EQUITY
RESEARCH REPORT
FINANCE AND INVESTMENT CELL,
SRI VENKATESWARA COLLEGE
FINANCE AND INVESTMENT CELL, SVC
TABLE OF CONTENTS
1
Particulars
Page No.
Company Overview
2
Industry Analysis
2-4
Key Risks
4-6
COVID 19 Impacts
6-7
Sustainability
7-8
Competitor Analysis
9-12
SWOT Analysis
12
Pestle Analysis
13
Porter's 5 Forces Analysis
13-15
Mergers and Acquisitions
15-18
Ratio Analysis
19-20
Technical Analysis
21
Discounted Cash Flow
22
Disclaimer
23
Contributors
24
FINANCE AND INVESTMENT CELL, SVC
COMPANY OVERVIEW
Hindustan Unilever Limited or HUL is one
of the largest FMCG companies
headquartered in Mumbai, India. It is a
subsidiary of the British company,
Unilever based in London. In 1931,
Unilever set up its first subsidiary in India
named Hindustan Vanaspati
Manufacturing co., followed by Lever
Brothers India Ltd. In 1933 and United
Traders Limited in 1935. All these three
companies merged to form Hindustan
Lever Limited in 1956. It was renamed
Hindustan Unilever Limited in June 2007.
HUL houses 50+ brands spanning 15
distinct categories: home and personal
care, washing powders, deodorants,
cosmetics, skincare, hair care, food, tea,
coffee, ice cream and frozen products.
With such a diverse product range, the
company has become a part of the
everyday life of millions of consumers
across India. According to the Annual
report for 2022, Home care grew by 24%
which was broadly based on strong
performance in fabric wash and household
care. Beauty and personal care grew
competitively at 4%. Double-digit growth
was seen in the skincare category led by
‘LUX’, ‘Dove’ and ‘Pears’. Food and
Refreshments too grew at a rate of 5%.
33%
39%
Home care
REVENUE
Beauty and
personal care
28%
Food and
refreshment
COMPANY PRODUCT DIVISION
2
For FY 2021-22, the company clocked a
turnover of Rs. 50,336 crores at a growth
rate of 11% with underlying volume
growth at 3%. EBITDA margins were also
very impressive at 24.8%. PAT i.e., profit
after tax came up by 11% at 8,818 crores.
HUL also provides employment to 21000
employees.
Home care
48%
29%
EBIT
23%
Beauty and
personal care
Food and
refreshment
HUL has a focus on Climate Action at
heart as their business strategy. It also
recognizes the interconnection of plants
and society and that sustainability can be a
driver of business performance. The
company has also taken steps to solve the
problems regarding plastic waste
management, water management and
deforestation. It has also launched several
programs like ‘Samavesh’ to enhance
women’s representation on the shop floor,
and Ahilya, which focuses on empowering
women to become sales professionals.
INDUSTRY ANALYSIS
The Fast Moving Consumer Goods or the
FMCG market is the fourth largest sector
in India at present. It can be majorly
divided into three broad categories of
household and personal care products,
healthcare and food and beverage
FINANCE AND INVESTMENT CELL, SVC
contributing 50%, 32% and 18%
respectively of the total sales in the
industry.
50%
Household and PC
products
REVENUE
Healthcare
32%
18%
Food and
Beverage
growth in the July-September quarter,
registering 461 million seconds of
advertising, which is the highest in 2021.
FMCG continued to maintain its leadership
position with a 29% growth in ad volumes
against the same period in 2019. Even the
e-commerce sector showed a healthy jump
of 26% in 2020 which is mainly due to
rising digital connectivity in cities and
rural areas, which is driving the demand
for FMCG. The E-commerce segment is
forecasted to contribute 11% to the overall
FMCG sales by 2030.
INDUSTRY DIVISION
India is a young and growing country that
no FMCG player can miss due to the rising
consumer income and shift in the
consumption pattern. With a median age of
just 27, the Indian population is becoming
more consumerist due to growing
ambition. Growing awareness and easier
access to change in lifestyle due to an
increase in disposable income of
consumers have been key drivers for
growth. The highest revenue for the FMCG
sector comes from urban India (55%)
followed by the rural and semi-urban areas
accounting for 50%.
The FMCG market in India is expected to
reach US$220 billion by 2025 from
US$110 billion in 2020, an increase at a
CAGR of 14.9%. The retail market in India
reached US$1.1 trillion by 2020 from US$
840 billion in 2017, with modern trade
expected to grow at 20-25% per annum,
which is likely to boost the revenue of
FMCG companies. The Indian processed
food market expanded from US$ 263
billion in 2019-20 and is expected to reach
US$ 470 billion by 2025. Advertising
volumes on television recorded healthy
3
MARKET SHARE(%)
7.12%
7.06%
14%
10.74%
2%
2%
3%
3%
8%
5%
Hindustan
Unilever
(HUL), 12%
ITC
Hindustan Unilever (HUL)
Marico
Parle Agro
Nestlé
Britannia
Dabur
Godrej Group
Procter & Gamble Co.
