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A REPORT ON FINANCIAL ANALYSIS
OF NESTLE INDIA LTD.
by
Siddharth Bhatnagar
i
ACKNOWLEDGMENT
I am highly indebted to Dr. Suprabha K.R. for her guidance and for giving me the opportunity
to work on this captivating project ‘Financial Analysis of Nestle India Ltd.’ her constant
supervision and help played a key role in the successful completion of this project.
I would like to express my special gratitude and thanks to my team members: Aditya, Elissa,
Navitha and Sandhya for providing valuable and timely inputs in developing the project.
My thanks and appreciations also go to my colleagues and people who have willingly helped
me out with their abilities.
Siddharth Bhatnagar
ii
CONTENTS
Particulars Page No.
Acknowledgement i
List of Tables & Figures iii
Chapter-1: Introduction 1
Chapter-2: Company Analysis 5
2.1 Comparative Balance Sheets 5
2.2 Common Size Balance Sheet 10
2.3 Ratio Analysis 12
2.4 Trend Analysis 13
2.5 BCG Matrix Analysis 18
2.6 Impact of Maggi Controversy 19
Chapter-3: Industry Analysis 20
3.1 Indian FMCG Industry at a Glance 20
3.2 Industry Ratios and Comparisons 20
3.3 Tax Rates revision after GST 21
3.4 Porter’s 9 Forces Industry Analysis 22
3.5 Market Breakup 24
3.6 Growth Rates: Past and Future 26
3.7 Compound Annual Growth Rate (CAGR) 27
Chapter-4: Conclusion 28
References
Annexure A
Annexure B
Annexure C
iii
LIST OF TABLES & FIGURES
Table/Figure Number and Name Page Number
Table 2.1.1: Comparative Balance Sheet for 2015-2016 5
Table 2.1.2: Comparative Balance Sheet for 2014-2015 6
Table 2.1.3: Comparative Balance Sheet for 2013-2014 7
Table 2.1.4: Comparative Balance Sheet for 2012-2013 8
Table 2.1.5: Comparative Balance Sheet for 2011-2012 9
Table 2.2.1: Common Size Balance Sheet for 2012-2016 10
Table 2.3.1: Ratio Analysis for 2012-2016 12
Table 3.3.1: Tax Rates Revision after GST 21
Fig. 2.4.1: Net Sales of Nestle for 2012-2016 13
Fig. 2.4.2: Fixed Assets of Nestle for 2012-2016 13
Fig. 2.4.3: Market Capitalization by Nestle for 2012-2016 14
Fig. 2.4.4: Employee Base of Nestle for 2012-2016 14
Fig. 2.4.5: Shareholders’ Fund in Nestle for 2012-2016 15
Fig. 2.4.6: Shareholders’ Fund in Nestle for 2012-2016 15
Fig. 2.4.7: Liabilities of Nestle for 2012-2016 16
Fig. 2.4.8: Assets of Nestle for 2012-2016 16
Fig. 2.4.9: Liabilities and Assets of Nestle for 2012-2016 17
Fig. 2.4.10: Profit after Tax of Nestle for 2012-2016 17
Fig. 2.5.1: BCG Matrix for Nestle India 18
Fig. 3.5.1: Urban-Rural Market Share 24
Fig. 3.5.2: Market Breakup by Revenue for FY 16 25
Fig. 3.5.3: Rural FMCG Market in India 25
Fig. 3.7.1: CAGR of FMCG Sector from 2007-2016 27
1
1. INTRODUCTION
Nestlé S.A. is a Swiss transnational food and drink company headquartered in Vevey, Vaud,
Switzerland. It is the largest food company in the world, measured by revenues and other
metrics, since 2014. It ranked No. 64 on the Fortune Global 500 in 2017 and No. 33 on the
2016 edition of the Forbes Global 2000 list of largest public companies.
Nestlé's products include baby food, medical food, bottled water, breakfast cereals, coffee and
tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks. Twenty-nine
of Nestlé's brands have annual sales of over CHF1 billion (about US$1.1 billion), including
Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi. Nestlé has 447
factories, operates in 194 countries, and employs around 339,000 people. It is one of the main
shareholders of L'Oreal, the world's largest cosmetics company.
Nestlé was formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in
1866 by brothers George and Charles Page, and Farine Lactée Henri Nestlé, founded in 1866
by Henri Nestlé (born Heinrich Nestle). The company grew significantly during the First World
War and again following the Second World War, expanding its offerings beyond its early
condensed milk and infant formula products. The company has made a number of corporate
acquisitions, including Crosse & Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree
Mackintosh in 1988, and Gerber in 2007.
Nestlé has a primary listing on the SIX Swiss Exchange and is a constituent of the Swiss Market
Index. It has a secondary listing on Euronext.
Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. With eight factories and a large
number of co-packers, Nestlé India is a vibrant Company that provides consumers in India with
products of global standards and is committed to long-term sustainable growth and shareholder
satisfaction.
The Company insists on honesty, integrity and fairness in all aspects of its business and expects
the same in its relationships. This has earned it the trust and respect of every strata of society
that it comes in contact with and is acknowledged amongst India's 'Most Respected Companies'
and amongst the 'Top Wealth Creators of India'.
2
The Nestlé Corporate Business Principles are at the basis of our Company’s culture, developed
over 150 years, which reflects the ideas of fairness, honesty and long-term thinking.
Nestlé is the world’s largest food and beverage company. They have more than 2000 brands
ranging from global icons to local favorites, and are present in 191 countries around the world.
Nestlé's relationship with India dates back to 1912, when it began trading as The Nestlé Anglo-
Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in
the Indian market.
After India's independence in 1947, the economic policies of the Indian Government
emphasized the need for local production. Nestlé responded to India's aspirations by forming a
company in India and set up its first factory in 1961 at Moga, Punjab, where the Government
wanted Nestlé to develop the milk economy. Progress in Moga required the introduction of
Nestlé's Agricultural Services to educate, advice and help the farmer in a variety of aspects.
From increasing the milk yield of their cows through improved dairy farming methods, to
irrigation, scientific crop management practices and helping with the procurement of bank
loans.
Nestlé set up milk collection centers that would not only ensure prompt collection and pay fair
prices, but also instil amongst the community, a confidence in the dairy business. Progress
involved the creation of prosperity on an on-going and sustainable basis that has resulted in not
just the transformation of Moga into a prosperous and vibrant milk district today, but a thriving
hub of industrial activity, as well.
Nestlé has been a partner in India's growth for over a century now and has built a very special
relationship of trust and commitment with the people of India. The Company's activities in
India have facilitated direct and indirect employment and provides livelihood to about one
million people including farmers, suppliers of packaging materials, services and other goods.
The Company continuously focuses its efforts to better understand the changing lifestyles of
India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness
through its product offerings. The culture of innovation and renovation within the Company
and access to the Nestlé Group's proprietary technology/Brands expertise and the extensive
centralized Research and Development facilities gives it a distinct advantage in these efforts.
3
It helps the Company to create value that can be sustained over the long term by offering
consumers a wide variety of high quality, safe food products at affordable prices.
Nestlé India manufactures products of truly international quality under internationally famous
brand names such as N Nescafé, Maggi, Milkybar, Kit Kat, Bar-One, Milkmaid and Nestea
and in recent years the Company has also introduced products of daily consumption and use
such as Nestlé Milk, Nestlé Slim Milk, Nestlé Dahi and Nestlé Jeera Raita.
Nestlé India is a responsible organization and facilitates initiatives that help to improve the
quality of life in the communities where it operates.
4
CORPORATE INFORMATION
BOARD OF DIRECTORS
Suresh Narayanan – Chairman & Managing Director
(DIN 07246738)
Shobinder Duggal – Director - Finance & Control and CFO
(DIN 00039580)
Aristides Protonotarios – Director - Technical
(DIN 06546858)
Rajya Vardhan Kanoria – Independent Non-Executive Director
(DIN:00003792)
Ashok Kumar Mahindra – Independent Non-Executive Director
(DIN:00916746)
Rakesh Mohan – Independent Non-Executive Director
(DIN:02790744)
Ravinder Narain – Independent Non-Executive Director
(DIN:00059197)
Swati A. Piramal – Independent Non-Executive Director
(DIN:00067125)
BOARD COMMITTEES:
AUDIT COMMITTEE
Ashok Kumar Mahindra – Chairman
Rajya Vardhan Kanoria – Member
Ravinder Narain – Member
STAKEHOLDERS RELATIONSHIP COMMITTEE
Ravinder Narain – Chairman
Shobinder Duggal – Member
Rajya Vardhan Kanoria – Member
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Swati A. Piramal – Chairperson
Ravinder Narain – Member
Suresh Narayanan – Member
NOMINATION AND REMUNERATION COMMITTEE
Rajya Vardhan Kanoria – Chairman
Ashok Kumar Mahindra – Member
Ravinder Narain – Member
RISK MANAGEMENT COMMITTEE
Shobinder Duggal – Chairman
Aristides Protonotarios – Member
Anurag Dikshit – Member
(Head of Treasury & M&A)
AUDITORS
A.F. Ferguson & Co., Chartered Accountants,
9, Scindia House,
Kasturba Gandhi Marg,
New Delhi 110 001
BANKERS
Axis Bank Limited
Bank of America N.A.
Citibank N.A.
Deutsche Bank AG
HDFC Bank Limited
ICICI Bank Limited
JP Morgan Chase Bank N.A.
Punjab National Bank
State Bank of Hyderabad
State Bank of India
Standard Chartered Bank
Yes Bank Limited
CORPORATE IDENTITY NUMBER
L15202DL1959PLC003786
MANAGEMENT COMMITTEE
Suresh Narayanan – Chairman & Managing Director
Aristides Protonotarios – Technical
Amit Narain – Human Resources
Arvind Bhandari – Dairy
Ashish Pande – Supply Chain
B. Kannan – Centre of Expertise - Sales
B. Murli – Legal & Company Secretary
Chandrasekar Radhakrishnan – Communications
Fabrice Cavallin – Nutrition
Hari Nariani – ISIT/Nestlé Business Excellence
Maarten Geraets – Foods
Nayla Sioufi – Beverages
Nikhil Chand – Chocolates and Confectionery
Ravi Ramchandran – Sales
Sanjay Khajuria – Corporate Affairs
Shobinder Duggal – Finance & Control and CFO
Ulrich Martin – Nestlé Professional
REGISTERED OFFICE
M-5A, Connaught Circus, New Delhi - 110 001
HEAD OFFICE
“Nestlé House”
Jacaranda Marg, ‘M’ Block,
DLF City, Phase II,
Gurgaon - 122 002 (Haryana)
WEBSITE
www.nestle.in
INVESTOR EMAIL ID
investor@in.nestle.com
BRANCH SALES OFFICES
– KRM Plaza, 1st
Floor, North Tower No. 2, Harrington Road, Chetpet, Chennai - 600
031
– Tower "C", 12th
Floor, DLF IT Park, 08, Major Arterial Road, Block –
AF, New Town, Rajarhat, Kolkata - 700 156
– 1st
Floor, ICC Chambers, Near Saki Vihar Telephone Exchange, Saki Vihar Road,
Powai, Mumbai - 400 072 (Maharashtra)
– M-5A, Connaught Circus, New Delhi - 110 001
FACTORIES
– Village Maulinguem (North), Bicholim Taluka - 403 504 (Goa)
– Plot No. 294-297, Usgao Industrial Area, Ponda - 403 406 (Goa)
– Unit I & II - Patti Kalyana, Kiwana Road, Samalkha - 132 101 Dist Panipat
(Haryana)
– Industrial Area, Tahliwal, District – Una - 174 301 (Himachal Pradesh)
– Industrial Area, Nanjangud - 571 301 Mysore District (Karnataka)
– Ludhiana - Ferozepur Road, Near Kingwah Canal, Moga - 142 001 (Punjab)
– P.O. Cherambadi - 643 205 Dist. Nilgiris (Tamil Nadu)
– Plot No. – 1A, Sector No. - 1, Integrated Industrial Estate, SIDCUL, Pantnagar-
263145, Dist. Udhamsingh Nagar (Uttarakhand)
REGISTRAR & TRANSFER AGENTS
M/s Alankit Assignments Limited
1E/13, Jhandewalan Extension,
New Delhi, 110 055
Tel No : 011 - 42541234, 23541234
Fax No : 011 - 41540064
LISTING OF EQUITY SHARES (Listing Fees paid)
BSE Limited, Mumbai, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai -
400 001 (Scrip Code : 500790)
58TH
ANNUAL GENERAL MEETING
Thursday, 11th
May, 2017 at 10.00 A.M. at
Air Force Auditorium, Subroto Park, New Delhi - 110 010
5
2. COMPANY ANALYSIS
2.1 COMPARATIVE BALANCE SHEETS
Table 2.1.1: Comparative Balance Sheet for 2015-2016
2016 2015
Abs.
