ECONOMIC ANALYSIS Dabur

ECONOMIC ANALYSIS:
An economic analysis is a process in which business owners gain a clear picture

of the existing economic climate, as it relates to their company's ability to
thrive. Economists, statisticians, and mathematicians often carry out this
analysis on behalf of for-profit and non-profit businesses.
GDP (gross domestic Product)
Since there is a direct relationship between the GDP and stock market: A positive change in
the GDP (a higher GDP growth number) will invigorate the stock markets, and as a result the
market will go up. If the stock market moves up, it will impact your investment portfolio
positively
Like most countries in the world, India also faced its fair share of headwinds during 2020-21.
The GDP numbers plummeted in Q1 of FY2020-21 to -24.4% on account of strict lockdowns
imposed by the government to curb the spread of the virus. There were mobility restrictions,
disruption in sales and distribution and supply chain, reverse migration of labour force, shifts
in consumer behaviour towards essential categories and severe impact on channels like
modern trade, salons and HORECA. With gradual unlocking of the economy, Q2 FY2020-21
saw sequential recovery, albeit the GDP growth rate remained in the negative on account of
declines in construction activity and non-essential services like travel, entertainment, and
hospitality industries. Indian economy returned to the growth side in Q3 of FY2020-21 on
account of pent-up demand, festive spending, and a jump in government expenditure. The big
surprise in terms of the sectors of production was the healthy expansion in financial, real
estate and professional services (+6.6%), and construction (+6.2%). During Q4 the GDP
reported growth of 1.6% and was on the path to recovery when the second wave of COVID-
19 came like a bolt from the blue. The lockdowns in various parts of the country during April
and May have once again put a shadow on economic growth and is likely to impact the GDP
growth going forward. Outlook While impact of the second wave of COVID-19 is coming
down as this report goes into print, the future is still uncertain. As per recent estimates
released by RBI, the GDP is likely to grow at 9.5% during FY2021-22. The quarter wise
estimates of GDP growth are presented. As per estimates provided by World Bank in Global
Economic Prospects June 2021, the Indian economy is expected to grow by 8.3% in 2021.
Compared to India, China is expected to see a growth of 8.5%, US to grow at 6.8% and Euro
Area to witness 4.2% growth in the same period.
The Company was growing at a steady pace when the COVID pandemic brought business to
a standstill towards the end of the 2019-20 fiscal. Amidst this challenging business
environment, Dabur quickly revamped its portfolio to meet the growing consumer need for
preventive healthcare, personal hygiene, and household hygiene products, while alongside
enhancing production of its existing Ayurvedic immunity boosters like Dabur Chyawanprash
and Dabur Honey. The Companys business revived quickly and posted strong double-digit
growth beginning second quarter of the FY2020-21. COVID has entirely changed the
innovation landscape for Dabur. The Company not only increased its R&D spends but also
ensured that innovations are targeted to meet the consumer needs and are quick to reach the
market. This shift in our innovation strategy is the reason why we were able to roll-out more
than 50 new products within few months of the COVID outbreak. Through the course of the
year, Dabur continued adding more products and offered age-old Ayurvedic remedies in
convenient and modern formats which not only increased its repertoire but also provided a
better connect with millennials and centennials, besides the tactical foray into the Personal &
Household Hygiene space. This strategic business transformation exercise to develop and
implement aggressive growth strategies in the core business areas and successfully address
the emerging challenges helped Dabur sail through troubled waters to deliver a quick
turnaround during 2020-21 fiscal. The consumer-relevant innovations were also well received
with new products accounting for 5.6% of Revenue during the year, a high for the Company.
The year was also characterised by continued investment behind our distribution, with village
coverage rising to 59,217 from 52,298 a year ago. despite the macro-economic challenges,
Dabur also sharpened its focus on the Power Brands strategy through increased investments
behind the 9 power brands.
Inflation Rate
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a
broad measure, such as the overall increase in prices or the increase in the cost of living in a
country.
Dabur report rise of 2.3 per cent in net profit for third quarter of FY 2022 amid inflation and
Dabur India Ltd CEO Mohit Malhotra said that the overall operating environment remained
challenging throughout the quarter with unprecedented inflation of 13 per cent and subdued
consumer sentiments. We have mitigated the impact of inflation partially through calibrated
price increases and cost-saving initiatives. Despite these macro-economic headwinds, we
remained focused on rolling our consumer-centric innovation that expanded our total
addressable market, besides gaining market share across 100 per cent of our product
portfolio, which is unprecedented. The company’s EBITDA margin witnessed a compression
of 60 basis points YoY but climbed 89 basis points quarter-on-quarter. Gross margins, too,
dropped by 204 basis points YoY but was up 74 basis points QoQ, primarily on account of
inflation.
FMCG companies have been battling inflation on several fronts for the last one year. While
on one hand, the cost of several key input prices such as vegetable and fruit oils have been on
a climb on the other, freight costs have shot through the roof due to rising fuel prices.
Packaging costs have also gone up for these companies. The price of vegetable and fruit oils,
a key ingredient for Dabur India, has risen by 35-50 percent year-on-year as per market
estimates.
Tax Structure
The tax structure consists of the central government, state governments, and local municipal
bodies. The direct tax includes income tax, gift tax, capital gain tax, etc while indirect tax
includes value-added tax, service tax, Good and Service taxm, customs duty, etc.
First of all, taxes reduce your investable income, that is, the amount of income you can
invest. When you pay taxes before you invest, you have less money to invest into the stock
market and other investments. If you have less money to invest, then you don't earn as high a
return. It's that simple.
Dabur Ltd has said that the company is not mulling price cuts of its FMCG products but will
keep a close watch on competitors and “take appropriate actions” if required. Since we are
availing fiscal benefits, there will not be any material impact on our tax rate.
Proposed Tax Structure
Central levies - to be subsumed in CGST
 CVD - Additional Duty of Customs
 SAD - Special Additional Duty of Customs
 Central Excise Duty
 Service Tax
 Central Sales Tax
 Central Surcharges and Cess
State levies - to be subsumed in SGST
 State VAT
 Octroi, Entry tax, Purchase Tax Entertainment tax, Luxury Tax etc
 State Surcharges and Cess
 State Excise Duty - Medicinal and Toilet Preparations (Excise Duties) Act, 1955

