has undergone a drastic stage. The main reasons are
lack of labor, operations limiting to production, increased knowledge in health and
hygiene, boost the demand for sanitizer, hand wash, tissue, etc., and improved
demand for organic goods results in a shift in consumer preference. So there is a surge
in the sectors contribution to the GDP; it is necessary to analyze changes in the sector
to avoid future complications. When comparing the data with before and after the
Covid-19 crisis, the impact is noticeable. This study specifically focused on the
impact of Covid-19 on the FMCG sector.

The COVID-19 pandemic has had a significant impact on the global FMCG market,
and it is expected that the market will continue to evolve and change in the post-
COVID world. Here are some possible market segments that may emerge:

Online sales: The pandemic has accelerated the trend towards online sales, and it is
expected that this trend will continue in the post-COVID world. FMCG companies

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will need to invest in e-commerce platforms and last-mile delivery capabilities to
capture this market segment.

Hygiene and wellness products: The pandemic has led to an increased focus on
hygiene and wellness, and FMCG companies that produce products in these
categories are likely to see increased demand in the post-COVID world.

Sustainable products: The pandemic has highlighted the importance of sustainability,

and consumers are likely to be more conscious of the environmental impact of the
products they use. FMCG companies that offer sustainable products are likely to see
increased demand in the post-COVID world.

Value and affordability: The pandemic has led to an economic downturn, and
consumers are likely to be more price-sensitive. FMCG companies that offer value
and affordability are likely to see increased demand in the post-COVID world.

Local and regional products: The pandemic has highlighted the importance of local
and regional supply chains, and consumers are likely to be more interested in locally
sourced products. FMCG companies that offer local and regional products are likely
to see increased demand in the post-COVID world.

Overall, the post-COVID FMCG market is likely to be characterized by a greater

emphasis on e-commerce, hygiene and wellness products, sustainability, value and
affordability, and local and regional products. FMCG companies that can adapt to
these changing market segments are likely to be successful in the post-COVID world.

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 SWOT ANALYSIS

What is SWOT analysis

SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses,
opportunities, and threats of a business or project. It is a simple yet powerful
technique used to assess both internal and external factors that can impact the success
of a business. SWOT analysis is typically used by organizations to identify areas for
improvement and to develop strategies

Strengths:

Low operational costs: One of the important strength of this sector is low operational
cost.

High demand: The FMCG sector is characterized by high demand for products that
are consumed daily and frequently.

Strong distribution network: The sector has a strong distribution network that reaches
both urban and rural area.

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Brand recognition: FMCG companies invest heavily in building brand recognition,
which can help them retain customers and increase sales. The Presence of strong
brands in Indian FMCG sector not only results in increased sales but also provides an
opportunity in Futures.

Established supply chain: The sector has an established supply chain that ensures
timely delivery of products to retailers and customers.

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Weaknesses:

“Me- too products, which illegally mimic the labels of established brands .These
products narrow the scope of FMCG products in rural and semi- urban markets.

Price sensitivity: Consumers are highly price-sensitive, which can make it difficult for
FMCG companies to maintain profitability.

Short product life cycle: The short product life cycle of FMCG products can make it
challenging for companies to keep up with changing consumer preferences.

Intense competition: The FMCG sector is highly competitive, and companies must
constantly innovate and differentiate their products to stay ahead of the competition.

Dependence on retailers: FMCG companies are highly dependent on retailers for

distribution, which can make it difficult for them to control their brand image.

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Less innovative abilities and systems: Indian FMCG sector, especially small players
are lagging behind in adopting innovative approaches for fulfilling needs of the
consumers.

Low scope for investing in technologies and achieving economies of scale, especially
in small sectors.

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Opportunities:

Growth in emerging markets: Emerging markets offer significant opportunities for

growth for FMCG companies as disposable incomes increase.

Increasing demand for premium products: As disposable incomes increase, there is an

increasing demand for premium FMCG products.

Growing demand for e-commerce: The growth of e-commerce provides FMCG

companies with an opportunity to reach new customers and increase sales.

Increasing demand for health and wellness products: Consumers are becoming more
health-conscious, creating opportunities for FMCG companies that offer health and
wellness products.

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Untapped rural market, changing life style: An un-tapped, huge and
fragmented rural market is an opportunity for FMCG players. The
Penetration level for many FMCG product categories is very low
especially in rural area.