Value
%
Change
EQUITY AND
LIABILITIES
(in million) (in million)
SHAREHOLDERS’ FUNDS
Share capital 964.2 964.2 0 0.00
Reserves and surplus 29,172.8 27,214.2 1958.6 7.20
30,137.0 28,178.4 1958.6 6.95
NON - CURRENT
LIABILITIES
Long-term borrowings 331.5 167.9 163.6 97.44
Deferred tax liabilities (net) 1,542.1 1,729.3 (187.2) (10.83)
Long-term provisions 19,722.1 15,971.7 3750.4 23.48
21,595.7 17,868.9 3726.8 20.86
CURRENT LIABILITIES
Short-term borrowings 9.4 (9.4) (100.00)
Trade payables
Payable to micro enterprises and
small enterprises
48.8 37.5 11.3 30.13
Other payables 7,942.8 7,456.6 486.2 6.52
Other current liabilities 5,128.4 4,659.3 469.1 10.07
Short-term provisions 3,207.0 2,653.2 553.8 20.87
16,327.0 14,816.0 1511 10.20
68,059.7 60,863.3 7196.4 11.82
ASSETS
NON - CURRENT ASSETS
Fixed assets
Tangible assets 27,294.6 28,978.5 (1683.9) (5.81)
Capital work-in-progress 1,881.7 2,307.9 (426.2) (18.47)
29,176.3 31,286.4 (2110.1) (6.74)
Non-current investments 4,743.1 3,417.8 1325.3 38.78
Long-term loans and advances 1,350.4 1,304.3 46.1 3.53
35,269.8 36,008.5 (738.7) (2.05)
CURRENT ASSETS
Current investments 12,750.4 9,831.4 2919 29.69
Inventories 9,431.8 8,208.1 1223.7 14.91
Trade receivables 979.3 784.2 195.1 24.88
Cash and bank balances 8,800.0 4,995.5 3804.5 76.16
Short-term loans and
advances
570.2 888.4 (318.2) (35.82)
Other current assets 258.2 147.2 111 75.41
32,789.9 24,854.8 7935.1 31.93
68,059.7 60,863.3 7196.4 11.82
6
Table 2.1.2: Comparative Balance Sheet for 2014-2015
2015 2014
Abs.
Value
%
Change
EQUITY AND
LIABILITIES
(in million) (in million)
SHAREHOLDERS’ FUNDS
Share capital 964.2 964.2 0 0
Reserves and surplus 27,214.2 27,407.9 (193.7) (0.71)
28,178.4 28,372.1 (193.7) (0.68)
NON - CURRENT
LIABILITIES
Long-term borrowings 167.9 154.6 13.3 8.6
Deferred tax liabilities (net) 1,729.3 2,227.2 (497.9) (22.4)
Long-term provisions 15,971.7 13,886.6 2085.1 15.02
17,868.9 16,268.4 1600.5 9.84
CURRENT LIABILITIES
Short-term borrowings 9.4 41.1 (31.7) (77.13)
Trade payables
Payable to micro enterprises and
small enterprises
37.5 24.1 13.4 55.60
Other payables 7,456.6 7,263.0 193.6 2.67
Other current liabilities 4,659.3 4,095.7 563.6 13.76
Short-term provisions 2,653.2 2,130.6 522.6 24.53
14,816.0 13,554.5 1261.5 9.31
60,863.3 58,195.0 2668.3 4.59
ASSETS
NON - CURRENT ASSETS
Fixed assets
Tangible assets 28,978.5 31,766.4 (2787.9) (8.78)
Capital work-in-progress 2,307.9 2,447.8 (139.9) (5.72)
Non-current investments 31,286.4 34,214.2 (2927.8) (8.56)
3,417.8 3,044.6 373.2 12.26
Long-term loans and advances 1,304.3 1,299.5 4.8 0.37
36,008.5 38,558.3 (2549.8) (6.61)
CURRENT ASSETS
Current investments 9,831.4 5,073.6 4757.8 93.78
Inventories 8,208.1 8,441.0 (232.9) (2.76)
Trade receivables 784.2 991.0 (206.8) (20.87)
Cash and bank balances 4,995.5 4,458.2 537.3 12.05
Short-term loans and
advances
888.4 520.7 367.7 70.62
Other current assets 147.2 152.2 (5) (3.29)
24,854.8 19,636.7 5218.1 26.57
60,863.3 58,195.0 2668.3 4.59
7
Table 2.1.3: Comparative Balance Sheet for 2013-2014
2014 2013
Abs.
Value
%
Change
EQUITY AND
LIABILITIES
(in million) (in million)
SHAREHOLDERS’ FUNDS
Share capital 964.2 964.2 0 0.00
Reserves and surplus 27,407.9 22,723.3 4684.6 20.62
28,372.1 23,687.5 4684.6 19.78
NON - CURRENT
LIABILITIES
Long-term borrowings 154.6 11,894.8 (11740) (98.70)
Deferred tax liabilities (net) 2,227.2 2,154.7 72.5 3.36
Long-term provisions 13,886.6 11,933.9 1952.7 16.36
16,268.4 25,983.4 (9715) (37.39)
CURRENT LIABILITIES
Short-term borrowings 41.1 0.1 41 41000.00
Trade payables 7,263.0 6,330.4 932.6 14.73
Other current liabilities 4,095.7 5,002.5 (906.8) (18.13)
Short-term provisions 2,130.6 2,138.8 (8.2) (0.38)
13,554.5 13,471.8 82.7 0.61
58,195.0 63,142.7 (4947.7) (7.84)
ASSETS
NON - CURRENT ASSETS
Fixed assets
Tangible assets 31,766.4 33,693.1 (1926.7) (5.72)
Capital work-in-progress 2,447.8 2,947.1 (499.3) (16.94)
Non-current investments 34,214.2 36,640.2 (2426) (6.62)
3,044.6 2,241.2 803.4 35.85
Long-term loans and advances 1,299.5 1,239.4 60.1 4.85
38,558.3 40,125.5 (1567.2) (3.91)
CURRENT ASSETS
Current investments 5,073.6 6,269.6 (1196) (19.08)
Inventories 8,441.0 7,359.3 1081.7 14.70
Trade receivables 991.0 842.7 148.3 17.60
Cash and bank balances 4,458.2 7,493.6 (3035.4) (40.51)
Short-term loans and
advances
520.7 1,013.6 (492.9) (48.63)
Other current assets 152.2 38.4 113.8 296.35
19,636.7 23,017.2 (3380.5) (14.69)
58,195.0 63,142.7 (4947.7) (7.84)
8
Table 2.1.4: Comparative Balance Sheet for 2012-2013
2013 2012
Abs.
Value
%
Change
EQUITY AND
LIABILITIES
(in million) (in million)
SHAREHOLDERS’ FUNDS
Share capital 964.2 964.2 0 0.00
Reserves and surplus 22,723.3 17,019.9 5703.4 33.51
23,687.5 17,984.1 5703.4 31.71
NON - CURRENT
LIABILITIES
Long-term borrowings 11,894.8 10,499.5 1395.3 13.29
Deferred tax liabilities (net) 2,154.7 1,620.8 533.9 32.94
Long-term provisions 11,933.9 10,147.5 1786.4 17.60
25,983.4 22,267.8 3715.6 16.69
CURRENT LIABILITIES
Short-term borrowings 0.1 2.4 (2.3) (95.83)
Trade payables 6,330.4 5,394.0 936.4 17.36
Other current liabilities 5,002.5 5,580.3 (577.8) (10.35)
Short-term provisions 2,138.8 410.6 1728.2 420.90
13,471.8 11,387.3 2084.5 18.31
63,142.7 51,639.2 11503.5 22.28
ASSETS
NON - CURRENT ASSETS
Fixed assets
Tangible assets 33,693.1 32,042.7 1650.4 5.15
Capital work-in-progress 2,947.1 3,440.8 (493.7) (14.35)
Non-current investments 36,640.2 35,483.5 1156.7 3.26
2,241.2 -
Long-term loans and advances 1,239.4 1,254.5 (15.1) (1.20)
Other non-current assets 4.7 -
40,125.5 36,738.0 3387.5 9.22
CURRENT ASSETS
Current investments 6,269.6 3,648.6 2621 71.84
Inventories 7,359.3 7,455.8 (96.5) (1.29)
Trade receivables 842.7 875.7 (33) (3.77)
Cash and bank balances 7,493.6 2,369.6 5124 216.24
Short-term loans and
advances
1,013.6 541.5 472.1 87.18
Other current assets 38.4 10.0 28.4 284.00
23,017.2 14,901.2 8116 54.47
63,142.7 51,639.2 11503.5 22.28
9
Table 2.1.5: Comparative Balance Sheet for 2011-2012
2012 2011
Abs.
Value
%
Change
EQUITY AND
LIABILITIES
(in million) (in million)
SHAREHOLDERS’ FUNDS
Share capital 964.2 964.2 0 0.00
Reserves and surplus 17,019.9 11,775.4 5244.5 44.54
17,984.1 12,739.6 5244.5 41.17
NON - CURRENT
LIABILITIES
Long-term borrowings 10,499.5 7,249.5 3250 44.83
Deferred tax liabilities (net) 1,620.8 502.2 1118.6 222.74
Long-term provisions 10,147.5 8,851.3 1296.2 14.64
22,267.8 16,603.0 5664.8 34.12
CURRENT LIABILITIES
Short-term borrowings 2.4 2,459.2 (2456.8) (99.90)
Trade payables 5,394.0 4,808.3 585.7 12.18
Other current liabilities 5,580.3 5,287.0 293.3 5.55
Short-term provisions 410.6 2,120.7 (1710.1) (80.64)
11,387.3 14,675.2 (3287.9) (22.40)
51,639.2 44,017.8 7621.4 17.31
ASSETS
NON - CURRENT ASSETS
Fixed assets
Tangible assets 32,042.7 15,757.5 16285.2 103.35
Capital work-in-progress 3,440.8 13,717.8 (10277) (74.92)
35,483.5 29,475.3 6008.2 20.38
Long-term loans and advances 1,254.5 1,639.1 (384.6) (23.46)
36,738.0 31,114.4 5623.6 18.07
CURRENT ASSETS
Current investments 3,648.6 1,343.7 2304.9 171.53
Inventories 7,455.8 7,340.4 115.4 1.57
Trade receivables 875.7 1,154.2 (278.5) (24.13)
Cash and bank balances 2,369.6 2,272.1 97.5 4.29
Short-term loans and
advances
541.5 790.0 (248.5) (31.46)
Other current assets 10.0 3.0 7 233.33
14,901.2 12,903.4 1997.8 15.48
51,639.2 44,017.8 7621.4 17.31
10
2.2 COMMON SIZE BALANCE SHEET
Table 2.2.1: Common Size Balance Sheet for 2012-2016
2016 Pr. 2015 Pr. 2014 Pr. 2013 Pr. 2012 Pr.
EQUITY AND
LIABILITIES (mill) (%) (mill) (%) (mill) (%) (mill) (%) (mill) (%)
SHAREHOLDERS
’ FUNDS
Share capital 964.2 1.4 964.2 1.6 964.2 1.7 964.2 1.5 964.2 1.9
Reserves and surplus 29,172.8 42.9 27,214.2 44.7 27,407.9 47.1 22,723.3 36.0 17,019.9 33.0
30,137.0 44.3 28,178.4 46.3 28,372.1 48.8 23,687.5 37.5 17,984.1 34.8
NON - CURRENT
LIABILITIES
Long-term
borrowings
331.5 0.5 167.9 0.3 154.6 0.3 11,894.8 18.8 10,499.5 20.3
Deferred tax
liabilities (net)
1,542.1 2.3 1,729.3 2.8 2,227.2 3.8 2,154.7 3.4 1,620.8 3.1
Long-term
provisions
19,722.1 29.0 15,971.7 26.2 13,886.6 23.9 11,933.9 18.9 10,147.5 19.7
21,595.7 31.7 17,868.9 29.4 16,268.4 28.0 25,983.4 41.2 22,267.8 43.1
CURRENT LIAB.
