PREFACE

For any Management Course Summer training is an essential part of curriculum of PGDM degree. It is an exposure to corporate environment and helps PGDM aspirants to get acquainted with organizational norms, procedures, practices, ethics and culture. It also gives an insight of actual functioning of the organization. It helps the students to understand and correlated theoretical aspects with practical reality.

It was a great experience to work with DABUR INDIA Ltd. during my summer project which has help me to improve my communication and interpersonal skills and also give me the better understanding of the subject.

ACKNOWLEDGEMENT

I take this opportunity to express my acknowledgement and deep sense of gratitude to the following personalities for rendering valuable assistance and guidance to me for the successful completion of summer training at DABUR INDIA LTD. I am grateful to Mr. R.S.Dani, GM (Internal Audit) and Mr. R.K. Garg for giving me a chance to undergo summer training in reputed and prestigious textile mill of India. I am also thankful to Dr. Simmi Agrawal (Faculty of Finance, IMS Ghaziabad) for her support and continuous help at all times during my summer training. I owe my wholehearted thanks and appreciation to the entire staff of the company for their cooperation and assistance during the course of my project.

TABLE OF CONTENTS

S. No. 1. 2. 3. 4. 5. 6. 7. Executive summary Objective Introduction of Dabur

Title

Page no. 8-9 10 12-18 20-21 22-23 25-34 w.r.t. 36-48

Research methodology Concept Ratio Analysis of Dabur India Ltd. Comparative Competitors Financial Analysis

8.

Brief

Introduction

of

Daburs

50-52

Competitors 9. 10. 11. 12. Consumer Survey Findings Conclusion, Recommendations & Limitations Annexure (1,2,3,4,5,6,7) Bibliography 53-59 60-62 63-70 71

LIST OF GRAPHS & TABLES

Objective-1: Graph No. 1 showing Current & quick ratio Graph No. 2 showing debt-equity ratio Graph No. 3 showing interest coverage ratio Table No. 1 showing liquidity ratio Table No. 2 showing solvency ratio Table No. 3 showing profitability ratio Table No. 4 showing rate of returns Table No. 5 showing turnover ratio Objective-2: Graph No. 1 showing current ratio Graph No. 2 showing quick ratio Graph No. 3 showing debt-equity ratio Graph No. 4 showing operating profit margin Graph No. 5 showing net profit margin Graph No. 6 showing ROE Graph No. 7 showing ROCE Graph No. 8 showing EPS Graph No. 9 showing P/E Graph No. 10 showing assets turnover Graph No. 11 showing inv turnover Graph No. 12 showing debtors turnover Table No. 1.1,1.2&1.3 showing liquidity ratio Table No. 2.1,2.2&2.3 showing solvency ratio Table No. 3.1,3.2&3.3 showing profitability ratio Table No. 4.1,4.2&4.3 showing rate of returns Table No. 5.1,5.2&5.3 showing turnover ratio Objective-3: Graph No. 1 showing sales Graph No. 2 showing usage Graph No. 3 showing response frequency Graph No. 4 showing euclidean distance model

PAGE

26 28 29 26 28 31 32 34 37 37 39 40 41 43 43 44 44 47 47 47 36 38 40 42 46 53 54 55 59

EXECUTIVE SUMMARY

The project assigned to me is to study the financial statements of DABUR INDIA LTD. as well as its competitors viz., ZANDU PHARMACEUTICALS WORKS and EMAMI. The main purpose of the project is to evaluate the financial strengths and market capabilities of Dabur vis--vis its competitors, Chyawanprash in particular. Industry and Company analysis is done thoroughly to understand the external factors influencing the company. It has been recorded that the FMCG industry aims for negative working capital and how it proved to be beneficial for the industry. The FMCG Companies have been able to keep their creditors almost equal to debtor and inventory, which have resulted in a lot of cash generation for these companies, which is again invested in the business. These companies also make investment in short-term paper and call money, which allow them to earn good returns. This has been also noted by the comparative analysis of financial statements of Dabur with Zandu and Emami that Dabur India Ltd. is following a very aggressive working capital policy which means that it is saving on the cost of Current Assets but it may also fall in danger in case it fails to meet its short term liabilities unlike its Competitors. We came to know how the strong distribution and dominant position in the FMCG has made the company to bargain with the debtors and creditors to expand the payment cycle in favour of the company. In fact, the company seemed to have taken the matter to the other extreme of negative working capital, with the current ratio declining to 0.8 and the quick ratio to just 0.4 in 2004-05. The technique used to analyze financial statements of DABUR INDIA LTD. and comparative analysis of it with ZANDU PHARMACEUTICALS WORKS and EMAMI is RATIO ANALYSIS. All various ratios are calculated and analyzed in length to appreciate their impact on companys performance w.r.t. its competitor, Chyawanprash in particular. After making all the calculations each ratio has been

interpreted. Analysis reveals arising inventory turnover ratio and debtors turnover ratio, at the same time the company has a high current asset and quick ratio, which represents high liquidity. The three financial statements of last three years are identified, studied and interpreted in light of companys performance as well as against its competitors. Lastly, business and marketing practices of Dabur India Limited, Dabur Chyawanprash in particular has been studied. A marketing survey (sample size 200) has been carried out in NCR region to understand the decision making process of customers while buying Dabur Chyawanprash. Also the study has been made to find out what are the outside factors, which influence their decision making, what are the sources of product information for the customer and how important are different product attributes in decision-making. And on the basis of the survey, conclusions and recommendations have been given.

OBJECTIVES OF THE PROJECT

Primary Objective: To do the ratio analysis of Dabur India Ltd. for 3 years i.e. Time Series analysis. To determine the comparative analysis of financial statements of Dabur India Ltd. vis--vis its competitors Zandu and Emami for 3 years, Dabur Chyawanprash in particular i.e. Inter-firm analysis Secondary Objective: To understand the decision making process of customers while buying Dabur Chyawanprash along with other factors, which influence their decision making, what are the sources of product information for the customer and importance of different product attributes in decision-making.