Large domestic market with more population of median age 25 years:

India has large young populations, 54 % of Indians are under 25 years of
age. A rising productive population fuels growth and drives personal
consumption.

High consumer goods spending: The rising income is resulting into high
spending into consumer goods. Ac-cording to a Nielsen report, the
spending on consumer goods set to triple to $ 5 billion by 2015.

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Threats:

Entry of MNCs with liberalization: In the post liberalizations era Indian market has
become highly competitive. Many multinational companies have entered in to the
Indian market

The removal of import restrictions resulted in replacement of domestic brands.

Rural demand is cyclical in nature and also depends upon monsoon to large extent.

Economic downturns: Economic downturns can lead to a decrease in consumer

spending, which can negatively impact FMCG companies.

Changes in consumer preferences: Rapid changes in consumer preferences can make

it difficult for FMCG companies to keep up.

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Rising input costs: Rising input costs can reduce profit margins for FMCG
companies.

Regulatory changes: Changes in regulations, such as increased taxes or restrictions on

advertising, can negatively impact FMCG companies.

New packaging norms made mandatory for all companies to sell products in standard
size packs. FINDINGS & DISCUSSION Indian FMCG sector has almost tripled in
last

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 PEST ANALYSIS

PEST analysis is a strategic planning tool used to evaluate the external macro-
environmental factors that can impact a business or project. PEST stands for Political,
Economic, Social, and Technological factors. This analysis helps businesses to
identify the opportunities and threats in the external environment and to adjust their
strategies accordingly.

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POLITICAL

Tax Structure: Complicated tax structure, high in direct tax and changing tax policies
are challenges for this sector.

Infrastructure Issues: Performance of FMCG sector is very much dependent on

government spending on Agricultural, Power, and Transportation Infrastructure.

Regulatory Constraints: Multiplicity permits and li-censes for various states,

prevailing outdated labor laws, cumbersome and lengthy export procedures are major
constraints.

Policy framework: FDI into Retail sector (single-brand & multi-brand retail), License
rules in setting up of Industry, Changes in Statutory Minimum Price of commodities
are-barriers for growth of this sector.

The Indian government has implemented various policies and regulations to promote
and support the FMCG sector, such as allowing 100% foreign direct investment (FDI)
in the sector.

The implementation of the Goods and Services Tax (GST) has made taxation more
streamlined and uniform across India, benefiting FMCG companies.

However, political instability and corruption can still affect the operations of FMCG
companies in India.

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ECONOMICAL

The increasing disposable income of consumers in India is leading to an increased

demand for premium FMCG products.

However, the FMCG sector in India is highly price-sensitive, and FMCG companies
need to offer products at competitive prices to remain profitable.

1)GDP Growth: Growth of FMCG industry is consistent with the Indian economy. It
has grown by 15 % over past 5 years. It shows good scope for this sector in near
future.

2)Private Consumption: The Indian economy, unlike other economies, has a very high
rate of private consumption (61%).

3) Consumer Income: Over the past few years, India has seen increased economic
growth. The GDP per capita in-come of India increased from 797.26 US dollars in
2006 to 1262.4 US dollars in 2014 . It resulted in increase of consumer expenditure.

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SOCIAL

India has a diverse and multicultural population with varying preferences and tastes,
which can create challenges for FMCG companies in terms of product development
and marketing.

Changing consumer lifestyles, such as increasing urbanization, can lead to changing

demand patterns for FMCG products.

Indian consumers are becoming increasingly health-conscious, creating opportunities

for FMCG companies that offer health and wellness products.

Change in consumer Profile: Rapid urbanization, in-creased literacy, increase in

nuclear families and rising per capita income, have all caused rapid growth and
change in demand patterns, leading to an explosion of new op-opportunities. Around
45 per cent of the population in India is below 20 years of age and the young
population is set to rise further.

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Change in Lifestyle : In past decade changes are taking place in consumption pattern
of Indian consumer with more spending on discretionary ( 52%) than ne-cessities (
e.g. food, clothings). In last decade the apparel, footwear and healthcare segments
have registered highest growth whereas essentials such as cereals, edible oil, fruits
and vegetables shown decline9.

Rural focus: As market is getting saturated, companies are focusing on rural area for
penetration by providing consumers with small sized or single-use packs such as
sachets.