Short-term
borrowings
0.0 9.4 0.0 41.1 0.1 0.1 0.0 2.4 0.0
Trade payables 0.0 0.0 7,263.0 12.5 6,330.4 10.0 5,394.0 10.4
Payable to micro
enterprises and small
enterprises
48.8 0.1 37.5 0.1 0.0 0.0 0.0
Other payables 7,942.8 11.7 7,456.6 12.3 0.0 0.0 0.0
Other current
liabilities
5,128.4 7.5 4,659.3 7.7 4,095.7 7.0 5,002.5 7.9 5,580.3 10.8
Short-term
provisions
3,207.0 4.7 2,653.2 4.4 2,130.6 3.7 2,138.8 3.4 410.6 0.8
16,327.0 24.0 14,816.0 24.3 13,554.5 23.3 13,471.8 21.3 11,387.3 22.1
68,059.7 100 60,863.3 100 58,195.0 100 63,142.7 100 51,639.2 100
ASSETS
NON - CURRENT
ASSETS
Fixed assets
Tangible assets 27,294.6 40.1 28,978.5 47.6 31,766.4 54.6 33,693.1 53.4 32,042.7 62.1
Capital WIP 1,881.7 2.8 2,307.9 3.8 2,447.8 4.2 2,947.1 4.7 3,440.8 6.7
29,176.3 42.9 31,286.4 51.4 34,214.2 58.8 36,640.2 58.0 35,483.5 68.7
Non-current Invest’s 4,743.1 7.0 3,417.8 5.6 3,044.6 5.2 2,241.2 3.5 -
Long-term loans and
advances
1,350.4 2.0 1,304.3 2.1 1,299.5 2.2 1,239.4 2.0 1,254.5 2.4
35,269.8 51.8 36,008.5 59.2 38,558.3 66.3 40,125.5 63.5 36,738.0 71.2
11
CURRENT
ASSETS
Current investments 12,750.4 18.7 9,831.4 16.2 5,073.6 8.7 6,269.6 9.9 3,648.6 7.1
Inventories 9,431.8 13.9 8,208.1 13.5 8,441.0 14.5 7,359.3 11.7 7,455.8 14.4
Trade receivables 979.3 1.4 784.2 1.3 991.0 1.7 842.7 1.3 875.7 1.7
Cash and bank
balances
8,800.0 12.9 4,995.5 8.2 4,458.2 7.7 7,493.6 11.9 2,369.6 4.6
Short-term loans and
advances
570.2 0.8 888.4 1.5 520.7 0.9 1,013.6 1.6 541.5 1.0
Other current assets 258.2 0.4 147.2 0.2 152.2 0.3 38.4 0.1 10 0.0
32,789.9 48.2 24,854.8 40.8 19,636.7 33.7 23,017.2 36.5 14,901.2 28.9
68,059.7 100 60,863.3 100 58,195.0 100 63,142.7 100 51,639.2 100
12
2.3 RATIO ANALYSIS
Table 2.3.1: Ratio Analysis for 2012-2016
2016 2015 2014 2013 2012 Average
Current Liabilities (millions) 16,327.00 14,816.00 13,554.50 13,471.80 11,387.30 13,911.32
Current Assets (millions) 32,789.90 24,854.80 19,636.70 23,017.20 14,901.20 23,039.96
Current Ratio 2.01 1.68 1.45 1.71 1.31 1.63
Percentage Change 23.18 2.90 (11.14) 4.80 (19.74) 0.00
Current Liabilities (millions) 16,327.00 14,816.00 13,554.50 13,471.80 11,387.30 13,911.32
Quick Assets (millions) 23,358.10 16,646.70 11,195.70 15,657.90 7,445.40 14,860.76
Quick Ratio 1.43 1.12 0.83 1.16 0.65 1.07
Percentage Change 33.92 5.18 (22.68) 8.80 (38.79) 0.00
Dividend/Share (₹) 63 48.5 63 48.5 48.5 54.3
Earnings/Share (₹) 96.1 58.42 122.87 115.87 110.76 100.804
Pay-out Ratio 0.66 0.83 0.51 0.42 0.44 0.54
Percentage Change 21.70 54.12 (4.81) (22.30) (18.71) 0.00
Sales (millions) 91,592.80 81,232.70 98,062.70 90,619.00 83,022.60 88,905.96
Inventory (millions) 9,431.80 8,208.10 8,441.00 7,359.30 7,455.80 8,179.20
Inventory Turnover (times) 9.71 9.90 11.62 12.31 11.14 10.93
Percentage Change (11.19) (9.49) 6.24 12.61 1.83 0.00
Sales (millions) 91,592.80 81,232.70 98,062.70 90,619.00 83,022.60 88,905.96
Net Assets (millions) 68,059.70 60,863.30 58,195.00 63,142.70 51,639.20 60,379.98
Assets Turnover (times) 1.35 1.33 1.69 1.44 1.61 1.47
Percentage Change (8.60) (9.36) 14.44 (2.53) 9.19 0.00
Net Assets (millions) 68,059.70 60,863.30 58,195.00 63,142.70 51,639.20 60,379.98
Net Worth (millions) 30,018.70 27,896.20 28,291.00 23,588.10 17,915.60 25,541.92
Capital-Equity Ratio 2.27 2.18 2.06 2.68 2.88 2.36
Percentage Change (4.09) (7.71) (12.98) 13.24 21.93 0.00
Profit after Tax (millions)
9,265.40 5,632.70 11,846.90 11,171.30 10,679.30 9,719.12
Net Worth (millions) 30,018.70 27,896.20 28,291.00 23,588.10 17,915.60 25,541.92
Return on Equity 0.31 0.20 0.42 0.47 0.60 0.38
Percentage Change (18.89) (46.94) 10.05 24.46 56.65 0.00
Total Debt (millions) 21,595.70 17,868.90 16,268.40 25,983.40 22,267.80 20,796.84
Total Equity (millions) 30,018.70 27,896.20 28,291.00 23,588.10 17,915.60 25,541.92
Debt-Equity Ratio 0.72 0.64 0.58 1.10 1.24 0.81
Percentage Change (11.64) (21.33) (29.38) 35.29 52.65 0.00
13
2.4 TREND ANALYSIS
Fig. 2.4.1: Net Sales of Nestle for 2012-2016
Fig. 2.4.2: Fixed Assets of Nestle for 2012-2016
14
Fig. 2.4.3: Market Capitalization by Nestle for 2012-2016
Fig. 2.4.4: Employee Base of Nestle for 2012-2016
15
Fig. 2.4.5: Shareholders’ Fund in Nestle for 2012-2016
Fig. 2.4.6: Shareholders’ Fund in Nestle for 2012-2016
16
Fig. 2.4.7: Liabilities of Nestle for 2012-2016
Fig. 2.4.8: Assets of Nestle for 2012-2016
17
Fig. 2.4.9: Liabilities and Assets of Nestle for 2012-2016
Fig. 2.4.10: Profit after Tax of Nestle for 2012-2016
18
2.5 BCG MATRIX ANALYSIS
Fig. 2.5.1: BCG Matrix for Nestle India
19
2.6 IMPACT OF MAGGI CONTROVERSY
The Maggi controversy has shattered many hearts, Maggi was not merely a product or a brand
in India, Indian consumer who is not used to suspect food standards, felt a deep sense of
betrayal by one of the most trusted food brand in India.
FSSAI noted three major violations:
1. Presence of lead detected in the product in excess of the maximum permissible levels
of 2.5 ppm.
2. Release of a non-standardized food product in the market, viz. “Maggi Oats Masala,
Noodles with Tastemaker” without risk assessment and grant of product approval.
3. Misleading labelling information on the package reading “No added MSG”.
Lab testing controversies:
1. MSG (Monosodium Glutamate): Testing found some MSG in Maggi noodles. The
packet stated “No added MSG”. However MSG naturally occurs in hydrolysed
groundnut protein, onion powder and wheat flour. Maggi offered to remove the words
“No added MSG” from the package to overcome the objection.
2. Lead: Out of the 13 samples tested by Delhi authorities, 10 of them had lead content
exceeding this limit. Testing outside of India (Singapore USA) resulted in reports that
Maggi noodles are safe. The court mandated testing to be done at three specific
laboratories (Punjab, Hyderabad and Jaipur) where Maggi was found safe. Some lead
occurs naturally in plants and soil. Some lead is found in Indian spices, although within
acceptable limits.
The effect of the Maggi noodle controversy on different aspects is listed below:
 Net Sales: Net sales reduced to 81,232.70 million ₹ in 2015 from 98,062.70 million ₹
in 2016.
 Profits: Profit reduced to 8,136.30 million ₹ in 2015 from 14,415.40 million ₹ in 2016.
 Earnings per Share: EPS reduced to 58.4 ₹ in 2015 from 122.9 ₹ in 2016.
 Dividends per Share: DPS reduced to 48.5 ₹ in 2015 from 63 ₹ in 2016.
20
3. INDUSTRY ANALYSIS
3.1 INDIAN FMCG INDUSTRY AT A GLANCE
 India’s FMCG Market size in 2017 is 51.4 billion $
 Rural FMCG Market size in 2017 is 29.7 billion $
 FMCG market in India is expected to grow at a CAGR of 20.6 per cent and is expected
to reach 103.7 billion $ by 2020
 FMCG Sector’s Contribution to India’s GDP in 2017 is 3.1
3.2 INDUSTRY RATIOS & COMPARISON
 Current Ratio
 The Current Ratio for Nestle is 2.01:1
 The Industry average is 1.98:1
 Nestlé’s current ratio is above the industry average.
 It means Nestle has a greater ability to use its current assets to pay short term
debts, on average, compared to other businesses within the same industry.
 Quick Ratio
 The Quick Ratio for Nestle is 1.43:1
 The Industry average is 1.27:1
 Therefore Nestle’s quick ratio is above the Industry Average
 It means that Nestle has a relatively higher liquidity position than its
competitors.
 Nestle, on average, has a greater ability to use its current assets (excluding
inventory) to pay or meet its short-term debt, compared to other businesses
within the same industry
 Debt Equity Ratio
 The Debt Equity Ratio for Nestle is 0.72:1
 The Industry average is 0.46:1
 Therefore Nestle’s debt equity ratio is above the Industry Average.
21
 This indicates that Nestle heavily rely on its creditors to finance its operations
whereas other companies in the same industry don’t.
 Stock Turnover
 The Stock Turnover for Nestle is 9.71 times
 The Industry average is 8.49 times
 Therefore Nestle’s stock turnover is above the Industry Average
 Nestle’s high stock turnover ratio implies either strong sales and/or large
discounts.
3.3 TAX RATES REVISION AFTER GST
Table 3.3.1: Tax Rates Revision after GST
Product Pre GST Post GST
Soaps 27% 18%
Hair Oil 27% 18%
Sugar Confectionery 21% 18%
Toothpaste 27% 18%
Toothpowder 17% 12%
Wheat 2.5% 0%
Rice 2.75% 0%
Unbranded Flour 3.5% 0%
Mineral Water 27% 18%
Vegetable Oils 6% 5%
Milk Powder 6% 5%
Sugar 6% 5%
Tea 6% 5%
*CST, Octroi, entry tax has not been considered in the pre-GST rate
22
3.4 PORTER’S 9-FORCES INDUSTRY ANALYSIS
1. Threat to/of New Entrant
 The Indian FMCG Industry is characterized with modest entry and exit barriers.
 Huge investments in setting up distribution networks, brand promotion and competition
from established companies restricts new entry.
2. Threat of Substitutes
 Multiple brands positioned with narrow product differentiation. Companies entering a
category tries to gain market share and compete on pricing which increases products
substitution.
 Threat of substitute is high in the industry.
