*Attaching ones name to a project that one has not participated in writing violates IILMs s

code. No exceptions

ACKNOWLEDGEMENT

We express a deep sense of gratitude to our Professor Gunjan Mehta for her guidance and
valuable inputs in this Project Evaluation

NESTLE INDIA PRIVATE LIMITED

Nestle was founded in Switzerland, in 1867 as a single product producer of infant cereal. Today,
Nestle has grown to become the worlds largest and most diversified food Company, and is about
twice the size of its nearest competitor in the food and beverages sector.
Nestle India
After nearly a century-old association with the country, today, Nestl India has its presence
across India with 7 manufacturing facilities and 4 branch offices spread across the region. As a
subsidiary of Nestle S.A of Switzerland, it has earned the trust & respect of the of the Indian
society and is acknowledged amongst Indias Most Respected Companies and also amoungst
The top Wealth creators of India. Over a period of nine decades, the companys activities have
also facilitated direct and indirect employment providing livelihood to over one million people
from every strata of the society- farmers, suppliers, service providers, etc.

Nestle India manufactures a wide range of product

Milk Products
Prepared dishes & cooking aides
Beverages
Chocolates & Confectionery
Nestle CSR Activities

To combat the challenge of rising food and commodity prices, business and government need to
engage each other in new and more productive ways so that we can:

Double food production by 2050;

Head off a looming global water crisis; and

Stem unacceptable levels of both hunger and obesity around the world.

Above all, Nestl is dedicated to bringing the joy of Good Food, Good Life to people
throughout their lives, throughout the world.

FINANCIAL ANALYSIS

Financial Statement Analysis: It can be used as a very useful tool for

understanding a firms performance and condition. Each financial statement
contains a wealth of information which when analyzed and interpreted, can provide
valuable insights into a firms performance and position.
Use of financial Analysis:
Assessing Corporate Excellence: There are nine parameters, on which companies
are ranked,
Increase in market capitalization over 12 months
Increase in revenue over an accounting period
Increase in profit after tax
Return on net worth
Compound annual growth rate
Price earnings ratio
Market capitalization
Sales for the latest financial year
Profit after tax for the latest financial year;
They collectively assess corporate excellence
Judging Creditworthiness: of the customer, by assigning points in the range of 0-15
Forecasting bankruptcy: To analyze the future of its operations and to assess
whether they are profitable in the long run so as to prevent bankruptcy, if not then
it could lead to shut down of the entire business.
Valuing Equity Shares: A technique of empirically relate price-earnings multiple to
key financial variables.
Predicting Bonds Ratings: Financial Ratios are used for predicting bond ratings,
hence, eac
Estimating Market Risk

The purpose of vertical analysis is to be able to fulfill the basic uses of financial
analysis. The absolute amounts dont have much use in comparing with other
companies, as a large firm for one may not be large firm for the other.
E.g
For Company A, its Net Sales 1000
C.O.G.S
800
This data is sufficient to calculate Gross Profit, however, to analyse Income
statement for either the purpose of comparing with its previous years, it is
important to have a common denominator, which in this case is Net sales.
Hence below financial analysis is done taking Net sales into a common denominator
i.e- conversion into 100.
Income statement
forthe year ended December 31
2010 & 1009
Items

Amount (Rs.)

2010
62,973,966

2009
51671743

Cost of goods sold

(materials consumed &pur. Of
goods + adjustment due to
dec. in stock)
Gross profit
(net sales C.O.G.S)
Administratative& other
expenses
Profit before impairment,
contingencies and taxation
(G.P Admn& other exp)
Impairment & contingencies

(30555678
)

(24483772)

32418288

Net Sales

Conversion in percentage terms

(with respect to Net Sales)
(approximate values)
2010
2009
100
100
(48.5)

(47.3)

27187971

51.4

52.6

(20783507
)
11634781

(16591844)

(33)

(32.1)

10596127

18.47

20.5

(183679)

(426369)

(0.29)

(0.82)

PBT

11451102

9169758

18.1

17.7

Total Expenses
(Current tax, Deferred tax &
fringe benefit tax)

(3264454)

(2619730)

(5.1)

(5.0)

Profit After Tax

8186648

6550028

13

12.6

Note :Conversion of C.O.G.S = (C.O.G.S/Net sales)*100 and similarly for the

rest.

