hem fmcg 16jan09

8/8/2019 Hem FMCG 16Jan09

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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY

INDUSTRY RESEARCH REPORT ONFAST MOVING CONSUMER GOODS (FMCG)

FOR INSTITUTIONAL CLIENTS


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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISO

FAST MOVING CONSUMER GOODS (FMCG) 11th January 20

Indian Economy has regis-tered an over of 9 per cent ofgrowth in Gross DomesticProduct (GDP) for last 3years. Fin Min expect GDP tobe between 7-8 per cent forthe year 2008-09.

According to CMIE forecast,the IIP could be at 4.5 per centfor the year 2008-09.

Inflation stands at 5.91 percent against a high of 12.63per cent.

Indian Economy: An Overview

Indian Economy is among one of the fastest growing economy in the World. It has regis-tered a robust growth rate in past few years. But weakening of U.S. Economy, higherinflation rate, higher interest rate, higher crude prices and higher commodity prices havea reflection on Indian Economy too.

The Index of Industrial Production (IIP) has registered a double digit growth of 11.5 percent in the year 2006-07 but it slip down by 300bp to 8.5 per cent in the year 2007-08.According to Centre for Monitoring Indian Economy (CMIE) forecast, the IIP could be at4.5 per cent for the year 2008-09.

Source: CMIE

To fight against the slowdown of the Economy, Government of India & Reserve Bank ofIndia took many fiscal as well as monetary actions. Clubbed with fiscal & monetary ac-tions, decreasing commodity prices, decreasing crude prices and lowering interest rate,we expect that Indian Economy could again register a robust growth rate in the year2009-10. Inflation stands at 5.91 per cent on 27

thDecember 2008 against a high of

12.63 per cent on 9th

August 2008.

For Private Circulation Only 1 Hem Institutional Research De


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For Private Circulation Only 2 Hem Institutional Research Des

85,000 Crores Indian FMCGmarket is one of the importantsector and has registered arobust growth rate.

According to CMIE Data, Ag-gregate sale FMCG industry isexpected to increase by 19.2per cent during the December2008 quarter.

According to Federation ofIndian Chambers of Com-merce and Industry (FICCI),FMCG industry sales couldgrow at 16 per cent during2008-09.

Industry Snapshot

FMCG Sector is one of the most important sectors for each and every Economy. It playsa vital role being a necessity and inelastic product which touches every life in one or theother aspect.

India's FMCG sector is the fourth largest sector in the economy and creates employmentfor more than three million people in downstream activities. Its principal constituents areHousehold Care, Personal Care and Food & Beverages. The total FMCG market is inexcess of INR 85,000 Crores. It is currently growing at double digit growth rate and isexpected to maintain a high growth rate. FMCG Industry is characterized by a well estab-lished distribution network, low penetration levels, low operating cost, lower per capitaconsumption and intense competition between the organized and unorganized seg-ments.

The FMCG Industry remained insulated from inflation led demand slowdown. Inflation asmeasured by the wholesale price index (WPI) shot up to 9.5 per cent in June 2008 quar-

ter and further climbed up to 12.63 per cent in September quarter. In both these quar-ters, industry sales accelerated by more than 15 per cent backed by healthy growth in offtake as well as price hikes affected. During this period, the industry was largely able tohold on to margins through a combination of strategies such as reduction in packagingcost and changes in product mix. Since October, inflation rate has been waning and fellto 5.91 per cent for the week ended 27

thDecember 2008. Thus demand for personal

care products is likely to remain buoyant.

According to CMIE Data, Aggregate sale of the industry is expected to increase by 19.2per cent during the December 2008 quarter.

Commodity prices after peaking are on the downswing. In September 2008 quarter, palmoil price fell by 13 per cent sequentially. In the subsequent months, palm oil price contin-ued to weaken further and in November 2008 its price ruled 38 per cent lower than theyear ago level. This would minimize input cost pressure for soap companies like HUL,

Nirma and Godrej Consumer Products. Even fall in crude price is expected to make pe-troleum derivatives like LAB (key input for detergents) cheaper as well reduce packagingcosts.

Even during the slowdown of the economy, the FMCG sector has registered a growthrate of 14.5 per cent for the year 2007-08.

There is a huge growth potential for all the FMCG companies as the per capita consump-tion of almost all products in the country is amongst the lowest in the world. Federation ofIndian Chambers of Commerce and Industry (FICCI) predicted that the Indian FMCGindustry sales could grow 16 per cent during 2008-09.

According to CRISIL anticipation, FMCG sector could touch around INR 140,000 Croresby 2015.

The key players in FMCG Industry are Hindustan Unilever Limited, Dabur India Limited,Procter & Gamble Hygiene & Health Care Limited, Nirma Limited, Emami Limited, Col-gate Palmolive India Limited, Godrej Consumer Products Limited to name a few.