Chapter 1
INTRODUCTION

INTRODUCTION TO DABUR INDIA LIMITED

Dabur India Limited is the fourth largest FMCG Company in India with interests in Health care, Personal care and Food products. Building on a legacy of quality and experience for over 100 years, today Dabur has a turnover of Rs.1536.95 Cr. with powerful brands like Dabur Chyawanprash, Dabur Amla, Vatika, Hajmola and Real. ORIGIN & GROWTH The brief history and growth of Dabur India Ltd. in chronological order:

1884 - The birth of Dabur in a small Calcutta pharmacy, where Dr. S. K. Burman launches his mission of making health care products. 1896 - Setting up a manufacturing plant: With the growing popularity of Dabur products, Dr. Burman expands his operations by setting up a manufacturing plant for mass productions of formulations. Early 1900s - Dabur enters the specialized area of Nature based Ayurvedic Medicines, for which standardized drugs are not available in the market. 1919-The

need to develop scientific processes and quality checks for mass production of traditional Ayurvedic medicines leads to establishment of research laboratories. 1920- Dabur expands further with new manufacturing units at Daburgram and Narendrapur. The distribution of Dabur products spreads to other states like Bihar and the North-East. 1936- Dabur becomes a full-fledged company- Dabur India (Dr. S. K. Burman) Pvt. Ltd. 1972- Daburs operations shift to Delhi. A new manufacturing is set up in temporary premises in Faridabad, on the outskirts of Delhi. 1979- Commercial production starts in the Sahibabad factory of Dabur, one of the largest and best equipped production facilities for Ayurvedic medicines. Launch of full fledged research operations the pioneering areas of healthcare with establishment of the Dabur Research Foundation. 1986- Dabur becomes a Public Limited Company. Dabur India comes into being after reverse merger with Vidogum Limited. 1992- Beginning a new chapter of strategic partnerships with international businesses, Dabur enters into a joint venture with Agrolimen of Spain. This new venture is to manufacture and market confectionary items in India. 1993- Dabur enters a specialized health care area of cancer treatment with its oncology formulation plant at Baddi in Himachal Pradesh. 1994- Dabur India Ltd. raises its first public issue. Due to market confidence in the Company, shares issued at a high premium are over subscribed 21 times. 1995- Extending its global partnerships, Dabur enters into joint ventures with Osem of Israel for food and Bongrain of France for cheese and other dairy products.

1996- For better operation and management, 3 separate divisions created according to their product mix- Health Care Products Division, Family Products Division and Dabur Ayurvedic Specialties Limited. 1997- Dabur enters full scale in the nascent processed foods market with the creation of the Foods Division. Project STARS (Strive to Achieve Record Successes) is initiated to give a jump start to the company and accelerate its growth. 1998- With changing demands of business and to inculcate a spirit of corporate governance, the Burman family induct professionals to manage the company. For the first tome in the history of Dabur, a non-family professional CEO sits at the helm of the Company. 2000- Dabur establishes its market leadership status with a turnover of 1,000 Crores. From a small beginning and upholding the values of its founder, Dabur now enters the august league of large corporate businesses. 2005- Dabur acquires Balsaras hygiene and home product businesses in an Rs 143 crore all-cash deal. DABUR AT PRESENT Leading consumer goods company in India with 4th largest 2 major strategic business units (SBU) - Consumer Care Division 3 Subsidiary Group companies - Dabur Foods, Dabur Nepal and

turnover of Rs.1536 Crores (FY04). (CCD) and Consumer Health Division (CHD). Dabur International and 3 step down subsidiaries of Dabur International - Asian Consumer Care in Bangladesh, African Consumer Care in Nigeria and Dabur Egypt. 13 ultra-modern manufacturing units spread around the globe. Products marketed in over 50 countries. Wide and deep market penetration with 47 C&F agents, more than

5000 distributors and over 1.5 million retail outlets all over India

Consumer Care Division: dealing with FMCG Products relating to Personal Care and Health Care. Leading brands Dabur - The Health Care Brand Vatika-Personal Care Brand Anmol- Value for Money Brand Hajmola- Tasty Digestive Brand and Dabur Amla, Chyawanprash and Lal Dant Manjan with Rs.100 Crore turnover each Vatika Hair Oil & Shampoo the high growth brand Strategic positioning of Honey as food product, leading to market leadership (over 40%) in branded honey market Dabur Chyawanprash the largest selling Ayurvedic medicine with over 65% market share. Leader in herbal digestives with 90% market share Hajmola tablets in command with 75% market share of digestive tablets category Dabur Lal Tail tops baby massage oil market with 35% of total share Real juices enjoy a market share of over 55% in fruit juice category. Consumer Health Division: dealing with classical Ayurvedic medicines.

Dabur Segments / Brands: Hair oils

Dabur Amla Health supplements

Vatika

Chyawanprash Foods

Honey

Glucose

Real

Activ

Twist

Toothpastes

Red Toothpowders

Babool

Meswak

Promise

Lal Dant Manjan Digestives

Hajmola
Baby & skin care

Pudin Hara

Lal Tail

Gulabari

Board of Directors: Dr. Anand Burman Chairman Mr. Amit Burman Vice-Chairman Mr. P D. Narang Director Mr. Sunil Duggal Director Mr. Pradip Burman Director Mr. Mohit Burman Director Mr. Bert Peterson Director Dr. S. Narayan Director Mr. Analjit Singh Director Mr. R C Bhargava Director Mr. P N Vijay Director Mr A K Jain Addl. GM (Finance) & Company Secretary Auditors M/s G. Basu & Co. Chartered Accountants Internal Auditors Price Waterhouse Coopers Pvt. Ltd.

Chapter 2
Research Methodology

RESEARCH METHODOLOGY
SOURCES OF DATA: 1. Primary Data: Primary data for constructing the research instrument was collected through a customer survey. 2. Secondary data: Resources like Business magazines, Internet and Prowess database were utilized for gathering secondary information. The study was based on data collected from secondary sources. These data comprises of the financial reports of Dabur India Ltd., Zandu Pharma Works and Emami Ltd. of last three years. These data were obtained from annual reports as well as from the website.Secondary sources consist of: Companys balance sheets of the last three years. Companys income statements of last three years.

The methodologies adopted for calculating different ratios are as per the standard suggested by different cost as well as financial management book.