Vertical Analysis:
Similarly with the Balance sheet we have taken 2 common denominators one ,
taking the total of shareholders funds as 100 and the total of Application of funds
as 100.
Balance sheet
As on December 31
2010 & 2009

Items

Amount (Rs.)
2010

Conversion
2009

Shareholders Funds

2010

2009

96.3

94.7

Shareholders finds

8554139

5812650

Deferred Tax

332724

319972

3.7

5.2

Total

8886863

6132622

100

100

Application of funds
Fixed assets
Investments
Current Assests
Current liabilities

13616453
1506788
10459697
(16696075)

9758321
2032555
8565592
(14223846)

153.2
16.9
117.6
(187.8)

159.1
33.1
139.6
(231.9)

Total

8886863

6132622

100

100

Findings of vertical analysis:

Though there has not been any minute changes in the Income Statement between
the years, the major changes has been with regard to Impairment & contingencies
is a positive change as impairment/expense has declined.

Investments has declined could be due to inadequate funds available for investing,
thus it is a negative for the Co. Similarly, decline in liabilities is favorable due to
repayment of old creditors.

Horizontal Analysis of Nestle with competitors

GlaxoSmithKline, Britannia, Kwality Diary are the major competitors of

Nestle. We have compared Nestle with GlaxoSmithKline and Britannia in
terms of current assets, net worth, total liabilities, sales, profit.
Current assets(in
crores)

Nestle
589.66

Glaxo
379.63

britannia
397.22

Percentage difference in current assets of nestle and Glaxo = (589.66379.63)/379.63 = 55%

% difference between nestle and Britannia = (589.66-397.22)/397.22 = 48 %
We see that worth of assests of nestle is 55% more than Glaxo and 48 %
more than Britannia.

Net worth (in

crores)

Nestle
581.27

Glaxo
960.04

britannia
451.30

Percentage difference in net worth of nestle and glaxo = (960.04581.27)/581.27 = 65 %

Percentage difference in net worth of nestle and Britannia = (581.27451.30)/451.30 = 28 %
Nestle worth is more than Britannia by 28 % but less than Glaxo by 65 %

Nestle

Glaxo

britannia

Total liabilities(in
crores)

581.27

481.90

383.76

Percentage difference in total liabilities of nestle and glaxo = (666.39481.90)/481.90 = 38 %

Percentage difference in total liabilities of nestle and Britannia = (666.39383.76)/383.76 = 73 %

Net profit(in
crores)

Nestle
655

Glaxo
299.85

britannia
145.29

difference in net profit of nestle and glaxo = (655-299.85)/299.85 = 1.18 cr

difference in net profit of nestle and Britannia= (655-145.29)/145.29 = 3.50
cr
profit of nestle is 1.18 cr more than the glaxo and 3.50 cr more than
Britannia

RATIO ANALYSIS

PROFITABILITY RATIO

LIQUIDITY RATIO

EFFICIENCY RATIO

CAPITAL STRUCTURE

INVESTMENT RATIO

PROFITABILITY RATIO
GROSS PROFIT RATIO: Gross profit ratio shows the efficiency of the firm.
This ratio shows the percantage os gross profit over sales. As Gross profit is
befor tax and expenses so as high this ratio goes it shows the strength of the
comapny to pay off its expenses and taxes.
GROSS PROFIT RATIO = (GROSS PROFIT/ SALES)* 100

Nestle (FY 2009)

Nestle (FY 2008)

17.58%

17.20%

In our study the ratio has increased form 17.20% to 17.58% which shows
that company's performance has improved.

NET PROFIT RATIO: The net profit margin ratio is the net profit as a
proportion of sales. It shows the effectiveness of the business at converting
the sales into profit. The higher the ratio the higher is the business
performance.

NET PROFIT RATIO = (NET PROFIT/ SALES)* 100

Nestle (FY 2009)

Nestle (FY 2008)

12.67%

12.24%

In this case the Net Profit Ratio of Nestle has increased fro 12.24% to 12.67%
displaying that the business has been much more effective in the later year.
RETURN ON CAPITAL EMPLOYED: The relationship between profitability
and investment is considered the key ratio by many analysis. It provides a
broad measure of managements operating and financial success. This ratio
shows how well the capital is used to generate profit. Higher the ratio implies
that high profits are earned by less capital invested in the business.
RETURN ON CAPITAL EMPLOYED = (NET PROFIT BEFORE TAX/
CAPITAL EMPLOYED)* 100

Nestle (FY 2009)

Nestle (FY 2008)

160.29%

163.97%

In this case the Return on Capital has decreased from 163.97% to 160.29%
showing that the capital employed wasn't used effectively to generate
returns in the later year.