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Industry Category and Products

Household Care

Personal Wash

The market size of personal wash is estimated to be around INR 8,300 Cr. The personalwash can be segregated into three segments: Premium, Economy and Popular. Thepenetration level of soaps is ~92 per cent. It is available in 5m retail stores, out of which,75 per cent are in the rural areas. HUL is the leader with market share of ~53 per cent;Godrej occupies second position with market share of ~10 per cent. With increase indisposable incomes, growth in rural demand is expected to increase because consumersare moving up towards premium products. However, in the recent past there has notbeen much change in the volume of premium soaps in proportion to economy soaps,because increase in prices has led some consumers to look for cheaper substitutes.

Detergents

The size of the detergent market is estimated to be INR 12,000 Cr. Household caresegment is characterized by high degree of competition and high level of penetration.With rapid urbanization, emergence of small pack size and sachets, the demand for thehousehold care products is flourishing. The demand for detergents has been growing butthe regional and small unorganized players account for a major share of the total volumeof the detergent market. In washing powder HUL is the leader with ~38 per cent of mar-ket share. Other major players are Nirma, Henkel and Proctor & Gamble.

Personal Care

Skin Care

The total skin care market is estimated to be around INR 3,400 Cr. The skin care marketis at a primary stage in India. The penetration level of this segment in India is around 20per cent. With changing life styles, increase in disposable incomes, greater productchoice and availability, people are becoming aware about personal grooming. The major

players in this segment are Hindustan Unilever with a market share of ~54 per cent, fol-lowed by CavinKare with a market share of ~12 per cent and Godrej with a market shareof ~3 per cent.

Hindustan Unilever Lim-ited is the biggest pro-ducer of Personal washand detergents. The seg-ment is expected to growby double digit.

The Skin Care segment isexpected to register agrowth rate of mare that

16 per cent.


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Personal Wash is a highlypenetrated category, withall India penetration lev-els exceeding 90 per cent.On the other hand, sham-poo is not as penetratedwhich is expected to bearound 40 per cent. Com-

panies can bet on growthrate for the shampoocategory.

According to Tea Boardof India, the export of teais expected to be morethat 210 million kg for theyear 2008 against about179 million kg last year.

Industry Category and Products (Cont)

Personal Care

Hair Care

The hair care market in India is estimated at around INR 3,800 Cr. The hair care marketcan be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels.Marico is the leader in Hair Oil segment with market share of ~ 33 per cent; Dabur occu-pies second position at ~17 per cent.

Shampoos

The Indian shampoo market is estimated to be around INR 2,700 Cr. It has the penetrationlevel of only 13 per cent in India. Sachet makes up to 40 per cent of the total shampoosale. It has low penetration level even in metros. Again the market is dominated by HULwith around ~47 per cent market share; P&G occupies second position with market shareof around ~23 per cent. Anti-dandruff segment constitutes around 15 per cent of the total

shampoo market. The market is further expected to increase due to increased marketingby players and availability of shampoos in affordable sachets.

OralCare

The oral care market can be segmented into toothpaste - 60 per cent; toothpowder - 23 percent; toothbrushes - 17 per cent. The total toothpaste market is estimated to be around INR3,500 Cr. The penetration level of toothpowder/toothpaste in urban areas is three timesthat of rural areas. This segment is dominated by Colgate-Palmolive with market share of~49 per cent, while HUL occupies second position with market share of ~30 per cent. Intoothpowders market, Colgate and Dabur are the major players. The oral care market, es-pecially toothpastes, remains under penetrated in India with penetration level ~50 per cent.

Food & Beverages

Food Segment

The foods category in FMCG is gaining popularity with a swing of launches by HUL, ITC,Godrej, and others. This category has 18 major brands aggregating INR 4,600 Cr. Nestleand Amul slug it out in the powders segment.The food category has also seen innovationslike softies in ice creams, ready to eat rice by HUL and pizzas by both GCMMF and GodrejPillsbury.

Tea

The major share of tea market is dominated by unorganized players. More than 50 per centof the market share is capture by unorganized players. Leading branded tea players areHUL and Tata Tea.

Coffee

The Indian beverage industry faces over supply in segments like coffee and tea. However,more than 50 per cent of the market share is in unpacked or loose form. The major playersin this segment are Nestl, HUL and Tata Tea.



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India is second largestCountry in terms of Popula-tion growth and increase inpopulation has a direct rela-tion to FMCG Products.

Increase in spending pat-tern because of higher dis-posable income.

Consumer mind setchanged towards Moneyfor Value from Value forMoney

Survey by A. C. Nielsenshows about 71 per cent ofIndian take notice of pack-aged goods' labels contain-ing nutritional informationcompared to two years ago

which was only 59 per cent.