3. Buyer’s Bargaining Power
 High brand loyalty for some products, thereby discouraging customers’ product shift.
 Low switching cost and aggressive marketing strategies under intense competition
induce customers to switch between products, thereby driving value for money deals
for consumers.
4. Supplier’s Bargaining Power
 Prices are generally governed by international commodity markets, making most
FMCG companies price takers.
 Due to the long term relationships with suppliers etc., FMCG companies negotiate
better rates during times of high input cost inflation.
5. Industry Competition
 Competitiveness among the Indian FMCG players is high.
 The industry is highly fragmented thus advertising spends continue to grow and
marketing budgets as well as strategies are becoming more aggressive. Private brands
offered by retailers at a discount to mainframe brands act as competition to
undifferentiated and weak brands.
23
6. Political Shift
 Infrastructure Issues: FMCG sector is very much dependent on government spending
on Agricultural, Power, and Transportation Infrastructure.
 Regulatory Factors: Separate permits and licenses for various states, prevailing labour
laws and complex & lengthy export procedures are major factors.
 Policy Framework: FDI into Retail sector, License rules in setting up of Industry,
Changes in Statutory Minimum Price of commodities are barriers for growth of this
sector.
7. Economical Shift
 GDP Growth: Growth of FMCG industry is consistent with the Indian economy. It has
grown over past 5 years which shows good scope for this sector in near future.
 Inflation: Inflation in India has not affected the Indian FMCG sector much.
 Consumer Income: Over the past years, there is an increased economic growth
resulting in increased consumer expenditure.
8. Socio-Cultural Shift
 Change in Consumer Profile: Rapid urbanization, increased literacy, increase in
nuclear families and rising per capita income, have caused rapid growth and change in
demand patterns.
 Change in Lifestyle: There is a change in consumption pattern of Indian consumer with
more spending on luxurious products (52%) than necessities.
 Rural Focus: Market is getting saturated, companies are focusing on rural areas by
providing consumers with small sized or single-use packs such as sachets.
9. Technological Shift
 Technological Advancement: Effective use of technology is seen only in leading
companies like HUL, ITC etc.
 E-Commerce: It’ll boost FMCG sales in future due to cheaper and effective outreach.
 Digitalization: 150 million consumers would be influenced by digital by 2020 and this
will increase the market by more than $45 billion in FMCG categories.
24
3.5 MARKET BREAKUP
The FMCG sector has grown from US$ 31.6 billion in 2011 to US$ 49 billion in 2016. The
sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 20.6 per
cent to reach US$ 103.7 billion by 2020.
In 2016-17, revenue for FMCG sector have reached US$ 49 billion and is expected to grow at
9-9.5 per cent in FY18 supported by expectations of the total consumption expenditure
reaching nearly US$ 3,600 billion by 2020 from US$ 1,469 billion in 2015.
Fig. 3.5.1: Urban-Rural Market Share
From Fig. 3.5.1 accounting for revenue share of around 60 percent, urban segment is the largest
contributor to the overall revenue generated by the FMCG sector in India and recorded a market
size of around usd29.4 billion in 2016.rural segments are growing at a rapid pace and accounted
revenue share of 40 percent in overall revenues recorded by the FMCG sector in India. FMCG
products account for 50 percent of total rural spending.
25
Hair care is the leading segment, accounting for 23 percent of the overall market revenue. Food
products is the second leading segment of the sector accounting for 19 percent followed by the
health supplements and oral care which has a market share of 16 percent. OTC & Ethical is
accounting 9 percent, home care has a market share of 6 percent and followed by the digestive
has a market share of 7 percent of the overall revenue.
Fig. 3.5.2: Market Breakup by Revenue for FY 16
As shown in Fig. 3.5.3, the FMCG sector in rural and urban India is estimated to cross 100
billion by 2025, the rural FMCG market is anticipated to expand at a CAGR of 17.41 percent
to USD 100 billion during 2009-25.
Fig. 3.5.3: Rural FMCG Market in India
26
3.6 GROWTH RATES: PAST & FUTURE
Growth Rate in the Past
 Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian
economy with Household and Personal Care accounting for 50 per cent of FMCG sales
in India.
 The urban segment is the largest contributor to the overall revenue generated by the
FMCG sector in India and recorded a market size of around US$ 29.4 billion in 2016-
17.
 It has grown at an annual average of 15 % over the last decade.
 The past 3 to 5 years has seen fluctuations in the growth rate of FMCG industry due to
inflation, demonetization and GST.
 The latest growth figure was 5.1 % in the urban market and 6.9% in the rural market.
Expected Growth Rate
 Amidst implementation of Goods and Services Tax (GST) and demonetization, the
Indian FMCG industry is managing its way through disruptions post festive months
recording a higher demand led growth.
 Between 2016 and 2020, the Indian FMCG market is expected to grow at a CAGR of
nearly 21%.
 Rise in rural consumption is all set to drive the FMCG market. It is estimated to grow
at a CAGR of 14.6% during the period 2016-2025. A major reason behind the spurt is
explained by an increased disposable income that has grown at a CAGR of 4.1%.
 Penetration of modern retail is expected to see a substantial rise at a CAGR of 24.6%
by 2020.
 Modern trade is a big ticket item that is expected to grow at 20% year on year, likely to
boost revenues for FMCG players.
 With the rising adoption of sales technologies and increased mobility usage, the
FMCG distribution system has become more transparent, structured and easily
compliable.
27
3.7 COMPOUND ANNUAL GROWTH RATE (CAGR)
 The FMCG sector in India generated revenues worth US$ 49 billion in 2016.
 Over 2007-2016, the FMCG Sector posted a CAGR of 11.9% in revenues.
 In 2016-17, revenues for FMCG sector have reached US$ 49 billion and is expected to
grow at 9-9.5% in FY 2018.
 According to the report of IBEF (India Brand Equity Foundation), in the long run, with
the system becoming more transparent and easily compliable, Demonetization is
expected to benefit organized players in the FMCG Industry.
Fig. 3.7.1: CAGR of FMCG Sector from 2007-2016
28
4. CONCLUSION
 This sector will continue to see growth as it depends on an ever-increasing internal
market for consumption, and demand for these goods remains more or less constant,
irrespective of recession or inflation.
 Availability of key raw materials, cheaper labor costs and presence across the entire
value chain gives Indian FMCG industry a competitive advantage.
 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.
 Increasing Indian population, particularly the middle class and the rural segments,
presents an opportunity to makers of branded products to convert consumers to branded
products.
 Nestle India was on its way to continuous growth from 2012 to 2016 but the Maggi
Noodles controversy not only dented the company’s image internationally but also gave
the competitors the chance to acquire the market share from Nestle.
 Financial year 2015 (Jan to Dec) proved to be a year worth forgetting as due to the
Maggi noodles their revenues decreased and their involvement with the various law
agencies resulted in drastically less profits.
 Nestle being a global player is trying its best to come out of the ‘MaggiGate’ and in
fact recorded increased sales, revenues and profits in the subsequent financial year
2016.
 There was very low impact of demonetization and GST on Nestle but most of the
negative impact it went through was due to the Maggi noodles controversy, but Nestle
now has almost recovered from the ‘shock’ and is again on its way towards growth.
References
https://www.ibef.org/industry/fmcg.aspx
http://www.careratings.com/upload/NewsFiles/SplAnalysis/FMCG_July%202017.pdf
https://www.ibef.org/download/FMCG-July-2017.pdf
https://www.nestle.in/investors/stockandfinancials/annualreports
https://www.hul.co.in/investor-relations/annual-reports/
https://www.dabur.com/in/en-us/investor/financial-information/reports/annual-reports
http://www.pidilite.com/annual-reports/
http://britannia.co.in/investors
http://indianexpress.com/article/explained/explained-noodles-in-the-soup/
https://www.researchgate.net/publication/314216580_An_Overview_of_Indian_FMCG_Sect
or
http://info.shine.com/industry/fmcg/6.html
Annexure-A: Combined Balance Sheet for 2012-2016
2016 2015 2014 2013 2012
EQUITY AND
LIABILITIES (mill) (mill) (mill) (mill) (mill)
SHAREHOLDERS
’ FUNDS
Share capital 964.2 964.2 964.2 964.2 964.2
Reserves and surplus 29,172.8 27,214.2 27,407.9 22,723.3 17,019.9
30,137.0 28,178.4 28,372.1 23,687.5 17,984.1
NON - CURRENT
LIABILITIES
Long-term
borrowings
331.5 167.9 154.6 11,894.8 10,499.5
Deferred tax
liabilities (net)
1,542.1 1,729.3 2,227.2 2,154.7 1,620.8
Long-term
provisions
19,722.1 15,971.7 13,886.6 11,933.9 10,147.5
21,595.7 17,868.9 16,268.4 25,983.4 22,267.8
CURRENT
LIABILITIES
Short-term
borrowings
9.4 41.1 0.1 2.4
Trade payables 7,263.0 6,330.4 5,394.0
Payable to micro
enterprises and small
enterprises
48.8 37.5
Other payables 7,942.8 7,456.6
Other current
liabilities
5,128.4 4,659.3 4,095.7 5,002.5 5,580.3
Short-term
provisions
3,207.0 2,653.2 2,130.6 2,138.8 410.6
16,327.0 14,816.0 13,554.5 13,471.8 11,387.3
68,059.7 60,863.3 58,195.0 63,142.7 51,639.2
ASSETS
NON - CURRENT
ASSETS
Fixed assets
Tangible assets 27,294.6 28,978.5 31,766.4 33,693.1 32,042.7
Capital WIP 1,881.7 2,307.9 2,447.8 2,947.1 3,440.8
29,176.3 31,286.4 34,214.2 36,640.2 35,483.5
Non-current Invest’s 4,743.1 3,417.8 3,044.6 2,241.2 -
Long-term loans and
advances
1,350.4 1,304.3 1,299.5 1,239.4 1,254.5
35,269.8 36,008.5 38,558.3 40,125.5 36,738.0
CURRENT
ASSETS
Current investments 12,750.4 9,831.4 5,073.6 6,269.6 3,648.6
Inventories 9,431.8 8,208.1 8,441.0 7,359.3 7,455.8
Trade receivables 979.3 784.2 991.0 842.7 875.7
Cash and bank
balances
8,800.0 4,995.5 4,458.2 7,493.6 2,369.6
Short-term loans and
advances
570.2 888.4 520.7 1,013.6 541.5
Other current assets 258.2 147.2 152.2 38.4 10
32,789.9 24,854.8 19,636.7 23,017.2 14,901.2
68,059.7 60,863.3 58,195.0 63,142.7 51,639.2
Annexure-B: Comparison of Industry’s & Nestle India’s Ratios
Company Current
Ratio
Quick
Ratio
Debt-Equity
Ratio
Stock Turnover
(times)
Pidilite 3.07 2.36 0.03 7.79
Nestle India 2.01 1.43 0.72 9.71
Dabur 1.48 0.98 0.43 8.83
HUL 1.31 0.98 0.16 13.86
Britannia 1.06 0.48 1.8 13.96
ITC 3.59 2.44 0.01 5.1
Himalaya Int. 1.53 0.69 1.13 1.85
Emami 0.52 0.26 0.1 13.6
Asian Paints 1.89 1.13 0.07 5.76
Marico 2.52 1.15 0.1 4.48
Industry Avg. 1.90 1.19 0.46 8.49
Difference 0.11 0.24 0.27 1.22
Perc. Diff. 5.90 20.17 58.24 14.32
Annexure-C: Key Figures for 2012-2016
Particulars (Million ₹) 2016 2015 2014 2013 2012
Domestic Sales 88,338.00 77,949.10 94,853.20 87,537.40 81,561.90
Export Sales 6,579.20 6,355.30 6,441.80 6,261.30 4,256.90
Less: Excise duty 3,324.40 3,071.70 3,232.30 3,179.70 2,796.20
Net Sales 91,592.80 81,232.70 98,062.70 90,619.00 83,022.60
Other Operating Income 645.2 520.4 485.7 391.5 322.7
Total revenue from operations 92,238.00 81,753.10 98,548.40 91,010.50 83,345.30
Total Expenses 76,519.30 68,415.60 80,622.90 74,068.70 67,944.90
Profit From Operations 15,718.70 13,337.50 17,925.50 16,941.80 15,400.40
Other income 1,493.90 1,100.90 873.2 830.9 310.3
Finance costs 35.1 32.9 142.3 365.1 266
Employee benefit expense due to
passage of time
874 753.2 648.3 558.1 558.1
Net provision for contingencies
(others)
1,266.70 301.5 249.5 207.4 -81.5
Profit Before Exceptional Items
And Taxation
15,036.80 13,350.80 17,758.60 16,642.10 15,526.20
Exceptional items -
Charge/(Credit)
307.8 5,008.40 -70 -138.1 -
Corporate social responsibility
expense
313.6 206.1 85.1 0 -
Profit before taxation 14,415.40 8,136.30 17,743.50 16,780.20 15,526.20
Tax expense 5,150.00 2,503.60 5,896.60 5,608.90 4,846.90
Profit after taxation 9,265.40 5,632.70 11,846.90 11,171.30 10,679.30
Earnings per Share (₹) 96.1 58.4 122.9 115.9 110.8
Dividends per Share (₹) 63 48.5 63 48.5 48.5

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Financial Analysis of Nestle India Ltd.