3. Research methodology The objective of my research is to analyze of financial statements focusing on ratios in Dabur India Ltd. as well as to analyze comparison of financial ratios w.r.t. its competitors for three years. The nature of my research is EXPLORATORY. Its goal is to shed light on the real nature of process.

It involves a number of steps: Define the process and research objective. Develop the research plan: - The second stage of research calls for developing the most efficient plan for gathering the needed information. Designing the research plan calls for decision on data sources and research approach Data source: Collection of data from the annual reports of and by the portals and magazines. Research approach: Data can be collected in many ways and I have used the following steps to analyze the data . Collection of information: After the above steps, I have collected all informations from different sources i.e. Annual reports and from the other sources provided by Dabur India Ltd., Zandu Pharma Works and Emami Ltd. Some of the information was collected from internet of the Dabur India Ltd., Zandu Pharma Works and Emami Ltd. 4. Analysis of Information: This step involves the extractions of findings from the collected data. I drew some facts after analyzing the information. 5. Conclusion and suggestion: As the last step I have mentioned the conclusion and suggestions that are relevant to make the financial statements of Dabur India Ltd.

SAMPLING Sample Size: 200 I have tried to get a representative sample of NCR population, so the survey was done at following places: Ghaziabad, Mayur Vihar III, Trilokpuri and Shipra mall. Each of these places consist somewhat different socio-economic class of consumers.

During the survey we took care to include each of the following five categories of consumers: 1. Housewives 2. Salaried persons 3. Businessmen 4. Students 5. Others Data Analysis: - I have used tool i.e. MDS test of SPSS to analyze the data and draw relevant inferences.

CONCEPTS

FINANCIAL ANALYSIS is a fascinating topic to study because it can teach us so much about accounts and businesses. The ratio analysis is based on the premise that a single accounting figure by itself may not communicate any meaningful information but then expressed as a relative to other figure, it may definitely give some significant information. The relationship between two or more accounting figures/groups is called financial ratio. When we use ratio analysis we can work out how profitable a business is, we can tell if it has enough money to pay its bills and we can even tell whether its shareholders should be happy. Ratio analysis can also help us to check whether a business is doing better this year; and it can tell us if our business is doing better or worse than other business doing and selling the same things. Ratio analysis has a very broad scope. One aspects looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantities). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantities analysis can produce excellent results. Infact, ratio analysis is not just comparing different numbers from the balance sheet, income statement ,and cash flow statement , its comparing the number against previous years, other companies , the industry or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company

has performed in the past, and might perform in the future. TYPES OF COMPARSIONS The ratio can be compared in following different ways: Time series analysis: When financial ratios over a period of time are compared. It is known as the time series analysis. It gives an indication of the direction of change and reflects whether the firms financial performance has improved, deteriorated or remained constant over time. The analyst should not simply determine the change, but more importantly, he/she should understand why ratios have changed.

Cross sectional analysis: Another way of comparison is to compare ratios of one firm with some selected firms in the same industry at the same point in time. This kind of comparison is known as the cross -sectional analysis or inter firm analysis. This kind of a comparison indicates the relative financial position and performance of the firm.

Industry analysis: To determine the financial condition and performance of a firm, its ratios may be compared with average ratios of the industry of which the firm is a member. This sort of analysis known as the industry analysis helps to ascertain the financial standing and capacity of the firm vis a vis other firms in the industry. Industry ratios will prove to be very useful in evaluating the relative financial condition and performance of a firm. Pro forma analysis: Sometimes future ratios are used as the standard of comparison. Future ratios can be developed from the projected or Pro forma financial statements. The comparison of current or past ratios with future ratios shows weaknesses in the past and the future. If the future ratios indicate weak financial position, corrective actions should be

initiated.

Chapter 3
OBJECTIVE - 1

Ratio Analysis of Dabur India Ltd.

OBJECTIVE: To study and evaluate the financial health, Liquidity, Profitability and operational efficiency of Dabur India Ltd in relation to its own performance in the past three years and in relation to its competitors in the Chyawanprash Segment which are Zandu and Emami (Himani Sona-Chandi). METHODOLOGY: To find the various data and figures required for this purpose, I have taken the Annual Reports of Dabur India Limited of the past years and also the balance sheets of Zandu and Emami for comparative financial analysis. The information was studied and analyzed to compute the relevant ratios. Then these ratios were compared with those of the main competitors. I have computed: 1.Liquidity ratios - Ability of the business to meet its short-term obligations. 2.Solvency ratios - Ability of the firm to meet its long-term obligations and assess their capital structure. 3.Profitability Ratios - To access the profitability of the firm with regard to its Sales, Profitability and Efficiency. 4.Activity or Turnover Ratios - To access the operational efficiency of the

company. 1. LIQUIDITY RATIOS Liquidity ratios test the ability of the firm to meet its short-term obligation. The level of liquidity is determined by the amount of liquid assets that are readily convertible into cash. Its the responsibility of the treasury manager to maintain the right balance between investments and liabilities to get the optimum liquidity. It involves constant monitoring of cash flow position. We will analyze the two popular measures of the liquidity of the company. Current Ratio: This is the ratio of current assets to current liability, represents the ability of the business to meet all its short-term money requirements through its current assets. Current ratio = current assets current liabilities

Quick Ratio/ Acid Test Ratio: This is the ratio of the assets that can be readily converted to cash at a very short notice (cash, bank deposits, short term investments, other cash equivalents). It shows the relationship between cash convertibles and current liabilities. Quick ratio = (current assets-inventories)current liabilities Dabur India Ltd Year 2007-08 2006-07 2005-06 Table No. 1 Current Ratio 0.91 0.97 0.82 Quick Ratio 0.58 0.63 0.52

Graph No. 1

Analysis Current Ratio: Dabur has a low current ratio of 0.91 in the current year, which suggests that company does not have sufficient current assets to pay of its short-term liabilities while in 2007 its current ratio was 0.97. In order to stay solvent, the firm must have a current ratio of at least 1, which means it can exactly met its current debt obligations. It has decreased over the years i.e. 0.82 in 2006. This suggests that the company is following an aggressive Working capital policy and also tells that the working capital of the company is negative. This means that the company is saving on costs required to finance the current assets but it may become risky if the company fails to meet its short-term obligations. Quick Ratio: The same pattern is also shown in the quick ratios. This means that the firm cannot meet its current (short-term) debt obligations without selling inventory because the quick ratio is 0.58 in 2007-08, which is less than 1. In order to stay solvent and pay its short-term debt without selling inventory, the quick ratio must be at least 1, which it is not. In this case, however, the firm will have to sell inventory to pay its short-term debt. If we observe the quick ratio for 2006-07, we will see that it was 0.63. So, the

firm was in a better condition in this year than 2008. So its liquidity condition is not improved by 2008, which, in this case, is not good since it is not operating with relatively low liquidity. So, a quick ratio great than 1 is better than a quick ratio of less than 1 with regard to maintaining liquidity and not being forced into the position of having to sell inventory.