Growth Prospect

Large Market

India has a population of more than 1.150 Billions which is just behind China. According tothe estimates, by 2030 India population will be around 1.450 Billion and will surpass Chinato become the World largest in terms of population. FMCG Industry which is directly relatedto the population is expected to maintain a robust growth rate.

Source: UN Population Division: Medium variant

Spending Pattern

An increase is spending pattern has been witnessed in Indian FMCG market. There is anupward trend in urban as well as rural market and also an increase in spending in organ-ized retail sector. An increase in disposable income, of household mainly because of in-

crease in nuclear family where both the husband and wife are earning, has leads to growthrate in FMCG goods.

Changing Profile and Mind Set of Consumer

People are becoming conscious about health and hygienic. There is a change in the mindset of the Consumer and now looking at Money for Value rather than Value for Money.We have seen willingness in consumers to move to evolved products/ brands, because ofchanging lifestyles, rising disposable income etc. Consumers are switching from economyto premium product even we have witnessed a sharp increase in the sales of packagedwater and water purifier.

Findings according to a recent survey by A. C. Nielsen shows about 71 per cent of Indiantake notice of packaged goods' labels containing nutritional information compared to twoyears ago which was only 59 per cent.


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4 per cent reduction in ex-cise duty

There is a continuousgrowth in FDI Inflow in In-dia.

Advantage India

Governmental Policy

Indian Government has enacted policies aimed at attaining international competitivenessthrough lifting of the quantitative restrictions, reducing excise duties, automatic foreign in-vestment and food laws resulting in an environment that fosters growth. 100 per cent ex-port oriented units can be set up by government approval and use of foreign brand namesis now freely permitted.

Central & State Initiatives

Recently Government has announced a cut of 4 per cent in excise duty to fight with theslowdown of the Economy. This announcement has a positive impact on the industry.

But the benefit from the 4 per cent reduction in excise duty is not likely to be uniform acrossFMCG categories or players. The changes in excise duty do not impact cigarettes (ITC,Godfrey Phillips), biscuits (Britannia Industries, ITC) or ready-to-eat foods, as these prod-

ucts are either subject to specific duty or are exempt from excise. Even players with manu-facturing facilities located mainly in tax-free zones will also not see material excise dutysavings. Only large FMCG-makers may be the key ones to bet and gain on excise cut.

Foreign Direct Investment (FDI)

Automatic investment approval (including foreign technology agreements within specifiednorms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas CorporateBodies (OCBs) investment, is allowed for most of the food processing sector except maltedfood, alcoholic beverages and those reserved for small scale industries (SSI).

There is a continuous growth in net FDI Inflow. There is an increase of about 150 per centin Net Inflow for Vegetable Oils & Vanaspati for the year 2008.

Source: DIPP


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Export - Leveraging theCost AdvantageIndia offers cost advantagebenefits by offering lower

raw material & labor cost

FMCG Industry has SectoralOpportunities as rural mar-ket has growth potential.

Market Opportunities

Vast Rural Market

Rural India accounts for more than 700 Million consumers, or ~70 per cent of the Indianpopulation and accounts for ~50 per cent of the total FMCG market. The working ruralpopulation is approximately 400 Millions. And an average citizen in rural India has lessthen half of the purchasing power as compare to his urban counterpart.

Still there is an untapped market and most of the FMCG Companies are taking differentsteps to capture rural market share. The market for FMCG products in rural India is esti-mated ~ 52 per cent and is projected to touch ~ 60 per cent within a year. HindustanUnilever Ltd is the largest player in the industry and has the widest market coverage.

Export - Leveraging the Cost Advantage

Cheap labor and quality product & services have helped India to represent as a cost ad-vantage over other Countries. Even the Government has offered zero import duty on capi-

tal goods and raw material for 100% export oriented units. Multi National Companies out-source its product requirements from its Indian company to have a cost advantage.

India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashewapart from being the second largest producer of rice, wheat, fruits & vegetables. It adds acost advantage as well as easily available raw materials.

Sectoral Opportunities

Major Key Sectoral opportunities for Indian FMCG Sector are mentioned below:

Dairy Based Products

India is the largest milk producer in the world, yet only around 15 per cent of the milk isprocessed. The organized liquid milk business is in its infancy and also has large long-

term growth potential. Even investment opportunities exist in value-added products likedesserts, puddings etc.

Packaged Food

Only about 10-12 per cent of output is processed and consumed in packaged form, thushighlighting the huge potential for expansion of this industry.

Oral Care

The oral care industry, especially toothpastes, remains under penetrated in India withpenetration rates around 50 per cent. With rise in per capita incomes and awareness oforal hygiene, the growth potential is huge. Lower price and smaller packs are also likely todrive potential up trading.

