The document discusses Hindustan Unilever Ltd's capital structuring and fund raising. It summarizes HUL's financial performance, noting that it is an unleveraged company with a high dividend payout ratio and return on net worth. The document also analyzes HUL's investments, noting they have grown at a 27% CAGR over 5 years. Finally, the document discusses an potential acquisition of REI Agro Ltd in the food processing sector to extend HUL's food portfolio.

1. Capital Structuring & Fund Raising
Assessment & Analysis
CA. Naman Khanna

2. Industry Company Strategy Comparative AssessmentFlow
• Industry – FMCG
• Company – Hindustan Unilever Ltd.
o Snapshot
o Major Financials
o Financial Analysis
• Industry Comparatives
o Hindustan Unilever Ltd. Vs. FMCG Industry
• Strategy
o Acquisitions & Strategic Investments
• Assessment
o Fund Review
o Suggested Value Investing
Capital Restructuring & Fund Raising
M B F

3. Industry Company Strategy Comparative AssessmentFlow
• FMCG 4th Largest Sector in Indian Economy
• Household & Personal Care Vertical – 48% of FMCG
• Lowest being Food
Capital Restructuring & Fund Raising
M B F
2000
2015
USD 47.3 bn
USD 9 bn
Indian FMCG

4. Industry Company Strategy Comparative AssessmentFlow
• The FMCG Sector in India generated revenues worth USD 47.3 billion in 2015
• Over 2007-15, the sector posted a CAGR of 13 per cent in revenues;
Capital Restructuring & Fund Raising
M B F
Indian FMCG
34.8 36.8 44.9 47.3
103.7
0
20
40
60
80
100
120
2011 2012 2013 2015 2020
CAGR 13%

5. Industry Company Strategy Comparative AssessmentFlow
• Unleveraged Company
• Average Dividend Payout Ratio – 88%
• Heavy Contingent Liability – 29% of Closing Net worth
• Return on Net Worth – 116%
• Investment Delta – 27% CAGR (over 5 years)
• Market Capitalization – INR 1,910 bn
Capital Restructuring & Fund Raising
M B F
Performance

6. Industry Company Strategy Comparative AssessmentFlow
Capital Restructuring & Fund Raising
M B F
Promoters Capital
Promoter Group 67.22% *
FII 14.56%
DII 4.19%
Bodies Corporate 1.24%
Public 12.79%
67.22%
14.56%
4.19%
1.24%
12.79%
* Unilever PLC thru open market increased form 53%
in 13-14

7. Industry Company Strategy Comparative AssessmentFlow
Capital Restructuring & Fund Raising
M B F
Adjusted ROE
Net Worth 3,724 3,276 2,673 3,512 2,659
Investments # 3,278 3,094 2,331 2,438 1,261
Adj. Net Worth 446 182 343 1,074 1,398
PAT 4,315 3,867 3,797 2,691 2,306
PAT (Less Other Income)* 3,033 3,018 2,581 2,294 1,826
Return on Capital Employed 680% 1656% 753% 214% 131%
# Majorly from Associates and Subsidiaries
* Majorly from investments in Associates and Subsidiaries
(INR/Crs.)
10-11 11-12 12-13 13-14 14-15

8. Industry Company Strategy Comparative AssessmentFlow
Capital Restructuring & Fund Raising
M B F
Investment Financing
Investment 1,261 3,278 27%
Gross Block 3,532 4,431 6%
Total Investment 4,793 7,709 13%
Net Worth 2,659 3,724 9%
Net Current Asset 1,059 2,490 24%
Depreciation Fund 1,362 1,973 10%
Total Funding 5,080 8,187 13%
• Strong bargaining power against suppliers
• Liquid Investments
10-11 14-15 CAGR
(INR/Crs.)

9. Industry Company Strategy Comparative AssessmentFlow
• Till 07-08 HUL was a leveraged company
• Market outlook during period was bearish
• Reserves & Surplus in 07-08
• Buy Back in Jan. 2008
• Next buy back in 2011
• Unleveraged since
• Additional Cash flow generated in 2008 & 2012
Capital Restructuring & Fund Raising
M B F
Debt/Equity Ratio – 1.94
Share Price – INR 237.50
INR 1,221 crs.
INR 630 crs.
INR 630 crs.
2009
Real Estate Asset Sale

10. Industry Company Strategy Comparative AssessmentFlow
Capital Restructuring & Fund Raising
M B F
Particulars Industry HUL
Sales Growth 10% 11%
EBDITA Growth 16% 22%
Net Profit Growth 11% 12%
PE Ratio 45 43
EVA/EBDITA 25 52

11. Industry Company Comparative Strategy AssessmentFlow
• Gross Block delta – INR 900 crs (with CAGR 8.80% during 5 yrs)
• Average Cash Balance – INR 564 crs
• Unilever holds 67% in HUL
• Investment increased 2.6X
Capital Restructuring & Fund Raising
M B F
Conservative investing in Fixed Assets
Covers expenditure of 10 days
Royalty Outflow to parent co. INR 735 crs.
Aggressive Strategic investment
Another Buy Back expected

12. Industry Company Comparative Strategy AssessmentFlow
Capital Restructuring & Fund Raising
M B F
Chairman(HUL):
As regards Surplus cash the
company utilizes cash very
prudently and did not intend to
enter into a non-core business.
Shareholder:
What is the
company’s plan
regarding the cash
generated?
79th AGM – 23.07.2012
Shareholder:
What is the yield on
investments?
Chairman(HUL):
The company was managing its
investments very prudently & as
a practice did not invest in high
risk investment. Hence, very
good yield.

13. Industry Company Comparative Strategy AssessmentFlow
• USP:
• Largest Basmati Processing and Marketing company in the globe;
• An integrated player engaged in activities from procuring paddy
to retailing of Basmati Rice;
Capital Restructuring & Fund Raising
M B F
Acquisition Option
REI Agro Ltd.
Sector – Food Processing
Established- 1996

14. Industry Company Comparative Strategy AssessmentFlow
• Financial Aspects:
• Net Worth (31.03.2014); Rs. 2,951 crores
• Current Market Capitalisation Rs. 50 crores (Approx.)
• Shareholding Pattern:
With Indian Promoters – 29%
With Financial Institutions – 14%
Others – 57%
Capital Restructuring & Fund Raising
M B F
Acquisition Option
REI Agro Ltd.
Sector – Food Processing
Established- 1996

15. Industry Company Comparative Strategy AssessmentFlow
Financial Facts
Capital Restructuring & Fund Raising
M B F
Acquisition Option
Factors Mar 14 Mar 13 Mar 12 Mar 11
Net operating Cash Flows (INR/ Crs) 1001 545 440 225
Operating Profit per Share (Rs.) 106 100 56 39
Operating Profit Margin 12% 16% 19% 21%

16. Industry Company Comparative Strategy AssessmentFlow
Capital Restructuring & Fund Raising
M B F
Acquisition Option
Critical Appraisal
• Pros
• HUL presence in processed Wheat Flour and salt can be extended to world class quality
Basmati rice, which will further enhance its position in food processing segment;
• Poor/Cheap Valuation with Heavy Bargaining power;
• Tax Benefit;
• After re-establishment, high prospects for Exports and value addition for HUL;
• Cons
• Acquisition risk of taking over sick company;

17. Thank You….

18. Capital Structuring & Fund Raising
Assessment & Analysis
CA. Naman Khanna