Hindustan Unilever Limited.docx

CONTENTS           

Hindustan Unilever Limited Profile Introduction Vision Sense of purpose Sustainability targets Capital Structure of HUL Equity share Balance sheet of HUL Last 5 years Comarative Balance sheet of HUL Last 5 years Common Size Balance sheet Ratio Analysis of HUL  Current Ratio  Quick Ratio  Debt Equity Ratio  Working Capital  Company with peer company  Balance sheet of HUL and P&G  Recommendation

IN THE FULLFILLMENT OF CONTINUOUS ASSESSMENT 2 COURSE: FIN 302 SECTION: RQ 1708 UNDER THE GUIDANCE OF DR. Rupesh Roshan Singh

SUBMITTED BY

REG.NO

ROLL.NO.

JUHI KUMARI

11716436

62

RINKESH RAJ

11716442

59

PRAKHAR SHARMA

11706697

58

SAMMER SINGH

11715666

60

MANISHA SEN

11711579

61

Hindustan Unilever Limited Type of Company

: Public

Industry

: Consumer Goods

Predecessor

: Hindustan Vanaspati Manufacturing Company (19311956) Lever Brothers India limited (1933-1956) United Traders limited (1935-1956) Hindustan Lever Limited (1956-2007)

Founded

1933

Headquarters

: Mumbai, Maharashtra

CEO

: Sanjiv Soshil Mehta

Products

: Foods, Cleaning Agents and Personal Care and Water Purifiers.

Revenue

: Rs. 34,487 Crore

Operating Income

: Rs. 6,047 Crore

Net Income

: Rs. 4,490 Crore

Parent

: Unilever

Website

: www.hul.co.in

INTRODUCTION Hindustan Unilever Limited (HUL) is a British-Dutch company headquartered in Mumbai, Maharashtra Its products include foods, beverages, cleaning agents, personal care products, water purifiers and consumer goods. HUL was established in 1933 as Lever Brothers. Following the merger among Lever Brothers in 1956, it was renamed as Hindustan Lever Limited. The company was renamed in June 2007 as "Hindustan Unilever Limited" As of 2019 HUL portfolio had 35 product brands in 20 categories and employs 18,000 employees with sales of Rs. 34,619 crores in 2017-18. Hindustan Unilever Limited is an India-based fast-moving consumer goods company. The Company operates in seven business segments. Soaps and detergents include soaps, detergent bars, detergent powders and scourers. Personal products include products in the categories of oral care, skin care (excluding soaps), hair care, talcum powder and color cosmetics. Beverages include tea and coffee. Packaged foods include staples (atta, salt and bread) and culinary products (tomatobased products, fruit-based products and soups), Icecreams and frozen desserts. Others include Exports, Chemicals, Water business. As of March 31, 2012, the Company had over 35 brands spanning 20 distinct categories. Its portfolio includes household brands, such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall's and Pureit.

Vision Our vision is to grow our business, while decoupling our environmental footprint from our growth and increasing our positive social impact.

Sense of purpose Our business has always been driven by a sense of purpose, a thread that connects us to our founding companies and their social missions to improve health, hygiene and livelihoods in their communities. We continue to believe that business must make a positive contribution to addressing the challenges the world faces and that this is the only way a business will succeed. In 2009, we launched The Compass – our strategy for sustainable growth, setting out our determination to build a sustainable business for the long term

Sustainability targets The Unilever Sustainable Living Plan, launched in 2010, laid the blueprint for achieving this strategy. We continue to work towards the ambitious targets we have set ourselves for halving our environmental impact, improving the health and wellbeing of 1 billion people, and enhancing the livelihoods of millions.We will grow our business by building on our strengths – combining our scale and expertise with our understanding of consumers in diverse markets to continue providing brands and services that people want and need. Our sustainable business model is making a difference to millions of people’s lives and to our environmental impact, and we will keep working to make these contributions greater. We’re also already seeing evidence that it is strengthening our business by helping to drive growth and trust, and reduce risk and cost.

Capital Structure Of HUL Hindustan Unilever Limited raised their funds from only Equity Shares. Capital Structure of HUL from 2014 to 2018 is given below.