Beverages

Indian tea market is dominated by unorganized players. More than 50% of the marketshare is capture by unorganized players highlighting high potential for organized players.


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Porter's Five Forces Model

Porter's Five Forces modeloutlines the primary forcesabout competitivenesswithin the industry.

Rivalry among Competing Firms

In the Fast Moving Consumer Goods (FMCG) Industry, rivalry among competitors is veryfierce. There are scarce customers because the industry is highly saturated and the com-petitors try to snatch their share of market. Market Players use all sorts of tactics and ac-tivities from intensive advertisement campaigns to promotional stuff and price wars etc.Hence the intensity of rivalry is very high.

The intensity of rivalry isvery high among the com-petitor of FMCG Industry.

Potential Entry of New Competitors

FMCG Industry does not have any measures which can control the entry of new firms.The resistance is very low and the structure of the industry is so complex that new firmscan easily enter and also offer tough competition due to cost effectiveness. Hence poten-tial entry of new firms is highly viable. There is a threat for new

entrants as well as for sub-stitute.Potential Development of Substitute Products

There are complex and never ending consumer needs and no firm can satisfy all sorts ofneeds alone. There are plenty of substitute goods available in the market that can be re-placed if consumers are not satisfied with one. The wide range of choices and needs givea sufficient room for new product development that can replace existing goods. Everyother day there is some short of new product, variants and design. This leads to higherconsumers expectation.

Bargaining Power of Suppliers

The bargaining power of suppliers of raw materials and intermediate goods is not veryhigh. There is ample number of substitute suppliers available and the raw materials arealso readily available and most of the raw materials are homogeneous. There is no mo-nopoly situation in the supplier side because the suppliers are also competing among

themselves.

Even there is high bargain-ing power for Suppliers aswell as for Buyers.

Bargaining Power of Consumers

Bargaining power of consumers is also very high. This is because in FMCG industry theswitching costs of most of the goods is very low and there is no threat of buying one prod-uct over other. Customers are never reluctant to buy or try new things off the shelf.


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Analysis of FMCG Sector

SWOT Analysis

Strengths:

Presence of established distribution networks in both urban and rural areas

Low Operational Costs

Presence of well-known brands in FMCG sector

Availability of raw materials

Weaknesses:

"Me-too" products which illegally mimic the labels and brands of the established brands

Lower scope of investing in technology and achieving economies of scale, especially in

small sectors

Low exports levels

Opportunities:

Large domestic market over a billion populations

Untapped rural market

Rising income levels, i.e. increase in purchasing power of consumers

Export potential and tax & duty benefits for setting exports units

Threats:

Tax and regulatory structure

Removal of import restrictions resulting in replacing of domestic brands

Temporary Slowdown in Economy can have an impact on FMCG Industry

Key Take Away for Investors

Robust Growth rate in Future

Wide distribution network and supply chain

Customized Product range to suit local market requirements

Superior processing technology

Brand building and marketingHigher Disposable Income

Awareness about Nutrition and Hygiene


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Hindustan Unilever Limited (HUL)

Company Outlook Positive


Company Description

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods(FMCG) Company, touching the lives of two out of three Indians with over 20 distinctcategories in Home & Personal Care Products and Foods & Beverages. In FY ending2007 the Company generated net sales of INR 13,913.40 Cr. and a profit of INR1,914.88 Cr.

HUL is also one of the country's largest exporters in FMCG product; it has been recog-nized as a Golden Super Star Trading House by the Government of India.

The mission that inspires HUL's over 15,000 employees, including over 1,300 managers,is to "add vitality to life." HUL meets everyday needs for nutrition, hygiene, and personalcare with brands that help people feel good, look good and get more out of life.

HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk,Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, KwalityWall's are household names across the country and span many categories - soaps, de-tergents, personal products, tea, coffee, branded staples, ice cream and culinary prod-ucts. They are manufactured over 40 factories across India. The operations involve over2,000 suppliers and associates. HUL's distribution network comprises of about 4,000redistribution stockists, covering 6.3 million retail outlets reaching the entire urban popu-lation, and about 250 million rural consumers.

Major Recent News

Margins scenario likely to change

We expected to see an increase in margins. The primary reason for our upgrade is thatwe expect the margin scenario to turn around. Crude prices have dropped drasticallyover the last quarter, driving a sharp decrease in cost of key inputs for soaps, detergentsand packing material. HUL increases the prices of soaps and detergents to partially passon rising costs, when crude rose from US$7080/bbl to US$140/bbl. Now, Crude pricesare down to ~25 per cent from its peak.

Unilever, U.K. reduces packaging spend

Unilever is lowering its expenditure on packaging across its portfolio of food brands aspart of a wider cost-cutting drive. HUL has pared down the colour palette used for print-ing across many products. The system has been used to reduce printed packaging costsfor Unilever's products. It is also eco-friendly because it reduces waste in the printingprocess. HUL is taking different steps to reduce the cost and increase the margin.