2. SOLVENCY RATIOS: They indicate the companys ability to meet its long-term liability. Also called the capital structure ratios, they influence most of the major financing decisions of the company. A proper mix of equity and debt is said to be always beneficial for the company rather than pure equity. Existence of debts disciplines management to some extent. Debt to Equity Ratio: This ratio represents the relationship between total debt and equity and the debt is shown as a percentage of the Equity capital of the company. DE Ratio= Total Debt/Net Worth Interest Coverage Ratio: This ratio measures the debt servicing capacity of a firm insofar as fixed interest on long-term loan is considered IC Ratio=EBIT/Interest

Dabur India Ltd Year 2007-08 2006-07 2005-06 Table No.2 Debt-Equity Ratio 0.03 0.05 0.05 Interest Ratio 44.38 66.63 39.25 Coverage

Graph No. 2

Graph No. 3 Analysis: The Debt to Equity ratio and total debt ratio of the company are almost negligible implies that most of the liabilities of the company are short term (as should be in a case of FMCG) and company is in fairly good position to meet its long-term liabilities. This means that the creditors of the company face very low risk of losing their money.

 The Company was also very comfortable in terms of its interest coverage through its profits till 2006-07. It was constantly rising every year. But due to Global recession Dabur is facing problem in current year, which is easily visible by current interest coverage ratio i.e. 44.38 while it was 39.25 in 2005-06. The lower the ratio, the more the company is burdened by debt expense. This shows that in current year the rate of interest is higher as compared to immediate previous year. For bond holders, the interest coverage ratio is supposed to act as a safety gauge. It gives you a sense of how far a companys earnings can fall before it will start defaulting on its bond payments. For stockholders, the interest coverage ratio is important because it gives a clear picture of the short-term financial health of a business. So this ratio has been reduced from last year.

3. PROFITABILITY RATIOS Profitability Ratios show how successful a company is in terms of generating returns or profits on the Investment that it has made in the business i.e. the Profitability ratios speak about the profitability of the company. There are two types of profitability ratios: Profit Margin ratios 1. Operating Profit Margin ratio (Operating profit/net sales) 2. Net Profit Margin ratio (Net profit/net sales) Rate of Return ratios 1. Return on Equity (operating profit/ Total assets) 2. Return on Capital Employed (operating profit/capital employed) 3. Earnings per Share (EPS) 4. Price Earnings Ratio (PE Ratio)

3.1) PROFIT MARGIN RATIOS measure how much a company earns relative to its sales. The Profit Margin of a company determines its ability to withstand competition and adverse conditions like rising costs, falling prices or declining sales in the future. The ratio measures the percentage of profits earned per rupee of sales and is thus a measure of efficiency of the company. Operating Profit Margin ratio: This ratio gives a relationship between the operating profit and sales. Operating profit Margin Ratio=EBIT/Net Sales

Net Profit Margin Ratio: It measures the earnings after interest and tax; it reflects the interest payment made by the company and its effect on profit margin. Net Profit Margin = Profit after tax/Net Sales Dabur India Ltd. Year 2007-08 2006-07 2005-06 Table No. 3 Analysis: The operating profit margin and net profit margin are constantly rising over the period of 3 years, which means that the company is becoming more and more efficient in terms of its operations: For every Re 1 of sales of Dabur India Ltd, the company earns an operating profit of 18.59 paisa and net profit of 15.07 paisa in 2007-08, and the difference in the amount goes towards the tax and the interest payments. Similarly, in 2007 and 2006 for every sales of Re.1 the company earns an operating profit of 17.45 and 17.90 paisa and net profit of 14.41 and 14.4 paisa respectively. This trend shows that company is earning more profit 3.2) RATE OF RETURN RATIOS Return On Equity: This ratio reveals how profitably the firm has utilized the Operating Profit Margin (%) 18.59 17.45 17.90 Net Profit Margin (%) 15.07 14.41 14.04

owners funds. ROE= Profit after tax (PAT)/ Net Worth

Return on Capital Employed: Capital employed means the long-term funds employed in the business and include the shareholders fund, debentures and longterm loans. This ratio explains the overall utilization of funds by a business enterprise. Profit before Interest and Tax is considered for computation of this ratio to make numerator and denominator consistent. ROCE= Profit before Interest and Tax (PBIT) / Capital Employed Earnings per Share: It measures the profit available to the equity shareholders on a per share basis. But all the profit per share may not be distributed to the shareholders. The company generally retains a part of the earnings to enable its growth. EPS= profit after tax/ number of common shares outstanding Price Earnings Ratio: This ratio gives the ratio of market price per share to the earnings per share. P/E=Market Price Per share/ EPS

Dabur India Ltd. Year Return Equity (%) 2007-08 2006-07 2005-06 Table No. 4 Analysis: Return on capital employed has increased significantly form about 48% in 2005-06 to more than 69% in 2007-08. It is the post tax version of earning of earning power. It considers the effect of taxation, but not the capital structure. It is internally consistent. In Table No. 4 we can see that the ratio of Dabur was low in the earlier 59.95 62.52 42.21 on Return Capital Employed (%) 69.61 69.81 48.01 3.67 2.92 3.30 20.11 33.62 38.82 on EPS PE Ratio

years of study but then it starts increasing. It has considerably increased due to higher profit margins. The impact of higher returns on Capital Employed is reflected in the Return on Equity that has increased from about 42% in 2005-06 to about 63% in 2006-07 but there is a light decrement in ROE i.e. around 60% in 2007-08. It revels that the company has not utilized its own resources very well in the current year as it has done in the earlier year. The EPS of the firm has also risen in the last two years. It has risen from Rs. 2.92 per share in 2006-07 to Rs. 3.67 in 2007-08.Here we see that the EPS of Dabur was good enough in 2006 but it declines after that and then again shows uptrend in 2008 due to high profits gained by the company. The performance of the company was very good in the year 2005 and now in 2008 having the highest position during the last three years. But the PE ratio is showing the reverse trend. All the fluctuation found in P/E ratio of Bajaj during last three years are mainly due to both change in EPS and price per share of the company. The highest P/E of the company was in the year 2006.

