Roll No.

Name
Batch : EMBA 2023-25 X002-23 Akshay Nag
Term :I X005-23 Arijit Chakraborty
Subject : Financial Reporting and Analysis(FRA) X015-23 Mohd Kashif Ahmad
Group : 001 X021-23 Sarvesh Chandra

Assignment : Financial Statement Analysis of HUL X022-23 Satyam

X029-23 Vikas

1. Company Overview
Hindustan Unilever is in the FMCG business comprising primarily of Home Care, Beauty & Personal Care
and Foods & Refreshment segments. The Company has manufacturing facilities across the country and
sells primarily in India.
Business Segment of HUL % Share in Revenue
Beauty & Personal Care Segment 42%
Home Care Segment 29%
Foods & Refreshments Segment 29%
Footprint
The company's brands are available across 80 lakh+ stores across India and around 90% of all households in
India use 1 or more of company's branded products.
India is the primary place of business for the company which accounts for 96% of revenues and the rest 4%
revenues are earned from sales outside India.

Market Leader
The company is the market leader in many product categories such as skin cleansing, skin care, hair care, fabric
wash, household care, tea, health food drinks and ketchup. It is a market leader in ~90% of its businesses.

Manufacturing Capabilities
The company's 31 manufacturing facilities and various other third-party manufacturers produces goods for the
company. Its manufacturing plants are located across India.

2. Industry Overview
The Fast-Moving Consumer Goods (FMCG) industry in India is a vibrant sector, characterized by its vast
consumer base and high market penetration. With urbanization, increased disposable incomes, and a young
population, the demand for FMCG products has been growing steadily. The sector is further divided into
urban and rural markets, with the rural segment offering immense growth potential. While the urban
market is driven by brand recognition and product innovation, the rural segment is all about accessibility
and affordability. Digitalization, e-commerce, and evolving consumer preferences are shaping the future of
the FMCG industry in India. Companies are increasingly focusing on sustainable practices, health and
wellness products, and leveraging technology for enhanced consumer engagement.
3. Financial Statement Analysis of HUL for FY’22-23 in comparison with FY’21-22

3-A Horizontal Analysis

Horizontal analysis, also known as trend analysis, involves evaluating financial statements and ratios over
a period. It provides insights into the direction a business is heading, indicating any trends by comparing
financial data from different periods.

3-A-I Income Statement Analysis

For the horizontal analysis, we'll calculate the growth percentages for each item in the income statement
for the year 2022-23 compared to the base year 2021-22.
Here's the horizontal analysis for the Income Statement for FY 2022-23 in comparison to FY 2021-22:
Particulars FY’22-23 FY’21-22 Growth (%)
Sales 52,446.00 60,580.00 15.51%
Expenses 39,589.00 46,432.00 17.29%
Operating Profit 12,857.00 14,148.00 10.04%
Other Income 219.00 447.00 104.11%
Depreciation 1,091.00 1,137.00 4.22%
Interest 106.00 114.00 7.55%
Profit before tax 11,879.00 13,344.00 12.33%
Tax 2,987.00 3,201.00 7.16%
Net profit 8,879.00 10,120.00 13.98%
EPS 37.79 43.07 13.98%
Price to earning 54.21 59.44 9.65%
Price 2,048.65 2,560.35 24.98%
Dividend Payout 89.99% 90.56% 0.64%
OPM 24.51% 23.35% -4.73%

Insights on Income Statement Analysis:

Sales Growth: The 15.51% increase in sales demonstrates that HUL continues to expand its market presence and
is effectively catering to the needs of its consumers. This could be attributed to the introduction of new
products, deeper market penetration, or successful marketing campaigns. For stakeholders, this growth indicates
a robust demand for HUL's products, and they might want to investigate which product lines or regions
contributed most to this growth.
Expenses Overview: A 17.29% rise in expenses, which is higher than the sales growth, could raise concerns. It's
essential to break down these expenses to understand if they are one-time investments (like infrastructure or
R&D) or recurring operational costs. If it's the former, this could mean HUL is gearing up for future growth.
However, recurring higher expenses could indicate inefficiencies or rising material costs, which need addressing.
Operating Profit Insights: The growth of 10.04% in operating profit, despite the higher expense growth, indicates
that HUL managed to keep its core business operations profitable. It might be interesting to see how this
compares to industry peers to gauge the company's performance in a broader market context.
Other Income Surge: The remarkable 104.11% rise in other income needs further investigation. Such a significant
increase could be due to non-recurring events like asset sales, receiving dividends, or beneficial investment
outcomes. It's crucial to differentiate this from the company's primary operations to get a clear picture of its
regular business health.
Net Profit Growth: A 13.98% growth in net profit suggests that, overall, the company remains on a profitable
trajectory. However, considering the substantial increase in other income, stakeholders might want to evaluate
how much of this net profit growth came from core business operations versus other income sources.
OPM (Operating Profit Margin) Decline: The 4.73% drop in OPM is a critical metric indicating that, while sales
are growing, the profit derived from each sale unit is reducing. This could be due to factors like increased
competition leading to reduced pricing power, increased production costs, or inefficiencies in the supply chain.
It's vital for HUL to address this to ensure long-term profitability.
3-A-II Balance Sheet Analysis
As with the Income Statement, for the horizontal analysis of the Balance Sheet, we'll calculate the
growth percentages for each item for the year 2022-23 compared to the base year 2021-22.
Horizontal analysis for the Balance Sheet for FY 2022-23 in comparison to FY 2021-22:

Particulars FY’22-23 FY’21-22 Growth (%)

Equity Share Capital 235.00 235.00 0.00%
Reserves 48,826.00 50,069.00 2.55%
Borrowings 1,043.00 1,219.00 16.87%
Current Liabilities 20,402.00 21,554.00 5.65%
Total 70,506.00 73,077.00 3.65%
Net Block 51,473.00 52,678.00 2.34%
Capital Work in Progress 1,313.00 1,132.00 -13.79%
Investments 3,521.00 2,882.00 -18.15%
Current Assets 14,199.00 16,385.00 15.40%
Working Capital 70,506.00 73,077.00 -16.67%
Debtors -6,203.00 -5,169.00 37.70%
Inventory 2,236.00 3,079.00 3.78%
Debtor Days 4,096.00 4,251.00 19.21%
Inventory Turnover 15.56 18.55 11.30%
Return on Equity 12.80 14.25 11.16%
Return on Capital Employed 24% 26% 9.15%

Insights on Balance Sheet Analysis:

Equity Share Capital: Remained constant at 0% growth. This suggests that there were no additional shares issued
or buybacks during this period. The equity base remains stable, which is a good sign for investors, as it shows the
company is not diluting its ownership.
Reserves: Experienced a modest growth of 2.55%. An increase in reserves can be due to retained earnings, which
signifies the amount of net income left over for the company after it has paid out dividends to its shareholders.
This indicates that the company is reinvesting its earnings for future growth.
Borrowings: Saw a notable increase of 16.87%. A rise in borrowings might suggest that the company is taking on
more debt to finance its operations or expansion activities. While debt can leverage growth, it's essential to
monitor the debt-to-equity ratio and ensure the company is not over-leveraged.
Current Liabilities: Grew by 5.65%. An increase in current liabilities could be due to various reasons, such as short-
term borrowings, accounts payable, or other short-term financial obligations. It's crucial to understand the
composition of this growth — for instance, if it's due to increased accounts payable, it might suggest extended
credit terms with suppliers.
Capital Work in Progress: Decreased by 13.79%, suggesting that the company might have completed some of its
ongoing projects.
Investments: Decreased by 18.15%, which might imply the company divested some of its investments.
Current Assets: Increased by 15.40%, indicating an increase in assets that are expected to be converted to cash
within a year.
Working Capital: Decreased by 16.67%, which could be a result of an increase in current liabilities or a decrease in
current assets.
Debtors: An increase of 37.70% in debtors might imply that the company extended more credit to its customers,
which could impact its cash flow.
Debtor Days: An increase by 19.21% suggests that it took longer for the company to collect payments from its
debtors compared to the previous year.
Return on Equity (ROE): Increased by 11.16%, indicating that the company generated a higher return on
shareholders' equity.
3-B Vertical Analysis
Vertical analysis, also known as common-size analysis, involves expressing each item in a financial
statement as a percentage of a base item. This type of analysis makes it easier to compare financial
statements of different-sized companies or different periods of the same company.

3-B-I Income Statement Vertical Analysis

For the vertical analysis of the Income Statement, each item will be expressed as a percentage of the
total sales for the respective years.

Vertical analysis for the Income Statement for FY 2021-22 and FY 2022-23:
Particulars FY 2021-22 (%) FY 2022-23 (%)
Sales 100.00% 100.00%
Expenses 75.49% 76.65%
Operating Profit 24.51% 23.35%
Other Income 0.42% 0.74%
Depreciation 2.08% 1.88%
Interest 0.20% 0.19%
Profit before tax 22.65% 22.03%
Tax 5.70% 5.28%
Net profit 16.93% 16.71%
EPS 0.07% 0.07%
Price to earning 0.10% 0.10%
Price 3.91% 4.23%

Insights on the Income Statement Analysis:

Sales: This is the base item and is considered 100% for vertical analysis.
Expenses: Expenses consumed approximately 76.65% of sales in FY 2022-23, which is higher than 75.49% in FY
2021-22.
Operating Profit: It represents the percentage of sales left after operating expenses. There is a decrease from
24.51% in FY 2021-22 to 23.35% in FY 2022-23.
Other Income: This increased from 0.42% of sales in FY 2021-22 to 0.74% in FY 2022-23.
Net profit: The net profit as a percentage of sales slightly decreased from 16.93% in FY 2021-22 to 16.71% in FY
2022-23.
The vertical analysis provides a clear picture of the cost structure and the profitability of the company. It highlights
the components of the income statement that take up a larger or smaller
3-B-II Balance Sheet Vertical Analysis
For the vertical analysis of the Balance Sheet, each item will be expressed as a percentage of the total
assets for the respective years.
Particulars FY 2021-22 (%) FY 2022-23 (%)
Equity Share Capital 100.00% 100.00%
Reserves 20777.02% 21305.96%
Borrowings 443.83% 518.72%
Current Liabilities 8681.70% 9171.91%
Net Block 21903.40% 22416.17%
Capital Work in Progress 558.72% 481.70%
Investments 1498.30% 1226.38%
Current Assets 6042.13% 6972.34%
Working Capital -2639.57% -2199.57%
Debtors 951.49% 1310.21%
Inventory 1742.98% 1808.94%
Debtor Days 6.62% 7.89%
Inventory Turnover 5.45% 6.06%
Return on Equity 0.08% 0.09%
Return on Capital Employed 0.10% 0.11%

Insights on the Balance Sheet Vertical Analysis:

Equity Share Capital: This is the base item for our vertical analysis and is considered 100%.
Reserves: Reserves as a percentage of equity share capital have increased slightly from FY 2021-22 to FY 2022-23.
Borrowings: Borrowings have seen an increase as a proportion of equity share capital from FY 2021-22 to FY 2022-
23.
Net Block: The net block, representing tangible assets, has seen a slight increase as a percentage of equity share
capital from FY 2021-22 to FY 2022-23.
Investments: There's a noticeable decrease in investments as a percentage of equity share capital from FY 2021-
22 to FY 2022-23.
Current Assets: Current assets, which are expected to be converted into cash within a year, have seen an increase
as a percentage of equity share capital.
The vertical analysis provides insights into how each item on the balance sheet is structured in relation to the total
equity share capital.

3-C Ratio Analysis

Financial ratios are used to evaluate various aspects of a company's performance. For this analysis, we
will focus on three categories of ratios:
Ratio Analysis

Profitability Ratios

Liquidity Ratios

Solvency Ratios
3-C-I Profitability Ratios
Profitability ratios provide insights into a company's ability to generate profit from its operations. Some
key profitability ratios include:

Gross Profit Margin: Gross Profit/Sales

Net Profit Margin: Net Profit/Sales
Return on Equity (ROE): Net Profit/Equity
Return on Assets (ROA): Net Profit/Total Assets
.
Key profitability ratios for FY 2021-22 and FY 2022-23:
Ratio FY 2021-22 (%) FY 2022-23 (%)
Gross Profit Margin 24.51% 23.35%
Net Profit Margin 16.93% 16.71%
Return on Equity (ROE) 18.10% 20.12%
Return on Assets (ROA) 12.59% 13.85%

Insights on Profitability Ratio Analysis:

Gross Profit Margin: There's a slight decrease from 24.51% in FY 2021-22 to 23.35% in FY 2022-23, indicating a
slight reduction in the profitability from its core operations.
Net Profit Margin: This ratio has marginally decreased from 16.93% to 16.71%. Even though sales increased, the
net profit as a percentage of sales has slightly decreased.
ROE: The Return on Equity has increased from 18.10% in FY 2021-22 to 20.12% in FY 2022-23. This indicates that
the company has been more effective in generating profit with the money shareholders have invested.
ROA: There's an increase in ROA from 12.59% to 13.85%, indicating that the company is more efficiently using its
assets to generate earnings.

3-C-II Liquidity Ratios

Liquidity ratios measure a company's ability to pay off its short-term debts as they become due.
Common liquidity ratios include:

Current Ratio: Current Assets/Current Liabilities

Quick Ratio (Acid-Test Ratio): Current Assets – Inventories/Current Liabilities

Key liquidity ratios for FY 2021-22 and FY 2022-23:

Ratio FY 2021-22 FY 2022-23
Current Ratio 0.70 0.76
Quick Ratio 0.50 0.56

Insights on the Liquidity Ratio Analysis:

Current Ratio: This ratio has increased from 0.70 in FY 2021-22 to 0.76 in FY 2022-23. A current ratio above 1
indicates that a company can pay off its short-term liabilities with its short-term assets. Even though HUL's ratio is
below 1, an increase in the ratio signifies improved liquidity.
Quick Ratio: The quick ratio has also seen an increase from 0.50 to 0.56. This ratio is a stricter measure of liquidity
as it excludes inventory. An increase in this ratio indicates better liquidity without relying on the sale of inventory.
Overall, the liquidity position of Hindustan Unilever Ltd has improved in FY 2022-23 compared to FY 2021-22.
 3-C-III Solvency Ratios
Solvency ratios measure a company's ability to meet its long-term debts and financial obligations. Some
key solvency ratios include:

Debt-to-Equity Ratio: Total Debt/Equity

Total Assets to Debt Ratio: Total Assets/Total Debt

Key solvency ratios for FY 2021-22 and FY 2022-23:

Ratio FY 2021-22 FY 2022-23
Debt-to-Equity Ratio 0.0213 0.0242
Total Assets to Debt Ratio 67.60 59.95

Insights on the Solvency Ratio Analysis:

Debt-to-Equity Ratio: This ratio has increased from 0.0213 in FY 2021-22 to 0.0242 in FY 2022-23. Even though the
increase is minor, a higher debt-to-equity ratio might indicate that the company is financing its growth with debt.
However, given the low absolute values, the company's leverage is still minimal.
Total Assets to Debt Ratio: The ratio has decreased from 67.60 to 59.95. This indicates that for every unit of debt,
the company has around 60 units of assets in FY 2022-23, which is a comfortable position.
In summary, while Hindustan Unilever Ltd has taken on a bit more debt in FY 2022-23 compared to the previous
year, its solvency position remains strong, given its vast asset base relative to its debt.

4. Conclusion on the Financial Statement Analysis of HUL

1. Hindustan Unilever Ltd (HUL) has exhibited a commendable financial performance during FY 2022-23, although
there are areas of concern that require attention:
2. Growth and Profitability: The Company demonstrated substantial growth with sales increasing by 15.51% in FY
2022-23 compared to the previous year. This growth signifies robust demand for the company's products.
However, profitability metrics such as Gross Profit Margin and Net Profit Margin have slightly declined. This
could be attributed to rising operational costs or other external factors affecting profitability.
3. Operational Efficiency: The remarkable surge in other income by over 100% could be due to factors like asset
sales, dividend income, or interest from investments, suggesting that the company is not just relying on its core
operations for revenue. However, a decline in the Operating Profit Margin suggests the need for better cost
management or improved pricing strategies.
4. Liquidity Position: HUL's liquidity, as indicated by the Current and Quick Ratios, has seen improvement, which is
a positive sign. However, the ratios are still below the ideal threshold of 1, suggesting potential challenges in
meeting short-term obligations using current assets.
5. Leverage and Solvency: The Debt-to-Equity Ratio, though still low, has seen a minor increase, indicating a slight
rise in leverage. This could be a strategic move by HUL to capitalize on low-interest rates or fund expansion
plans. The robust Total Assets to Debt Ratio reiterates the company's strong solvency position and its capability
to cover its debts.
6. Asset Management: An increase in debtor days suggests that HUL might be offering more favorable credit terms
to its customers or facing challenges in collecting payments timely. This could have implications for cash flows if
not managed properly.
7. In essence, while Hindustan Unilever Ltd showcases strong growth and solvency, it needs to closely monitor its
profitability margins and asset management strategies. The company's resilience in the face of challenges,
combined with its strategic decisions, can determine its trajectory in the coming years. Stakeholders, while
optimistic, should keep an eye on these metrics to ensure sustained growth and profitability.

Key Notes:
• The company's equity base remains stable, which assures existing shareholders about the stability of their ownership percentage.
• The growth in reserves suggests good profitability, and the company might be reinvesting its profits for future expansion or other strategic
initiatives.
• The increased borrowings could be a double-edged sword. On one hand, it provides the necessary capital for growth, but on the other, it
increases the company's financial risk. Stakeholders should keep an eye on the company's ability to manage and repay this debt.
• A rise in current liabilities necessitates a deeper dive into its constituents to understand if the company is managing its short-term obligations
efficiently.
Resources:
1. Company Website: https://www.hul.co.in/
2. Latest FY’23 Annual Report : https://www.bseindia.com/xml-data/corpfiling/AttachHis/a3971977-8bf4-
4041-b5a6-f28d4830b147.pdf
3. March Quarter and Financial Year 2023 Earnings Call of Hindustan Unilever Limited:
https://www.hul.co.in/files/0bb086b3-f169-4234-bc36-1e00877299f0/hindustanunilever-earnings-
apr27-2023.pdf
4. Annual Report 31st March 2023: https://www.bseindia.com/xml-data/corpfiling/AttachHis//dbf3868a-
97f3-43ed-b5ce-47e83261fdc4.pdf
5. Annual Report 31st March 2022:
https://www.bseindia.com/bseplus/AnnualReport/500696/73027500696.pdf