Unilever's Pureit wins the UNESCO Water Digest Water Award 2008-2009

Hindustan Unilevers product - Pureit (a water purifier) has received the UNESCO Water

Digest Water Award 2008-2009 in the category of best domestic non-electric water puri-fier. Pureit received the award for outstanding contribution in the field of water in India.The product is available across 21 Indian states and has reached more than 1 millionhomes in India giving them access to microbiologically safe drinking water.

Pureits performance has been tested by leading international & national medical, scien-tific & public health institutions and meets the germ-kill criteria of the Environmental Pro-tection Agency, the drinking water regulatory agency in the USA.


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Key Financial Result for the Financial Year Ending Dec 07

The company has reported total income of INR 14,366.54 Crores as compare to last

year of INR 12,803.90 Crores to report a growth rate of ~12 per cent. The company isamong one of the fastest growing in FMCG Industry.

HUL is a market leader inFMCG Industry.

Where as, Profit after taxes were at INR 1,767.66 Crores as compare to last year ofINR 1523.16 Crores to register a growth rate of ~16 per cent. The company is able to main-

tain its margin and even tocapture bigger market bywidest coverage.

The Company sale has registered a CAGR of 9.67 per cent across the last three yearswhere as the profit after taxes has registered a CARG 13.83 per cent over the lastthree years.

HUL Q3 (Sep 08) Net Profit Soars by ~34 per cent to INR ~547 Crores

The Company continues to impress on sales growth with one more quarter of near ~21per cent growth. Total Income reported by the company for the quarter was INR4,110.91 Crores as compare to INR 3,395.17 Crores QOQ basis.

The company is innovative inlaunching new products. Thenew flavor in coffee has leadsHUL to snatch big marketshare in Coffee Division.

The Net Profit registered for the quarter was INR 546.61 Crores as compare to INR408.06 Crores.

Outlook

The Company is the largest FMCG player and market leader in most of the productcategory. The Company has registered a robust growth rate over last few years andhas wide market coverage. HUL believe in product innovation and entrance into nichemarket. Recently company has launch Pureit, a water purifier, received a good re-sponse from the market. The company has a good growth rate.

The Company has launchedPureit, a water purifier, hasreceived a good response andis expected to grab big mar-ket share.


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Godrej Consumer Products Limited (Godrej)



Company Description

Godrej Consumer Products Limited (GCPL) continues to be one of the leading FMCGcompanies in the country. One in three households in India uses a Godrej product everyday.

The company is a leader in hair colour category and Liquid Detergent category and isamong the largest marketer of toilet soaps with leading brands such as Cinthol, Fairglow,Godrej No 1.

The company has wide market coverage and by the means of acquisition the company isbuilding a presence in different countries. The company is presently exporting thereproducts to 30 different countries. The acquired arms of Godrej like Keyline, Rapidol andKinky are expected to create synergy and larger market share. The company launchessome new products that include Godrej Expert Powder and Liquid hair colors, CintholMusk and Godrej Ezee Bright and Soft.

The mission that inspires Godrej's over 950 employees, spread over 3 state-of-the-artmanufacturing facilities at different location, is to Deliver Superior Stakeholder Value byproviding solutions to existing and emerging consumer needs in the Household & Per-sonal Care business.

The company has annual sales of INR 1102.57 Crores with a CAGR in double digits overpast many years.

Major Recent News

Godrej takes over Joint Venture

The Board of Directors of Godrej Consumer Products Limited (GCPL) has approved the

acquisition of 50 per cent stake of its joint venture partner SCA Hygiene Products stakein Godrej SCA Hygiene Limited. After the transaction, the Joint Venture which owns theSnuggy brand of baby diapers will become a 100 per cent subsidiary of GCPL.

Godrej buys back equities

The Company has bought back 23.83 Lakhs shares for INR 3.11 Crores under its buyback offer. The share represents 20.89 per cent of the INR 14.9 Crores offer.

Godrej acquired Kinky - One of South Africas leading hair brand

Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky GroupLimited, South Africa. Kinky is among one of the largest brand into hair segment withproduct portfolio includes dry hair, hair braids, human hair extensions, hair pieces, wigsand wefted pieces. Kinky also offers hair accessories like styling gels, hair sprays, oil

free shampoo, bonding glue and bonding glue removal.


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Key Financial Result for the Financial Year Ending Mar 08

The company reported sales of INR 1,102.57 Crores to register a jump of ~16 per cent

compare to INR 951.52 Crores last year. Where as the profit after taxes were at INR159.23 Crores grew by ~11 per cent from INR 144.03 Crores last year

The Company sale has registered a CAGR of 25.11 per cent across the last threeyears where as the profit after taxes has registered a CARG of 20.80 per cent over thelast three years.