Colgate-Palmolive
Johnson and Johnson
COMPANY MARKET SHARE IN INDUSTRY
2018 (source: digotalgumma.com)
The government of India is also working
towards promoting growth in the FMCG
sector. It has allowed 100% and 51%
Foreign Direct Investment (FDI) in food
processing & single-brand retail and multibrand retail respectively which will boost
employment, supply chain and high
FINANCE AND INVESTMENT CELL, SVC
visibility for FMCG brands thereby
stimulating consumer spending and hence
encourage more product launches. The
sector also recorded an FDI of US$ 20.84
billion between April 2000-June 2022. The
government’s production-linked incentive
(PLI) scheme gives companies a major
opportunity to boost exports with an outlay
of US$ 1.42 billion. The goods and Service
Tax (GST) is also beneficial for the FMCG
industry as many FMCG products like
toothpaste, soaps, etc. now come under the
18% tax bracket against the previous rate
of 23-24%. Also, the GST on food
products and hygiene products has been
reduced to 0-5% and 12-28% respectively,
as quoted by IBEF.
India being a young country is growing
rapidly which in turn has increased
demand for FMCG in both rural as well as
urban India with more brand
consciousness. This has also resulted in the
fall of FMCG in the unorganised sector
and a rise in the organised sector. Another
major factor propelling the demand for the
products is the young consumer, who
forms the majority of the workforce and
doesn’t have time to cook. The Internet has
contributed in a big way, facilitating a
cheaper and more convenient way for the
movement of goods through E-commerce
websites or large-scale advertising. All
these factors added to some more factors
promise a bright future for the FMCG
industry in the coming years.
KEY RISKS
Hindustan Unilever Limited (HUL)
operates in a highly competitive and
4
dynamic environment, and faces several
key risks that could impact its performance
and growth. Some of these risks include:
 Fake Products - The company has
been dealing with a growing number
of imitation products. The scope and
popularity of HUL's brand
encourage local manufacturers to
copy its items, some of which even
develop fake goods. In rural
markets, fraudulent goods are
frequently encountered. This
negatively impacts HUL's brand
equity.
 Increased Competition - ITC,
Procter & Gamble, ColgatePalmolive, Nestle, and Godrej are
among the companies that Hindustan
Unilever must contend with today.
ITC is a fierce competitor to HUL
due to a number of marketdominating brands. A number of
new competitors have increased the
level of competitiveness. This scaled
up the competition, which was
already shown in HUL's loss of
market share in some categories and
rise in operating expenses.
 Inflation - The company is facing
increasing input costs due to an
increase in prices of the raw
materials. There is a potential impact
on the company due to rising
inflation, freight costs and raw
materials. The operations and
financial performance of the
FINANCE AND INVESTMENT CELL, SVC
organisation may be significantly
impacted by rising inflation, which
could have a detrimental effect on
HUL's profit margins. Additionally,
as consumers may have less spare
income to spend on non-essential
items like consumer goods, inflation
can also result in lower consumer
expenditure and purchasing power.
 Price Wars - A price war is when
businesses compete with one another
to sell their products for less money
in an effort to expand their market
share and boost sales. Many
businesses are striving for market
dominance in the fast-moving
consumer goods (FMCG) industry,
which can result in price wars. One
of the biggest FMCG firms in India,
Hindustan Unilever Limited (HUL),
has experienced fierce rivalry from
other firms like Procter & Gamble,
Nestle, and ITC, which has resulted
in price wars in the market.
PRICING PRESSURE IN FMCG (source:
livemint.com)
5
 Rising Costs and Input Prices Hindustan Unilever Limited may be
significantly threatened by rising
costs and input prices. HUL's
manufacturing costs rise along with
the cost of labour, raw materials, and
other inputs, which lowers profit
margins and weakens
competitiveness.
This can be particularly difficult for
HUL, which competes fiercely in its
market and has to strike a balance
between maintaining fair prices for
its goods and maintaining a profit.
HUL may experience decreased
profitability and diminished
competitiveness if it is unable to
pass on rising expenses to customers
in the form of higher prices.
 Economic and Political InstabilityIndia has undergone rapid economic
growth phases as well as times of
economic unpredictability and
volatility. This is also true of the
political situation. The company
may face a number of difficulties as
a result of economic and political
unrest, including lower consumer
spending and purchasing power,
currency fluctuations, inflation,
modifications to governmental rules
and regulations, and supply chain
interruptions. These obstacles could
have a negative effect on HUL's
sales and profitability, as well as
raise expenses and complicate
operations. Due to its powerful
brand, wide range of products, and
effective supply chain, HUL has
FINANCE AND INVESTMENT CELL, SVC
been able to maintain its position as
a top player in India's consumer
goods market despite these
obstacles.