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TECHNOLOGICAL

Effective use of technology is seen only in leading companies like HUL, ITC etc.

E- Commerce will boost FMCG sales in future. More than 150 million consumers
would be influenced by digital by 2020.

The increasing use of e-commerce and digital marketing provides FMCG companies
with an opportunity to reach new customers and increase sales.

Technological advances in packaging, manufacturing, and supply chain management

can improve efficiency and reduce costs for FMCG companies.

However, the adoption of new technologies can be slow in India due to infrastructure
and connectivity issues in some regions.

Overall, the FMCG sector in India has significant opportunities for growth due to a
growing economy, increasing disposable incomes, and a large and diverse population.
However, FMCG companies need to be aware of the various political, economic,
social, and technological factors that can impact their operations and adjust their
strategies accordingly

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 THEORICAL FRAME WORKS

Fundamental analysis is a method of evaluating the intrinsic value of a security or

asset by analyzing its underlying financial and economic factors. This type of analysis
involves examining a company’s financial statements, management, industry trends,
and macroeconomic conditions to determine its potential for growth and profitability.

Fundamental analysis focuses on a company’s financial statements, including its

income statement, balance sheet, and cash flow statement. These statements provide
information on the company’s revenue, expenses, assets, liabilities, and cash flows.
By analyzing these financial statements, an analyst can evaluate the company’s
financial health and performance.

In addition to financial statements, fundamental analysis also considers qualitative

factors such as the quality of a company’s management, its competitive advantages,
and the overall health of the industry in which it operates. This analysis also considers
macroeconomic factors such as interest rates, inflation, and government policies that
can impact the overall economy and the performance of individual companies.

The fundamental analysis focuses on calculating a security’s fair value and compares
it to the market price to determine if the security is overvalued, undervalued, or fairly
valued. By taking into account the economic variables that influence the investment
decision-making, this analysis can estimate future trends based on a firm’s or the
market’s real potential. On a broader scope, we can perform fundamental analysis on
industries or the economy as a whole. The term simply refers to the analysis of the
economic well-being of a financial entity as opposed to only its price movements.

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The term fundamental analysis is used most often in the context of stocks, but we can
perform fundamental analysis on any security, from a bond to a derivative. As long as
we look at the economic fundamentals, we are doing fundamental analysis. For the
purpose of this project, fundamental analysis always is referred to in the context of
stocks.

The goal of fundamental analysis is to determine the intrinsic value of a security or

asset based on its underlying financial and economic factors. This analysis can help
investors make informed decisions about buying or selling securities, and it is
commonly used in the stock market, real estate, and other investment markets.

Financial Ratios: Financial ratios are generally computed from the financial
statement of the company. They tell us about the specific things about
the company, for e.g. dividend payout ratio tells us what percentage of the
earnings, company pays as dividend. Some of the most well-known valuation ratios
are price-to-earnings and price-to-book. Each valuation ratio uses different measures
in its calculations.

For

Example, price-to-book compares the price per share to the company’s book value.

The calculations produced by the valuation ratios are used to gain some
understanding of the company’s value. The ratios are compared on an absolute
basis, in which there are threshold values. For example, in price-to-book,
companies trading below ‘1’ are considered undervalued. Valuation ratios are also
compared to the historical values of the ratio for the company, along
with comparisons to competitors and the overall market itself.

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 OBJECTIVE OF THE STUDY

In this Project, I have done the fundamental analysis of FMCG industry. The
objective of studying fundamental analysis of the FMCG sector is to gain a deep
understanding of the underlying financial and economic factors that can impact the
performance of FMCG companies. This knowledge can be useful for investors,
financial analysts, and other stakeholders who are interested in analyzing and
evaluating FMCG companies for investment purposes.

1)To know about the FMCG industry and its contribution towards Indian economy.

2)To guide investor that in which company’s stock to invest in.

3)To find out some ratios and analyze them for the purpose of investment.

4)To calculate the risk of the stock.

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 LITERATURE REVIEW

According to Dr. Pramod H. Patil, Assistant Professor, School of Management

Sciences, Sub-centre Latur, Volume:5, Issue:2, February 2016, FMCG sector is
recession proof and have created huge employment opportunities in India, hence
becoming one of the key pillars of Indian economy. He says that competition
coming from the unorganized sector can be overcome by increasing
brand awareness and reducing cost through sharing resources such as
distribution network and the future of FMCG sector is bright as favorable
movements in demand and supply side of this sector.