Capital Structure 216.5 216.45 216.45

216.43 216.39

216.4

216.35 216.35 216.3

216.27

216.25 216.2 216.15 1

Year 2018(1) 2017(2) 2016(3) 2015(4) 2014(5)

2

3

Authorized Capital (Cr) 225 225 225 225 225

4

5

Issued Capital (Cr) 216.45 216.43 216.39 216.35 216.27

From 2014 to 2015 HUL Issued Share Rs.8,00,000 more And 2015 to 2016 HUL Issued Share Rs.4,00,000 more Further in 2016 to 2017 HUL Issued Share Rs. 4,00,000 more Again 2017 to 2018 HUL Issued Share Rs.2,00,000 more. Its clearly showing that HUL is Issuing their equity share every year. And Issuing rate is not constant. Hindustan Unilever Limited is using only Equity share for its Capital and They are not using any debt. So HUL is an unlevered firm.

Equity Share Equity shares were earlier known as ordinary shares. The holders of these shares are the real owners of the company. They have a voting right in the meetings of holders of the company. They have a control over the working of the company. Equity shareholders are paid dividend after paying it to the preference shareholders. The rate of dividend on these shares depends upon the profits of the company. They may be paid a higher rate of dividend or they may not get anything. These shareholders take more risk as compared to preference shareholders. Equity capital is paid after meeting all other claims including that of preference shareholders. They take risk both regarding dividend and return of capital. Equity share capital cannot be redeemed during the life time of the company.

Balance Sheet of HUL Last 5 Years Particulars Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories

2018 cr 216 6859 0

2017 cr 216 6274 0

2016 cr 216 6063 0

2015 cr 216.35 3508.43 0

2014 cr 216.27 3060.78 0

0

0

0

0

0

7075

6490

6279

3724.78

3277.05

0 0

0 0

0 0

0 0

0 0

0 7075

0 6490

0 6279

0 3724.78

0 3277.05

5267 1125

4712 688

3218 304

4721.36 2263.83

4442.85 2020.79

0

0

0

0

0

4142 0

4024 0

2914 0

2457.53 0

2422.06 0

430

203

386

479.01

319.78

0

0

0

0

0

3111

3779

2780

3277.93

3094.12

2359

2362

2528

2602.68

2747.53

Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax

1147 3373 1405

928 1671 885

1064 2759 740

782.94 2537.56 716.55

816.43 2220.97 609.59

8284

5846

7091

6639.73

6394.52

7985

6815

6362

6196.95

6535.17

651 8636

387 7202

290 6652

2585.87 8782.82

1983.37 8518.54

352

-1356

439

-2143.09

-2124.02

0

0

0

0

0

653

572

510

466.62

396.14

398

412

342

270.66

234.41

255

160

168

195.96

161.73

Comparative Balance Sheet of HUL Last 5 Years Particulars 2018

2017

2016

2015

2014

Share Capital Reserves Total Total Shareholders Funds Total Liabilities

0%

0%

0%

-35%

8%

5.85

2.11

25.55

4.48

30.61

5.85

2.11

25.54

4.48

32.77

5.85

2.11

25.54

4.48

32.77

Inventories Sundry Debtors Cash and Bank Loans and Advances Net Block Capital Work in Progress Net Deferred Tax Investments Total Assets Particulars Share Capital Reserves Total

-0.03 2.19

-1.66 -1.36

-0.75 2.81

-1.45 -0.33

27.48 8.16

17.02

-10.88

2.21

3.17

22.21

5.20

1.45

0.23

1.07

6.10

1.18 2.27

11.10 -1.83

4.56 -0.93

0.35 1.59

24.22 3.20

0.95

-0.08

-0.28

0.34

1.62

-6.68 7.76 2018 0%

9.99 1.23 2017 0%

-4.98 24.20 2016 0%

1.84 3.94 2015 -35%

30.94 38.74 2014 8%

5.85

2.11

25.55

4.48

30.61

Common Size Balance Statement Particulars 2018

2017

2016

2015

2014

Share Capital Reserves Total Total

3.05%

3.33%

3.44%

5.81%

6.60%

96.95%

96.67%

96.56%

94.19%

93.40%

100.00%

100.00%

100.00%

100.00%

100.00%

Inventories Sundry Debtors Cash and Bank Loans and Advances Total Liabilities Net Block Capital Work in Progress Net Deferred Tax Investments Total