COVID-19 IMPACTS
The COVID-19 pandemic had a significant
impact on Hindustan Unilever Limited
(HUL), like many other companies. Some
of the impacts of COVID-19 on HUL
include:
 Supply chain disruptions: The
pandemic caused supply chain
disruptions, like as plant closures
and delays in shipping, which had an
effect on HUL's capacity to produce
and deliver goods. In order to reach
customers, the business had to
quickly adapt to new working
practises, such as the switch to ecommerce and home delivery. In
order to make up for disrupted
supply chains, HUL also needed to
identify new suppliers and put safety
and health precautions in place for
their employees. HUL demonstrated
the resiliency of the business and its
supply chain by continuing
operations and serving its clients in
the face of these obstacles.
 Decreased demand: The pandemic
resulted in decreased consumer
spending, as people focused on
essential items and cut back on nonessential items, affecting HUL's
sales and profitability.
6
 Shift in consumer behaviour:
Lockdowns and other social
isolation measures caused a change
in consumer behaviour, with
consumers spending more on
necessities like food and personal
care products and less on nonessentials like clothing. As
consumers concentrated on
preserving their health and
cleanliness, there was an increase in
demand for some categories, such as
hand sanitizers, disinfectants, and
health supplements. HUL was able
to adapt to these changes by swiftly
refocusing its manufacturing and
marketing initiatives to satisfy the
new expectations, and the business
has subsequently witnessed a
resurgence in sales as society adapts
to the new normal.
 Remote work: The pandemic led to
remote work and reduced travel,
impacting HUL's ability to conduct
business as usual, including face-toface sales and marketing activities.
In order to ensure the safety of its
workers and the continuity of
business operations during the
pandemic, the corporation had to
quickly develop remote work
practices. For HUL, working
remotely has brought both
difficulties and opportunities.
 Increased digital adoption: Global
digital adoption has significantly
increased as a result of the COVID-
FINANCE AND INVESTMENT CELL, SVC
19 pandemic, and Hindustan
Unilever Limited (HUL) is no
exception. The usage of digital
channels for commerce,
communication, and entertainment
has increased dramatically as a
result of physical barriers being put
in place and consumers spending
more time at home. HUL has been
aggressively investing in digital
technology and enhancing its online
presence in order to meet the rising
demand for digital services. This has
involved expanding its e-commerce
capabilities, introducing new online
platforms for sales and marketing,
and using social media and digital
advertising to reach customers. To
effectively satisfy the rising demand
for online orders, the company has
also been working to optimise its
supply chain and distribution
procedures.
However, despite these challenges, HUL
was able to respond quickly and effectively
to the pandemic, leveraging its strong
brand, distribution network, and digital
capabilities to maintain its position in the
market. HUL also took steps to support
communities during the pandemic, such as
providing hand sanitizers and soap to
health workers and implementing measures
to protect its employees.
SUSTAINABILITY
HUL has made a commitment to
sustainability, and has taken several steps
7
to reduce its environmental footprint and
promote responsible business practices.
Corporate Social Responsibility
Hindustan Unilever has various CSR Units
and understands its social responsibilities
very well. It has worked on various aspects
of social well-being and runs a lot of CSR
Projects. HUL aims to build “sustainable
and inclusive communities” by
contributing to a fairer, more socially and
environmentally inclusive world while
using its scale for good through its
community development initiative called
“Prabhat.” Project Shakti is an initiative to
financially empower rural women and
create livelihood opportunities for them.
Through this project, the Company
endeavours to enhance the livelihoods of
rural women. Additionally, HUL runs a
free mobile medical service camp -Sanjeevani -- near its Doom Dooma
Factory in Assam. The aim is to provide
free mobile medical facilities in the interior
villages of Assam. Other initiatives include
Sustainable Sourcing, supporting
maintenance, development of road central
medians and protection of flora and fauna
of the public area outside the Company’s
Head Office premises. There are a lot more
CSR Projects on water conservation, waste
management, personal hygiene, covid 19
relief, etc.
ESG Adherence
Environment:
Hindustan Unilever is working hard
towards improving the health of our planet
FINANCE AND INVESTMENT CELL, SVC
with timebound commitments and through
various initiatives within the organisation
and beyond.
