Project Report on Dabur Company Essay

Declaration By CandidateI wish to state that the treat embodied in this project tit guide fiscal Modeling Of Dabur forms my own contribution to management carried disc over at Vivekanand Education Societys Institute Of Management Studies & investigate Chembur, Mumbai low the guidance of Mr.DheerajVaidya, Director, Corpo pose nosepiece Consultancy Pvt. Ltd. Wherever references commence been made to intellectual properties of any individuals/ institute/ government/ private/ public bodies/ universities, explore paper, text books, reference books, archives of newspapers, corporate, individuals, and any other source of intellectual properties viz., speeches, quotations, conference proceedings, extr passages from the websites etc they puddle been distinctly indicated, duly acknowledge and included in the Bibliography.Signature of the candidateAcknowledgmentI would the homogeneouss of to designate my profound gratitude to all(prenominal) told those who down been instrumental in the preparation of my project report. On the onset, I would like to thank the organization Corporate tie Consultancy Pvt.Ltd. for providing me the opportwholey to under issuing this summer internship and allowing me to explore the argona of military rank and pecuniary mannequin, which was sterilisely new for me and which would prove step forward to be very beneficial in my succeeding(a) assignments, studies and c arer. I wish to place on records, my deep sense of gratitude for my project guide, Mr.DheerajVaidya, director of corporate pair consultancy pvt. Ltd. for continuous guidance and encouragement grantd to me throughout my internship period.Table Of Con tentsSR. NO. CONTENTS rascal NO.1 Executive Summary 2 close to Corporate bridge 3 verifiable Of Study 4 5 Industry Profile 6 order Profile Introduction Of Financial Modeling 7 Micro-Economical Factors 8 Understanding The Financial Statements 9 Research Methodology 10 Observations 11 Suggestions 12 Concl usion 13 Appendix 14 Bibliography 15 16 17 18 19 20 EXECUTIVE SUMMARYIndian economy is the fastest growing economy in the world. Indian companies are growing at faster rate in terms of gross, elaboration and global existence. collect to significant evolution shareholders are benefitted by inviolable dividend and re liberate on investments in share mart. In the last decade equity has get outn the best return and still the increment phase is continued. provided retail investor has withal lost his hard earned money imputable to lack of knowledge and knowingness of the equity commercializeplace. Without knowledge in equity market and trading on tips it become gambling instead of smart investment.Here the role of financial modeling and rating of securities begins to find out the intrinsic nurse of the stock, whether it is over surveyd or undervalued. Based on the research findings equity psychoanalyst recommends whether to buy, sell or hold the stock. In this report I have explained Financial Modeling of Dabur Company. This report begins with the understanding the present micro and macro- frugal insure and how they affect the gain of the country. It discusses the present economic indicators and expect harvest-home of India and FMCG manufacture in the time to come. The report and analyse financial controls of the Dabur Company. By victimization historical data and qualification some assumptions, calculations future dough are forecasted. After that using DCF military rating we find out intrinsic value and Relative valuation used to compare Dabur with his peers.Hence, this report is an attempt to comprehensively study of Financial Modeling And military rating Of Dabur Company.About Corporate BridgeCorporate Bridge Group is formed by graduates from leading institutes (IITs, IIMs & AIM). Corporate Bridge as the name suggest, helps in bridging the gap between the aspiring entrant and the corporate world. Corporate Bridge is globally a cknowledge training unfaltering, providing blend of instructor-led and online financial training programs along with e-learning services. With Corporate Bridges entrepreneurial spirit coupled with unparalleled experience (CLSA India, KPMG, YES Bank, JPMorgan, SBI Capital foodstuffs, CRISIL etc) and comprehensive capabilities (MBA, CFA, FRM, CAs) a stain all industries and personal credit line functions, we commit to deliver a world class professional training and learning services that continues astir(p) knowledge efficiency.Corporate Bridge Group has ii verticals Educorporatebridge and Elearninglabz * EduCorporateBridge deals with Online and Instructor Lead Training Programs in conglomerate financial courses viz. Equity Research, Wealth Management, Technical compendium investiture banking, Private Equity, Fundamental psycho digest, Investment Research, Credit Research etc and preparatory courses like CFA Level I & II and FRM Level I & II, Campus position