LIQUIDITY RATIO

CURRENT RATIO: The ratio indicates the companys ability to meet its
short term debt obligations. A higher ratio indicates that comapny has
the ability to pay off its obligations in time but a lower ratio says that
the company is not a position to pay of its debts. 2:1 is considered as
an appropriate ratio for a company.
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITY

Nestle (FY 2009)

Nestle (FY 2008)

.60 TIMES

.66 TIMES

In our case the ratio is approximately 6:10 which is near to 2:1 hence shows
company is in a normal position to pay off its short term debts.
QUICK RATIO: The acid test or quick ratio measures the ability of a
company to use its near cash or quick assets to immediately extinguish its
current liabilities. Quick assets include those current assets the presumely

can be quickly converted to cash at close to their book value. Such items are
cash, stock, investments, and accounts receivable.
QUICK RATIO = LIQUID ASSETS / CURRENT LIABILITY

Nestle (FY 2009)

Nestle (FY 2008)

.24 TIMES

.29 TIMES

The standard ratio is 1:1 but in our case the ratio comes out to be decreased
from 0.29 to 0.24 showing that the company's ability to pay off its liabilities
has decreased significantly which is not a good sign.

EFFICIENCY RATIO

DEBTORS TURNOVER RATIO: Sundry debtors always hold more core part
in the total current assets of the firm. This ratio helps the management to
find out that in how many days average sales are locked up in the amount of
debtors. The higher this ratio indicates that management is efficient enough
to handle debtors or how liquid the debtors are.
DEBTORS TURNOVER RATIO = SALES / AVERAGE DEBTORS

Nestle (FY 2009)

Nestle (FY 2008)

93.68TIMES

87.37TIMES

In this case the ratio has significantly increased from 87.37 to 93.68 times
hence indicating that in the later year Nestle has been efficient enough to
turn its debtors into liquid assets.
AVERAGE COLLECTION PERIOD: The average collection period ratio
represents the average number of days for which a firm has to wait before its
debtors are converted into cash. The lesser the days the better it is for the
company as the cash comes back early.
AVERAGE COLLECTION PERIOD = 365/ DEBTOR TURNOVER RATIO

Nestle (FY 2009)

Nestle (FY 2008)

3.9 DAYS

4.2 DAYS

In our case the period has decreased from 4.2 days to 3.9 days indicating
that debtors are turning into cash faster as compared to the last financial
year.

STOCK TURNOVER RATIO: Stock turnover ratio and inventory turnover

ratio are the same. This ratio is a relationship between the cost of goods sold
during a particular period of time and the cost of average inventory during a
particular period. A higher ratio indicates that the investment in the stock jas
been judicious enough to get enough sales.

STOCK TURNOVER RATIO = COST OF GOODS SOLD/ AVG INVENTORY

Nestle (FY 2009)

Nestle (FY 2008)

11.61TIMES

11.39TIMES

In our case the ratio has increased from 11.39 to 11.61 times indicating that
the investments in stock have been showing better results in the later year.
AVERAGE DAYS INVENTORY: The number of days inventory is also known
as average inventory period and inventory holding period.A high number of
days inventory indicates that their is a lack of demand for the product
being sold.A low days inventory ratio (inventory holding period) may
indicate that the company is not keeping enough stock on hand to meet
demands.
AVERAGE DAYS INVENTORY = 360/ STOCK TURNOVER RATIO

Nestle (FY 2009)

Nestle (FY 2008)

31DAYS

31.6DAYS

In our case the days have gone down from 31.6 to 31 days implying that the
company's stock holding has decreased.
FIXED ASSET TURNOVER RATIO: A financial ratio of net sales to fixed
assets. The fixed-asset turnover ratio measures a company's ability to
generate net sales from fixed-asset investments - specifically property, plant
and equipment. A higher fixed-asset turnover ratio shows that the company
has been more effective in using the investment in fixed assets to generate
revenues.
FIXED ASSET TURNOVER RATIO = SALES / FIXED ASSETS

Nestle (FY 2009)

Nestle (FY 2008)

3.24 TIMES

3.20 TIMES

In our case the ratio has increased from 3.20 to 3.24 so the fixed assets are
being used in a better manner than previous year
CAPITAL STRUCTURE RATIO
DEBT EQUITY RATIO -It indicates what proportion of equity and debt the
company is using to finance its assets. A high debt equity ratio generally
means that a company has been aggressive in financing its growth with
debt.
DEBT EQUITY RATIO = DEBT/ EQUITY

Nestle (FY 2009)

Nestle (FY 2008)