According to Dr. N. Manicka Mahesh, Assistant Professor, school of

Management, Sri Krishna College of Engineering and Technology,
Coimbatore,Volume:6,Issue:5, may 2016, if the foundation of the company is strong
then the performance of the company will be everlasting nature. Pricing of the scrips
do not depend on the euphoria built among the market participants, but the valuation
matters. It is better to trade and invest with the scrips which are fundamentally strong
in nature. According to Dr. G. Sudarsana Reddy, Associate Professor, Department of
Studies Research in Commerce, Volume 4, Issue 1, January 2013, while
taking the investment decision, the investor should take relevant information. The
analysis like fundamental and technical are very important to make better
decision of buying and selling shares. Investing in share market is risky
and long term investment are always more preferable than short term investment so
the investor should prefer long term investment like equity.

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“Fundamental analysis of FMCG sector: A study of selected Indian companies” by S.
S. Vasantha Kumar and S. Meera (2014)

This study analyzed the financial statements of five Indian FMCG companies to
determine their financial health and potential for growth. The authors found that
companies with strong financials and a focus on innovation were more likely to be
successful in the industry.

Overall, the literature suggests that fundamental analysis can provide valuable
insights into the financial health and potential for growth of FMCG companies.
Companies with strong brand recognition, distribution networks, and innovation tend
to be more successful in the industry, while profitability ratios, debt levels, and
management are important factors to consider when evaluating a company’s financial
health.

Fundamental analysis of the FMCG sector: A study of selected Indian companies” by

R. K. Yadav and Ritu Mehra (2018)

This study analyzed the financial statements of five Indian FMCG companies to
determine their financial health and potential for growth. The authors found that the
companies had strong financials and were well-positioned to take advantage of the
growing Indian economy.

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 RESEARCH METHODOLOGY

Problem Statement:

Fundamental analysis with reference to FMCG (Fast moving Consumer Goods)

sector.

Assumption:-

Certain assumptions of this study are given below:

All the data taken is secondary and taken from internet.

I have taken 5 major companies of FMCG industry and have done the analysis on the
basis of those companies only.

In some situations, my personal judgement is involved.

Benefits:

Fundamental analysis helps in:

1.Identifying the intrinsic value of a security.

2.Identifying long-term investment opportunities, since it involves real-time data

Research design: The research design would be a descriptive study that aims to
analyze the financial and economic factors that impact the FMCG sector and
individual companies within it. The study would use secondary data sources,
including financial statements, industry reports, and other relevant data sources.

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Data collection: The study would collect data on financial statements, industry
reports, and other relevant data sources from reputable sources such as stock
exchanges, industry associations, and government agencies. The data would be
collected for a specific time period, such as the past five years, to ensure consistency
and accuracy.

Data analysis: The data would be analyzed using various financial ratios, such as
profitability ratios, liquidity ratios, and solvency ratios, to evaluate the financial health
of individual companies within the FMCG sector. Industry trends and macroeconomic
factors such as interest rates, inflation, and government policies would also be
analyzed to determine their impact on the FMCG sector.

Results and findings: The results of the data analysis would be presented in the form
of tables, graphs, and charts. The findings would highlight the financial health and
potential for growth of individual companies within the FMCG sector, as well as
industry trends and macroeconomic factors that impact the sector as a whole.

Conclusion and recommendations: Based on the findings, the study would draw
conclusions about the financial health and potential for growth of individual
companies within the FMCG sector and the sector as a whole. The study would also
make recommendations for investors and analysts who are interested in investing in
the FMCG sector based on the findings of the analysis.

Limitations: The limitations of the study would be discussed, including potential

biases and limitations in the data sources used. Future research directions could also
be suggested to address any limitations of the study.

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 DATA INTERPRETATION

Data interpretation is a crucial part of fundamental analysis of the FMCG sector. Here
are some steps that can be followed to interpret the data:

Analyze financial ratios: Use financial ratios such as profitability ratios, liquidity
ratios, and solvency ratios to analyze the financial health of the FMCG companies.
Compare the ratios of different companies and industry benchmarks to identify the
strengths and weaknesses of each company.