Trainings Elearn inglabz solution portfolio consists of custom e-content suppuration for training and learning brings in collaboration with our clients and subject field specialist, custom Learning Management System (LMS) suite, Test & Assessment solutions.Industry OverviewThe Indian FMCG sphere is the fourth largest in the Indian economy and has a market size of $13.1 billion. This industry primarily includes the mathematical product, diffusion and selling of consumer package goods, that is those categories of products which are consumed at regular intervals. The sector is growing at rapid pace with well-established distribution nedeucerks and intense contest between the nonionic and un nonionized components. It has a strong and belligerent MNC presence crosswise the entire value chain. The FMCGs promising market includes shopping mall class and the boorish segments of theIndian macrocosm, and give dirt makers the luck to convert them to fall guyed products. It includes food an d beverage, personal care, pharmaceuticals, plastic goods, paper and stationery and sign of the zodiac products etc.India, Asias third largest economy, saw urban consumers spend less in calendar year 2012 due to high ostentation, muted salary hikes, and slowing economic harvest-time that affected both legitimate wages and sen datent. During 2012, the overall slowdown in the economy has begun to affect the FMCG sector with companies posting deceleration in pile growth in the re cent quarterly results. Discretionary spending has been hit severely due to the ongoing slowdown. The prevailing high inflation level is also a cause of concern for the sector. The trends seen in 2012 are credibly to accelerate in 2013. Growth impart come from rude dwellers that are expected to see a rise in disposable incomes due to the direct property transfer scheme, tour urban consumers will continue to be affected by the macroeconomic environment.The consumer products industry has been growing at a brisk pace in the past few years backed by healthy economic growth and rising artless income. Growth drivers much(prenominal)(prenominal) as premiumization, rapid urbanization, evolving consumer lifestyles and emergence of innovational trade have shielded the industry from the slowdown.The consumer products or the Fast Moving Consumer goods (FMCG) sector is valued at Rs 1.6 trillion (Source Nielsen). The industry is urban-centric with 66% share of the goods being consumed by urban India. Metropolitan cities & small towns (population of 1-10 lakh) have been driving the FMCG uptake in urban India since 2002. In event middle India, comprising of the small towns and consuming 20% of overall FMCG gross tax, has been growing the fastest across agricultural and urban segments. As per Nielsen, the FMCG market size of middle India is set to expand from Rs 287 bn in 2010 to over Rs 4 trillion by 2026. coarse India, where 70% of the population resides but only 34% consume FMCG g oods, presents the biggest market potential for the industry. Backed by low unit packs and aggressive distribution glide by, clownish market size has expanded four times to Rs 564 bn since 2002. Companies much(prenominal)as Hindustan Unilever and Dabur which derive nearly half their sales from rural India have been incr go their reach.FMCG goods are retailed through two primary sales channels General Trade and Modern Trade. General Trade comprising of the ubiquitous kirana stores is the largest sales channel forming 95% of overall retail sales. nonwithstanding, growth of consumer goods retailed through Modern Trade channel is outpacing the growth of FMCG products in General Trade. Factors such as a comfortable and modern store experience, access to a wide variety of categories and brands under a ace roof and compelling value-for-money deals are attracting consumers to organized retail in a big way.solely modern trade is still an urban phenomenon with 17 tell metros contribut ing to 73% of overall modern trade in India. Product categories such as packaged rice, liquid toilet soaps, floor cleaners, breakfast cereals, air fresheners & mosquito repellent equipment have a higher sharpness in modern trade channel. Despite the congenatorly new performance of private label products in India, it is already close to 7% of modern trade sales. Modern Trade is expected to gain greater importance with opening up of contrasted direct investment in multi-brand retail.The implementation of the Goods and Services measure (GST) is expected to benefit the sector immensely by reducing the overall incidence of taxation. GST aims to contract the cascading frame by replacing a multitude of indirect taxes such as central excise, service tax, ad valorem tax and inter-state sales tax with a single GST rate. Moreover, FMCG companies will be able to optimize logistics and distribution be in the GST era. The resulting cost savings by the companies can