Godrej enjoys a market shareof ~35 per cent in Hair Colourand ~80 per cent in LiquidDetergent. For both the seg-ment the company is a marketleader.

Godrej Q2 (Sep 08) Revenue Soars by 26 per cent to 346 Crores

The Company continues to impress on sales growth with one more quarter of morethan 26 per cent growth. Total Income reported by the company for the quarter wasINR 346.46 Crores as compare to INR 274.02 Crores QOQ basis.

The Net Profit registered for the quarter was INR 34.73 Crores as compare to INR37.06 Crores QOQ basis. There is a decrease in Net profit in mainly on account of

increase in raw material prices.

Outlook

Although the company ismarket leader for Hair Colourand Liquid Detergent, thecompany always does someproduct innovative. The com-pany launched some newproducts in Liquid hair colorsand Godrej Ezee.

The Company is one of the largest FMCG player and market leader in hair colourcategory and Liquid Detergent category. The company is come international acquisi-tions. The company has entered into several new categories during the year and ex-pects to add significant value to the company.

The company registered a decrease in profit, mainly on account of high raw materialprices, now as the raw materials process are down, the company will be able to main-tain the margins.


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Dabur India Limited (Dabur)



Company Description

Dabur India Limited is the fourth largest FMCG Company in India with interests inHealth care, Personal care and Food products. Dabur has build on a legacy of qualityand experience for over 120 years, today Dabur has powerful brands like Dabur Amla,Dabur Chyawanprash, Vatika, Hajmola and Real.

Dabur is a market leader for Dabur Chyawanprash and packaged juice - Real & Ac-tive. The Company never limits itself to power branded product but believes to strengthin other business opportunities by growing in niche segments. The company has en-tered into Health and Beauty Retail segment which is an emerging retail category inIndia. The Company has opened 7 H&B stores and has plan to setup 160 stores by2010. Hindustan Unilever Ltd (Ayush) and Marico (Kaya Skin) have presence in Healthand Beauty Retail segment.

The mission that inspires Daburs over 3500 employees is to Dedicated to the Healthand well being of every household. Dabur posses Strong capabilities which are re-flected by Strong R&D infrastructure, 14 manufacturing units and wide distributionnetwork which covers 2.5 million retailers.

Major Recent News

Dabur foray into health drink

Dabur has entered into the malted food drink market with the launch of a new healthdrink Dabur Chyawan Junior. According to the company, they expect to capture amarket share of 10 per cent of the INR 1,900 Crores malted food drink market over thenext two years.

Acquisition of Fem

Dabur has acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL), a leading playerin the womens skin care products market, for Rs 203.7 Crores in an all-cash deal. TheCompany is expected to create synergy by this deal.

Dabur to set up new medicine manufacturing in Himachal Pradesh

Dabur got approval from Government of Himachal Pradesh to set up another medicinemanufacturing unit. The project has an expected investment of INR 130 Crores.

Margins scenario to increase

We expected to see an increase in margins of FMCG Company. The recent fall incommodity prices are primary reason for the margin scenario to turn around. Crudeprices have dropped drastically over the last quarter, driving a sharp decrease in costof key inputs for soaps, detergents and packing material.

The company also expects to see a significant correction in packaging costs. Thecompany is taking different steps to reduce it packaging cost which currently consist~17 per cent of the total cost for the company.


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Dabur has achieved a turnover of INR 2,396.30 Crores compare to INR 2080.3 Crores

last year to register a growth rate of ~15 per cent and Profit after Tax of INR 332.90compare to INR 281.7 Crores last year to registered a growth rate of ~18 per cent.

Dabur is able to maintain ismargin. The company hascontinuously registered arobust growth rate.Over the last five years, the company has reported compound annual growth rates of

18 per cent in Net Revenues and 33 per cent in Profit after Tax.

The Company sale has registered a CAGR of 19.15 per cent across the last threeyears where as the profit after taxes has registered a CARG 28.76 per cent over thelast three years.

Recently company foray intohealth drink and expect tocapture 10 per cent marketshare in next two years.

Dabur Q2 (Sep 08) Net Profit Soars by 18 per cent to INR 107 Crores

Dabur took aggressive cost management initiatives coupled with a judicious pricingstrategy and continued strong performance in key categories helped Dabur to mitigatethe impact of steep cost inflation and the company announced an increase in EBITDA

margin by 52 bps. The Company net profit for the quarter stood at INR 106.96 Crores,up from INR 90.55 Crores (QOQ).

Outlook Dabur is not leaving anystone un-green. The Companyhas acquired 72.15 per centstank in Fem. By this acquisi-tion the company got an en-trance into womens skin careproduct.