Initiatives Taken: (Against 2002 Baseline)
o Reduction in CO2 Emissions – 94%
o Reduction in Total Waste Generated
– 54%
o Reduction in Water Consumption –
47%
o Use of environment-friendly freezer
cabinets for Ice Cream and Frozen
Desserts that use Hydrocarbon (HC)
refrigerants instead of
Hydrofluorocarbons refrigerants
Social Commitments:
1. Positive Nutrition
o Double the number of products sold
that deliver positive nutrition by
2025
o 95% of packed ice cream to contain
no more than 250 kcal per serving
by 2025
o 95% of packed ice cream to contain
no more than 22g total sugar per
serving by 2025
o 85% of the Foods portfolio to help
consumers reduce their salt intake to
no more than 5g per day
2. Equality, diversity & inclusion
o 5% of the workforce to be made up
of people with disabilities by 2025
o Achieve an equitable and inclusive
culture by eliminating any bias and
discrimination in their practices and
policies
8
3. Raise living standards
o Ensure that everyone who directly
provides goods and services to HUL
will earn at least a living wage or
income by 2030
o Help 2 million small and medium
sized enterprises grow their business
by 2025
4. Future of work
o Help equip 1.5 million young people
with essential skills by 2030
o Upskill the employees with future-fit
skills by 2025
Governance
Hindustan Unilever has adopted various
policies and strict principles related to
accountability, integrity and
transparency at various steps such as
diverse board with key skill sets and
having qualities like respect, dignity
and fair treatment to all stakeholders. It
has remained transparent by
maintaining regular interface with
stakeholders and investors grievance
mechanisms.
Some of the steps that has been taken
for governance are:
 Countering corruption
 Safeguarding information
 Engaging externally
 Respecting people
 Responsible risk management
 Living the code of business
principles
FINANCE AND INVESTMENT CELL, SVC
COMPETITOR ANALYSIS
ITC
DABUR
PATANJALI
Founder
ITC is a Britishowned company
established in 1910.
Dabur was founded
by Dr k. Burman in
1884.
Areas of operation
ITC business is not a
one-business
company and it
operates in many
segments.
FMCG- Bingo,
savlon, sunfeast,
ashirvaad, lychee
flavor, stationery
products, etc. Other
than the FMCG
segment it operates
in Apparel,
Cigarettes, Hostel
and Resorts,
Agribusiness,
paperboards, and
packaging.
Dabur is not
restricted to one
product but it has
diverse fields
offering products.
Hair oil- amla,
vatika, almond.
Shampoo- Almond
shampoo, Vatika
shampoo.
Healthcare
supplement- dabur
honey, dabur
glucose.
Other fields are
Skincare, Home
care, oral care, OTC,
and Ethicals,
Digestives and Gaur
GUM.
Market share
It has occupied
around 25% market
share.
It has occupied 19%
market share.
It has occupied
roughly 4% market
share.
Marketing strategy
ITC promotes its
goods using many
media such as
television, radio, and
print, as well as
through its various
Dabur uses a variety
of traditional
promotional tactics
including TV
commercials, radios,
newspapers, point-
Patanjali takes a
comprehensive
strategy for its
digital marketing
initiatives. It has
various digital
9
The founder of
Patanjali is Ramdev
and Balkrisna and
was established in
2006.
Skincare products,Neem tulsi face
wash, Saundrya face
wash, rose face wash
Toiletries products Drishti eye drop,
herbal kajal
Health care
products- pachak
jeera, pachak hind
goli
Hair care productskesh kanti natural,
kesh kanti reetha,
Food productsPatanjali Doodh
Biscuits DIVYA
PEYA- dental care
products, DANT
KANTI NATURAL.
FINANCE AND INVESTMENT CELL, SVC
brand ambassadors.
Kartik Aryan and
Tara Sutaria are two
of their brand
ambassadors. To
market its products,
it has employed a
range of promotional
activities such as an
ad campaign
presented on a wellknown television
station and hoarding.
Pricing Strategy
10
The enterprise has
implemented
premium pricing
policies for lavish
items and fair
pricing for the
middle-class group,
which will assist
generate sales and
lead to higher
revenue statistics.
They use various
pricing tactics for
various items.
of-purchase displays,
wall paintings,
Melas, Haats, video
vans, and several
sales promotions.
Project DoubleUnder employed
digitized maps and
electronic data to
create a list of
specific locations to
target. Apart from it
has been found that
it invests in social
initiatives and
campaigns to
promote its products
and service.
Dabur has
coordinated its
pricing strategy
deftly. Because the
corporation has
separated its
premium items from
other versions in
each category, the
pricing of the
products varies from
one another. Dabur
has maintained its
prices low so that
Dabur goods may be
purchased by
families of all
economic levels.
Dabur also targets
upper-class families
by delivering luxury
items to meet their
demands.
advertisements that
focus on promoting
its products.
It also uses Baba
Ramdev as its brand
ambassador on their
posts, very
frequently to market
its products.
