Garg. A., and Tyagi. A.

, OPJU Business Review 1 (2022) 79-86

A Comparative Study on Financial Analysis OPJU BUSINESS REVIEW

79-86, (2022)
with Special Reference to FMCG Sector Published online in OPJU
University
(http://www.opju.ac.in/opjubr/)

Akansh Garg and Anshu Tyagi

Rukmini Devi Institute of Advanced Studies (RDIAS), Delhi
For further information, please contact Anshu Tyagi: anshu.tyagi@rdias.ac.in

Abstract
In India FMCG is the fourth largest sector and provides employment to around three million people
accounting for approximately five per cent of the total factory employment in the country. India's market
for fast moving consumer goods (FMCG) is expected to more than double to $104 billion by 2020 from
the present level of $49 billion. The present study examines the financial performance of selected fast
moving consumer goods (FMCG) companies in India. For the purpose of the study three leading FMCG
companies, Indian Tobacco Company Ltd. (ITC), Hindustan Unilever Limited (HUL) and Dabur Ltd.
have been selected. The study covers a time period from 2020 to 2021. The paper empirically examines
and compares the financial performance of the selected companies in terms of liquidity and
profitability. The ratio analysis which plays a very important role and is an essential part of the
financial statements of any company, has been used to evaluate various aspects of the selected FMCG
companies operating and financial performance such as its efficiency, liquidity, profitability.

Keywords: Fast moving consumer goods (FMCG) sector, financial analysis, accounting ratios,
Quantitative data, Growth prospects

Introduction
This project focuses on the fast-moving consumer goods (FMCG), commonly referred to as
consumer-packaged goods, which is one of the industries with the fastest growth rates. It is the
fourth-largest sector of the Indian economy. The FMCG (fast-moving consumer goods)
industry in India increased by 16 percent in value during 2021.These are the products whose
prices are comparatively low from other goods and are also sold at relatively minimal cost.
Their demand is very high, so they are sold very rapidly in the market.
FMCGs have a short life-span because of high consumer demand (e.g., soft drinks, sweetmeats
etc.) or because they are perishable (e.g., meat, dairy products, and confection goods). The
outright benefit made on FMCG items is moderately little, they for the most part is sold in huge
amounts, so the total benefit on such items can be enormous.
The project also focuses on the financial analysis of some FMCG companies which are ITC,
HUL and Dabur Ltd. In the project the focus will be more on fundamental type of financial
analysis. Fundamental analysis uses ratios and financial statement data to determine the true
value of a security. Ratios used for the analysis are net profit ratio, return on investment (ROI),
current ratio, liquid ratio, earnings per share (EPS), assets turnover ratio and inventory turnover
ratio. The present study is a descriptive study which tries to analyze financial position of the
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FMCG companies. The research undertaken was quantitative research as it was concerned with
numerical, applied statistics, and use of graphs and tables.
The ratios give us an overview about the financial standing of the 3 selected fast moving
consumer goods companies and also helps us to analyze and compare the financial position of
the selected FMCG companies (Subham Tebriwal, 2018).