The company is well known for ayurvedic brand which have existence of over 120years. The major product of the company is Dabur Chyawanprash and packaged juice.The acquisition with Fem will add synergy to the company and will help the companyto capture market in womens products too. Recently the company has entered intoHealth and Beauty Retail segment. The company has registered a continuous andhigh growth rate. There is growth in Profit margin also. We expect the company tocontinue the growth.


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Procter & Gamble Hygiene & Health Care Limited (P&G)

Company Outlook Neutra


Company Description

Procter & Gamble Hygiene & Health Care Limited (P&G) is one of Fast MovingConsumer Goods (FMCG) Company having a portfolio of a Billion dollar brandssuch as Vicks & Whisper. With a turnover of INR 643.00 Crores, the Company hascarved a reputation for delivering high quality, value-added products to meet the needsof consumers.

The company has presence in Feminine care and Health care. In Health care thecompany was rated as Indias Most Trusted Brand by the Advertising & MarketingMagazine and continues to be among the top of the charts of Brand-Equity surveys.

The philosophy that inspires P&Gs employee is to Touching Lives, Improving Lifeand every year the company had tried and gone a little further in their effort to advancemore and more lives for the betterment.

Profit before Tax (PBT) for the year ending June has reported an increase by 24 percent at INR 180.60 Crores compare to last year INR 145.50 Crores. However, the PBTof the last year included one-time preoperational expenses on setting up of the Plant.Hence, PBT, when compared with last years PBT excluding these exceptional ex-penses, grew by 17 per cent.

During the year under review, your Company delivered a Profit after Tax (PAT) of INR131.41 Crores. However, PAT at INR 131.41 Crores is not comparable to PAT of INR89.8 Crores last year. The PAT of last year includes adjustment for the impact of pro-visions of taxes for prior years and for pre-operational expenses on setting up of plantsat Baddi. Even after including the expenses on the above mention exceptional items,PAT is up by 23 per cent primarily reflecting savings from Baddi tax-free zone, wherethe Company has set up a health care plant.

Major Recent News

New product categories to enter Indian Market

The Company has 21 product categories out of which only 8 product have presence inIndia. The company is planning to launch the rest 13 product in India. The companyexpects to see a growth in other categories.

P&G plans to set up 20 new factories

The company has an aggressive plan to set up 20 new factories across the World outof which 19 is expected to come in emerging markets and most of them would be seenin Brazil, Russia, India, and China (BRIC) nations.

P&G Whisper makes a record

Whisper which is one of the companys power brands has recorded 50 per cent marketshare in urban India.


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Key Financial Result for the Financial Year Ending June 08

Building on the robust performance of last year, both Health Care and Feminine Care

business continued to deliver very healthy growth. The company has a goodpresence in internationalmarket. Currently the Com-pany is taking several stepsto capture Indian marketwhere the company has asmall market share in termsof revenue.

The sales for Health Care category reported to INR 312.3 Crores reflected a record jump of 16 per cent compare to INR 268.7 Crores last year where as the FeminineCare sales of INR 340 Crores reflected a record jump of 21 per cent compare to INR282.0 Crores last year.

This year, PAT at INR 131.41 Crores grew by 46 per cent from INR 89.8 Crores lastyear.

The Company sale has registered a CAGR of 4.66 per cent across the last five yearswhere as the profit after taxes has registered a CARG 9.87 per cent over the last fiveyears.

Procter & Gamble announces Q1 (Sep 08) Results For the year ended 2007, thecompany PAT has droppedsignificantly but the companyhas managed to retain in theyear 2008.

Companys sales grew to INR 188.30 Crores from INR 155.10 Crores in the corre-sponding period last year registering a growth rate of ~21 per cent. Profit before Taxes(PBT) grew by ~23 per cent where as Profit after taxes (PAT) grew by ~43 per centcompared to the corresponding quarter of last year.

Outlook

The company was having presence mainly into women products before P&G acquireGillette. This was a step by P&G took the step towards getting into men products. Thecompany has a little market share in Indian market. The company is planning to comeup with 20 new plants out of which mainly will be in emerging markets and most ofthem would be in Brazil, Russia, India, and China (BRIC) nations. The company has ahuge development plans in India. The company is planning to launch 13 products inIndia. The company have good growth prospect in Indian market.

The company is planning tolaunch the rest 13 productfrom a bouquet of 21 prod-ucts.


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Nirma Limited (Nirma)

Company Outlook Neutra


Company Description

Nirma Limited (Nirma) is one of the largest players of Indian household product. It isamong some of the brands which have created a wave in the Indian market and hasbeen labeled as Marketing Miracle of an era. The company launched detergent powderat priced INR 3 per kg, when the available cheapest brand in the market was INR 13 perkg. Nirma gave a tough competition to HUL.