They also use
marketing initiatives
like ‘swadeshi ka
swabhiman’ and
‘healthy India
Banega' to advertise
their products.
Patanjali educates
individuals about the
advantages of
utilizing their
products and uses
price comparison as
a marketing tool.
Patanjali's pricing
strategy is
penetrative because
the company
understands that
higher prices would
not allow it to
capture the market.
Furthermore, if the
components are
natural and
homegrown, the
product costs less.
When compared to
foreign brands,
practically every
product has a price
drop of 25-30%.
FINANCE AND INVESTMENT CELL, SVC
Distribution channel
Target market
11
ITC has an unrivaled
distribution network.
Its goods are sold at
over 4 million retail
outlets in India.
It has significant
agri-sourcing
capabilities, with
agricultural
connections in over
17 states that supply
it with high-quality
wheat, soya, potato,
coffee, and other
commodities
it operates
approximately 100
hotels in 70
countries. Food
goods from ITC are
shipped to North
America, the Middle
East, Africa, and
Australia.
Dabur has four
channels of
distribution:
wholesalers,
retailers, distributors,
and the internet. The
ayurvedic firm has a
large distribution
network, with six
million retail outlets
and a strong
presence in both
urban and rural
regions. Dabur's
goods are also wellknown in
international
markets, with items
accessible in over
120 countries
worldwide.
Patanjali has a strong
distribution network
because of
partnerships with
companies such as
Future Group,
Reliance Retail, and
Hypercity. This has
allowed the Patanjali
brand to ensure that
its goods are widely
available throughout
India's cities and
towns. Patanjali
goods are
extensively
promoted by around
5000 shops,
including local
grocery stores.
Patanjali's online
presence is growing
in tandem with the
rise of e-commerce
in the Indian market.
It fascinates every
Dabur is one of the
Patanjali tries to sell
pair of eyes and ears, largest Ayurveda and its product to every
regardless of age
natural health
Indian household.
group, with its broad companies in the
ability to generate
world with a range
and continually
of over 250
maintains diversity
Ayurveda & herbal
in front. ITC is
products. Its target
expanding its
market is
offerings and
institutional sales
audiences. It ensures such as hotels and
that individuals of all airlines. It also tries
ages are included in to sell its products to
its creation in a way every household,
that accommodates
although its main
everyone's
consumers are the
requirements.
middle-class group.
FINANCE AND INVESTMENT CELL, SVC
Strength
Weakness
ITC is a well-known
brand with goods
that are market
leaders in the
majority of the
markets in which it
operates. ITC
controls some of the
most well-known
cigarette brands,
including Gold Flake
and Classic.
The hotel business is
not able to establish
a large market share.
Dabur's website is
efficient and
engaging, attracting
a sizable number of
visitors and ecommerce offers.
The ingredients used
to create the goods
offered by Patanjali
are natural, herbal,
and ayurvedic.
Under the brand
name Dabur, several
off-brand and
knockoff items are
offered for sale.
Patanjali offers
substantially smaller
profit margins to
distributors and
retailers than other
consumer goods
firms.
SWOT ANALYSIS
STRENGTH
OPPORTUNITY
 The organization has a stellar reputation and  The consumer market will continue to
has constantly been acknowledged as a
grow as a result of Project Shakti
leading FMCG provider.
AMMA's increased penetration into
 The firm has more than 80 years of
rural areas and the shift from
expertise in the consumer products
unorganized to organized businesses.
industry and is supported by Unilever,
 The brand can be further strengthened
which owns 67% of HUL.
through mergers and acquisitions.
WEAKNESS
 Competitors specializing in one product
are stealing market share from HUL, as
is the case with Ghadi & Nirma
detergents for wheel washes.
 A number of Hindustan Unilever's
products, including skin-lightening
lotions, caused controversy.
12
THREAT
 It is getting increasingly difficult for
companies to set themselves apart from
rivals due to the rise in local and
national suppliers. The market
reputation of the brand might potentially
be ruined by counterfeit goods.
 Governmental standards and rules that
change can also have a direct impact on
corporate policies and operations.
FINANCE AND INVESTMENT CELL, SVC
PESTLE ANALYSIS
Political:
Legal:
• India's government supports the FMCG
sector, which creates a favourable
environment for companies like HUL. The
merger of HUL with Tata Oil Mills and
Lakme proves this statement.
• However, the government's emphasis on
promoting domestic products and reducing
import duties may impact HUL's imported
raw materials.
• India has strict regulations regarding food
safety and labelling, which HUL must
adhere to.
• HUL must also comply with competition
laws and regulations regarding advertising
and marketing.
Economic:
• India's growing middle class and
increasing disposable income are
positively affecting consumer spending,
benefiting HUL.