be passed on to the fi nal consumer thereby encouragementing demand. However the implementation of GST has up-to-dately been put on the backburner by the government.FMCG Industry size (India)* Of the entire FMCG sector, Food is 52%, Non-Food at 45% and OTC 3% * Growth being driven by increasing intake led by rise in incomes, changing lifestyles and favourable demographics. * FMCG industry expectedto grow in mid to high teens going ahead. * In the last decade the FMCG sector has grown at an intermediate of 11% a year in the last five years, yearly growth accelerated to 17%. * FMCGs are slowly and gradually positioning and deeply pe enlightenrating in the fast growing rural market. The Rural mind set is open to consumption of newer, to a greater extent contemporary food categories and as a result, drive consistent growth. FMCG industry to be Rs.4000-6000 billion industry by 2020. * Indian rural market currently worth US$ 9 bn is expected to become a US$ speed of light bn opportunity by 2025. * By 2025 , total consumption is believably to quadruple making India the 5th largest consumer market.* The FMCG sector in India continues on a strong growth path with both urban and rural India contributing to its growth. Rural India contributes one third of FMCG sales in India. * Growth driven by increasing consumption led by rise in incomes, changing lifestyles and favourable demographics. * Rural India accounts for more than 700 Million consumers or 70% of the Indian population andaccounts for 40% of the total FMCG market. * The Rural market is a large market situation with very low organized player penetration. Across the globe, the Indian rural market is probably the single largest unit of opportunity also with changing lifestyle and increasing consumer demand, the Indian FMCG market is expected to cross $80 billion by 2026 in towns with population of up to 10 lakhs. * The sector has a abominable opportunity for growth in India, with the growing population, the rising incomes, educat ion and urbanization, the advent of modern retail, and a consumption driven society.Source credit suisse* According to credit suisse report, FMCG growth was 14% in the rural market and 16% in the urban market during the quarter ended December 2011 for the quarter ended frame 2013, while growth in the urban market improved to 17%, it rose even higher, to 18%, in the rural market.Industry Classification and Performance tether well-identified sets of players operate deep down a super developed and intenselycompetitive landscape of the Indian FMCG market. 1. Foreign players who are present through their subsidiaries such as Unilever, P&G, Nestle and PepsiCo2. rugged Indian players with established national presence such as Marico, Dabur and Godrej Consumer Products.3. Regional or small domestic players, such as Ajanta, Anchor, CavinKare etc., who are presentin a few regions of the country apart from these, there are regional and small-scale FMCG players such as small teaproducers and organic food producers, who mainly repugn by offering low- damaged products withsimilar looks or packaging compared to the bigger brands, to the right consumers typically brutald in rural cranial orbits or in small towns. These players with lower corporate overheads andclear focus on specific consumer requirements have a competitive edge over larger FMCG players.Growth DriversGovernment Policies and Regulatory Framework* Investment Approval self-locking investment approval up to nose candy per cent foreign equity forNRI and abroad corporate bodies. These investments are allowed in food dish upingsegments such as coffee and tea. * FDI in organized retail India currently allows 100 per cent FDI in Cash & Carry segment and51% in single-brand retail, which is expected to be further change magnitude to 100%. India is also expected to allow 51% FDI in multi-brand retail, which will boost the nascent organized retail market in the country.* Priority Sector The Government of Indi a recognizes food processing and agro industries aspriority sectors. * Relaxation of attest rules Industrial licenses are not required for almost all food and agro-processing industries, barring veritable items such as beer, potable alcohol and wines, cane sugar, and hydrogenated animal fats and oils as well as items reserved for exclusive manufacturing in the small-scale sector. * statutory Minimum price In October 2009, the government amended the Sugarcane ControlOrder, 1966, and replaced the Statutory Minimum Price (SMP) ofsugarcane with Fair andRemunerative Price (FRP) and the State- Advised Price (SAP).Opportunities in the FMCG Sectorsurgical incision Overview department Overview Household Care* The detergents segment dominates the household care segment and has been growing at an yearly growth rate of 10- 11% in the past five years.