4. ACTIVITY OR TURNOVER RATIOS This ratio is concerned with measuring the efficiency in asset management with respect to the sales. The efficiency with which the assets are used would be reflected in the speed and the rapidity with which they are used. The greater the rate of return the better it is. Depending on the various types of assets, there are the following types of activities ratios: Total Assets Turnover ratio: This is the ratio of Net Sales to the Total Assets in a given year. It reflects the level of utilization of Assets. Total Assets turnover=Net Sales /Total assets

 Inventory turnover ratio: This is the ratio of Cost of Goods Sold to Average Inventory. Inventory turnover = Net Sales /closing Inventory

Inventory held Period: (No. of days in a year (365)/ Inventory turnover ratio). This period indicates, how fast the inventory is sold out, the lesser the number of days , the better for a firm, it is represented in number of days. Inv Held Period=365/Inventory Ratio Debtors turnover ratio: This Ratio indicates the ratio of Sales and the average debtors. This ratio shows the no. of times a debtor completes a full cycle which involves sales and realization of sale proceeds. Net Sales /Debtors

Dabur India Ltd. Year Total Asset Inventory Turnover Ratio 2007-08 2006-07 2005-06 Table No. 5 3.98 4.30 2.94 Turnover Ratio 12.52 11.11 11.65 28.43 32.04 30.55 Inventory Held Period Debtors Turnover Ratio 20.84 28.62 49.83 Avg Collection Period 17.51 12.75 7.30

Analysis: The company has a fairly consistent Total Asset turnover ratio over the period and sales is 3.98 times of the total assets Inventory turnover ratio is 12.52 times and it is held for a period of 28 days for current year i.e. 2007-08. Debtors are presently making their payments in a slow mode as compared to previous years i.e. 2006-07 and 2005-06.

Chapter 4
OBJECTIVE - 2

COMPARTIVE FINANCIAL ANALYSIS WITH RESPECT TO COMPETITORS

1. LIQUIDITY RATIOS Year 2007-08 Company Dabur Zandu Emami Table No. 1.1 Year 2006-07 Company Dabur Zandu Emami Table No. 1.2 Year 2005-06 Company Current Ratio Quick Ratio Current Ratio 0.97 2.15 1.71 Quick Ratio 0.63 1.31 1.72 Current Ratio 0.91 1.77 2.25 Quick Ratio 0.58 1.18 1.84

Dabur Zandu Emami Table No. 1.3

0.82 2.26 1.87

0.52 1.37 1.89

Current Ratio Graph No. 1

Quick Ratio Graph No. 2

Analysis: It measures the firms ability to meet its current liabilities-current assets get converted into cash during the operating cycle of the firm and provide the funds needed to pay current liabilities. Apparently, the higher the ratio the greater the short term solvency. In order to stay solvent, the firm must have a current ratio of at least 1, which means it can exactly met its current debt obligations. No two companies are nearer to Dabur. In the year 2008 there was increase in the assets but the liabilities also increases because the company has raised its long-term source of finance by which the interest burden increases and it leads to decrease in cash balance. Although the ratio is o.91 in the year 2008 but in this year the proportion of inventory is more as compared to previous years 2007 and 2006, also the burden of interest and expenses of finance lead to decrease in cash balance. We see that the liquidity ratios of Dabur are very significantly lower than those of its competitors. This means that Dabur is following a very aggressive working capital policy that means that it is saving on the cost of Current Assets but it may also fall in danger in case it fails to meet its short-term liabilities. We also see that Zandu and Emami follow the traditional approach of maintaining working capital and current assets. 3. SOLVENCY RATIOS: Year 2007-08 Company Dabur Zandu Emami Table No. 2.1 Year 2006-07 Company Dabur Zandu Emami Debt Equity Ratio 0.05 Not Available 0.10 Interest Ratio 69.81 66.63 69.96 Coverage Debt Equity Ratio 0.03 Not Available 0.12 Interest Ratio 44.38 60.65 20.32 Coverage

Table No. 2.2 Year 2005-06 Company Dabur Zandu Emami Table No. 2.3 Debt Equity Ratio 0.05 0.01 0.08 Interest Ratio 48.01 39.25 36.61 Coverage

Debt Equity Ratio Graph No. 3 Analysis: The Debt Equity ratio shows the relative contribution of creditors and owners. The debt consists of all debts, short term as well as long term and equity means net worth. The lower the ratio, the higher the degree of protection enjoyed by the creditors. In Annex Table 2.10 we can see the all the companies except Zandu study are highly levered, Dabur is also having a high Debt equity ratio, which shows that the company is highly dependent on borrowings from outside instead of using its own funds. We see that Dabur is far better than Zandu and Emami in case interest coverage ratio in all the three financial years i.e. 2007-08, 2006-07 and 2005-06. 3. PROFITABILITY RATIOS: 3.1 Profit Margin Ratios Year 2007-08

Company Dabur Zandu Emami Table No. 3.1

Operating Profit Margin 18.59 17.27 16.44

Net Profit Margin 15.07 11.80 15.35

Year 2006-07 Company Dabur Zandu Emami Table No. 3.2 Operating Profit Margin 17.45 15.29 12.85 Net Profit Margin 14.41 11.03 12.43

Year 2005-06 Company Dabur Zandu Emami Table No. 3.3 Operating Profit Margin 17.90 15.40 17.51 Net Profit Margin 14.04 10.32 16.14

