DABUR INDIA

There are two techniques for choosing a company’s share.

1) FUNDAMENTAL ANALYSIS- It is the examination of the underlying forces that affect the well being of the company, industry groups and companies. It requires an examination of the market from a broader perspective. At the company level, fundamental analysis may involve examination of financial data, management , business concept and competition. At the industry level their might be an examination of supply and demand forces of the products. For the national economy fundamental analysis might focus on economic data to asses the present and future growth of the economy. Approaches of fundamental analysis

There are two approaches to conducting fundamental analysis:-

1 .Top-down approach: In this approach firstly we do the economic analysis then industry

analysis and finally company analysis.

2. Bottom-up approach: In this approach, an analyst do the company analysis first and then the industry analysis and finally economic analysis of India.

TOP DOWN APPROACH SELECTED

(i) ECONOMIC ANALYSIS of INDIAN INDUSTRY– The economy of India is eleventh largest economy in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). Generally, economic analysis implies the examination of GDP, government financing, government borrowing, consumer durable goods market, nondurable goods and capital goods market, savings and investment pattern, interest rates, inflation rates, tax structure, foreign direct investment and money supply.

India is the second fastest growing economy in the world. India’s economy grew by 7.4% which is an upward revision from earlier estimates of

7.2 percent because this year growth in agriculture is high due to good monsoon. In the opening month of 2010-11 continue to rise, it grew by 17.6%which was higher

than the rate of 13.5% increase recorded a month ago. This is mainly due to growth seen in all sectors. The industrial growth was just 1.1% a year ago(2009).

When economy expands most industry groups and companies benefits and grows. When the economy decline, most sectors and companies usually suffer.

India is likely to grow by 7.7% in 2010 and by 8% in 2011-12, the Economist Intelligence Unit (EIU), the arm of ‘The Economist’, said.

MONEY SUPPLY- The money supply increased by 0.8% in april 2010 compared to growth of 2.6% in the same month of 2009.

DEPOSITS- Total deposits increased by 1.6% in april 2010, over March 2009

FISCAL DEFICIT- Decline of 0.3% in fiscal deficit in the opening month of 2010-11 as the deficit has stepped down from Rs.54158 crore to Rs.53993 crore. Finance minister Pranab Mukherjee presented a budget with a fiscal deficit of 5.5% of the gross domestic product (GDP) on 26 Feb 2010.He pegged the total expenditure at Rs11.09 lakh crore while the total tax and non-tax revenue was estimated at Rs6.82 lakh crore for the year 2010-11.The deficit is much lower than the budgeted estimate for the current fiscal (6.8%), which, however, has been revised to 6.9%.To meet the shortfall, the government has estimated borrowing of Rs3.81 lakh crore for fiscal 2010-11, lower than the current fiscal's Rs4.01 lakh crore. The rolling targets for the fiscal deficit are pegged at 4.8% and 4.1% for 2011-12 and 2012-13, respectively, according to Fin Minister Pranab Mukharjee

REVENUE and EXPENDITURE- Total expenditure by govt. has Rs.67226 crore in the opening month of 2010. And revenue receipt increased from Rs.11846 crore in April 2009 to Rs.12979 crore in April 2010.

Economist predicts that by 2020 India will be among the leading economies of the world.

DIFFERENT INDUSTRY CONTRIBUTION-India's large service industry accounts for 58.4% of the country's Gross Domestic Product (GDP) while the industrial and agricultural sector contributes 25.8% and 15.8% respectively according to 2009.

AGRICULTURE- Agriculture is the predominant occupation in India, accounting for about 52% of employment. The service sector makes up a further 34%, and industrial sector around 14%.

Total expenditure at Rs11.09 lakh crore while the total tax and non-tax revenue was estimated at Rs6.82 lakh crore for the year 2010-11.

FDI- The aggregate cost of 32 domestic mergers and acquisition (M&A) agreements in India in January 2010 stood at US$ 2,167 million against 8 deals amounting to US$ 1,324 million and 28 deals amounting to US$ 223 million in 2009 and 2008, respectively. 