• HUL's profitability may be impacted by
rising inflation and interest rates.
Social:
• Changing consumer preferences and an
increasing focus on health and wellness are
affecting the demand for HUL's products.
• HUL's marketing strategies must consider
the cultural diversity of India and changing
consumer values.
Technological:
• HUL is leveraging technology to improve
its supply chain and distribution network,
making it more efficient and cost-effective.
• HUL is also investing in research and
development to innovate its products and
improve quality.
Environmental:
• HUL is committed to sustainability and
reducing its environmental impact through
initiatives such as reducing packaging
waste and improving water usage
efficiency.
• The increasing concern for environmental
issues is creating demand for eco-friendly
products, which HUL is well-positioned to
meet.
In conclusion, while HUL faces several
challenges in the Indian market, it also has
many opportunities to grow and succeed.
The company must be proactive in
addressing these external factors to remain
competitive and meet the changing needs
of its customers.
PORTER’S FIVE FORCES
ANALYSIS
Porter's Five Forces is a framework for
analysing the competitive environment of a
business. Here's a brief Porter's Five
Forces Analysis of Hindustan Unilever
Limited (HUL):
1.Threat of new entrants: The FMCG
sector in India is highly competitive, with
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FINANCE AND INVESTMENT CELL, SVC
several established players and many new
entrants. HUL enjoys good repute and
customers rely on it.
However, the high capital requirements,
distribution networks needed, and the
ability to earn the customer’s trust can
limit the threat of new entrants. As a result,
HUL remains in a very strong position and
the threat of new entrants is low.
2. Bargaining power of suppliers: The
bargaining power of suppliers for HUL is
considered moderate. HUL has a
diversified supplier base, reducing its
dependence on any single supplier.
However, some suppliers may have
bargaining power if they are the only
source of a critical raw material.
Another factor that comes into play here is
that HUL shares a very good relationship
with its suppliers just like their customers.
Hence, suppliers do not increase their costs
so as to maintain their strong relationship
with the company.
3. Bargaining power of buyers: The FMCG
sector in India is dominated by a few large
players, giving buyers significant
bargaining power. HUL must respond to
the demands of these buyers to remain
competitive.
The cost of switching for consumers is low
so making the switch from HUL to other
companies is easy. Customers also possess
all the required information which allows
them to judge the products well and change
14
if beneficial. As a result, the bargaining
power for customers of HUL is high.
4. Threat of substitutes: HUL faces
competition from both local and
international players, as well as potential
substitutes for its products. The cost of
switching for consumers is also quite low
and this also poses a threat. The company
must continuously innovate and improve
its products to stay ahead of its
competitors.
However, HUL has been regarded as a
reliable and well-reputed company and as a
result has loyal customers. They have
always provided high-quality products at
fair prices which has won the trust of their
customers. These factors combined, make
HUL the best choice for all customers.
5. Rivalry among existing competitors:
The FMCG sector in India is highly
competitive, with several established
players and many new entrants. Since the
products have very little differentiation, the
cost of switching is also low.
HUL faces intense competition from both
local and international companies and must
continuously innovate and improve its
products and strategies to remain
competitive.
To conclude, while HUL operates in a
highly competitive environment, the
company has several strengths and
opportunities to succeed. HUL must
continuously monitor and respond to the
five forces to remain competitive and meet
the changing needs of its customers.
FINANCE AND INVESTMENT CELL, SVC
PORTER’S FORCE
THREAT
Threat of New Entrants
LOW
Bargaining power (Suppliers)
MODERATE
Bargaining power (Buyers)
HIGH
Threat of Substitutes
LOW
Competitive Rivalry
HIGH
MERGERS AND
ACQUISITIONS OF HUL
The year 2018 witnessed the emergence of
one of the greatest deals in the history of
FMCG sector, wherein FMCG giant
Hindustan Unilever took the decision of
merging with GlaxoSmithKline (GSK). It
was the result of the proposition of
divestment of business by GSK and several
market players competed for the deal and
at the end it was grabbed by HUL. The
merger was officially completed on 1 APR
2020. The deal resulted into diversification
of HUL business in turn capturing the
market for products such as Horlicks and
boost. It was mainly a result of HUL’S
15
strategy to taper the food and
replenishment industry with nutritious and
sustainable products already enjoying a
goodwill among the population.
(Source: The Economic Times)
FINANCE AND INVESTMENT CELL, SVC
MERGER OVERVIEW
EXECUTED MERGER
TIMELINE
Hindustan Unilever Limited (HUL), India’s largest fastmoving consumer goods company announced the
successfully completion of the merger of
GlaxoSmithKline Consumer Healthcare Limited
(GSKCH) with HUL on April 1 ,2020. This is one of the
largest deals in the FMCG sector.