Literature Review
• Soumya, P., Deepthi, L. N., (2019) told that financial analysis is a method of reviewing and
analyzing a company’s accounting reports (financial statements) so as to urge a far
better understanding of its past, present, and future performance. the method of reviewing
financial statements helps to form better economic decisions. Around the world, it is legal
for publicly traded companies to submit their financial statements to the appropriate
authorities. Some companies within the United States must file reports with the Securities
and Exchange Commission (SEC). Firms are obligated to produce their financial
statements within the annual report they share with their stakeholders.
• PARMAR, S. S. (2017) researched that the entire F.M.C.G. Market is above Rs. 85,000.
The company is growing rapidly and is expected to maintain this growth trajectory. The
fast-moving consumer goods (FMCG) industry is projected to be worth Rs 4 trillion by
2020. The process of measuring a firm's financial performance in monetary terms is used
to understand how well the company is doing overall, and can also be used to compare
similar companies or sectors. In this study, ratio analysis is used to evaluate the overall
financial efficiency of seven chosen FMCG companies in India. The study was conducted
to suggest ways to improve the financial efficiency of the units selected for improvement.
• Abbasi, Habiba. (2017) researched that by 2020, the Indian FMCG market is expected to
more than double to $104 billion from its current level of $49 billion. Ratio analysis, which
plays a very important role and is an integral part of the financial statements of any
company, was used to evaluate various aspects of FMCG's operating and financial
activities, such as its efficiency, liquidity, profitability. The present study focuses on
examining how HUL and ITC compare on various factors. HUL has over 16,000 employees
and had an annual turnover of around Rs.19,400 in 2010-2011. ITC has a market
capitalization of over $40 billion and annual turnover of $8 billion. The ITC group's
contribution to foreign income during the last ten years amounted to almost US$ 6.6billion,
of which agriculture exports constituted 57%.
• Patel, Harish., Patel, Dr. V. B. (2018) aimed to analyze fundamental position of major listed
FMCG companies using ratios. The aim of study is P&G, NESTLE, ITC, DABUR, and
HUL. Analysis was done using past three-year computed date of income Margin Ratio,
profits margin, Price to Earnings, Debt to equity ratio, Dividend payout ratio, Earnings per
share starting April 2016 to March 2018.This study provides a specific presentation of
data and guidelines which can help a fresh investor likewise as a venture investor to
understand vital aspects of investing. This study helps to the investors to make a
decision on a secure investment and to identify the expansion opportunities within the long
run.
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• Yasodha, Dr. M.; R, Aishvarrya; G, Anuraghavi; R, Krithika (2021) studied that the Fast-
moving consumer goods industry is projected to grow at CAGR of 27.9 to reach US $103.7
billion by 2020 and US $220 billion by 2025. This study provides a comparative analysis
of Britannia Industries and Marico Limited by evaluating and analyzing the company’s
financial statements, strengths and weaknesses to form proper economic decisions
for this and future. The analysis is finished with the assistance of assorted accounting tools
- comparative record, swot analysis and ratio analysis. The findings of the study show the
liquidity position of the businesses and therefore the article studies the financial position of
both the businesses.
Research Methodology

Research Objectives:
1. To know about the FMCG sector.
2. To analyze the financial position of the selected FMCG companies.
3. To compare the financial position of the selected FMCG companies.
Sampling Frame
Sample Size: The Sample population for the study is FMCG companies.
Sampling Unit: The sampling units consist of 3 companies –
1. India Tobacco Company Limited (ITC)
2. Hindustan Unilever Limited (HUL)
3. Dabur India Limited
Research Design
The present study is a descriptive study which tries to analyze financial position of the FMCG
companies. The research undertaken was quantitative research as it was concerned with
numerical, applied statistics, and use of graphs and tables.

Data Collection
The data for this project is collected with the help of only secondary data.

Source Of Data Collection

1. Companies annual balance sheet
2. Literature Review
3. Articles and Journals
Tools And Instrument
Financial tools like ratios will be used for analysis.

Time Period of The Study

2020-2021

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Data Analysis

Indian Tobacco Company Ltd. (ITC)

Table 1- Accounting Ratios of Indian Tobacco Company Ltd. (ITC)

Net Profit Current Liquid EPS Asset Inventory

Year Margin ROI Ratio Ratio Turnover Turnover
(%) Ratio Ratio
2020- 27.17 28.49 3.27 2.29 10.70 66.74 4.69
2021

Graph-1

Indian Tobacco Company Ltd. (ITC)

80
66.74
70
60
Ratio Values

50
40
27.17 28.49
30
20 10.7
10 3.27 2.29 4.69
0
2020-2021
Different Accounting Ratios

NET PROFIT MARGIN (%) ROI

CURRENT RATIO LIQUID RATIO
EPS ASSET TURNOVER RATIO
INVENTORY TURNOVER RATIO

The graph shows values of 7 accounting ratios for Indian Tobacco Company Ltd. (ITC)
and assets turnover ratio of ITC is the highest.

