Industry Analysis:

Government Policies & Regulatory

Framework Investment Approval:
Automatic investment approval up to 100 per cent foreign equity for NRI and foreign companies. These
investments includes investment in food segments like Coffee and Tea
FDI in organised retail: India presently permits 100 percent FDI in Cash and Carry section and 51% in
single-brand retail, which is required to be additionally expanded to 100%. India is likewise expected to
permit 51% FDI in multi-brand retail, which will help the nascent organised retail market in the nation
Priority Sector: The Government of India perceives food processing and agro ventures as priority areas
Statutory Minimum Price: In October 2009, the government changed the Sugarcane Control Order,
1966, and changed the Statutory Minimum Price (SMP) of sugarcane with Fair and Remunerative Price
(FRP) and the State Advised Price (SAP)

GOODS AND SERVICE TAX

Implementation of GST from April 1, 2016.
The rate of GST on administrations is probably going to be 14 percent and on products is proposed to
be 20 percent.
FMCG segment needs an early rollout of the Goods‐and‐Services charge (GST) in order to supply
inventory network constraints, improve intensity of FMCG organizations against unorganized players

EXCISE DUTY
Excise duty on intant tea, quick brewing black tea, and ice tea would be reduced to decrease the retail
cost by 30 percent.
Excise duty on other beverages and lemonade would be decreased to reduce retail sale price by 35
percent.

RELAXATION OF LICENSE RULES:

Industrial license is not required for most of the food processing industries, barring certain items such
as beer, consumable liquor and wines, cane sugar, and hydrogenated animal fats and oils as well as
items reserved for exclusive manufacture in the small-scale sector.

FOOD SECURITY BILL (FSB)

FSB woul help in reducing the price of food products for Below Poverty Line (BPL) households, making
it easier for them to spend their money on other goods as well, including FMCG products
This is expected to increase consumer expenditure, particularly in rural areas, which is an important
market for most FMCG companies.
TELECOM REGULATORY AUTHORITY OF INDIA(TRAI) ADVERTISING RUGULATIONS
FMCG companies, which are top advertisers on television , are likely to face the twin risks of reduced
reduce to advertise, and increased prices as broadcasters hike prices

Pestel Analysis On Fmcg Industry:

A PESTEL analysis is a measurement tool, taking in consideration all the external factors affecting the
organization. It can also be used inside a SWOT analysis.
POLITICAL FACTORS:
 India was a closed economy initially due to which it faced difficulties to enter in the
international market because of the restrictions imposed by the Britishers.
 Less importance to FDIs in FMCG slowed down the economic growth of the country so they
started opening up.
 Government intervention also has a huge impact on the growth of FMCG industry. Sometimes
more government intervention can help the organizations to a good extent, sometimes it can
go the other way round.
 Taxation policy of government will affect the price of inputs & it ultimately affectthe prices of
final products which will affect the sale of product.
 Subsidies provided by government can also help the industry grow at a faster pace, may also
help getting the finance funded from outside.

ECONOMIC FACTORS:
 Lifting of trade restrictions and import duties actually provided customers large number of
products to choose from and increased competition which let to reduced prices, hence
decrease in inflation and better quality of the products.
 Domestic market was protected through tariffs as all of them were not lifted, it was lifed from
already established markets, this will enable foreign companies in India to import stuff from
outside.
 This will also enable the companies to import from anywhere, this will create more options for
them to look for suppliers all over the world
 Higher inflation rates will increase the cost of the products & if inflation rate is lower the cost of
product will be lower. This directly affect the growth of the organization.

SOCIAL FACTORS:
 Progress in FMCG industry will improve people’s lifestyle, all FMCG products are any day more
healthier and hygienic than street foods.
 FMCG industry is the fourth biggest sector, it employs thousand of graduates every year.
 MNCs like HUL invest millions to improve the living conditions of millions in India. For example-
“Project Shakti”
 Education is one of the most important factor which influence the buying
 tendency of consumer, while buying a particular product a consumer must have the required
knowledge to choose the right product.
TECHNOLOGICAL FACTORS:
 New technology helps in economy of scale, this will increase the level of production, & reducine
the costs of inputs, & maximising the level of profits.
 Advancement in technology will lead to innovations & further improvements in technology
which will automatically make the process more efficient in every aspect.
 Advance technology will make the product more competitive in the market

ENVIRONMENTAL FACTORS:
 Raw materials used by FMCGs are grown in the fields and they are careful in preserving and
protecting the environment
 Setting up of green houses, use of herbal waste, establishing green buildings and minimal
consumption of fresh water is being done by various FMCGS lately.
 Government has also made some anti dumping laws which prohibits any manufacturing
facility to contaminate any water body.