Look for trends: Identify trends in financial statements such as revenue growth, profit
margins, and return on investment over time. This can help to identify the growth
potential and sustainability of the companies.

Analyze industry trends: Look at industry trends such as market share, competitive
landscape, and consumer behavior to identify the opportunities and threats in the
FMCG sector. This can help to determine which companies are well-positioned to
take advantage of industry trends.

Assess management quality: Analyze the quality of management in the FMCG

companies by looking at factors such as leadership, strategic planning, and financial
discipline. This can help to determine which companies have strong leadership and
are likely to make smart decisions in the future.

Compare with peers: Compare the financial performance of the FMCG companies
with their peers in the industry to identify the strengths and weaknesses of each
company.

Make recommendations: Based on the analysis, make recommendations on which

FMCG companies are strong investments and which ones may be risky. This can help
investors to make informed decisions about which companies to invest in.

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Overall, data interpretation in fundamental analysis of the FMCG sector requires a
thorough understanding of financial ratios, industry trends, and management quality
to make informed recommendations. It is important to consider both quantitative and
qualitative factors in the analysis to gain a holistic understanding of the FMCG
companies.

The study will provide a precise presentation of data and guidelines that will help
investor to finalize his investment decision I have chosen top 5 companies as my
sample. These 5 companies are the biggest in the FMCG sector based on their market
capitalization. These 5 companies are Hindustan Unilever, ITC, Dabur,
Britannia and Godrej consumer products ltd. I am going to analyze their financial
statements like balance sheet, Profit and loss statement, shareholding pattern using
this and will comment on them whether the company is fundamentally strong
or not.

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ITC

DABUR

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HUL

BRITANNIA

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GODREJ CONSUMER PRODUCTS

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P/E RATIO

PE ratio stands for Price-to-Earnings ratio, which is a financial ratio used to measure
the relative value of a company’s stock price to its earnings per share (EPS). It is one
of the most commonly used valuation ratios by investors and analysts to assess the
attractiveness of a company’s stock as an investment.

A high PE ratio indicates that investors are willing to pay more for each dollar of
earnings, indicating that the stock may be overvalued or that investors have high
expectations for the company’s future growth. Conversely, a low PE ratio suggests
that the stock may be undervalued or that investors have low expectations for the
company’s future growth.

It is important to note that the PE ratio should not be used in isolation to make
investment decisions, as it does not provide a complete picture of a company’s
financial health. Other factors such as the company’s growth prospects, industry
trends, and management quality should also be considered.

Price to earnings ratio known as P/E ratio is used for valuing a company that
measures its current share price relative to its Earning per Share (EPS). This ratio is
generally computed to compare different companies of same industry or same
company with its past records. A company with a high P/E ratio usually indicated
positive future performance and investors are willing to pay more for
this company’s shares. Formula to calculate P/E Ratio:

P/E Ratio = Market Value per Share/ Earning per Share

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INTERPRETATION

HUL: As we can see from the chart the P/E Ratio of HUL keeps on increasing over
the years and it is the only company among my sample taken that has a
positive growth of P/E ratio. This is a favorable situation for the investors. The P/E
ratio of HUL is nearly doubled over 5 years.

ITC: The P/E ratio for ITC is rather fluctuating over the years. Like in the 2015 it
declined by 3 points then for two consecutive years it rose than after this in 2018 it
again declined and it is not good for a company who is trying to
retain its shareholders.

DABUR: The P/E ratio for Dabur is not so fluctuating as it has declined only for
1year, i.e. for 2016 and it has keeps on increasing for the rest of years. And also its
P/E ratio for 2018 is very high so investors may want to invest in this company.

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BRITANNIA: the ratio of this company has shown a positive trend over years
except 2016 where it has fallen by 1 point. This ratio for the company has doubled
itself in the past 5 years so maybe we can say that company has some potential and
going on a right track.

Godrej Consumer Products: The P/E ratio of this company is good as

compared to rest of the companies but it had not shown a good trend over the years.
Like From 35% in 2014 it went up to 55% in 2016 and then in 2018 it declined to
47%.So by looking at the trend we cannot say what it is like to be in the future as it is
uncertain but this company does have a good P/E ratio so risky investors May
invest in it. In general a higher ratio means that investors anticipate higher
performance and growth in the future. So P/E ratio of HUL is highest
followed by Dabur and Godrej so according to this ratio HUL is the company in
which you should invest your money into.