< .01

< .01

INVESTMENT RATIO

EARNING PER SHARE: The portion of a company's profit allocated to each

outstanding share of common stock. Earnings per share serve as an indicator
of a company's profitability.
EARNING PER SHARE =( NET PROFIT AFTER TAX LESS PREFRENCE
DIVIDEND)/ NUMBER OF SHARES OUTSTANDING

Nestle (FY 2009)

Nestle (FY 2008)

67.94

55.39

Balance Sheet of
GlaxoSmithKline
Consumer Healthcare

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets

------------------- in Rs. Cr. -------------------

Dec '10

Dec '09

Dec '08

Dec '07

Dec '06

12 mths

12 mths

12 mths

12 mths

12 mths

42.06
42.06
0.00
0.00
917.98
0.00
960.04
0.00
0.00
0.00
960.04
Dec '10

42.06
42.06
0.00
0.00
863.04
0.00
905.10
0.00
0.00
0.00
905.10
Dec '09

42.06
42.06
0.00
0.00
718.82
0.00
760.88
0.00
0.00
0.00
760.88
Dec '08

42.06
42.06
0.00
0.00
604.29
0.00
646.35
0.00
0.00
0.00
646.35
Dec '07

42.06
42.06
0.00
0.00
500.66
0.00
542.72
0.00
0.00
0.00
542.72
Dec '06

12 mths

12 mths

12 mths

12 mths

12 mths

598.96
396.71
202.25
108.33
0.00
312.00
50.53
17.10
379.63
852.76
959.00
2,191.39
0.00
481.90
1,060.04
1,541.94
649.45
0.00
960.03

558.48
364.00
194.48
37.79
0.00
266.03
31.36
36.60
333.99
620.15
783.20
1,737.34
0.00
393.79
670.71
1,064.50
672.84
0.00
905.11

539.47
329.24
210.23
16.33
0.00
277.17
43.25
20.48
340.90
73.61
450.50
865.01
0.00
268.24
62.45
330.69
534.32
0.00
760.88

523.68
297.65
226.03
17.31
297.84
194.82
27.36
32.17
254.35
62.15
61.50
378.00
0.00
243.65
29.17
272.82
105.18
0.00
646.36

521.69
270.32
251.37
6.53
219.68
145.57
28.09
36.42
210.08
80.77
11.50
302.35
0.00
216.88
20.32
237.20
65.15
0.00
542.73

Contingent Liabilities
Book Value (Rs)

335.09
228.28

59.92
215.21

72.85
180.92

7.03
153.69

3.86
129.05

Balance Sheet of Nestle

India

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Contingent Liabilities

------------------- in Rs. Cr. ------------------Dec '09

Dec '08

Dec '07

Dec '06

Dec '05

12 mths

12 mths

12 mths

12 mths

12 mths

96.42
96.42
0.00
0.00
484.85
0.00
581.27
0.00
0.00
0.00
581.27
Dec '09

96.42
96.42
0.00
0.00
376.93
0.00
473.35
0.82
0.00
0.82
474.17
Dec '08

96.42
96.42
0.00
0.00
322.01
0.00
418.43
2.87
0.00
2.87
421.30
Dec '07

96.42
96.42
0.00
0.00
292.47
0.00
388.89
16.27
0.00
16.27
405.16
Dec '06

96.42
96.42
0.00
0.00
257.72
0.00
354.14
14.30
0.00
14.30
368.44
Dec '05

12 mths

12 mths

12 mths

12 mths

12 mths

1,640.79
744.59
896.20
79.63
203.26
498.74
64.19
26.73
589.66
184.85
128.86
903.37
0.00
666.39
834.79
1,501.18
-597.81
0.00
581.28

1,404.85
651.85
753.00
109.17
34.90
434.91
45.59
12.66
493.16
162.67
181.03
836.86
0.00
582.44
677.32
1,259.76
-422.90
0.00
474.17

1,179.77
577.96
601.81
73.70
94.40
401.22
53.49
15.75
470.46
186.23
22.01
678.70
0.00
529.51
497.79
1,027.30
-348.60
0.00
421.31

1,058.27
516.48
541.79
38.24
77.77
276.22
55.76
6.53
338.51
175.12
69.82
583.45
0.00
440.82
395.28
836.10
-252.65
0.00
405.15

942.40
468.63
473.77
22.83
104.43
253.10
30.52
3.64
287.26
194.33
33.00
514.59
0.00
381.68
365.50
747.18
-232.59
0.00
368.44

63.07

84.90

63.27

35.93

50.04

Book Value (Rs)

60.29

Key Financial Ratios of

Nestle India

Operating Profit Per Share (Rs)