Operating Profit Margin Graph No. 4

Net Profit Margin Graph No. 5 Analysis: The Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage. Also known as Net Profit Margin. Merely observing the earnings of a company often doesn't tell the entire story. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increased at a greater rate than sales, it leads to a lower profit margin. This indicates that costs need

to be under better control. The higher the Operating Profit Margin, the better. This is because a higher Operating Profit Margin shows the company can keep its costs under control. A higher Operating Profit Margin can also mean sales are increasing faster than costs, and the firm is in a relatively liquid position. The Operating Profit Margin accounts for both Cost of Goods sold and Administration/Selling expenses. We see that Dabur has the upper hand with respect to both the Profit Margin Ratios when compared with its competitors. It has a significantly higher Operating ratio than Zandu and Emami respectively in 2007-08. Similarly, Dabur is also very efficient with respect to the other ratios. In the same way Dabur is showing this trend in 200607 and 2005-06. 3. RATE OF RETURN RATIOS: Year 2007-08 Company Dabur Zandu Emami Table No. 4.1 Year 2006-07 Company Dabur Zandu Emami Table No. 4.2 Return Equity (%) 62.52 21.32 28.82 on Return on Capital EPS Employed (%) 69.81 29.86 29.98 2.92 181.01 10.78 PE Ratio 33.62 33.48 25.18 Return Equity 59.95 21.13 32.10 on Return on Capital EPS Employed (%) 69.61 31.18 34.05 3.67 203.47 14.92 PE Ratio 20.11 33.82 16.25

Year 2005-06

Company Dabur Zandu Emami Table No. 4.3

Return Equity (%) 42.21 19.50 14.74

on Return on Capital EPS Employed (%) 48.01 28.13 14.07 3.30 200.50 8.07

PE Ratio 33.82 17.85 31.74

ROE Graph No. 6

ROCE Graph No.7

EPS Graph No.8

P/E Ratio Graph No. 9 Analysis: ROE measures the profitability of equity funds invested in the firm. It reflects the productivity of the ownership fund in the firm. It is influenced by several factors like earning power, debt equity ratio etc. The impact of higher returns on Capital Employed is reflected in the Return on Equity

We see that Dabur and Emami have high return on Capital Employed and Equity and that the same ratios are lower for Zandu. ROCE it is the post tax version of earning of earning power. It considers the effect of taxation, but not the capital structure. It is internally consistent. If we see Dabur has recorded very good return as compared to Zandu and Emami. The ratio of Dabur has performed far better than its competitors. Still we see that the EPS of Zandu is very high when compared with the others and the reason behind this is that they have a very small equity base when compared with the others.

The relationship between market price of common stock and earning per share is so widely recognized that it is expressed as a separate ratio, called price-earning ratio. The P/E Ratio is determined by dividing the market price per share by the annual

earning per share. All the fluctuation found in P/E ratio of all three companies during last three years are mainly due to both change in EPS and price per share of the company. Also Dabur has higher PE ratio than its competitors.

4. ACTIVITY RATIOS: Year 2007-08 Total Assets Inventory Company Turnover Ratio Turnover Ratio Inventory Held Period Debtors Turnover Ratio Avg Collection Period

Dabur Zandu Emami Table No. 5.1 Year 2006-07

3.98 1.79 1.81

12.52 11.07 14.81

28.43 32.97 24.64

20.84 40.54 15.91

17.51 9.01 22.9

Total Assets Inventory Company Dabur Zandu Emami Table No. 5.2 Year 2005-06 Total Assets Inventory Company Turnover Ratio Dabur Zandu Emami Table No. 5.3 2.94 1.88 0.80 Turnover Ratio 11.65 6.26 8.35 Turnover Ratio 4.30 1.93 2.06 Turnover Ratio 11.11 7.19 12.86

Inventory Held Period 32.04 50.76 28.38

Debtors Turnover Ratio 28.62 40.55 11.26

Avg Collection Period 12.75 9.01 32.91

Inventory Held Period

Debtors Turnover Ratio

Avg Collection Period 7.30 18.08 41.19

30.55 58.30 43.71

49.83 20.18 8.86

Total Assets Turnover Ratio Graph No.10

Inventory Turnover Ratio Graph No. 11

Debtors Turnover Ratio Graph No. 12 Analysis: Inventory turnover is an activity ratio that measures the companys effectiveness by dividing cost of goods sold (an income statement item) by the average inventory balance (a balance sheet item.) Since cost of goods sold represents the inventory that leaves the firm, the ratio allows the investor to see how frequently the company needs to replenish its existing inventory.

For Dabur Inventory held period is 30.55 for current year. In this case, a lower ratio would represent more effective inventory management, all else being equal. While for Zandu this period is less i.e.24.64 as compared to other two companies. Debtors turnover ratio measures the liquidity of debtors of a firm and average collection period indicates the average time lag (in days) between sales and collection thereof. The debtors velocity also indicates receivables management efficiency rate. Higher turnover and lower collection period of receivables reflect the firm's ability in transacting a larger business without corresponding increase in receivables. The reverse is the case with lower turnover and higher collection period. Average Collection Period (days) = (365 / Debtors Turnover Ratio) We see that Dabur has the upper hand with respect to all the Activity or Turnover Ratios when compared with its competitors. It has a significantly higher Total Assets T.O. ratio of 3.98, which is higher than 1.79 and 1.81 of Zandu and Emami respectively in 2007-08. Similarly, Dabur is also very efficient with respect to the other ratios. In the same way Dabur is showing this trend in 2006-07 and 2005-06.

Chapter 5
OBJECTIVE - 3

BRIEF INTRODUCTION OF MAIN COMPETITORS OF DABUR

EMAMI Limited:

Emami Limited is in the business of manufacturing personal, beauty and health care products. The company manufactures herbal and Ayurvedic products. The company's

product basket comprises over 20 products, the major being Boroplus Antiseptic Cream, Navratna Oil, Mentho Plus Pain Balm, Fast Relief, Bororplus Prickly Heat Powder, Sona Chandi Chyawanprash and Amritprash, Golden Beauty Talc, Madhuri Range of Products and others. The products are sold across all states in India and in countries like Nepal, Sri Lanka, the Gulf countries, Europe, Africa and the Middle East, among others. Emami's products are manufactured in Kolkata, Pondicherry, Guwahati and Mumbai. They have a robust distribution network of over 2100 direct distributors and 3.9 lakh retail outlets. Emami is headquartered in Kolkata. The company's branch offices are located across 27 cities in India. 2. ZANDU PHARMACEUTICAL WORKS LTD Zandu, a household name, is one of the leading players in the over-the-counter Ayurvedic healthcare segment with products including the popular Zandu balm, general fitness medicine Zandu Kesari Jivan, Zandu Chyawanprash and digestive tonic Zandu Pancharishta. In the personal care segment, the major product is hair tonic Alma Lio. Jivan is the market leader of ayurvedic healthcare industry. Zandu also has a wide range of ethical ayurvedic formulations for skin problems, arthritis, liver problems, malaria, diabetes & diabetes.