LEGAL FACTORS:
 GST will help in lowering prices as the taxes imposed increased the cost of production
 FMCG Industry cannot artificially increase the prices by making any product scarce
 Various Consumer protection laws have already been made to protect the right of the
consumers so that the marketers do not exploit them.
 Industry laws: No industry can set up its factory in between cities, it should be in the outskirts.
COMPANY ANALYSIS
B032

About HUL:
Hindustan Unilever Limited (HUL) is a British-Dutch manufacturing company headquartered in
Mumbai, India. Its products include foods, beverages, cleaning agents, personal care products, water
purifiers and consumer goods. HUL was established in 1933 as Lever Brothers and following merger of
constituent groups in 1956 was renamed as Hindustan Lever Limited. The company was renamed in
June 2007 as "Hindustan Unilever Limited". As of 2019 Hindustan Unilever portfolio had 35 product
brands in 20 categories and employs 18,000 employees with sales of Rs. 34,619 crores in 2017-18.

SWOT Analysis of Hindustan Unilever

Strengths:
 Being in consumer goods market, it provides over 20 product categories such as soap, tea,
shampoo etc., gained HUL acceptance of their products in the market.
 According to statistics 2 out 0f 3 Indian consumers use HUL products, they follow targeting
strategy which helped them being the market leader.
 Hindustan Unilever Research center (HURC),Mumbai & Unilever Research India, Bangalore are
continuously coming up with innovations in their manufacturing process and products.
 It follows a 4-tier distribution system which covers direct coverage, indirect coverage for
villages to urban markets, leveraging the rural wholesale market to reach markets inaccessible
by road and project Shakti Amma.
 By taking popular celebrities in their ads, HUL has created huge brand awareness which helped
them in making their products socially expected.
 It has a huge product line, from oral care to pet nutrition they cover it all.
 They have over 80 years of experience in the market which makes they more competitive in
the market.
 They are financially strong as Uniliver Limited owns 67% controlling share in HUL.
 HUL strategy to offer different products for different income groups (selective targeting) has
been successful in having share of wallet of a consumer.
Weaknesses:
 Growing competition from new entrants as their focus is on a particular product, for example-
Ghadi & Nirma detergent eating up HUL’s wheel detergent market share.
 HUL has large number of products in different product categories, this can lead to confused
product positioning.
 Increasing income of people due to stable political scenario, improved literacy rate &
controlled inflation resulting into change of lifestyle.

Opportunities:
 By infiltrating more in the rural markets through its undertaking Shakti AMMA and change of
unorganized business to organized one will prompt further development of the buyer products
market.
 People are becoming more aware of the products through ads, word of mouth, doctor
prescription is resulting in increase usage of these products.
Threats:
 With increasing number of competitors it is becoming very difficult for the company to come
up with innovative and unique products.
 Increase price of commodities will lead to increase in price of the products which will result in
decrease in sales, margins & brand switching.
 The consumer goods market is very diversified so a lot of brands have come up with various
unique products, its very difficult for consumers to stick to a particular brand

Product Portfolio:
 HUL's product portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel,
Rin, Wheel, Fair & Lovely, Pond's, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Pepsodent,
Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall's and Pureit.
 The FMCG major has a total 35 brands and 1,200 SKUs (stock keeping units) of which it will
look to eliminate SKUs not doing well.
 HUL’s market share in categories such as laundry, personal wash, shampoo, toothpaste, tea
and coffee stood at 37%, 28%, 44.9%, 28%, 23.4% and 44% respctively.
Company-Moats
 HUL (Hindustan Unilever Limited) is India's largest fast-moving consumer goods company. One
in three Indians use at least one HUL product on a regular basis. The company while being a
consumer goods manufacturer, is a marketer at heart.
 If you notice Indian TV channels you’ll find out that there are few channels that exclusively air
HUL ads. HUL has customized, aiming directly to the psychology of their target customers.
 For instance, Wheel - a low cost detergent - has Salman Khan as its brand ambassador. The
huge group of public over whom Salman Khan employs mass appeal is a similar target market
Wheel would like to gain.
 Dove, then again, a head brand of skin and hair care, is intended for people who either aren't
astonished by the doctored excellence of big celebs, or perceive the futility of meaning to
accomplish it. In this way its adverts include standard people, and endorse one to discover
beauty in oneself.
 HUL posted a21% rise in EBIDTA at Rs 2443 crore, 20% rise at Rs 1848 crore in its net profit,
revenue was also up by 7% despite economic slowdown

Quality of Management
Mr Sanjiv Mehta:
Chairman & Managing Director
Sanjiv Mehta is the Chairman and Managing Director of HUL since 30th June, 2018. He has been
leading Unilever’s business in India and South Asia since October 2013 as CEO and Managing Director,
HUL and Executive Vice President, Unilever, South Asia. Sanjiv was appointed as President, Unilever,
South Asia and member of the Unilever Leadership Executive, effective May 2019. Sanjiv has been with
Unilever for 26 years and during the last 17 years has led businesses in different parts of the world. He
has been the Chairman and Managing Director of Unilever Bangladesh Limited (2002-06), Chairman
and CEO of Unilever Philippines Inc. (2007-08) and Chairman of Unilever - North Africa & Middle East
(2008 – September 2013). Sanjiv chairs the FMCG Committee of FICCI as well as the national
committee on MNCs of CII. Sanjiv also chairs Xynteo's 'India 2022', a purpose-driven business coalition
of top Indian and MNC companies formed with an intention to solve some of the intractable
environmental and social issues, and is working to create a new model of growth.