DEAL PROPOSED ON: 3 DECEMBER 2018
DEAL CLOSURE: 2019 END
OFFICIAL MERGER: 1 APR 2020
MERGER VALUE
EQUATION
HUL acquiring GSK for a consideration of INR 3045cr,
exercising the option available in the original agreement
made.
The merger of GlaxoSmithKline Consumer Healthcare
Limited with HUL has been on the basis of an exchange
ratio of 4.39 HUL shares for each GSK CH India
OWNERSHIP POST
MERGER
Through the merger of GSK India with HUL, GSK now
holds a 5.7% stake in HUL.
Following the issue of new HUL shares, Unilever ‘s
holding in HUL diluted from 67.2% to 61.9%.
SHARE PRICE POST
MERGER
The stock price of HUL witnessed an increase by 35%
and GSK Consumer has seen a surge of 39% on the BSE
within one year from the closure of the deal.
16
FINANCE AND INVESTMENT CELL, SVC
SYNERGIES OF HUL AND GSK MERGER
GlaxoSmithKline (GSK) is one of the
prominent players in the food and
replenishment(F&R) industry with its
major products Horlicks and boost
enjoying a good reputation among the
people. Its diverse product portfolio is an
edge over other businesses in the same
industry.
•
The merger of GSK and Hindustan
Unilever (HUL) resulted in HUL
expanding its market segment with new
products in its portfolio. It led to a strategic
response to build a sustainable and
nutritious brand in India.
•
HUL increased penetration into
uncatered areas such as rural domains and
emerging channels to expand its offering in
the fast-moving consumer goods space.
•
HUL benefitted from the combined
synergies which led to cost efficiency and
operational improvements, expansion of
the go to market and distribution network,s
and grabbing benefits from the economies
of scale. Through supply chain
efficiencies.
•
HUL will distribute GSK’s Overthe-Counter and Oral Health products
under a consignment sale agreement (5
years).
•
The merger led to a consolidation of
the business of the companies resulting in
the expansion of the consolidated business
creating greater value for shareholders and
all other stakeholders.
SHAREHOLDING PATTERN
(pre and post merger)
100%
80%
38.09
32.81
61.91
67.19
HUL(POST
MERGER)
HUL(PRE MERGER)
60%
40%
20%
0%
promoters
17
public
FINANCE AND INVESTMENT CELL, SVC
ACQUISITION OF
INDULEKHA (2015-2016)
Consumer goods major Hindustan
Unilever Ltd acquired Kerala-based
Mosons Group Indulekha and Vayodha
hair care brands for Rs 330 crore ($49.8
million).
With Indulekha, HUL would re-enter the
hair oil market in India, which it exited in
2006 when it sold the Nihar brand to
Marico. It continued to have a portfolio of
products related to hair care with
shampoos.
The acquisition deal of indulekha benefited
HUL in the way that it acquired a premium
brand relating to ayurveda that
complemented its existing products and
eventually strengthens its current position
in the hair care category.
The deal includes a deferred consideration
of 10 per cent of the domestic turnover of
the brands each year, payable annually for
a five-year period beginning 2017-18,
HUL said in a statement.
18
ACQUISITION OF VWASH
(2019-2020)
Leading FMCG player Hindustan Unilever
acquired the leading female hygiene wash
brand VWash from Pharma major
Glenmark pharmaceuticals.
The deal includes the acquisition of
intellectual property rights including
trademarks, design and technical knowhow relating to the VWash brand.
The company did not disclose the
financials of the deal. The deal was split
into two parts, the first included the
upfront cash payment upon deal closure
and a deferred consideration through the
next year years.
The move helped HUL in expanding its
beauty and personal care category.
The acquisition of VWash gave HUL an
entry into the currently underpenetrated
and rapidly growing female hygiene
segment. The brand has a leadership
position and fits well into the white spaces
in the beauty and personal care business
and uses the gaps efficiently.
FINANCE AND INVESTMENT CELL, SVC
RATIO ANALYSIS
Ratios
Current
Ratio
2122
1.3
Debt/Equity
Ratio
0.02
Net profit
Margin %
ITC
2.7
0
25.4
17.5
8
Return on
Capital
20.1
Employed % 9
32.1
19
Patanjali
1.96
0.72
4.05
15.49
Dabur
1.3
Analysis
The Current Ratio
of HUL is lowest
among its
competitors is
concerning and it
suggests that the
company does not
have enough
short-term assets
to cover the
debts.
0.12
The Debt/Equity
Ratio of HUL is
0.02 which is not
the lowest among
its peers but
overall its quite
low. It indicates
lower risk of loan
defaults and
bankruptcy.
17.52
29.59
The net profit
margin of HUL is
close to that of
Dabur but
significantly
lower than ITC's
showing
moderate
efficiency in
generating profits
from the sales.