3. BAIDYANATH Shree Baidyanath Ayurved Bhawan (p) Ltd., popularly known as Baidyanath, is the acknowledged leader of Ayurvedic know-how. Established in 1917, the Company has played a pioneering role in re-establishing ancient knowledge with modern research and manufacturing techniques. Shree Baidyanath Ayurved Bhawan (p) Ltd. was founded in 1917 by Late Pt. R. D. Joshi. Its registered office is in Kolkata.

Baidyanath is manufacturing over 700 Ayurvedic Products the largest range of Ayurvedic Products in the world at its10 manufacturing Centers spread all over India. It has over 10,000 distributors and over 3,500 exclusive showrooms manned by qualified medical practitioners. Price comparison of different brands of Chyawanprash: 250 gm 500 gm 1000 gm Dabur (Rs.) 62 110 195 Zandu 55 114 (450 gm) 180 Himani Sona-Chandi 60 123 210

CURRENT TRENDS IN CHYAWANPRASH INDUSTRY IN INDIA Presently the old guard of Dabur, Zandu and Baidyanath (which account for over 80 per cent of this market) are now facing a spirited fight from new kids-on- the-block such as Himani, Himalaya and Sivananda. The major strategies adopted by different companies in chyawanprash market are as follows: 1.PRODUCT DIFFERENTIATION: Emami group is pushing its Himani Sona Chandi chyawanprash as `all season' health supplement. The idea is to avoid sales dips in summer months. Mayar India Group in Orissa has introduced three variants of its Sivananda chyawanprash - Amrit Chyawanprabha for adults, Special Chyawanprash for the entire family and Bal Chyawanprabha for kids. Bal Chyawanprabha is flavoured with vanilla beans to make it more palatable for kids. In contrast to these companies, Dabur had been projecting its chyawanprash as a family product.

CELEBRITY ENDORSEMENT:

Emami started the trend of celebrity endorsement of chyawanprash. The signing of Saurav Ganguly as the brand ambassador of its Sona-Chandi Chyawanprash has

helped Emami improve its market share. Dabur has also roped in Amitabh Bacchan as the brand ambassador for Dabur Chyawanprash. And now its recent Brand ambassador is M.S. Dhoni while Shahrukh Khan for Himani Sona-Chandi.

FOCUS ON ATTRACTIVE PACKAGING:

Dabur had been using a constant unattractive plastic container to package its chyawanprash till 2003. It changed its packaging then calling it as Swarna Jayanti pack. However it had to change its packaging again as it also generated complaints. The shape of the jar provided very little space for display. Moreover, rats could easily climb and damage its contents.

CONSUMER SURVEY FINDINGS 1. Packaging Most Bought for Dabur Of the various packaging sizes made available in the market by Dabur, the 500 grams packaging seems to be doing very well with the Customers. However, the company can look at working out schemes whereby the customer is encouraged to move onto biggers quantity packages.

Quantity Purchased 250 gms 500 gms 1000 gms

Numbers 30 91 79

Graph No.1 2. Dabur chyawanprash usage From the survey findings we can easily interprete that Dabur Chyawanprash is very popular as a family product rather than as kids or adults product. Hence Dabur can look at working out promotions for making chyawanprash popular as Kids product also.

Graph No.2

3. Brand Loyalty towards Dabur The questionnaire tried to query the customers of Dabur chyawanprash about their response if they were to not get Dabur chyawanprash at their Shop of purchase. The options were helpful in giving us a better insight to the brand loyalty among the customers. The first option of buying another brand was to see if the customer was indifferent between the various brands available in the market. The second option of Going to another shop to purchase the Dabur product showed a high level of brand loyalty but low level of shop loyalty. If the customer chose to postpone his/her purchase of the product to a later date, it showed a higher level of brand as well as shop loyalty. Dabur has a high brand loyalty among its consumers. Only 6% of its customers responded with the option which showed low brand loyalty.

Action Taken if product not found Buy Another Brand Go to another Shop Postpone Purchase

Response Frequency 170 18 12

Graph No. 3

4. Factors Influencing Choice of Product (MDS test):

The Customer survey included a question, which inquired about the Factors, that influenced the consumer to make a decision on which brand of Chyawanprash they wished to buy. This reflects the pre-purchase decision making of the consumer before the actual point of purchase. The trends reflected are summarized in the following chart: Kruskal stress It is measure of extent of misfit of MDS solution. Value of k-stress varies from 0-1. Value closed to 1 shows highest stressed solution, values close to 0 shows good solution. For an acceptable solution k-stress should be less than 0.15.

Procedure: Analyze

Scale

MDS

CTRLA

Model

Select interval

Dimension

Min. =1,max=(2n<= no. Of brands)

Continue

Options

Display

group plots

model&summaryoption

continue

ok

SPSS Output Alscal Procedure Options Data OptionsNumber of Rows (Observations/Matrix). 8 Number of Columns (Variables). . . 8 Number of Matrices . . . . . . 1 Measurement Level . . . . . . . Interval Data Matrix Shape . . . . . . . Symmetric Type . . . . . . . . . . . Dissimilarity Approach to Ties . . . . . . . Leave Tied Conditionality . . . . . . . . Matrix Data Cutoff at . . . . . . . . .000000

Model OptionsModel . . . . . . . . . . . Euclid Maximum Dimensionality . . . . . 2 Minimum Dimensionality . . . . . 1 Negative Weights . . . . . . . Not Permitted

Iteration history for the 2 dimensional solution (in squared distances) Young's S-stress formula 1 is used. Iteration 1 S-stress .00307 Iterations stopped because Improvement

S-stress is less than .005000 Stress and squared correlation (RSQ) in distances RSQ values are the proportion of variance of the scaled data (disparities) in the partition (row, matrix, or entire data) which is accounted for by their corresponding distances. Stress values are Kruskal's stress formula 1.