* The Household care segment is plagued by intense competition and high level of penetration. With rapid urbanization, emergence of small pack sizes and sachets is picking up * Local and unorganized players account for a major share of the total volume ofthe detergent market.Segment Overview Personal CareLocal and unorganised players account for a major share of the total volume ofthe detergent marketThe detergent segment dominates the household care segment and has been growing at an annual growth rate of 10-11% in the past five years.The Household care segment is plaguedby intense competition and high level ofpenetration. With rapid urbanization,emergence of small pack sizes andsachets is picking up.Segment Overview Food and BeveragesThe Food and Beverages segment comprises of the food processingindustry,health beverage industry, breadand biscuits, chocolates & confectionery,Mineral Water and ice creams. The trey largest consumed categories ofpackaged foods are packed tea biscuitsand soft drinks. The Indian hot beverage market is dominate by tea and the major share ofthe tea market is dominated byunorganized players.Dab ur India extra overview* Established in 1884 more than 127 years of Trust & Excellence * Among top 4 FMCG companies in India* Worlds largest in Ayurveda and natural healthcare* Revenue of r US$1 cardinal (Rs 5,283 Crore) and MarketCapitalisation of US$4 Billion (Rs 20,000 Crore)* Wide distribution network covering 3.4 zillion retailers across the country * 23 world class manufacturing plants catering to needs of diverse markets * Strong overseas presence with 30% contribution to consolidated sales * Dabur India is also a world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. * Headquarters KaushambiGhaziabad 201010Uttar Pradesh, India* Top management Dr. AnandBurman (Chairman)Mr.AmitBurman (Vice-Chairman)Mr. Sunil Duggal (CEO)* Employees approximately 3000Key players at FMCGCompany Key categoriesHindustan Unilever Ltd Soaps, Detergents, Personal Care, Foods Nestle India Ltd Food, Beverages, Infant NutritionDabur India Ltd Personal, wellness &Homecare, FoodsGodrej Consumer tomentum cerebri Care, SoapsColgate Palmolive Ltd Oral Care & ToiletriesGlaxoSmithkline Consumer Consumer Health CareMarico Ltd. Hair care, Food, SkincareProcter & Gamble Feminine Hygiene personal careBritannia Industries Ltd BiscuitsPEST AnalysisPolitical* Stable political government.* Restrictions in import policies.* Rise in customs duty on petrol & diesel.* Partial withdrawal of stimulus packagesEconomical* splashiness rate* Decreased GDP* join on in disposable income.* Indian FMCG Recorded 16% Sales Growth in last fiscal. The FMCG sector is the4thlargest sector of Indian economy with market size of more than 60,000croreSocial* Rising rural India.* Consumerism.* human ecologyTechnological* Research and development intensity* Information technologyCOMPETITOR ANALYSISThe find competitors are KeoKarpin, Emami, Bajaj, Marico, HLL which together with Dabur have some 64% of Indias domestic market. Emami HimaniNavratan oil and Himani Oil. Emami has taken Madh uri Dixit as brand ambassador for emami oil and Amitabh Bachchan for Himami Navratan Oil. Overall it has a share of 4% in hair oil market. Bajaj Bajaj Brahmi Amla and Bajaj sweet almond Drops currently have a value share of 19 per cent and 12 per cent in their respective oil categories as per ORG-Marg. Besides, the partnership has also decided to enhance its retail presence by nearly 20 per cent from the existing 5 lakh retail outlets in an attempt to reach the rural parts.Maricos Parachute is premium edible grade oil, amarket leader in its category. synonymic with pure coconut oil in the market, Parachute is positioned on the platform of purity. In fact over time it has become the atomic number 79 standard for purity. Parachutes primary target has been women of all ages. The brand has a huge loyalty, not only in the urban sections of India but also in the rural sector. It has a market share of 28%. HUL It has two products, Clinic plus Hair Oil and either view Clinic Hair Oil. Overall it has a 3%share in hair oil market. The key competitors of Dabur in the Chyawanprash segment are Baidyanath, Zandu andHimani, which together with Dabur have almost 85% of Indias domestic market. DaburChyawanprash (herbal honey) has a market share of 61%.We have tried to analyse the competition for Dabur in the Chyawanprash segment as follows uprise AnalysisSTRENGTH * Strong presence in well defined niches( like value added Hair Oil and Ayurveda specialties) * Core knowledge of Ayurveda * Strong Brand Image * diffusion Network, Extensive Supply Chain, IT Initiatives and R & D WEAKNESS * Seasonal demand like chyawanprash in winter * High price Vatika * Limited disparateiation in some products like vatika OPPORTUNITIES * Export opportunities * Increasing demand by people * Market development THREATS * Existing competition like Zandu, Himani, Baidyanath * New entrant threats from substitutes like Bryllcream for vatika hair oilDabur Strong Presence in FMCG CategoriesCategory Position Market share Key BrandsHair Care 3 12% DaburAmla hair Oil, Vatika hair oil &Vatika Shampoos Oral Care 3 13% carmine toothpaste, Babool, Meswak, Red toothpowder Skin Care 3 7% DaburGulabari, FemAyurvedicTonics 1 67% DaburChyawanprashDigestives 1 56% Hajmola proceeds Juices 1 52% Real Fruit Juices, Real ActivHoney 1 50% Dabur HoneyGlucose 2 25% Dabur GlucoseSegment wise Market share of Dabur global chore* Focus markets* Egypt* Nigeria* Turkey* Bangladesh* Nepal* U.S.