Note on HUL- Leverage Level
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Low debt to equity ratio- As of March 2023, the company's debt to equity ratio was
0.0274. This means that for every ₹1 of debt, HUL India has ₹40 of equity. A debt to
equity ratio of 0.0274 is considered to be very low, and it is a sign that the company
is financially stable.
Profitability- There are a few reasons why HUL India has such a low debt to equity
ratio. The company is very profitable. In the fiscal year 2022-23, HUL India's net
profit margin was 16.8%. This means that the company is generating a lot of cash
from its operations, and it does not need to rely on debt to finance its growth.
High Cash Assets- HUL India has a long history of paying dividends to its
shareholders. In the fiscal year 2022-23, HUL India paid out a dividend of 25% of its
net profit. This means that the company is returning a significant portion of its
profits to its shareholders, and it is not using this money to fund its operations.
Underleveraged - HUL India is Underleveraged. HUL is one of the leading consumer
goods companies in India, and it has a strong track record of success. This makes it
easier for HUL India to raise debt if it needs to, and it also gives the company access
to lower interest rates. For future capital needs it should increase debt so as to take
advantage of tax shield.