  • 1. A REPORT ON FINANCIAL ANALYSIS OF NESTLE INDIA LTD. by Siddharth Bhatnagar
  • 2. i ACKNOWLEDGMENT I am highly indebted to Dr. Suprabha K.R. for her guidance and for giving me the opportunity to work on this captivating project ‘Financial Analysis of Nestle India Ltd.’ her constant supervision and help played a key role in the successful completion of this project. I would like to express my special gratitude and thanks to my team members: Aditya, Elissa, Navitha and Sandhya for providing valuable and timely inputs in developing the project. My thanks and appreciations also go to my colleagues and people who have willingly helped me out with their abilities. Siddharth Bhatnagar
  • 3. ii CONTENTS Particulars Page No. Acknowledgement i List of Tables & Figures iii Chapter-1: Introduction 1 Chapter-2: Company Analysis 5 2.1 Comparative Balance Sheets 5 2.2 Common Size Balance Sheet 10 2.3 Ratio Analysis 12 2.4 Trend Analysis 13 2.5 BCG Matrix Analysis 18 2.6 Impact of Maggi Controversy 19 Chapter-3: Industry Analysis 20 3.1 Indian FMCG Industry at a Glance 20 3.2 Industry Ratios and Comparisons 20 3.3 Tax Rates revision after GST 21 3.4 Porter’s 9 Forces Industry Analysis 22 3.5 Market Breakup 24 3.6 Growth Rates: Past and Future 26 3.7 Compound Annual Growth Rate (CAGR) 27 Chapter-4: Conclusion 28 References Annexure A Annexure B Annexure C
  • 4. iii LIST OF TABLES & FIGURES Table/Figure Number and Name Page Number Table 2.1.1: Comparative Balance Sheet for 2015-2016 5 Table 2.1.2: Comparative Balance Sheet for 2014-2015 6 Table 2.1.3: Comparative Balance Sheet for 2013-2014 7 Table 2.1.4: Comparative Balance Sheet for 2012-2013 8 Table 2.1.5: Comparative Balance Sheet for 2011-2012 9 Table 2.2.1: Common Size Balance Sheet for 2012-2016 10 Table 2.3.1: Ratio Analysis for 2012-2016 12 Table 3.3.1: Tax Rates Revision after GST 21 Fig. 2.4.1: Net Sales of Nestle for 2012-2016 13 Fig. 2.4.2: Fixed Assets of Nestle for 2012-2016 13 Fig. 2.4.3: Market Capitalization by Nestle for 2012-2016 14 Fig. 2.4.4: Employee Base of Nestle for 2012-2016 14 Fig. 2.4.5: Shareholders’ Fund in Nestle for 2012-2016 15 Fig. 2.4.6: Shareholders’ Fund in Nestle for 2012-2016 15 Fig. 2.4.7: Liabilities of Nestle for 2012-2016 16 Fig. 2.4.8: Assets of Nestle for 2012-2016 16 Fig. 2.4.9: Liabilities and Assets of Nestle for 2012-2016 17 Fig. 2.4.10: Profit after Tax of Nestle for 2012-2016 17 Fig. 2.5.1: BCG Matrix for Nestle India 18 Fig. 3.5.1: Urban-Rural Market Share 24 Fig. 3.5.2: Market Breakup by Revenue for FY 16 25 Fig. 3.5.3: Rural FMCG Market in India 25 Fig. 3.7.1: CAGR of FMCG Sector from 2007-2016 27
  • 5. 1 1. INTRODUCTION Nestlé S.A. is a Swiss transnational food and drink company headquartered in Vevey, Vaud, Switzerland. It is the largest food company in the world, measured by revenues and other metrics, since 2014. It ranked No. 64 on the Fortune Global 500 in 2017 and No. 33 on the 2016 edition of the Forbes Global 2000 list of largest public companies. Nestlé's products include baby food, medical food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks. Twenty-nine of Nestlé's brands have annual sales of over CHF1 billion (about US$1.1 billion), including Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel, and Maggi. Nestlé has 447 factories, operates in 194 countries, and employs around 339,000 people. It is one of the main shareholders of L'Oreal, the world's largest cosmetics company. Nestlé was formed in 1905 by the merger of the Anglo-Swiss Milk Company, established in 1866 by brothers George and Charles Page, and Farine Lactée Henri Nestlé, founded in 1866 by Henri Nestlé (born Heinrich Nestle). The company grew significantly during the First World War and again following the Second World War, expanding its offerings beyond its early condensed milk and infant formula products. The company has made a number of corporate acquisitions, including Crosse & Blackwell in 1950, Findus in 1963, Libby's in 1971, Rowntree Mackintosh in 1988, and Gerber in 2007. Nestlé has a primary listing on the SIX Swiss Exchange and is a constituent of the Swiss Market Index. It has a secondary listing on Euronext. Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. With eight factories and a large number of co-packers, Nestlé India is a vibrant Company that provides consumers in India with products of global standards and is committed to long-term sustainable growth and shareholder satisfaction. The Company insists on honesty, integrity and fairness in all aspects of its business and expects the same in its relationships. This has earned it the trust and respect of every strata of society that it comes in contact with and is acknowledged amongst India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India'.
  • 6. 2 The Nestlé Corporate Business Principles are at the basis of our Company’s culture, developed over 150 years, which reflects the ideas of fairness, honesty and long-term thinking. Nestlé is the world’s largest food and beverage company. They have more than 2000 brands ranging from global icons to local favorites, and are present in 191 countries around the world. Nestlé's relationship with India dates back to 1912, when it began trading as The Nestlé Anglo- Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. After India's independence in 1947, the economic policies of the Indian Government emphasized the need for local production. Nestlé responded to India's aspirations by forming a company in India and set up its first factory in 1961 at Moga, Punjab, where the Government wanted Nestlé to develop the milk economy. Progress in Moga required the introduction of Nestlé's Agricultural Services to educate, advice and help the farmer in a variety of aspects. From increasing the milk yield of their cows through improved dairy farming methods, to irrigation, scientific crop management practices and helping with the procurement of bank loans. Nestlé set up milk collection centers that would not only ensure prompt collection and pay fair prices, but also instil amongst the community, a confidence in the dairy business. Progress involved the creation of prosperity on an on-going and sustainable basis that has resulted in not just the transformation of Moga into a prosperous and vibrant milk district today, but a thriving hub of industrial activity, as well. Nestlé has been a partner in India's growth for over a century now and has built a very special relationship of trust and commitment with the people of India. The Company's activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods. The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. The culture of innovation and renovation within the Company and access to the Nestlé Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts.
  • 7. 3 It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices. Nestlé India manufactures products of truly international quality under internationally famous brand names such as N Nescafé, Maggi, Milkybar, Kit Kat, Bar-One, Milkmaid and Nestea and in recent years the Company has also introduced products of daily consumption and use such as Nestlé Milk, Nestlé Slim Milk, Nestlé Dahi and Nestlé Jeera Raita. Nestlé India is a responsible organization and facilitates initiatives that help to improve the quality of life in the communities where it operates.
  • 8. 4 CORPORATE INFORMATION BOARD OF DIRECTORS Suresh Narayanan – Chairman & Managing Director (DIN 07246738) Shobinder Duggal – Director - Finance & Control and CFO (DIN 00039580) Aristides Protonotarios – Director - Technical (DIN 06546858) Rajya Vardhan Kanoria – Independent Non-Executive Director (DIN:00003792) Ashok Kumar Mahindra – Independent Non-Executive Director (DIN:00916746) Rakesh Mohan – Independent Non-Executive Director (DIN:02790744) Ravinder Narain – Independent Non-Executive Director (DIN:00059197) Swati A. Piramal – Independent Non-Executive Director (DIN:00067125) BOARD COMMITTEES: AUDIT COMMITTEE Ashok Kumar Mahindra – Chairman Rajya Vardhan Kanoria – Member Ravinder Narain – Member STAKEHOLDERS RELATIONSHIP COMMITTEE Ravinder Narain – Chairman Shobinder Duggal – Member Rajya Vardhan Kanoria – Member CORPORATE SOCIAL RESPONSIBILITY COMMITTEE Swati A. Piramal – Chairperson Ravinder Narain – Member Suresh Narayanan – Member NOMINATION AND REMUNERATION COMMITTEE Rajya Vardhan Kanoria – Chairman Ashok Kumar Mahindra – Member Ravinder Narain – Member RISK MANAGEMENT COMMITTEE Shobinder Duggal – Chairman Aristides Protonotarios – Member Anurag Dikshit – Member (Head of Treasury & M&A) AUDITORS A.F. Ferguson & Co., Chartered Accountants, 9, Scindia House, Kasturba Gandhi Marg, New Delhi 110 001 BANKERS Axis Bank Limited Bank of America N.A. Citibank N.A. Deutsche Bank AG HDFC Bank Limited ICICI Bank Limited JP Morgan Chase Bank N.A. Punjab National Bank State Bank of Hyderabad State Bank of India Standard Chartered Bank Yes Bank Limited CORPORATE IDENTITY NUMBER L15202DL1959PLC003786 MANAGEMENT COMMITTEE Suresh Narayanan – Chairman & Managing Director Aristides Protonotarios – Technical Amit Narain – Human Resources Arvind Bhandari – Dairy Ashish Pande – Supply Chain B. Kannan – Centre of Expertise - Sales B. Murli – Legal & Company Secretary Chandrasekar Radhakrishnan – Communications Fabrice Cavallin – Nutrition Hari Nariani – ISIT/Nestlé Business Excellence Maarten Geraets – Foods Nayla Sioufi – Beverages Nikhil Chand – Chocolates and Confectionery Ravi Ramchandran – Sales Sanjay Khajuria – Corporate Affairs Shobinder Duggal – Finance & Control and CFO Ulrich Martin – Nestlé Professional REGISTERED OFFICE M-5A, Connaught Circus, New Delhi - 110 001 HEAD OFFICE “Nestlé House” Jacaranda Marg, ‘M’ Block, DLF City, Phase II, Gurgaon - 122 002 (Haryana) WEBSITE www.nestle.in INVESTOR EMAIL ID investor@in.nestle.com BRANCH SALES OFFICES – KRM Plaza, 1st Floor, North Tower No. 2, Harrington Road, Chetpet, Chennai - 600 031 – Tower "C", 12th Floor, DLF IT Park, 08, Major Arterial Road, Block – AF, New Town, Rajarhat, Kolkata - 700 156 – 1st Floor, ICC Chambers, Near Saki Vihar Telephone Exchange, Saki Vihar Road, Powai, Mumbai - 400 072 (Maharashtra) – M-5A, Connaught Circus, New Delhi - 110 001 FACTORIES – Village Maulinguem (North), Bicholim Taluka - 403 504 (Goa) – Plot No. 294-297, Usgao Industrial Area, Ponda - 403 406 (Goa) – Unit I & II - Patti Kalyana, Kiwana Road, Samalkha - 132 101 Dist Panipat (Haryana) – Industrial Area, Tahliwal, District – Una - 174 301 (Himachal Pradesh) – Industrial Area, Nanjangud - 571 301 Mysore District (Karnataka) – Ludhiana - Ferozepur Road, Near Kingwah Canal, Moga - 142 001 (Punjab) – P.O. Cherambadi - 643 205 Dist. Nilgiris (Tamil Nadu) – Plot No. – 1A, Sector No. - 1, Integrated Industrial Estate, SIDCUL, Pantnagar- 263145, Dist. Udhamsingh Nagar (Uttarakhand) REGISTRAR & TRANSFER AGENTS M/s Alankit Assignments Limited 1E/13, Jhandewalan Extension, New Delhi, 110 055 Tel No : 011 - 42541234, 23541234 Fax No : 011 - 41540064 LISTING OF EQUITY SHARES (Listing Fees paid) BSE Limited, Mumbai, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001 (Scrip Code : 500790) 58TH ANNUAL GENERAL MEETING Thursday, 11th May, 2017 at 10.00 A.M. at Air Force Auditorium, Subroto Park, New Delhi - 110 010