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DIVIDEND PAYOUT RATIO

What is dividend payout ratio

Dividend payout ratio is a financial ratio that measures the proportion of earnings
distributed as dividends to shareholders. It is calculated by dividing the total
dividends paid out by a company by its net income for the same period. The result is
expressed as a percentage.

The dividend payout ratio is an important metric for investors who are interested in
receiving regular income from their investments. A higher dividend payout ratio
indicates that a company is distributing a larger percentage of its earnings to
shareholders in the form of dividends. This can be attractive to investors who are
seeking a steady stream of income from their investments.

On the other hand, a lower dividend payout ratio indicates that the company is
retaining a larger portion of its earnings for reinvestment or other purposes. This can
be beneficial for investors who are interested in long-term growth potential, as the
company is able to use its retained earnings to fund growth initiatives or other
strategic investments.

It is important to note that a high dividend payout ratio may not always be sustainable,
as the company may need to retain earnings to fund future growth or other capital
expenditures. Therefore, investors should consider other factors such as the
company’s financial health, growth prospects, and management quality when
evaluating the attractiveness of a company’s dividend payout ratio.

Dividend payout Ratio = Dividend per Share / Earning per share

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58 | P a g e
INTERPRETATION:

HUL: HUL pays a good percentage of dividend to its shareholders i.e. 74.39% in2018
and it is more or less constant over the years which is a very good sign for
shareholders because to pay dividend you have to earn profits and cash. Paying
dividends mean the company is earning good money.

ITC: ITC is not much constant rather it is fluctuating when it comes to paying
dividend. This doesn’t surely means that company is not making profits or earning
money but it can also be the case that the company is earning money but saving it for
the future projects and because of it not giving out dividends. This will make some
shareholders upset.

DABUR: Dividend payout ratio of Dabur in 2014 was 45.4% and in 2018 it
is44.49% and there has been little ups and downs in between. The company has
almost a constant dividend payout ratio which is good for shareholders who are
looking for a steady income.

BRITANNIA: This Company is paying lowest level of dividend compared to

other companies in the sector in my sample. Aged people won’t be happy investing in
this company because generally they are looking for steady income rather than
making an investment seeking capital gains.

Godrej Consumer Products: This Company has done very well in terms of paying
out dividend in 2018. It went straight up to 61% in 2018 from 23% in 2017.Maybe
company has earn some big profits and thus distributing to its shareholders. Constant
high dividend payout ratio will attract more shareholders.

Not all the companies who are huge money or make good profits payout higher
dividend because of the opportunity cost involved with it. They might save this
money for some future projects and pay higher dividends in future. Among above
chosen companies HUL has the highest Dividend payout ratio followed by Godrej
consumers goods.

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RETURN ON EQUITY

Return on equity (ROE) is a financial ratio that measures a company’s profitability by

calculating the amount of net income returned as a percentage of shareholders’ equity.
ROE is an important metric for investors because it shows how effectively a company
is using its shareholders’ equity to generate profits.

A high ROE indicates that a company is generating a strong return on its

shareholders’ equity, which can be attractive to investors. However, it is important to
consider other factors such as the company’s industry, financial health, and growth
prospects, as well as the level of debt that the company has taken on to fund its
operations. A high ROE may also be a signal that a company is taking on too much
debt or not investing enough.

Return on equity ratio is a profitability ratio that tells us about the firm’s ability to
generate profits from its shareholders’ investment. In layman terms, it tells us how
much profit each rupee of common shareholders’ equity generates. It is
also considered as a measure of how effectively management is using company’s
assets or investments to generate profits. A company which have a high ROE ratio
is more successful to generate cash internally. Generally, companies with high
ROE attracts investors and it is a better benchmark when comparing different
companies of same industry. Formula to calculate ROE

ROE = Net Income / Shareholders’ Equity

ROCE
COMPANY 2018 2017 2016 2015 2014
HUL 74.02 69.18 65.88 115.87 118.04
ITC 21.83 22.49 29.94 31.31 33.51
DABUR 25.36 27.29 32.71 32.64 35.33
BRITANNIA 29.29 32.67 44.05 50.37 43.33
GODREJ 21.54 19.38 19.34 19.34 18.67
CONSUMER
PRODUCTS

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INTERPRETATION

HUL: The ROE ratio of HUL is greater than its competitors. Actually it is nearly3-4
times more than its competitors. But if we look at the past trend of the
company, it is not positive over the time. As it was 118% in 2014, it declined to65%
in 2016 and then from there it is rising slowly coming back on the right track.