Taxes Outside GST
 Basic Customs duty
 Stamp duty
 Taxes and duties on alcohol for human consumption
 Taxes and duties on electricity
Budget
A government budget is a document that presents a governing body's anticipated revenues
and proposed spending for a fiscal year. Government budgets often require legislative
approval and are subject to political pressure from interest groups that compete for resources.
If the share market perceives the Union Budget positively, the stocks are set to go up.
However, if the market feels Budget 2022 is not in its favour, there will be a downfall in
stocks. If FM Sitharaman announces any change in corporate tax, the share market will react.
Any decrease in the taxation burden would result in a positive reaction. On the other hand,
any increase in the tax burden will dampen the spirit of D-street.
Finance Minister Nirmala Sitharaman’s first Budget of the new decade is a forward-looking
Budget with a focus on economic growth, infrastructure development and privatisation,
besides supporting employment generation. It takes the investment route to drive long-term
economic growth with a focus on Healthcare.
The FMCG industry, facing a consumption slowdown, on Saturday welcomed the Union
Budget saying that proposed reduction in personal taxes would help drive consumption and
the thrust on rural development would revive demand from the segment. The Union Budget
attempts to activate multiple levers like rural, infrastructure, entrepreneurship and financial
sectors to stimulate growth. It remains to be seen which of these will fire and to what extent.
We are optimistic about the government's rural agenda and hope that it buoys consumer
demand for the FMCG sector. Terming it as "incremental budget", Dabur India CEO Mohit
Malhotra said the government continues to focus on farmers' income and is offering
significant sops at the lower end of the spectrum, which will enhance the purchasing power of
the consuming class.
Interest Rate
The interest rate is the amount charged on top of the principal by a lender to a borrower for
the use of assets. An interest rate also applies to the amount earned at a bank or credit union
from a deposit account. Most mortgages use simple interest. The investment community and
financial media tend to obsess over interest rates and for a good reason. Interest rates refer to
the cost someone pays for the use of someone else's money.
When the Federal Open Market Committee (FOMC), which consists of seven governors of
the Federal Reserve Board and five Federal Reserve Bank presidents, sets the target for the
federal funds rate—the rate at which banks borrow from and lend to each other overnight—it
has a ripple effect across the entire U.S. economy, including the U.S. stock market. And,
while it usually takes at least 12 months for a change in the interest rate to have a widespread
economic impact, the stock market's response to a change is often more immediate.

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ECONOMIC ANALYSIS:

An economic analysis is a process in which business owners gain a clear picture

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