GDP-The contributions of various sectors in the Indian GDP for 2008-2009 are:-composition by sector:  Agriculture: 15.8%  Industry: 25.8%  Services: 58.4% (2009) The Gross Domestic Product (GDP) in India expanded at an annual rate of 8.80 percent in the last reported quarter (jun2010).

India GDP Annual Growth Rate 2008 9.2

2009 6.7

2010 7.4

Government of India is still trying to improve the GDP of the country and therefore several

steps have been taken to boost the economy. Policies of FDI, NRI investment have been framed to give a push to the economy.

Inflation Rate INFLATION- The overall inflation average for the month of April 2010 stood at 9.6% as

compared to growth of inflation of 1.3% seen in the same month of last year.

The broader price index as measured by the Wholesale Price Index (WPI) touched a 16 month high of 9.89% in the month of February 2010, up from 8.56% in the previous month. Interestingly, during the corresponding month last year, inflation rate was 3.50%.

The rise in inflation was broad-based with non-food items such as cement, metals and machinery becoming costlier over the month, after manufacturers raised prices to absorb rising input costs. Inflation in manufactured items too has surged from 6.55% (in January 2010) to 7.40% in February 2010. 

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25          

2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.97

2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

Interest Rate

A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies. For example, if a lender(such as a bank)chargesacustomer$90 in a year on a loan of $1000, then the interest rate would be 90/1000 *100% = 9%.

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 3.25 3.25 3.38 3.63 3.75 3.75 4.08 4.50 5.00      

2009 4.50 4.00 3.75 3.38 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25

2008 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 5.50

(ii) INDUSTRY ANALYSIS

FMCG industry, alternatively called as CPG (Consumer packaged goods) industry primarily deals with the production, distribution and marketing of consumer packaged goods. The Fast Moving Consumer Goods (FMCG) are those consumables which are normally consumed by the consumers at a regular interval. Some of the prime activities of FMCG industry are selling, marketing, financing, purchasing, etc. The industry also engaged in operations, supply chain, production and general management.

Growth Potential in FMCG Industry «««////

Most of India’s population still lives in villages and hence, it is one area that can’t be overlooked. As an agricultural economy, which is gaining a lot of focus, rural income is bound to increase. That will definitely provide a better growth prospect for the FMCG industry. The growing demand in the market will also support the sector in an effective manner. Per capita consumption of various products is very low in India and hence it will have varied growth possibility. The new generation customer is brand savvy. However, now the companies need to focus on rural customer to make them more aware of the kind of new products and services that the FMCG basket can offer. The purchasing power of the people also plays an important role. The urban area will continue to dominate the market share of the FMCG products, what with increasing incomes and new categories. Currently urban populace has a 66 per cent share in terms of consumption.

Indian FMCG Market Progress

India will continue to be a major FMCG player because of reasons like abundance of raw

material, labour costs and an effective value chain. The climate conditions across India is

varied which gives it a huge raw material base for food processing industries. It is coming

up as major coffee market. For a long time it has been the largest producer of milk, spices

cashew and livestock.

India FMCG Market Size (in USD Billion)

2003- 2006- 2007- 2015-0

5

10

15

20

25

30

35

11.614.6

18

33.4

Growing Industry (Sunrise industry):- Huge growth rate in India The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest

sector in the economy. FMCG Sector is expected to grow by over 60% by 2010. It has been estimated that FMCG

sector will rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. There is a large raw material base suitable for food processing industries. The availability of

these raw materials gives India the location advantage.  The FMCG sector is one that saw a growth in the year 2009. The steady rise in prices saw an

industry growth by 12%.  In 2010 the FMCG industry is slated for a growth of 15% compared with that of 2009.

The primary expectation of the FMCG industry from the Budget of 2010 -11 is that of tax benefits and better infrastructural benefits. 