  • 9. 5 2. COMPANY ANALYSIS 2.1 COMPARATIVE BALANCE SHEETS Table 2.1.1: Comparative Balance Sheet for 2015-2016 2016 2015 Abs. Value % Change EQUITY AND LIABILITIES (in million) (in million) SHAREHOLDERS’ FUNDS Share capital 964.2 964.2 0 0.00 Reserves and surplus 29,172.8 27,214.2 1958.6 7.20 30,137.0 28,178.4 1958.6 6.95 NON - CURRENT LIABILITIES Long-term borrowings 331.5 167.9 163.6 97.44 Deferred tax liabilities (net) 1,542.1 1,729.3 (187.2) (10.83) Long-term provisions 19,722.1 15,971.7 3750.4 23.48 21,595.7 17,868.9 3726.8 20.86 CURRENT LIABILITIES Short-term borrowings 9.4 (9.4) (100.00) Trade payables Payable to micro enterprises and small enterprises 48.8 37.5 11.3 30.13 Other payables 7,942.8 7,456.6 486.2 6.52 Other current liabilities 5,128.4 4,659.3 469.1 10.07 Short-term provisions 3,207.0 2,653.2 553.8 20.87 16,327.0 14,816.0 1511 10.20 68,059.7 60,863.3 7196.4 11.82 ASSETS NON - CURRENT ASSETS Fixed assets Tangible assets 27,294.6 28,978.5 (1683.9) (5.81) Capital work-in-progress 1,881.7 2,307.9 (426.2) (18.47) 29,176.3 31,286.4 (2110.1) (6.74) Non-current investments 4,743.1 3,417.8 1325.3 38.78 Long-term loans and advances 1,350.4 1,304.3 46.1 3.53 35,269.8 36,008.5 (738.7) (2.05) CURRENT ASSETS Current investments 12,750.4 9,831.4 2919 29.69 Inventories 9,431.8 8,208.1 1223.7 14.91 Trade receivables 979.3 784.2 195.1 24.88 Cash and bank balances 8,800.0 4,995.5 3804.5 76.16 Short-term loans and advances 570.2 888.4 (318.2) (35.82) Other current assets 258.2 147.2 111 75.41 32,789.9 24,854.8 7935.1 31.93 68,059.7 60,863.3 7196.4 11.82
  • 10. 6 Table 2.1.2: Comparative Balance Sheet for 2014-2015 2015 2014 Abs. Value % Change EQUITY AND LIABILITIES (in million) (in million) SHAREHOLDERS’ FUNDS Share capital 964.2 964.2 0 0 Reserves and surplus 27,214.2 27,407.9 (193.7) (0.71) 28,178.4 28,372.1 (193.7) (0.68) NON - CURRENT LIABILITIES Long-term borrowings 167.9 154.6 13.3 8.6 Deferred tax liabilities (net) 1,729.3 2,227.2 (497.9) (22.4) Long-term provisions 15,971.7 13,886.6 2085.1 15.02 17,868.9 16,268.4 1600.5 9.84 CURRENT LIABILITIES Short-term borrowings 9.4 41.1 (31.7) (77.13) Trade payables Payable to micro enterprises and small enterprises 37.5 24.1 13.4 55.60 Other payables 7,456.6 7,263.0 193.6 2.67 Other current liabilities 4,659.3 4,095.7 563.6 13.76 Short-term provisions 2,653.2 2,130.6 522.6 24.53 14,816.0 13,554.5 1261.5 9.31 60,863.3 58,195.0 2668.3 4.59 ASSETS NON - CURRENT ASSETS Fixed assets Tangible assets 28,978.5 31,766.4 (2787.9) (8.78) Capital work-in-progress 2,307.9 2,447.8 (139.9) (5.72) Non-current investments 31,286.4 34,214.2 (2927.8) (8.56) 3,417.8 3,044.6 373.2 12.26 Long-term loans and advances 1,304.3 1,299.5 4.8 0.37 36,008.5 38,558.3 (2549.8) (6.61) CURRENT ASSETS Current investments 9,831.4 5,073.6 4757.8 93.78 Inventories 8,208.1 8,441.0 (232.9) (2.76) Trade receivables 784.2 991.0 (206.8) (20.87) Cash and bank balances 4,995.5 4,458.2 537.3 12.05 Short-term loans and advances 888.4 520.7 367.7 70.62 Other current assets 147.2 152.2 (5) (3.29) 24,854.8 19,636.7 5218.1 26.57 60,863.3 58,195.0 2668.3 4.59
  • 11. 7 Table 2.1.3: Comparative Balance Sheet for 2013-2014 2014 2013 Abs. Value % Change EQUITY AND LIABILITIES (in million) (in million) SHAREHOLDERS’ FUNDS Share capital 964.2 964.2 0 0.00 Reserves and surplus 27,407.9 22,723.3 4684.6 20.62 28,372.1 23,687.5 4684.6 19.78 NON - CURRENT LIABILITIES Long-term borrowings 154.6 11,894.8 (11740) (98.70) Deferred tax liabilities (net) 2,227.2 2,154.7 72.5 3.36 Long-term provisions 13,886.6 11,933.9 1952.7 16.36 16,268.4 25,983.4 (9715) (37.39) CURRENT LIABILITIES Short-term borrowings 41.1 0.1 41 41000.00 Trade payables 7,263.0 6,330.4 932.6 14.73 Other current liabilities 4,095.7 5,002.5 (906.8) (18.13) Short-term provisions 2,130.6 2,138.8 (8.2) (0.38) 13,554.5 13,471.8 82.7 0.61 58,195.0 63,142.7 (4947.7) (7.84) ASSETS NON - CURRENT ASSETS Fixed assets Tangible assets 31,766.4 33,693.1 (1926.7) (5.72) Capital work-in-progress 2,447.8 2,947.1 (499.3) (16.94) Non-current investments 34,214.2 36,640.2 (2426) (6.62) 3,044.6 2,241.2 803.4 35.85 Long-term loans and advances 1,299.5 1,239.4 60.1 4.85 38,558.3 40,125.5 (1567.2) (3.91) CURRENT ASSETS Current investments 5,073.6 6,269.6 (1196) (19.08) Inventories 8,441.0 7,359.3 1081.7 14.70 Trade receivables 991.0 842.7 148.3 17.60 Cash and bank balances 4,458.2 7,493.6 (3035.4) (40.51) Short-term loans and advances 520.7 1,013.6 (492.9) (48.63) Other current assets 152.2 38.4 113.8 296.35 19,636.7 23,017.2 (3380.5) (14.69) 58,195.0 63,142.7 (4947.7) (7.84)
  • 12. 8 Table 2.1.4: Comparative Balance Sheet for 2012-2013 2013 2012 Abs. Value % Change EQUITY AND LIABILITIES (in million) (in million) SHAREHOLDERS’ FUNDS Share capital 964.2 964.2 0 0.00 Reserves and surplus 22,723.3 17,019.9 5703.4 33.51 23,687.5 17,984.1 5703.4 31.71 NON - CURRENT LIABILITIES Long-term borrowings 11,894.8 10,499.5 1395.3 13.29 Deferred tax liabilities (net) 2,154.7 1,620.8 533.9 32.94 Long-term provisions 11,933.9 10,147.5 1786.4 17.60 25,983.4 22,267.8 3715.6 16.69 CURRENT LIABILITIES Short-term borrowings 0.1 2.4 (2.3) (95.83) Trade payables 6,330.4 5,394.0 936.4 17.36 Other current liabilities 5,002.5 5,580.3 (577.8) (10.35) Short-term provisions 2,138.8 410.6 1728.2 420.90 13,471.8 11,387.3 2084.5 18.31 63,142.7 51,639.2 11503.5 22.28 ASSETS NON - CURRENT ASSETS Fixed assets Tangible assets 33,693.1 32,042.7 1650.4 5.15 Capital work-in-progress 2,947.1 3,440.8 (493.7) (14.35) Non-current investments 36,640.2 35,483.5 1156.7 3.26 2,241.2 - Long-term loans and advances 1,239.4 1,254.5 (15.1) (1.20) Other non-current assets 4.7 - 40,125.5 36,738.0 3387.5 9.22 CURRENT ASSETS Current investments 6,269.6 3,648.6 2621 71.84 Inventories 7,359.3 7,455.8 (96.5) (1.29) Trade receivables 842.7 875.7 (33) (3.77) Cash and bank balances 7,493.6 2,369.6 5124 216.24 Short-term loans and advances 1,013.6 541.5 472.1 87.18 Other current assets 38.4 10.0 28.4 284.00 23,017.2 14,901.2 8116 54.47 63,142.7 51,639.2 11503.5 22.28
  • 13. 9 Table 2.1.5: Comparative Balance Sheet for 2011-2012 2012 2011 Abs. Value % Change EQUITY AND LIABILITIES (in million) (in million) SHAREHOLDERS’ FUNDS Share capital 964.2 964.2 0 0.00 Reserves and surplus 17,019.9 11,775.4 5244.5 44.54 17,984.1 12,739.6 5244.5 41.17 NON - CURRENT LIABILITIES Long-term borrowings 10,499.5 7,249.5 3250 44.83 Deferred tax liabilities (net) 1,620.8 502.2 1118.6 222.74 Long-term provisions 10,147.5 8,851.3 1296.2 14.64 22,267.8 16,603.0 5664.8 34.12 CURRENT LIABILITIES Short-term borrowings 2.4 2,459.2 (2456.8) (99.90) Trade payables 5,394.0 4,808.3 585.7 12.18 Other current liabilities 5,580.3 5,287.0 293.3 5.55 Short-term provisions 410.6 2,120.7 (1710.1) (80.64) 11,387.3 14,675.2 (3287.9) (22.40) 51,639.2 44,017.8 7621.4 17.31 ASSETS NON - CURRENT ASSETS Fixed assets Tangible assets 32,042.7 15,757.5 16285.2 103.35 Capital work-in-progress 3,440.8 13,717.8 (10277) (74.92) 35,483.5 29,475.3 6008.2 20.38 Long-term loans and advances 1,254.5 1,639.1 (384.6) (23.46) 36,738.0 31,114.4 5623.6 18.07 CURRENT ASSETS Current investments 3,648.6 1,343.7 2304.9 171.53 Inventories 7,455.8 7,340.4 115.4 1.57 Trade receivables 875.7 1,154.2 (278.5) (24.13) Cash and bank balances 2,369.6 2,272.1 97.5 4.29 Short-term loans and advances 541.5 790.0 (248.5) (31.46) Other current assets 10.0 3.0 7 233.33 14,901.2 12,903.4 1997.8 15.48 51,639.2 44,017.8 7621.4 17.31