Net Operating Profit Per Share (Rs)
Free Reserves Per Share (Rs)
Bonus in Equity Capital
Profitability Ratios
Operating Profit Margin(%)
Profit Before Interest And Tax
Margin(%)
Gross Profit Margin(%)
Cash Profit Margin(%)
Adjusted Cash Margin(%)
Net Profit Margin(%)
Adjusted Net Profit Margin(%)
Return On Capital Employed(%)
Return On Net Worth(%)
Adjusted Return on Net Worth(%)
Return on Assets Excluding
Revaluations
Return on Assets Including
Revaluations
Return on Long Term Funds(%)
Liquidity And Solvency Ratios
Current Ratio
Quick Ratio
Debt Equity Ratio

43.40

40.33

36.73

------------------- in Rs. Cr. -------------------

Dec
'09
Investment Valuation Ratios
Face Value
Dividend Per Share

49.09

Dec '08

Dec '07

Dec '06

10.00
42.50

10.00
33.00

10.00
25.50

10.00
25.00

86.81

70.84

55.17

52.11

448.96

363.11

292.40

256.71

39.04
76.14

33.37
76.14

30.31
76.14

26.70
76.14

19.74

19.33

19.50

18.86

20.29

17.48

17.07

17.24

16.39

17.83

17.58
15.08
15.08
12.67
12.67
160.2
9
112.68
114.98

17.20
14.43
14.43
12.24
12.24

20.05
13.85
13.96
11.73
11.84

19.44
13.43
13.61
11.09
11.28

21.02
14.66
14.64
12.39
12.36

163.97

150.33

120.01

127.18

112.83
113.47

98.90
99.82

81.03
82.38

87.42
87.22

60.29

49.09

43.40

25.39

27.75

60.29

49.09

43.40

25.39

27.75

160.2
9

164.25

151.36

125.03

132.32

0.60
0.24
--

0.66
0.29
--

0.66
0.23
0.01

0.67
0.31
0.04

10.00
48.50
105.3
1
533.3
1
50.24
76.14

Dec '05

0.66
0.28
0.04

Long Term Debt Equity Ratio

Debt Coverage Ratios
Interest Cover
Total Debt to Owners Fund
Financial Charges Coverage Ratio
Financial Charges Coverage Ratio
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio
Debtors Turnover Ratio
Investments Turnover Ratio
Fixed Assets Turnover Ratio
Total Assets Turnover Ratio
Asset Turnover Ratio
Average Raw Material Holding
Average Finished Goods Held
Number of Days In Working Capital
Profit & Loss Account Ratios
Material Cost Composition
Imported Composition of Raw
Materials Consumed
Selling Distribution Cost Composition
Expenses as Composition of Total
Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit
Dividend Payout Ratio Cash Profit
Earning Retention Ratio
Cash Earning Retention Ratio
AdjustedCash Flow Times

Earnings Per Share

Book Value

--

--

--

--

473.22

741.20

1,103.09

0.00

0.01

0.04

529.44

828.67

1,253.46

2,476.14

382.28

572.74

866.20

1,727.72

11.61
93.68
11.61
3.24
9.75
3.24

11.39
87.37
11.39
3.20
10.29
3.20

8.79
64.09
10.02
6.10
9.52
3.11

10.28
65.35
12.01
5.77
8.02
2.81

9.87
87.32
12.02
5.61
7.67
2.76

30.95
22.17
-41.86

25.19
26.46
-35.17

31.03
28.54
-35.85

25.57
24.26
-32.26

26.26
25.96
-33.83

48.21

49.75

50.37

47.82

45.88

9.34

5.96

6.71

11.24

14.55

10.04

10.38

9.71

9.87

10.85

6.34

7.79

9.33

9.78

10.40

83.52
71.39
18.15
29.83
--

89.76
76.52
10.75
23.85
0.00

89.50
75.81
11.33
24.79
0.01

88.97
73.50
12.50
27.50
0.04

88.78
75.01
11.03
24.86
0.04

Dec
'09

Dec '08

Dec '07

Dec '06

67.94
60.29

55.39
49.09

42.92
43.40

32.68
40.33

666.2
5
-745.8
1
548.9
2

2,208.29
0.04

Dec '05
32.11
36.73

Sources:
http://www.moneycontrol.com/competition/nestleindia/comparison/NI
http://www.moneycontrol.com/india/stockpricequote/foodprocessing/glaxosmithklineconsu
merhealthcare/GSC04
http://www.nestle.in/pdf/NESTLE%20AR%20LRP1.pdf