ITC: The ROE ratio of the ITC continuously declined over the years. It
was33.51% in 2014 and it went down to 21.83% in 2018. This means that company is
not effectively using employing it’s investment to generate more profits which is a red
sign for the shareholders.

DABUR: Just like ITC, ROE of Dabur has declined continuously over the years
except for 2016 where it has risen up by point percentage. This type of stock seem

Unattractive to the investors and usually they refrain themselves from investing in this
type of stock.

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BRITANNIA: ROE of Britannia has risen up by a good percentage in 2015, it
went up to 50% from 43% in 2014. But after 2015, ROE ratio of Britannia has fallen
drastically from 50% in 2015 to 29% in 2018 which is not a good sign for investors.

Godrej Consumer Products: ROE ratio for Godrej was constant for 3
years straight from 2015 to 2017 but in 2018 it has risen up by some points which is a
good sign and shows that management has started using its assets effectively. A
company with higher ROE ratio is more favorable to investors than a company with
low ROE ratio. HUL has the highest ROE ratio in the FMCG sector which investors
find very lucrative and hence will want to invest in this company. No company is
near HUL in terms of ROE ratio but it is followed by Britannia with a ROE ratio of
29.29%.

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NET PROFIT MARGIN

Net profit margin ratio is a financial ratio that measures a company’s profitability by
calculating the percentage of net income generated from total revenues. It is a key
measure of a company’s ability to generate profits from its operations.

The net profit margin ratio is an important measure of a company’s financial

performance because it indicates how much profit a company is generating from each
dollar of revenue. A high net profit margin ratio indicates that a company is efficient
at controlling its costs and generating profits from its operations, which is generally
seen as a positive sign for investors. However, it is important to consider other factors
such as the company’s industry, financial health, and growth prospects when
evaluating a company’s net profit margin ratio.

The net profit margin ratio is calculated by dividing net income by net sales. It

shows us that how much profit is generated as a percentage of revenue. It is also said

as the best indicator of company’s financial health. Investors can look into ratio and

see whether the company’s management is generating enough profit from its sales that

its costs and expenses are being covered.

Formula to calculate Net Profit Margin ratio:

Net Profit Margin ratio = Net Income / Net Sale

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INTERPRETATION

HUL: The NP ratio of HUL is not that great when compared to its other
competitors but it shows a positive trend over the years. It started from 13.18 in year
2014 and now stands at 15.16% in year 2018. This is not a big gap but the company is
improving its net profit over the years.

ITC: The NP ratio of ITC is greatest when compared to its competitors but it is
fluctuating over the years like it is rising and falling in every alternate years and
investors generally refrain themselves from investing in these type of companies but
ITC has a great NP ratio in 2018 so investors will go for this company.

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DABUR: Despite of not having greatest NP ratio if compared to its competitors. ITC
has a very positive growth over the years. Like it started with 13.8% in year2014 as
same as HUL but in 2018 it is 4% stronger than HUL. This means Dabur has done
great work for improving its net profit.

BRITANNIA: Britannia has the lowest NP ratio among its competitors but it has
shown positive growth over the years and its NP is doubled in past 5 year. Despite of
having a smaller NP number it has shown a good growth which is appreciated by
most of the investors.

GODREJ CONSUMER PRODUCTS: The NP numbers of Godrej consumer

group are quite good and it keeps on increasing year after year. It started from
13.84% in2014 and now it stands at 19% in 2018 which is a good sign for investors.

So as can be interpreted form the above data, the Net profit ratio of the FMCG sector
is quite good and all the companies in this sector has shown positive growth over the
years except ITC but it has the greatest Net Profit ratio in the industry followed by
Dabur and Godrej consumer group.

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 SHAREHOLDERS PATTERN

HUL

ITC

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DABUR

BRITANNIA

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GODREJ CONSUMER PRODUCTS

INTERPRETATION

HUL: promoters holding are good almost above 60%, which means company
owner’s have trust on it’s company, even FII(Foreign institutions investors) Have
also have holding. DII(Domestic institutions investors) it’s have been said that if DII
have holding in any company which means that company is good for long term
purpose. Public have 12% of holding which is fair enough.