  • 14. 10 2.2 COMMON SIZE BALANCE SHEET Table 2.2.1: Common Size Balance Sheet for 2012-2016 2016 Pr. 2015 Pr. 2014 Pr. 2013 Pr. 2012 Pr. EQUITY AND LIABILITIES (mill) (%) (mill) (%) (mill) (%) (mill) (%) (mill) (%) SHAREHOLDERS ’ FUNDS Share capital 964.2 1.4 964.2 1.6 964.2 1.7 964.2 1.5 964.2 1.9 Reserves and surplus 29,172.8 42.9 27,214.2 44.7 27,407.9 47.1 22,723.3 36.0 17,019.9 33.0 30,137.0 44.3 28,178.4 46.3 28,372.1 48.8 23,687.5 37.5 17,984.1 34.8 NON - CURRENT LIABILITIES Long-term borrowings 331.5 0.5 167.9 0.3 154.6 0.3 11,894.8 18.8 10,499.5 20.3 Deferred tax liabilities (net) 1,542.1 2.3 1,729.3 2.8 2,227.2 3.8 2,154.7 3.4 1,620.8 3.1 Long-term provisions 19,722.1 29.0 15,971.7 26.2 13,886.6 23.9 11,933.9 18.9 10,147.5 19.7 21,595.7 31.7 17,868.9 29.4 16,268.4 28.0 25,983.4 41.2 22,267.8 43.1 CURRENT LIAB. Short-term borrowings 0.0 9.4 0.0 41.1 0.1 0.1 0.0 2.4 0.0 Trade payables 0.0 0.0 7,263.0 12.5 6,330.4 10.0 5,394.0 10.4 Payable to micro enterprises and small enterprises 48.8 0.1 37.5 0.1 0.0 0.0 0.0 Other payables 7,942.8 11.7 7,456.6 12.3 0.0 0.0 0.0 Other current liabilities 5,128.4 7.5 4,659.3 7.7 4,095.7 7.0 5,002.5 7.9 5,580.3 10.8 Short-term provisions 3,207.0 4.7 2,653.2 4.4 2,130.6 3.7 2,138.8 3.4 410.6 0.8 16,327.0 24.0 14,816.0 24.3 13,554.5 23.3 13,471.8 21.3 11,387.3 22.1 68,059.7 100 60,863.3 100 58,195.0 100 63,142.7 100 51,639.2 100 ASSETS NON - CURRENT ASSETS Fixed assets Tangible assets 27,294.6 40.1 28,978.5 47.6 31,766.4 54.6 33,693.1 53.4 32,042.7 62.1 Capital WIP 1,881.7 2.8 2,307.9 3.8 2,447.8 4.2 2,947.1 4.7 3,440.8 6.7 29,176.3 42.9 31,286.4 51.4 34,214.2 58.8 36,640.2 58.0 35,483.5 68.7 Non-current Invest’s 4,743.1 7.0 3,417.8 5.6 3,044.6 5.2 2,241.2 3.5 - Long-term loans and advances 1,350.4 2.0 1,304.3 2.1 1,299.5 2.2 1,239.4 2.0 1,254.5 2.4 35,269.8 51.8 36,008.5 59.2 38,558.3 66.3 40,125.5 63.5 36,738.0 71.2
  • 15. 11 CURRENT ASSETS Current investments 12,750.4 18.7 9,831.4 16.2 5,073.6 8.7 6,269.6 9.9 3,648.6 7.1 Inventories 9,431.8 13.9 8,208.1 13.5 8,441.0 14.5 7,359.3 11.7 7,455.8 14.4 Trade receivables 979.3 1.4 784.2 1.3 991.0 1.7 842.7 1.3 875.7 1.7 Cash and bank balances 8,800.0 12.9 4,995.5 8.2 4,458.2 7.7 7,493.6 11.9 2,369.6 4.6 Short-term loans and advances 570.2 0.8 888.4 1.5 520.7 0.9 1,013.6 1.6 541.5 1.0 Other current assets 258.2 0.4 147.2 0.2 152.2 0.3 38.4 0.1 10 0.0 32,789.9 48.2 24,854.8 40.8 19,636.7 33.7 23,017.2 36.5 14,901.2 28.9 68,059.7 100 60,863.3 100 58,195.0 100 63,142.7 100 51,639.2 100
  • 16. 12 2.3 RATIO ANALYSIS Table 2.3.1: Ratio Analysis for 2012-2016 2016 2015 2014 2013 2012 Average Current Liabilities (millions) 16,327.00 14,816.00 13,554.50 13,471.80 11,387.30 13,911.32 Current Assets (millions) 32,789.90 24,854.80 19,636.70 23,017.20 14,901.20 23,039.96 Current Ratio 2.01 1.68 1.45 1.71 1.31 1.63 Percentage Change 23.18 2.90 (11.14) 4.80 (19.74) 0.00 Current Liabilities (millions) 16,327.00 14,816.00 13,554.50 13,471.80 11,387.30 13,911.32 Quick Assets (millions) 23,358.10 16,646.70 11,195.70 15,657.90 7,445.40 14,860.76 Quick Ratio 1.43 1.12 0.83 1.16 0.65 1.07 Percentage Change 33.92 5.18 (22.68) 8.80 (38.79) 0.00 Dividend/Share (₹) 63 48.5 63 48.5 48.5 54.3 Earnings/Share (₹) 96.1 58.42 122.87 115.87 110.76 100.804 Pay-out Ratio 0.66 0.83 0.51 0.42 0.44 0.54 Percentage Change 21.70 54.12 (4.81) (22.30) (18.71) 0.00 Sales (millions) 91,592.80 81,232.70 98,062.70 90,619.00 83,022.60 88,905.96 Inventory (millions) 9,431.80 8,208.10 8,441.00 7,359.30 7,455.80 8,179.20 Inventory Turnover (times) 9.71 9.90 11.62 12.31 11.14 10.93 Percentage Change (11.19) (9.49) 6.24 12.61 1.83 0.00 Sales (millions) 91,592.80 81,232.70 98,062.70 90,619.00 83,022.60 88,905.96 Net Assets (millions) 68,059.70 60,863.30 58,195.00 63,142.70 51,639.20 60,379.98 Assets Turnover (times) 1.35 1.33 1.69 1.44 1.61 1.47 Percentage Change (8.60) (9.36) 14.44 (2.53) 9.19 0.00 Net Assets (millions) 68,059.70 60,863.30 58,195.00 63,142.70 51,639.20 60,379.98 Net Worth (millions) 30,018.70 27,896.20 28,291.00 23,588.10 17,915.60 25,541.92 Capital-Equity Ratio 2.27 2.18 2.06 2.68 2.88 2.36 Percentage Change (4.09) (7.71) (12.98) 13.24 21.93 0.00 Profit after Tax (millions) 9,265.40 5,632.70 11,846.90 11,171.30 10,679.30 9,719.12 Net Worth (millions) 30,018.70 27,896.20 28,291.00 23,588.10 17,915.60 25,541.92 Return on Equity 0.31 0.20 0.42 0.47 0.60 0.38 Percentage Change (18.89) (46.94) 10.05 24.46 56.65 0.00 Total Debt (millions) 21,595.70 17,868.90 16,268.40 25,983.40 22,267.80 20,796.84 Total Equity (millions) 30,018.70 27,896.20 28,291.00 23,588.10 17,915.60 25,541.92 Debt-Equity Ratio 0.72 0.64 0.58 1.10 1.24 0.81 Percentage Change (11.64) (21.33) (29.38) 35.29 52.65 0.00
  • 17. 13 2.4 TREND ANALYSIS Fig. 2.4.1: Net Sales of Nestle for 2012-2016 Fig. 2.4.2: Fixed Assets of Nestle for 2012-2016
  • 18. 14 Fig. 2.4.3: Market Capitalization by Nestle for 2012-2016 Fig. 2.4.4: Employee Base of Nestle for 2012-2016
  • 19. 15 Fig. 2.4.5: Shareholders’ Fund in Nestle for 2012-2016 Fig. 2.4.6: Shareholders’ Fund in Nestle for 2012-2016
  • 20. 16 Fig. 2.4.7: Liabilities of Nestle for 2012-2016 Fig. 2.4.8: Assets of Nestle for 2012-2016
  • 21. 17 Fig. 2.4.9: Liabilities and Assets of Nestle for 2012-2016 Fig. 2.4.10: Profit after Tax of Nestle for 2012-2016
  • 22. 18 2.5 BCG MATRIX ANALYSIS Fig. 2.5.1: BCG Matrix for Nestle India
  • 23. 19 2.6 IMPACT OF MAGGI CONTROVERSY The Maggi controversy has shattered many hearts, Maggi was not merely a product or a brand in India, Indian consumer who is not used to suspect food standards, felt a deep sense of betrayal by one of the most trusted food brand in India. FSSAI noted three major violations: 1. Presence of lead detected in the product in excess of the maximum permissible levels of 2.5 ppm. 2. Release of a non-standardized food product in the market, viz. “Maggi Oats Masala, Noodles with Tastemaker” without risk assessment and grant of product approval. 3. Misleading labelling information on the package reading “No added MSG”. Lab testing controversies: 1. MSG (Monosodium Glutamate): Testing found some MSG in Maggi noodles. The packet stated “No added MSG”. However MSG naturally occurs in hydrolysed groundnut protein, onion powder and wheat flour. Maggi offered to remove the words “No added MSG” from the package to overcome the objection. 2. Lead: Out of the 13 samples tested by Delhi authorities, 10 of them had lead content exceeding this limit. Testing outside of India (Singapore USA) resulted in reports that Maggi noodles are safe. The court mandated testing to be done at three specific laboratories (Punjab, Hyderabad and Jaipur) where Maggi was found safe. Some lead occurs naturally in plants and soil. Some lead is found in Indian spices, although within acceptable limits. The effect of the Maggi noodle controversy on different aspects is listed below:  Net Sales: Net sales reduced to 81,232.70 million ₹ in 2015 from 98,062.70 million ₹ in 2016.  Profits: Profit reduced to 8,136.30 million ₹ in 2015 from 14,415.40 million ₹ in 2016.  Earnings per Share: EPS reduced to 58.4 ₹ in 2015 from 122.9 ₹ in 2016.  Dividends per Share: DPS reduced to 48.5 ₹ in 2015 from 63 ₹ in 2016.
  • 24. 20 3. INDUSTRY ANALYSIS 3.1 INDIAN FMCG INDUSTRY AT A GLANCE  India’s FMCG Market size in 2017 is 51.4 billion $  Rural FMCG Market size in 2017 is 29.7 billion $  FMCG market in India is expected to grow at a CAGR of 20.6 per cent and is expected to reach 103.7 billion $ by 2020  FMCG Sector’s Contribution to India’s GDP in 2017 is 3.1 3.2 INDUSTRY RATIOS & COMPARISON  Current Ratio  The Current Ratio for Nestle is 2.01:1  The Industry average is 1.98:1  Nestlé’s current ratio is above the industry average.  It means Nestle has a greater ability to use its current assets to pay short term debts, on average, compared to other businesses within the same industry.  Quick Ratio  The Quick Ratio for Nestle is 1.43:1  The Industry average is 1.27:1  Therefore Nestle’s quick ratio is above the Industry Average  It means that Nestle has a relatively higher liquidity position than its competitors.  Nestle, on average, has a greater ability to use its current assets (excluding inventory) to pay or meet its short-term debt, compared to other businesses within the same industry  Debt Equity Ratio  The Debt Equity Ratio for Nestle is 0.72:1  The Industry average is 0.46:1  Therefore Nestle’s debt equity ratio is above the Industry Average.
  • 25. 21  This indicates that Nestle heavily rely on its creditors to finance its operations whereas other companies in the same industry don’t.  Stock Turnover  The Stock Turnover for Nestle is 9.71 times  The Industry average is 8.49 times  Therefore Nestle’s stock turnover is above the Industry Average  Nestle’s high stock turnover ratio implies either strong sales and/or large discounts. 3.3 TAX RATES REVISION AFTER GST Table 3.3.1: Tax Rates Revision after GST Product Pre GST Post GST Soaps 27% 18% Hair Oil 27% 18% Sugar Confectionery 21% 18% Toothpaste 27% 18% Toothpowder 17% 12% Wheat 2.5% 0% Rice 2.75% 0% Unbranded Flour 3.5% 0% Mineral Water 27% 18% Vegetable Oils 6% 5% Milk Powder 6% 5% Sugar 6% 5% Tea 6% 5% *CST, Octroi, entry tax has not been considered in the pre-GST rate
  • 26. 22 3.4 PORTER’S 9-FORCES INDUSTRY ANALYSIS 1. Threat to/of New Entrant  The Indian FMCG Industry is characterized with modest entry and exit barriers.  Huge investments in setting up distribution networks, brand promotion and competition from established companies restricts new entry. 2. Threat of Substitutes  Multiple brands positioned with narrow product differentiation. Companies entering a category tries to gain market share and compete on pricing which increases products substitution.  Threat of substitute is high in the industry. 3. Buyer’s Bargaining Power  High brand loyalty for some products, thereby discouraging customers’ product shift.  Low switching cost and aggressive marketing strategies under intense competition induce customers to switch between products, thereby driving value for money deals for consumers. 4. Supplier’s Bargaining Power  Prices are generally governed by international commodity markets, making most FMCG companies price takers.  Due to the long term relationships with suppliers etc., FMCG companies negotiate better rates during times of high input cost inflation. 5. Industry Competition  Competitiveness among the Indian FMCG players is high.  The industry is highly fragmented thus advertising spends continue to grow and marketing budgets as well as strategies are becoming more aggressive. Private brands offered by retailers at a discount to mainframe brands act as competition to undifferentiated and weak brands.