List of major FMCG companies in India-

1. HLL2. ITC3. NESTLE INDIA4. GCMMF5. DABUR INDIA6. ASIAN PAINTS7. CADBURY INDIA8. BRITANNIA INDUSTRIES 9. PROCTER & GAMBLE HYGIENE and HEALTH CARE10. MARICO INDUSTRIES

(iii) COMPANY ANALYSIS The purpose of company analysis to analyze the financial and non-financial aspects of a company to determine whether to buy, sells, or holds onto the shares of a particular company This is usually done by studying the company's financial statements. From these statements a number of useful ratios can be calculated. When performing ratio analysis on a company, the ratios should be compared to other companies within the same or similar industry.. When some companies have done well irrespective of economic or industry failures, this implies that there are certain unique characteristics for this particular company that had made it success.

ABOUT COMPANY

Dabur India Limited is the fourth largest FMCG Company in India, with the turnover of approximately US$ 750 Million (Rs. 3390.9 Crore FY 09-10) & Market Capitalization of over US$ 3.5 Billion (Rs 15500 Crore), with brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real.

Company Name - Dabur IndiaType - PublicIndustry - Health Care, Food Founded by - Dr. S.K. Burman Fonded - 1884Headquarters - Dabur Tower, Kaushambi, Sahibabab, Ghaziabad Area served - Worldwide Key People - Dr. Anand Burman (RBI) Mr. Amit Burman (Vice-chairman) Mr. Sunil Duggal (CEO)Products - Dabur Amla, Dabur Chyanprash, Vatika, Hajmola etc. Net income - 425 crore(2008-09)Total Assets - 559 crore (2008-09)Employees - 3000 approxWebsite - www.dabur.com

Two largest segments such as consumer care (hair care, oral care, health supplements, homecare and skincare)  and foods  have shown strong traction in business in the domestic market, as they reported a healthy growth of 20.5 per cent and 24 per cent in sales at Rs 704 crore and Rs 132 crore, respectively.

.

Sales to be driven by hair care, healthcareDABUR is forecast to report a CAGR of 18.8% in sales during FY09‐FY12. This is on the back

of a CAGR of 16% during FY09‐FY12f, compared to 12% during FY06‐FY09 for the

Consumer Care Division. Within the Consumer Care division, baby and skin, foods and hair

care are likely to grow fastest, at a CAGR of 23%, 23% and 16%, respectively. Of the larger

segments, oral care is likely to grow at 13%, despite decline in toothpowders. The Consumer Health Care division is expected to report a CAGR of 15% duringFY09‐FY12f. The acceleration in growth is likely to be on account of the transfer of a few products, segregation

into two SBUS and re‐branding of products. The international business is expected to achieve a

CAGR of 26% on the back of increased penetration in existing markets. We have included Fem and retail in Others; the segment’s share is likely to increase from 1% in FY09 to 5% in FY10f.

Exhibit 15: Growth assumptions for the Consumer Care division (%)

FY08 FY09 FY10f FY11f FY12fHair Care 15.7 22.0 16.0 16.5 15.0Oral Care 16.0 4.2 13.0 13.7 13.0Health Supplements 14.3 11.3 14.0 14.5 13.0Digestives & Candies 4.4 11.0 13.0 13.0 13.0Baby Oils & Skin Care 9.3 2.0 28.0 24.0 18.0Home Care 10.0 9.7 8.0 10.0 9.0Foods n.a. 14.4 21.0 23.0 24.0Total sales 30.7 12.7 15.7 16.4 15.4