ITC: Promoter Holding is less than 50% which means it’s not good, but if we see the
DII( DOMESTIC INSTITUTIONS INVESTORS) also have same kinds of holding.
Public have holding of 14% which is good enough.

DABUR: Promoters have good percentage of holding in this company which is

Benefit and FII(FOREIGN INSTITUTIONS INVESTORS) also have holding of
20%, DII(DOMESTIC INSTITUTIONS INVESTORS) holding is less than 10%
which is not good point.

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BRITANNIA: Promoter Holding is almost 50% which is quiet good, but
DII(DOMESTIC INSTITUTIONS INVESTORS) and FII(FOREIGN
INSTITUTIONS INVESTORS) have same % of holding which is good from
investors points of view.

GODREJ CONSUMER PRODUCTS:

Promoters holding is good in this company which is good benefits and also FII
(FOREIGN INSTITUTIONS INVESTORS) and DII (DOMESTIC INSTITUTIONS
INVESTORS) have same % of holding in company which is good for investment for
investors in long term basis.

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 CONCLUSION

Fundamental analysis can be important to investor when they are looking to invest in
company. If they find the financials of the company strong enough then they will
invest in that company. As per the analysis FMCG sector is booming with all the
factors favoring it. It has a revenue of $68.4billion in 2018 and projected revenue for
2020 is $103 billion. The Retail market in India is estimated to reach US$ 1.1 trillion
by 2020 from US$840 billion in 2017, with modern trade expected to grow at 20 per
cent – 25 percent per annum. Government initiatives are helping the FMCG sector in
every way possible like government has allowed 100 per cent Foreign Direct
Investment(FDI) in food processing and single-brand retail and 51 per cent in
multi-brand retail which would bolster employment and supply chain and also
implementation of GST proved to be a boon for FMCG industry I have done the
analysis of 5 top companies of FMCG sector and came up with the result that HUL is
the best stock according to some ratios that are: P/E ratio, Return on Equity ratio and
dividend payout ratio but when I calculated EV/EBITDA of the companies given,
Godrej Consumer Group was the clear winner and according to net profit margin
ratio, an investor should invest into ITC. Well clearly 3 major ratios are telling us
that HUL is best but rest two ratios i.e. EV/EBITDA and Net profit margin ratio tells
us some different story and hence cannot be ignored as these are two important
ratios. So according to me HUL is a good stock to pick as it pays good returns on
equity and highest dividend payout ratio in the industry and also this company
comes under the good brand name i.e. Unilever. If one is looking for
couple of stocks then HUL and GODREJ will be the best because IT Chas lowest
EV/EBITDA and very bad return on equity.

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 RECOMMENDATIONS

Here are some recommendations on fundamental analysis of FMCG stock selection:

Focus on long-term growth potential: FMCG companies that have a strong track
record of consistent revenue growth and profitability, and have a solid business model
with a competitive advantage, are likely to perform well in the long term. Look for
companies that have a strong brand, a diversified product portfolio, and a loyal
customer base.

Evaluate financial health: Evaluate the financial health of FMCG companies by

analyzing their balance sheet, income statement, and cash flow statement. Focus on
key financial ratios such as return on equity, net profit margin ratio, debt-to-equity
ratio, and price-to-earnings ratio.

Monitor industry trends: Stay up-to-date with industry trends and changes in
consumer behavior. FMCG companies that are able to adapt to changing consumer
preferences and trends are more likely to succeed in the long term. Keep an eye on
new product launches, marketing strategies, and technological innovations that may
impact the industry.

Consider dividend payout: FMCG companies that pay consistent and growing
dividends are often attractive to income-oriented investors. Look for companies that
have a history of paying dividends and have a healthy dividend payout ratio.

Diversify your portfolio: Diversification is key to reducing risk in your portfolio.

Consider investing in a range of FMCG companies that have different product
offerings, geographic locations, and market capitalizations.

Conduct regular reviews: Conduct regular reviews of your portfolio to ensure that
your investments align with your investment goals and risk tolerance. Stay up-to-date
with company news, financial reports, and industry developments that may impact
your investments.

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 REFFERENCE

WWW.GOOGLE.COM

WWW.SLIDESHARE.NET

WWW.RESEARCHGATE.NET

WWW.SCRENNER.COM

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