For matrix Stress = .00890 RSQ = .99983

Configuration derived in 2 dimensions

Stimulus Coordinates Dimension

Stimulus Stimulus Number Name

1 2.6014 .1023 1.9586 -.7376 -1.0431 -.7113 -.5038 -1.6664

2 -.2824 .0690 .2750 -.1302 .0201 .0088 .1602 -.1206

1 2 3 4 5 6 7 8

zandu himani dabur baidyana himalya surya vedic locals

Abbreviated Extended Name Name baidyana baidyanath

Derived Stimulus Configuration

Euclidean distance model

0.3 dabur

0.2

vedic

Dimension 2

0.1 himalyasurya 0.0

himani

-0.1

locals

baidyanath

-0.2 zandu -0.3 -2 -1 0 1 2 3

Dimension 1

Dimension 1: Price. Main ingredient, Packaging, Product Quality Dimension2: Taste, Easy Availability, Advertisement, Celebrity Endorsement

Graph No. 4 The above 8 brands has been rated on 1-5 scale against 8 parameters viz., price, packaging, product quality, taste, easy availability, advertisements, celebrity endorsement and schemes. Now the Multi Dimensional Scaling test has given the above Euclidean Distance graph which shows that Dabur is itself a bigger player in chyawanprash industry that has no significant competitor in the market. But Emami can become its great competitor in future according to above graph.

CONCLUSION After analyzing the financial statements of the Dabur by the help of various ratios, I observed that the trend of growth is positive. Dabur has strong performance with robust top line growth and high quality earnings in all business segments. The performance is more satisfying when viewed in the light of the challenging business environment of the Ayurvedic industry, Pharma, FMCG, Food in the export and domestic markets. Current ratio has continuously increased but the company needs to raise more of its current assets and quick assets so that it can fulfill all its obligations and can raise the amount of working capital for short- term investment. Earnings per share have increased which would surely help the organization in expanding its market share. Gross income also show the positive trend of growth, net turnover has also increased and return on net worth has also grown. All these ratios show that the trends of profit are growing at a rapid rate and thus it helps the company to meet the latent demands of customer too. Moreover, after analyzing and comparing the financial statements of Dabur w.r.t. its competitors I observed that Dabur is itself a big player in Chyawanprash industry as most of its ratios are far better than Zandu and Emami. At last I can say from the above study that Emami (Himani Sona-Chandi Chyawanprash) is also showing positive growth rate and can emerge as a great competitor for Dabur.

RECOMMENDATIONS The Company already had a 65.8% market share in India. It would be difficult to increase the market share substantially. Hence the company should focus on increasing the market size. The company should promote Chyawanprash as an all season product and try to remove the misconception that it is only to be consumed during the winters to strengthen the immune system against Winter Infections and Allergies. It should occupy the shelf space next to the Health drinks in retail stores so that they can remind the consumer of its claim of a comprehensive health supplement. Now that the company is successfully shedding its image of being associated with middle and old age people it could also target younger generation to expand its market. Since Dabur Chyawanprash is perceived to be a Health supplement that aids in the enhancement of the Immunity against winter related health problems , hence it should be promoted strongly in areas where winters have traditionally been harsh and long. Chyawanprash is traditionally consumed by the middle class segment, whereas the higher segment prefers health drinks like Bournvita & Horlicks to health supplements like Dabur Chyawanprash.However this segment can be penetrated with a promotional focus on Ayurvedic benefits and traditional Indian measures, which this segment values at a premium. The company needs to shift focus from a traditional value system that it projects and add to its portfolio a contemporary touch that would include Children and youth in the Chyawanprash segments also. Children are a primary next focus for the company and it needs to channelize adequate promotion focus through such media as Cartoon Channel and other children related programmes.

LIMITATIONS

1.

The time duration was less for the project as this project includes both financial and marketing (survey) portions.

2. Some databases were not available due to the policy of company. So some part of analysis would have been better if this limitation was not there.

3. Some sorts of problems were involved during marketing survey.

Annexure QUESTIONNAIRE Q1. Name ______________________________ Q2. Gender____________ Q3. I have purchased Dabur Chyawanprash in last 3 years (if your answer is option (a), then only proceed the questionnaire). (a) Yes Q4. Marital Status (a) Married (b) Single (b) No (c) Cant Say

Q5. Occupation (a) Business Housewife (b) Service (c)

(d) Student

(e) Others

Q6. I like to prefer Dabur Chyawanprash of (a) 250 gms (b) 500 gms (c) 1000 gms

Q7. Members of my family taking Dabur Chyawanprash (a) Kids (b) Adults (c) Elders

(d) Both a and c

(e) Whole family

Q8. If I do not get Dabur Chyawanprash then (a) Buy another brand (b) Go to another Shop to buy Dabur Chyawanprash (c) Postpone my purchase

Q9. Rank the following brands in 1-5 scale (1-Very Good, 2-Good, 3-Neither Good Nor Bad, 4-Bad, 5-Very Bad).

Brands Dabur

Zandu

Himani

Baidyan ath

Himalya

Surya

Vedic

Local Brands

Paramet ers Price

Main ingredie nts Packagi ng Product Quality Taste Easy Availabi lity Advertis ement Celbrity Endors ment Special Offers

REFRENCES & BIBLIOGRAPHY

Annual report of DIL. Organizations magazines Financial Management: I.M.Pandey, M.Y.Khan &P.K.Jain

http://www.moneycontrol.com/ http://www.dabur.com/ http://www.zandu.com/ http://www.emami.com/ http://www.baidyanath.com/ http://www.equitymaster.com/detail.asp?date=5/19/2000&story=6 http://www.oppapers.com/essays/Marketing-Report-Dabur-Chyawanprash/167474 http://www.antya.com/detail/Dabur-Chyawanprash/17246 http://dabur.com/en/products/Health_Care/Health_Supplements/Chyawanprash/ http://www.business-standard.com/india/news/ http://marketingpractice.blogspot.com/2008/01/dabur-chyawanprash-zaroorathai.html http://businesstoday.intoday.in/index.php?option=com_content&task=view&id=9077