  • 27. 23 6. Political Shift  Infrastructure Issues: FMCG sector is very much dependent on government spending on Agricultural, Power, and Transportation Infrastructure.  Regulatory Factors: Separate permits and licenses for various states, prevailing labour laws and complex & lengthy export procedures are major factors.  Policy Framework: FDI into Retail sector, License rules in setting up of Industry, Changes in Statutory Minimum Price of commodities are barriers for growth of this sector. 7. Economical Shift  GDP Growth: Growth of FMCG industry is consistent with the Indian economy. It has grown over past 5 years which shows good scope for this sector in near future.  Inflation: Inflation in India has not affected the Indian FMCG sector much.  Consumer Income: Over the past years, there is an increased economic growth resulting in increased consumer expenditure. 8. Socio-Cultural Shift  Change in Consumer Profile: Rapid urbanization, increased literacy, increase in nuclear families and rising per capita income, have caused rapid growth and change in demand patterns.  Change in Lifestyle: There is a change in consumption pattern of Indian consumer with more spending on luxurious products (52%) than necessities.  Rural Focus: Market is getting saturated, companies are focusing on rural areas by providing consumers with small sized or single-use packs such as sachets. 9. Technological Shift  Technological Advancement: Effective use of technology is seen only in leading companies like HUL, ITC etc.  E-Commerce: It’ll boost FMCG sales in future due to cheaper and effective outreach.  Digitalization: 150 million consumers would be influenced by digital by 2020 and this will increase the market by more than $45 billion in FMCG categories.
  • 28. 24 3.5 MARKET BREAKUP The FMCG sector has grown from US$ 31.6 billion in 2011 to US$ 49 billion in 2016. The sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 20.6 per cent to reach US$ 103.7 billion by 2020. In 2016-17, revenue for FMCG sector have reached US$ 49 billion and is expected to grow at 9-9.5 per cent in FY18 supported by expectations of the total consumption expenditure reaching nearly US$ 3,600 billion by 2020 from US$ 1,469 billion in 2015. Fig. 3.5.1: Urban-Rural Market Share From Fig. 3.5.1 accounting for revenue share of around 60 percent, urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India and recorded a market size of around usd29.4 billion in 2016.rural segments are growing at a rapid pace and accounted revenue share of 40 percent in overall revenues recorded by the FMCG sector in India. FMCG products account for 50 percent of total rural spending.
  • 29. 25 Hair care is the leading segment, accounting for 23 percent of the overall market revenue. Food products is the second leading segment of the sector accounting for 19 percent followed by the health supplements and oral care which has a market share of 16 percent. OTC & Ethical is accounting 9 percent, home care has a market share of 6 percent and followed by the digestive has a market share of 7 percent of the overall revenue. Fig. 3.5.2: Market Breakup by Revenue for FY 16 As shown in Fig. 3.5.3, the FMCG sector in rural and urban India is estimated to cross 100 billion by 2025, the rural FMCG market is anticipated to expand at a CAGR of 17.41 percent to USD 100 billion during 2009-25. Fig. 3.5.3: Rural FMCG Market in India
  • 30. 26 3.6 GROWTH RATES: PAST & FUTURE Growth Rate in the Past  Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 per cent of FMCG sales in India.  The urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India and recorded a market size of around US$ 29.4 billion in 2016- 17.  It has grown at an annual average of 15 % over the last decade.  The past 3 to 5 years has seen fluctuations in the growth rate of FMCG industry due to inflation, demonetization and GST.  The latest growth figure was 5.1 % in the urban market and 6.9% in the rural market. Expected Growth Rate  Amidst implementation of Goods and Services Tax (GST) and demonetization, the Indian FMCG industry is managing its way through disruptions post festive months recording a higher demand led growth.  Between 2016 and 2020, the Indian FMCG market is expected to grow at a CAGR of nearly 21%.  Rise in rural consumption is all set to drive the FMCG market. It is estimated to grow at a CAGR of 14.6% during the period 2016-2025. A major reason behind the spurt is explained by an increased disposable income that has grown at a CAGR of 4.1%.  Penetration of modern retail is expected to see a substantial rise at a CAGR of 24.6% by 2020.  Modern trade is a big ticket item that is expected to grow at 20% year on year, likely to boost revenues for FMCG players.  With the rising adoption of sales technologies and increased mobility usage, the FMCG distribution system has become more transparent, structured and easily compliable.
  • 31. 27 3.7 COMPOUND ANNUAL GROWTH RATE (CAGR)  The FMCG sector in India generated revenues worth US$ 49 billion in 2016.  Over 2007-2016, the FMCG Sector posted a CAGR of 11.9% in revenues.  In 2016-17, revenues for FMCG sector have reached US$ 49 billion and is expected to grow at 9-9.5% in FY 2018.  According to the report of IBEF (India Brand Equity Foundation), in the long run, with the system becoming more transparent and easily compliable, Demonetization is expected to benefit organized players in the FMCG Industry. Fig. 3.7.1: CAGR of FMCG Sector from 2007-2016
  • 32. 28 4. CONCLUSION  This sector will continue to see growth as it depends on an ever-increasing internal market for consumption, and demand for these goods remains more or less constant, irrespective of recession or inflation.  Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives Indian FMCG industry a competitive advantage.  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.  Increasing Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products.  Nestle India was on its way to continuous growth from 2012 to 2016 but the Maggi Noodles controversy not only dented the company’s image internationally but also gave the competitors the chance to acquire the market share from Nestle.  Financial year 2015 (Jan to Dec) proved to be a year worth forgetting as due to the Maggi noodles their revenues decreased and their involvement with the various law agencies resulted in drastically less profits.  Nestle being a global player is trying its best to come out of the ‘MaggiGate’ and in fact recorded increased sales, revenues and profits in the subsequent financial year 2016.  There was very low impact of demonetization and GST on Nestle but most of the negative impact it went through was due to the Maggi noodles controversy, but Nestle now has almost recovered from the ‘shock’ and is again on its way towards growth.
  • 34. Annexure-A: Combined Balance Sheet for 2012-2016 2016 2015 2014 2013 2012 EQUITY AND LIABILITIES (mill) (mill) (mill) (mill) (mill) SHAREHOLDERS ’ FUNDS Share capital 964.2 964.2 964.2 964.2 964.2 Reserves and surplus 29,172.8 27,214.2 27,407.9 22,723.3 17,019.9 30,137.0 28,178.4 28,372.1 23,687.5 17,984.1 NON - CURRENT LIABILITIES Long-term borrowings 331.5 167.9 154.6 11,894.8 10,499.5 Deferred tax liabilities (net) 1,542.1 1,729.3 2,227.2 2,154.7 1,620.8 Long-term provisions 19,722.1 15,971.7 13,886.6 11,933.9 10,147.5 21,595.7 17,868.9 16,268.4 25,983.4 22,267.8 CURRENT LIABILITIES Short-term borrowings 9.4 41.1 0.1 2.4 Trade payables 7,263.0 6,330.4 5,394.0 Payable to micro enterprises and small enterprises 48.8 37.5 Other payables 7,942.8 7,456.6 Other current liabilities 5,128.4 4,659.3 4,095.7 5,002.5 5,580.3 Short-term provisions 3,207.0 2,653.2 2,130.6 2,138.8 410.6 16,327.0 14,816.0 13,554.5 13,471.8 11,387.3 68,059.7 60,863.3 58,195.0 63,142.7 51,639.2 ASSETS NON - CURRENT ASSETS Fixed assets Tangible assets 27,294.6 28,978.5 31,766.4 33,693.1 32,042.7 Capital WIP 1,881.7 2,307.9 2,447.8 2,947.1 3,440.8 29,176.3 31,286.4 34,214.2 36,640.2 35,483.5 Non-current Invest’s 4,743.1 3,417.8 3,044.6 2,241.2 - Long-term loans and advances 1,350.4 1,304.3 1,299.5 1,239.4 1,254.5 35,269.8 36,008.5 38,558.3 40,125.5 36,738.0
  • 35. CURRENT ASSETS Current investments 12,750.4 9,831.4 5,073.6 6,269.6 3,648.6 Inventories 9,431.8 8,208.1 8,441.0 7,359.3 7,455.8 Trade receivables 979.3 784.2 991.0 842.7 875.7 Cash and bank balances 8,800.0 4,995.5 4,458.2 7,493.6 2,369.6 Short-term loans and advances 570.2 888.4 520.7 1,013.6 541.5 Other current assets 258.2 147.2 152.2 38.4 10 32,789.9 24,854.8 19,636.7 23,017.2 14,901.2 68,059.7 60,863.3 58,195.0 63,142.7 51,639.2
  • 36. Annexure-B: Comparison of Industry’s & Nestle India’s Ratios Company Current Ratio Quick Ratio Debt-Equity Ratio Stock Turnover (times) Pidilite 3.07 2.36 0.03 7.79 Nestle India 2.01 1.43 0.72 9.71 Dabur 1.48 0.98 0.43 8.83 HUL 1.31 0.98 0.16 13.86 Britannia 1.06 0.48 1.8 13.96 ITC 3.59 2.44 0.01 5.1 Himalaya Int. 1.53 0.69 1.13 1.85 Emami 0.52 0.26 0.1 13.6 Asian Paints 1.89 1.13 0.07 5.76 Marico 2.52 1.15 0.1 4.48 Industry Avg. 1.90 1.19 0.46 8.49 Difference 0.11 0.24 0.27 1.22 Perc. Diff. 5.90 20.17 58.24 14.32
  • 37. Annexure-C: Key Figures for 2012-2016 Particulars (Million ₹) 2016 2015 2014 2013 2012 Domestic Sales 88,338.00 77,949.10 94,853.20 87,537.40 81,561.90 Export Sales 6,579.20 6,355.30 6,441.80 6,261.30 4,256.90 Less: Excise duty 3,324.40 3,071.70 3,232.30 3,179.70 2,796.20 Net Sales 91,592.80 81,232.70 98,062.70 90,619.00 83,022.60 Other Operating Income 645.2 520.4 485.7 391.5 322.7 Total revenue from operations 92,238.00 81,753.10 98,548.40 91,010.50 83,345.30 Total Expenses 76,519.30 68,415.60 80,622.90 74,068.70 67,944.90 Profit From Operations 15,718.70 13,337.50 17,925.50 16,941.80 15,400.40 Other income 1,493.90 1,100.90 873.2 830.9 310.3 Finance costs 35.1 32.9 142.3 365.1 266 Employee benefit expense due to passage of time 874 753.2 648.3 558.1 558.1 Net provision for contingencies (others) 1,266.70 301.5 249.5 207.4 -81.5 Profit Before Exceptional Items And Taxation 15,036.80 13,350.80 17,758.60 16,642.10 15,526.20 Exceptional items - Charge/(Credit) 307.8 5,008.40 -70 -138.1 - Corporate social responsibility expense 313.6 206.1 85.1 0 - Profit before taxation 14,415.40 8,136.30 17,743.50 16,780.20 15,526.20 Tax expense 5,150.00 2,503.60 5,896.60 5,608.90 4,846.90 Profit after taxation 9,265.40 5,632.70 11,846.90 11,171.30 10,679.30 Earnings per Share (₹) 96.1 58.4 122.9 115.9 110.8 Dividends per Share (₹) 63 48.5 63 48.5 48.5