* leverage the Natural preference among local consumers to increase share in personal care categories * High level of localization of manufacturing and sales and marketing * Sustained investments in brand building and marketingDomestic FMCG companies such as Godrej Consumer Products (GCPL), Marico and Dabur have grown at a robust pace of 20% second-rate annual growth over the last five years. In a bid to expand their businesses further, these companies acquired several foreign brands and companies. Consequently , the share of the multinational sales to their total revenue has increased. The chart of the day shows that between FY06 and FY12, the contribution of international sales has increased substantially for most FMCG companies. However, the benefit at the top line has failed to percolate at the bottom line.Sometimes, acquired brands take a long time to break-even. Hair-styling brand Code 10 acquired by Marico in 2010 and Daburs Namaste erudition in 2011 continue to remain in red. However, GCPL has seen reasonable success with several acquisitions such as Megasari in Indonesia, Darling Group in Africa and Cosmetica National. This may be on account of the fact that GCPL has focused on product acquisitions in which it has a strong core presence. Growth StrategyThree Growth Strategies removeInnovateExpandExpand* Strengthenceing presence in existing categories and markets as well entering new geographies * Maintain dominant share in categories where we are category builders like Health Su pplements, Honey etc. and expand market shares in other categories * Calibrated international expansion local manufacturing pp y y g and supply chain to enhance flexibility/ reduce chemical reaction time to change in market demands Innovate* Strong focus on innovation. Have turn over out new variants & products which have contributed to around 5-6% of our growth p.a. * Renovation of existing products to respond to changing demands (Toothpowder to Toothpaste) Acquire* acquirements critical for building scale in existing categories & markets * Should be synergistic and make a good strategic fit* Target opportunities in our focus markets scholarships of Hobi Group, Turkey* Acquisition of Hobi Group, Turkey for a total consideration of US$ 69 Million completed on October 7, 2010 * Hobi manufactures and markets hair, skin and body care products under the brands Hobby and New Era * Product range of the association is complementary to our product range * Acquisition provides an entry i nto another attractive uphill market and a good platform to leverage this across the regionAcquisitions of Namaste Laboratories* Dabur India Limited through its subsidiary Dabur outside(a) Limited acquired 100% stake in Namaste Laboratories LLC for $100 one million million million, in an all- gold deal on January 1, 2011 * Namaste is a leading ethnic hair care products participation, having products for women of colour, with revenues of $95 million from US, Europe, Middle East and African markets * The phoner markets a portfolio of hair care products under the brand innate Root Stimulator and has a strong presence in ethnic hair care market for women of colour. * Acquisition to enable entry into Ethnic Hair Care products market valued at more than US$1.5 billion and tap into significant market opportunity in the fast growing * At an acquisition price of $100 million, the deal value is at 1.1x Sales and 8.3x EBITDAPorters Industry AnalysisSupply verdant supply through a distrib ution network of over 8 m stores across the country. Distribution networks are being beefed up to penetrate the rural areas. HUL has tripled rural network in 2011 and Dabur wants to double rural reach by FY13. Demand Being items of daily consumption, demand is least impacted by economic slowdown. Barriers to entry Huge investments in setting up distribution networks and promoting brands and competition from established companies. Bargaining force of suppliers Inputs being more lots than not agri-commodities, the suppliers are numerous and lack scale to wield bargaining power.Companies like ITC that are integrated backwards have lower dependence on suppliers. Bargaining power of customers Customer does not have bargaining power in case of branded products but intense competition within the FMCG companies results in value for money deals for consumers. Competition