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Hindustan Unilever Limited (HUL)

Table 2- Accounting Ratios of Hindustan Unilever Limited (HUL)

Year Net Profit ROI Current Liquid EPS Asset Inventory

Margin Ratio Ratio Turnover Turnover
(%) Ratio Ratio
2020- 17.00 19.01 1.28 0.96 34.03 68.39 13.14
2021

Graph-2

Hindustan Unilever Limited (HUL)

80
66.74
70
60
Ratio Values

50
40
27.17 28.49
30
20 10.7
10 3.27 2.29 4.69
0
2020-2021
Different Accounting Ratios

NET PROFIT MARGIN (%) ROI

CURRENT RATIO LIQUID RATIO
EPS ASSET TURNOVER RATIO
INVENTORY TURNOVER RATIO

The graph shows values of 7 accounting ratios for Hindustan Unilever Limited (HUL) and
assets turnover ratio of HUL is the highest.

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Dabur Ltd.

Table 3- Accounting Ratios of Dabur Ltd.

Year Net Profit ROI Current Liquid EPS Asset Inventory

Margin Ratio Ratio Turnover Turnover
(%) Ratio Ratio
2020- 17.76 26.38 1.63 1.04 9.58 88.01 5.50
2021

Graph-3

Dabur Ltd.
80
66.74
70
60
Ratio Values

50
40 28.49
27.17
30
20 10.7
10 3.27 2.29 4.69
0
2020-2021
Different Accounting Ratios

NET PROFIT MARGIN (%) ROI

CURRENT RATIO LIQUID RATIO
EPS ASSET TURNOVER RATIO
INVENTORY TURNOVER RATIO

The graph shows values of 7 accounting ratios for Dabur Ltd. and assets turnover ratio of Dabur
Ltd. is the highest.

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Findings
On comparing the ratios of the 3 companies we get to know that –

• The Net Profit Margin (%) of Indian Tobacco Company Ltd. (ITC) for the year 2020-
2021 is higher than Hindustan Unilever Limited (HUL) and Dabur Ltd.
• The Return on Investment (ROI) of Indian Tobacco Company Ltd. (ITC) for the year
2020-2021 is higher than Hindustan Unilever Limited (HUL) and Dabur Ltd
• The Current Ratio of Indian Tobacco Company Ltd. (ITC) for the year 2020-2021 is
higher than Hindustan Unilever Limited (HUL) and Dabur Ltd
• The Liquid Ratio of Indian Tobacco Company Ltd. (ITC) for the year 2020-2021 is
higher than Hindustan Unilever Limited (HUL) and Dabur Ltd.
• The Earning per Share (EPS) of Hindustan Unilever Limited (HUL) for the year 2020-
2021 is higher than Indian Tobacco Company Ltd. (ITC) and Dabur Ltd.
• The Asset Turnover Ratio of Dabur Ltd. for the year 2020-2021 is higher than Indian
Tobacco Company Ltd. (ITC) and Hindustan Unilever Limited (HUL).
• The Inventory Turnover Ratio of Hindustan Unilever Limited (HUL) for the year 2020-
2021 is higher than Indian Tobacco Company Ltd. (ITC) and Dabur Ltd.

Conclusion
From the project we can conclude that, the FMCG industry is booming due to all of the
favorable reasons. It generated $68.4 billion in revenue in 2018 and is expected to generate
$103 billion in revenue in 2020. According to estimates, India's retail industry would increase
from US$840 billion in 2017 to US$1.1 trillion by 2020, with contemporary trade predicted to
grow at a rate of 20% to 25% annually.
My analysis of the three FMCG companies led me to the conclusion that Indian Tobacco
Company Ltd. (ITC) has a high profitability and it is generating enough profit from its sales
and it is able to contain its operating costs and overhead costs, it gives more return on
investment to its investors, its ability to pay its short-term obligations is better, its ability to pay
off current debt obligations is also better than Hindustan Unilever Limited (HUL) and Dabur
Ltd.
On calculating Earnings per Share (EPS) of Hindustan Unilever Limited (HUL) it indicates
that the company is more profitable and has more profits to distribute to shareholders and on
calculating Inventory Turnover Ratio we conclude that it has sold and replenished its
inventory more than Indian Tobacco Company Ltd. (ITC) and Dabur Ltd.
On calculating Asset Turnover Ratio of Dabur Ltd., we conclude that it uses its assets very
effectively to generate revenue or sales than Indian Tobacco Company Ltd. (ITC) and
Hindustan Unilever Limited (HUL).

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