Balance sheet

 Mar ' 10

Mar ' 09

Mar ' 08

Mar ' 07 Mar ' 06

Sources of funds

Owner's fund

Equity share capital 86.76 86.51 86.40 86.29 57.33

Share application money 0.14 - - - -

 Mar ' 10

Mar ' 09

Mar ' 08

Mar ' 07 Mar ' 06

Preference share capital - - - - -

Reserves & surplus 662.48 651.69 441.92 316.90 390.54

Loan funds

Secured loans 24.27 8.26 16.45 19.28 19.23

Unsecured loans 81.80 130.72 0.24 0.26 1.25

Total 855.45 877.17 545.01 422.73 468.35

Uses of funds

Fixed assets

Gross block 687.23 518.77 467.93 404.30 328.23

Less : revaluation reserve - - - - -

Less : accumulated depreciation 236.28 210.45 189.77 168.97 142.46

Net block 450.95 308.32 278.17 235.33 185.77

Capital work-in-progress 23.31 51.71 16.26 3.71 13.07

Investments 348.51 232.05 270.37 145.35 275.08

Net current assets

Current assets, loans & advances 941.77 973.42 576.82 397.78 285.68

Less : current liabilities & provisions 911.83 696.97 610.57 379.27 324.12

 Mar ' 10

Mar ' 09

Mar ' 08

Mar ' 07 Mar ' 06

Total net current assets 29.94 276.45 -33.75 18.52 -38.44

Miscellaneous expenses not written 2.74 8.64 13.95 19.82 32.87

Total 855.45 877.17 545.01 422.73 468.35

Profit & Loss account

  Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07Mar ' 06

Income

Operating income 2,867.42 2,408.33 2,093.63 1,745.14 1,345.50

  Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07Mar ' 06

Expenses

Material consumed 1,384.29 1,232.85 1,023.94 778.27 582.43

Manufacturing expenses  58.17 54.22 54.02 39.24 27.10

Personnel expenses 212.34 167.32 149.69 118.66 98.31

Selling expenses 474.79 358.75 337.69 403.42 316.46

Adminstrative expenses 187.90 153.67 138.69 100.90 80.24

Expenses capitalised - - - - -

Cost of sales 2,317.49 1,966.81 1,704.03 1,440.48 1,104.55

Operating profit 549.93 441.52 389.60 304.66 240.95

Other recurring income 14.85 10.72 9.76 3.14 1.05

Adjusted PBDIT 564.78 452.24 399.36 307.80 242.01

Financial expenses 13.28 14.47 10.92 4.43 5.73

Depreciation  31.91 27.42 25.75 21.98 19.05

Other write offs 5.66 3.94 5.67 6.49 4.26

Adjusted PBT 513.93 406.41 357.01 274.90 212.97

Tax charges  93.70 51.44 48.40 32.15 25.78

Adjusted PAT 420.23 354.97 308.61 242.76 187.19

Non recurring items 13.10 18.58 8.16 9.32 1.90

Other non cash adjustments -0.19 -0.72 -0.86 -0.13 0.21

Reported net profit 433.14 372.84 315.92 251.94 189.29

Earnigs before appropriation 862.08 696.07 545.07 426.95 314.52

Equity dividend 173.60 151.39 129.60 122.13 100.32

Preference dividend - - - - -

  Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07Mar ' 06

Dividend tax 29.50 25.73 22.03 17.13 14.07

Retained earnings 658.98 518.95 393.44 287.70 200.13

Ratios (2006 to 2010)

  Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Per share ratios

  Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

Dividend per share 2.00 1.75 1.50 1.75 2.50

Operating profit per share (Rs) 6.34 5.10 4.51 3.53 4.20

Net operating income per share (Rs) 33.05 27.84 24.23 20.22 23.47

Profitability ratios

Gross profit margin (%) 18.06 17.19 17.37 16.19 16.49

Net profit margin (%) 15.03 15.44 15.06 14.41 14.04

Leverage ratios

Long term debt / Equity 0.02 0.03 0.01 0.01 0.01

Total debt/equity 0.14 0.18 0.03 0.04 0.04

Fixed assets turnover ratio 4.31 4.84 4.67 4.50 4.24

Liquidity ratios

Current ratio 1.03 1.40 0.94 1.05 0.88

Quick ratio 0.67 0.98 0.57 0.63 0.52

Inventory turnover ratio 11.31 10.94 12.52 13.44 14.44

Dividend (From Jan 2000 to June 2010)

Year Month Dividend (%)

2010 Oct -

2010 Jun 125

2009 Oct 75

2009 Apr 100

2009 Jan 75

2008 Apr 75

2007 Oct 75

2007 Mar 75

2006 Oct -

2006 Apr 100

2005 Sep 150

2005 Apr 150

2004 Oct 100

2004 May 140

2003 Oct 60

2003 May 90

2002 Oct 50

2002 Jun -

2001 Nov 50

Year Month Dividend (%)

2001 Jul 50

2001 Apr 100

2000 Apr 50

2000 Jan 50

Year Jan

Inflation Rate

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25          2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.972008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

The inflation rate is the percentage by which prices of goods and services rise beyond their average

levels. It is the rate by which the purchasing   power  of the people in a particular geography has

declined in a specified period. The rate of inflation may be calculated weekly, monthly or annually.