HUL's Return on
Capital Employed
is low in contrast
to its competitors
indicating that
company is
inefficient in
generating profits
from its capital
employed.
Graph
Current Ratio
1.45
1.4
1.35
1.3
1.25
17-18
18-19
19-20
20-21
21-22
Debt/Equity Ratio
1.5
1
0.5
0
17-18 18-19 19-20 20-21 21-22
Net profit Margin %
18
17.5
17
16.5
16
15.5
15
14.5
14
13.5
17-18
18-19
19-20
20-21
Return on Capital
Employed %
100
80
60
40
20
0
17-18 18-19 19-20 20-21 21-22
FINANCE AND INVESTMENT CELL, SVC
Basic Earning per share
Basic
Earning
per share
37.53
12.22
27.26
8.11
Basic EPS of HUL
is significantly
higher than its
competitors thus
offering better
returns to its
investors.
40
30
20
10
0
17-18 18-19 19-20 20-21 21-22
Interest coverage ratio
Interest
coverage
ratio
129.2
0
3.34
HUL has
incredibly high
interest coverage
ratio indicating that
HUL can pay for
its interest
obligations several
68.57
times.
400
350
300
250
200
150
100
50
0
17-18 18-19 19-20 20-21 21-22
Inventory turnover
Inventory
turnover
20
13.8
6.07
3.89
Inventory turnover
ratio of HUL is
notably high
indicating that the
company has an
efficient inventory
management
13.39
system.
16
15.5
15
14.5
14
13.5
13
12.5
17-18 18-19 19-20 20-21 21-22
FINANCE AND INVESTMENT CELL, SVC
TECHNICAL ANALYSIS
When the 100 MA moved below the 200 MA during the first week of February 2022, a
bearish market was predicted. The market fell further until March.
When the 100 MA moved over the 200 MA during the second week of August, the market
turned bullish. Previously, the market had been in a state of consolidation from July 2022 to
January 2023 It attempted to exceed 2720 but was unable due to stiff opposition at R2. As a
result, it is falling and trending sideways. The buying can take place at 2428 according to
technical analysis
The company has announced that it had entered into a new agreement with Unilever under
which the fees would increase from 2.65% to 3.45%. This will be staggered over three
phases, the first fee will increase by 45 bps for February to December in the year 2023, by a
further 25bps for next year, and another 10bps for the year 2025.
According to our fundamental analysis, the market value of a share is far from its intrinsic
value as compared to our estimation which is 1414.56 per share.
21
FINANCE AND INVESTMENT CELL, SVC
DISCOUNTED CASH FLOW
In crores*
1
Discounting Cash Flow Model
2
3
4
4
Terminal
Value
2023E
2024E
2025E
2026E
Free Cash Flow
12814
14736
16946
19488 3,47,759
Discounting Factor
Present Value of Future Cash
Flows
1.06
1.12
1.19
1.25
Required Rate of Return
(WACC)
Perpetual Growth
Enterprise Value
Shares Outstanding (in crores)
Fair Value of Equity /
Intrinsic Value
Market Price as on 23rd
February
Margin of safety
1.25
12,108 13,158 14,298 15,537 2,77,251
5.83%
4.00%
3,32,352.00
234.95
₹ 1,414.56
₹ 2,490.25
-43.20%
As per the Discounted Cash Flow Statement, the intrinsic/fair value of an equity share is
₹ 1,414.56. The share is currently priced at ₹ 2,490.25 and is trading at a premium of 43.20%.
22
FINANCE AND INVESTMENT CELL, SVC
DISCLAIMER
This document may not be reproduced, distributed or published in whole or in part, directly
or indirectly, for any purpose or in any manner.
It is meant for sole use by the recipient and not for circulation. The information and opinions
presented in the research have been arrived at by own research. Information and opinions
presented here have not been independently verified. This research is meant for information
purposes only.
Practice caution in matters of financial decisions and consult your financial advisor before
taking any decision.
Finance and Investment Cell, Sri Venkateswara College would not be held responsible in
case of a loss or an all-out misfortune.
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FINANCE AND INVESTMENT CELL, SVC
Made By:
The Research Team
Sri Venkateswara College
University of Delhi
Project Head
Suhanee Gupta
Research Department Head
Arshnoor Kamboj
Research Curator(s)
Chirag Gupta
Sumanyu Doomra
Shivangi Jindal
Research Team
Rohan Bakhshi
Vishal Yadav
Annu
Samarth Jain
Krsna Varadpande
Reach out to us at:
Suhanee Gupta: suhaneegupta10@gmail.com
Shivangi Jindal: jiindalshivangi@gmail.com
Sumanyu Doomra: sumdoo2004@gmail.com
24