31.10% 15.12%

34.68% 13.63%

37.80% 15.91%

60.99% 18.35%

70.93% 21.08%

44.46%

24.54%

41.26%

59.46%

57.34%

18.52%

13.00%

11.07%

16.79%

15.74%

-113.8%

-105.8%

-99.5%

-205.8%

-219.9%

54.60% 5.67%

59.09% 2.98%

43.58% 5.77%

57.59% 11.23%

62.53% 8.26%

3.4%

2.3%

2.5%

4.6%

4.2%

41.01% 100.00%

55.49% 100.00%

41.57% 100.00%

76.81% 100.00%

79.88% 100.00%

Ratio Analysis of HUL 1. Current Ratio Chart Title 1.200 1.066 1.000

0.959 0.812

0.800

0.756

0.751

4

5

0.600 0.400 0.200 0.000 1

2

3

Last Five Years Ratio

2018(1)

2017(2)

2016(3)

2015(4)

2014(5)

0.959

0.812

1.066

0.756

0.751

Not Good Not Good

Not Good

Good

Not Good

Not Good

An Ideal Current Ratio is between 1 – 1.2. As stated above, if the current ratio stays below 1 for a prolonged period of time, it may be a cause of concern. At the same time, a current

ratio higher than 1.5 indicates that the company is not productively utilizing

its cash resources. As per the graph in 2016 HUL was having Ideal Current Ratio. If we notice the graph from 2017 to 2018 Ratio increases. So the current trend is showing in 2020 current ratio will increase.

2. Quick Ratio

Quick Ratios 0.800 0.700

0.686

0.686

0.600 0.484

0.500

0.460

0.428

0.400 0.300 0.200 0.100 0.000 1

Not Good

2

3

4

5

2018(1)

2017(2)

2016(3)

2015(4)

2014(5)

0.686

0.484

0.686

0.460

0.428

Not Good

Not Good

Not Good

Not Good

The higher the quick ratio, the better the position of the company. The commonly acceptable current ratio is 1,but may vary from industry to industry. A company with a quick ratio of less than 1 cannot currently pay back its current liabilities; it's the bad sign for investors and partners.

3. Debt Equity Ratio

2018

2017

2016

2015

2014

0

0

0

0

0

Hindustan Unilever Limited is Using only Equity Capital. So Debt Equity Ratio is 0.

4. Working Capital Working Capital 1000 439

500 0 2

1 -500

4

5

-2143.09

-2124.02

3

-352

-1000 -1500

-1356

-2000 -2500

2018(1)Cr

2017(2)Cr

2016(3)Cr

2015(4)Cr

2014(5)Cr

-352

-1356

439

-2143.09

-2124.02

In 2016 HUL was having best working capital. Trend is showing that in 2019 their working capital may be increase.

Balance Sheet of HUL and P&G Particulars Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Producing Properties Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets

2018 HUL 216 6859 0 0

2018 P&G 32.46 773.04 0 0

7075 0 0 0 7075

805.5 0 0 0 805.5

5267 1125

399.96 149.85

0

0

4142 0 430 0 3111

250.11 0 21.48 0 0

2359 1147 3373 1405 8284

123.61 148.47 399.59 1153.76 671.67

7985 651 8636 352

566.85 53 619.85 533.91

Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities

0

0

653 398 255 7586 1539

0 0 0 805.5 166.12

Ratios Analysis 74.02

80 70 60 46.5

50 40 30 20 10

0

0

1.86

0.94

0

1

2 P&G

Company 2018

Debt Equity Ratio

3 HUL

Current Ratio

Return on Assets

P&G

0

1.86

46.5

HUL

0

0.94

74.02

In 2018 Their debt Equity ratio was 0. P&G Is having more current ratio then HUL. But HUL is having more Return on Assets. Both Company Use Equity Capital for rising capital.

Recommendations 

Hindustan Unilever is not having Optimal capital structure. An optimal capital structure is the objectively best mix of debt, preferred stock, and common stock that maximizes a company’s market value while minimizing its cost of capital.



An optimal capital structure is the objectively best mix of debt, preferred stock, and common stock that maximizes a company’s market value while minimizing its cost of capital.



According to economists Modigliani and Miller, in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information; and in an efficient market, the value of a firm is unaffected by its capital structure.

Chart Title 22.5 75

127.5

Debt

Equtiy

Preferance Share

Debt

33%

75 Cr

Equity Capital

57%

127.5 Cr

Preference Share Capital

10%

22.5 Cr

Total

100%

225 Cr

According to Us This will be best Capital Structure for Hindustan Unilever Limited.