Mr Srinivas Phatak:
Executive Director, Finance and IT and Chief Financial Officer
Srinivas has been with Unilever for 20 years and worked extensively in India and different parts of the
world. His experiences cover all aspects of the finance function. He has been Vice President Category
Finance for Deodorants and Oral Care (2012-2013), Vice President Supply Chain finance Americas
(2014-2016) and Head of Financial Shared Services for Unilever (2017). Srinivas is a Chartered
Accountant (ICAI – 1996) and Cost & Works Accountant (ICWAI – 1996).

Mr Willem Uijen:
Executive Director, Supply Chain
Willem is of Dutch nationality, has been with Unilever since 1999 and has held a series of assignments
in Supply Chain and Research & Development. He has spent most of his professional life working in
various roles in Supply Chain for Unilever’s Latin America business where he was based in Mexico City
from 2003 to 2015 with a short assignment in London. He has been the Supply Chain Vice President for
Unilever, Mexico and the Caribbean (2012-2015), Vice President Home Care SC Latin America based
out of Switzerland (2015-2016) and recently headed Unilever’s Supply Chain, Home Care division
based out of London (2016-2019). Willem was appointed Executive Director, Supply Chain of
Hindustan Unilever Limited with effect from January 2020. He holds a Master of Science (M.Sc.) degree
in Applied Physics from Eindhoven University in the Netherlands.

Mr Aditya Narayan:
Independent Director
Mr Aditya Narayan (62) began his career as a Management Trainee with ICI India Limited (now Akzo
Nobel India Limited) in 1973. He grew through diverse functions and businesses including a role as a
Corporate Planning Manager at ICI Group HQ in London. He served as the Managing Director of ICI
India during 1996 - 2003 and then as its Non-Executive Chairman over 2003 - 2010. He also served as
the President and CEO of BHP Billiton India during 2005 - 2009. Mr Narayan is a B. Tech. from IIT
Kanpur and also has formal qualifications in Law. He was a Fellow in Interdisciplinary Sciences at the
University of Rochester, USA. He was a Commonwealth Scholar at the Manchester Business School in
1991 and a Fellow at the Aspen Institute, Colorado, USA in 1998. Mr Narayan joined the Board of the
Company as an Independent Director in 2001. He is the Chairman of the Audit Committee and a
Member of the Nomination and Remuneration Committee and Corporate Social Responsibility
Committee of the Company.

Budget 2020 impact on of HUL

Ahead of the first budget of the new decade to be presented by Finance Minister Nirmala Sitharaman,
rural demand seems to be denting Hindustan Unilever Ltd (HUL). The Indian unit of Anglo-Dutch
consumer group Unilever Plc UNc.AS missed market expectations for quarterly profit on Friday.
Consumer price inflation in India has ticked up to a five-year high, making Indian consumers, several of
whom make less than Rs 100 a day, cut back on discretionary spending. HUL, whose overall market
growth slowed down in the personal wash, or soap, category, will raise prices by up to 6 percent in the
March quarter for these products.
Abolition of DDT-Hindustan Unilever Ltd (HUL) have the dividend pay-out of 90-95 percent of which the
effective receipt by the shareholders in their hands is just 70-75 percent, so those things will increase. I
am quite positive that because of the savings having got curtailed, you have no other option but to go
for the investment into the stock market. This seems to be an overreaction because the expectations
did not meet but DDT abolition and the personal income tax rejig seems to be a big positive. Huge
capital will come into the capital market post this. DDT being abolished, 20 percent higher dividend
payment will be made by the companies
Conclusion:

Qulaitative Analysis:
Though current price is more than intrinsic value, it is generating better returns than a Bank FD,
stocks offer good dividend returns. As per PE&PB ratio it is higher than the sector as it provides
better quality, it is showing positive financial trend. The company’s revenue and earnings growth
were 11% and 16% respectively in 2019-20.

HUL posted a21% rise in EBIDTA at Rs 2443 crore, 20% rise at Rs 1848 crore in its net profit in 2019,
revenue was also up by 7% despite economic slowdown, if the economic conditions improves the
shares price of the company’s stock will increase drastically.

Shares can be bought for long term investments as it is mostly expected to hike in the long term.
Whenever it shows dip in its share price it should be bought as the price is most expected to
increase in the long term.

VALUATION ANALYSIS

According to all the models i.e. Dhandho, Ben Graham, DCF and Expected return models, the intrinsic
value of HUL is less than the current market capitalisation of Rs. 467,448 crores. Hence, clearly the
company is OVERVALUED and the investors must SELL the stock as it is likely that its prices may fall in
the future, making it unprofitable for the investors.

Overall Conclusion:
There is too much difference in the intrinsic value shown by all the models and the current
market capitalisation of Rs. 467,448. Hence the investors may SELL the stock in the future.
References
www.slideshare.net
www.economictimes.indiatimes.com
www.ukessays.com
www.mbaskool.com
www.marketing91.com
www.scribd.com
www.wikipedia.com
www.business-standard.com
www.hul.co.in