Nirma has a strategy of self sufficiency by way of backward integration to facilitate thecontrol over the cost of key products and key raw materials such as Soda Ash and LAB,which find application in the production of detergents.

Nirma marketed its product by two networks. One which consists of about 450 exclusivedistributors and is one of the low cost, fastest & flexible in distributing FMCG distributionchannels of the country. Where as the other network comprises of more than 2000 dis-tributors and posses wider reach, speedy market intelligence, competitive edge and bet-

ter focus.


The gross sales of the company registered a growth rate by 4.32 per cent to INR2650.78 Crores against INR 2541.05 Crores last year. Where as net profit has registereda growth of mare than 100 per cent. The Net Profit for the year ended was INR 229.73Crores against INR 109.12 Crores last year.

Nirma Limited announces Q2 (Sep 08) Results

The Company announced a phenomenon drop in net profit for the quarter ended Sep-tember 2008. During the quarter, the profit of the company declined by 97.88 per cent toINR 1.71 Crores from INR 80.79 Crores in the same quarter last year. The decrease inthe profit was mainly due to high raw materials prices and other expenses.

OutlookThere is growth rate in top line of the company but the company is losing the marketshare. HUL has become the market leader in Household care.


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Emami Limited (Emami)



Company Description

Emami Limited (Emami) is one of the know brands whose principal activities are to de-velop and manufacture personal, beauty and health care products through an effectiveleverage of Ayurveda. The companys portfolio consists of 20 products made from herbs,natural extracts and essential oils. The company started with a vision of making peoplehealthy and beautiful naturally. The products are sold across India and in countries likeHolland, Bangladesh, Nepal, Sri Lanka, Pakistan, Gulf countries, Europe, Russia, Africaand the Middle East.

The company has a network which consist of 2,700 distributors which have a direct cov-erage of 4,00,000 retail outlets across the country. The company has plants located inKolkata, Pondicherry and a new plant in Guwahati.

The Company accounts for ~22 per cent share of personal care of the countrys FMCGmarket. Some of the company power brands like Boroplus Antiseptic Cream is the mar-ket leader with a ~70 per cent market share; Navratna Oil is also a market leader withmore than 50 per cent market share. Companys other power brands also plays an im-portant part and hold a good market share.

The company entered into Realty business in May 2007. Emami Realty with its joint ven-ture partners undertook 31 projects. Recently the company called off its earlier decisionto quit the realty business. The company is planning to transfer its stake in 100 per centsubsidiary Emami Realty to other group companies.

Major Recent News

Emami may hive off Zandu Chemical

The company has recently bought Zandu Pharmaceuticals for ~INR 700 Crores is evalu-ating the possibility to hiving off Zandu Chemicals, a subsidiary of Zandu Pharmaceuti-

cals, because there are limited growth prospects and chemicals in not the core businessof Emami.

Emami plans to transfer holding of realty arm to group companies

The company has decided to stay rooted in the real estate business and transfer itsstake in 100 per cent subsidiary Emami Realty to other group companies. The companyshare swap ratio would be worked out so that Emami Realty's stake is fairly distributedamong other group companies. The company has reversed its earlier decision to quit theproperty business.

Emami plans to set up a manufacturing facility in Africa

The company is planning to set up a new manufacturing facility in Africa with an invest-ment of INR 90 Crores. The facility is anticipated to commence operations by 2010.


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The company performance improved significantly in 2007-08. The company reported a

net sales of INR 583.71 Crores registered a growth rate of ~13 per cent over the lastyear which was INR 515.80 Crores whereas the profit after taxes were INR 92.75 Croresto registered a growth rate of ~41 per cent over the last year which stood at INR 65.92Crores.

Emami is one of the bestnames for Ayurvedic prod-ucts.

The Company sale has registered a CAGR of 24.56 per cent across the last three yearswhere as the profit after taxes has registered a CARG 45.81 per cent over the last threeyears.

The company has acquiredstake in Zandu Pharmaceu-ticals. The company hasplans to get into differentindustries.

Emami Limited announces Q2 (Sep 08) Results

The Company has registered sales of INR 122.09 Crores as compare to INR 103.50Crores for the last year to report a growth rate of ~18 per cent where as profit after taxesamount to INR 12.05 Crores as compare to INR 10.56 Crores for the last year. Profitafter taxes growth rate was ~14 per cent which was lower as compare to the growth rate

of sales. The profit margin decreases due to rise in raw material prices.

OutlookIn 2007, the company hasundertaken 31 projects withEmami Realty, 100 per centsubsidiary, with its jointventure partners.

The company is one of the know brands whose principal activities are to develop andmanufacture personal, beauty and health care products through an effective leverage ofAyurveda. Recently the company has entered into Realty business.


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this information, all care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended as an offer or solicitati

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