However, it is always expressed as an annualized figure.

Category

Hair Care

Oral Care

Skin Care

Ayurvedic Tonics

Digestives

Fruit Juices

Honey

Glucose

Presence in FMCG Industry

Position Market Share

3

12%

3

13%

3

7%

1

63%

1

55%

1

52%

1

50%

2

24%

Key Brands

Dabur Amla hair Oil, Vatika hair oil & Vatika Shampoos

Red toothpaste, Babool, Meswak, Redtoothpowder

Dabur Gulabari, Fem, Dabur Uveda

Dabur Chyawanprash

Hajmola

Real Fruit Juices, Real Activ

Dabur Honey

Dabur Glucos

TECHNICAL ANALYSIS

“Technical analysis refers to the study of market generated data like prices &

volume to determine the future direction of prices movements.”

Technical analysis mainly seeks to predict the short term price travels. It is

important criteria for selecting the company to invest. It also provides the

base for decision-making in investment. The one of the most frequently used

yardstick to check & analyze underlying price progress. For that matter a

verity of tools was consider.

This Technical analysis is helpful to general investor in many ways. It

provides important & vital information regarding the current price position of

the company.

Technical analysis involves the use of various methods for charting,

calculating & interpreting graph & chart to assess the performances & status

of the price. It is the tool of financial analysis, which not only studies but also

reflecting the numerical & graphical relationship between the important

financial factors.

Usually the following tools & instruments are used to do

the technical analysis:

Price Fields

Technical analysis is based almost entirely on the analysis of price and

volume. The fields which define a security's price and volume are explained

below.

Open - This is the price of the first trade for the period (e.g., the first trade of

the day). When analyzing daily data, the Open is especially important as it is

the consensus price after all interested parties were able to "sleep on it."

High - This is the highest price that the security traded during the period. It is

the point at which there were more sellers than buyers (i.e., there are always

sellers willing to sell at higher prices, but the High represents the highest

price buyers were willing to pay).

Low - This is the lowest price that the security traded during the period. It is

the point at which there were more buyers than sellers (i.e., there are always

buyers willing to buy at lower prices, but the Low represents the lowest price

sellers were willing to accept).

Close - This is the last price that the security traded during the period. Due to

its availability, the Close is the most often used price for analysis. The

relationship between the Open (the first price) and the Close (the last price)

are considered significant by most technicians. This relationship is

emphasized in candlestick charts.

Volume - This is the number of shares (or contracts) that were traded during

the period. The relationship between prices and volume (e.g., increasing

prices accompanied with increasing volume) is important.

Open Interest - This is the total number of outstanding contracts (i.e., those

that have not been exercised, closed, or expired) of a future or option. Open

interest is often used as an indicator.

For Three months

The technical chart above is being drawn by taking the monthly closing prices of the share price of Dabur India ltd. The closing values of each day have been compared by taking the time period of 3 months.

From June to the end of August, there are normal fluctuations in the value of the share of Dabur India ltd. But the technical analysis shows a sudden downfall in the value of the share, especially in the month of September. This fall shows the large withdrawal of money by institutional investors.

For Six months

Now the analysis is done for the period of 6 months. Major inferences drawn from the analysis are:1. In the above analysis we have observed that the price of the share

suddenly fell down in September to Rs.100 & even below that, but here we can see that the share has gained the momentum pretty quickly.

2. Sharp rise can be observed from February to March.

3. Then a sharp fall is registered in between March & April.

4. Then the prices have been continuously increasing despite of normal fluctuations till the month of may

For One year

Now the period of analysis is 1 year & major inferences drawn are as follows:The biggest inference we can draw is that again in the month nearby September, the price of the share has fallen drastically. We observed a major fall in the price of share of Dabur in the month of September last year, i.e, 2009 & now again in the month of September in 2010 the share price has fallen down to almost same level, i.e, 100 approx.