Competition is faced from domestic unorganized players and established MNCs. Price wars are a common phenomenon. Priv ate labels offered by retailers at a discount to mainframe brands act as competition to un diametricaliated and weak brands.Financial year 2013-2014 With consumer spending remaining healthy, value growth in FMCG sales were over 18% in 2012-13 (Source Nielsen). All the frontline FMCG companies registered double-digit sales growth during the year. Companies like Dabur, Godrej Consumer Products and Marico affix over 25% topline growth aided by brisk rise in overseas revenues. The rural markets continued to lead demand in personal care and oral care products. According to Nielsens data, rural sales in washing powder, hair oil and shampoo each contributed more than a third of the overall category sales in FY2012-13. Sales growth in rural markets surpassed that in urban markets in more than 50% of the FMCG categories.Nielsen has projected the size of the rural market to grow ten folds to $ 100 bn by 2025. In FY2012-13, margins of FMCG companies were hit by unprecedented increase in price of sodding(a) and other commodities. As crude price spiralled above $100 a barrel, price of input crude-derivatives, ecstasy/freight and packaging costs increased sharply. Advertisement and promotional spends remained high on account of heightened competitive activity. The companies effected judicious price increases and also reduced the packet sizes and stock- sustainmenting units (SKUs). Hence the growth seen by FMCG companies was mostly volume led. The drop-off in surcharge from 7.5% to 5% and hike in the base MAT unplowed effective tax rates unchanged during the year.Prospects Household spending on FMCG goods has not witnessed any cart so far. alone going forward, a deficient monsoon is likely to impact farm income and thereby rural spending in the short term. Even in urban India, discretionary spending can get impacted by lower salary hikes and food inflation re-surfacing on poor rainfall. This is more likely to result in down-trading by consumers. FMCG companies have been reaping the benefit of waning inflation and series of price-hikes taken earlier. But with the New Standard Packaging rules coming into effect in November 2012, the companies will no longer be able to hold prices by reducing the grammage sold. High base-effect in price levels and fears of hurting demand is likely to prevent companies from raising prices substantially.Apart from absorbing higher input costs, FMCG companies may have to bear expenses to exploit theirproducts in line with the new packaging rules. Additionally, even rising competition is expected to keep brand investments by companies high through increased ad-spends and promotional expenses. Therefore, profitability of FMCG companies may witness short-term pain. But long term demand potential of FMCG goods remains robust. According to International Labour Organisation, India will have the highest working age population in the world by 2020. The National Council of Applied Economic Research projects the propo rtion of middle class population to swell from 13.1% at present to 37.2% by 2025-26. Increase in working-age population and rising middle class will translate into higher purchasing power & boost consumerism. Higher penetration and evolution in consumption pattern will drive rural demand. The FMCG sector is expected to reach market size of $ 74 bn by 2018 (Source FICCI).Introduction Of Financial ModelingFinancial modeling refers to the process through which a company builds up a financial representation of some, or even all aspects of the company or the given security. The financial model is generally featured by performing calculations, and making recommendations on the rump of that information. Moreover, the model might also prcis specific events for the end user in addition to providing direction regarding possible alternatives or actions.Theoretically, a financial model is a set of assumptions about future business conditions that drive projections of a companys revenue, earnin gs, interchange run fors and symmetry sheet accounts.In practice, a financial model is a spreadsheet (normally in Microsofts Excel software) that analysts use to forecast a companys future financial performance. Properly projecting earnings and cash plays into the future is chief(prenominal) since the intrinsic value of a stock depends largely on the outlook for financial performance of the return company.A financial model spreadsheet ordinarily looks like a table of financial data organized into fiscal quarters and/or years. Each column of the table represents the relief sheet, income rumor and cash melt down statement of afuture quarter or year. The rows of the table represent all the line items of the companys financial statements, such as revenue, expenses, share count, capital expenditures and balance sheet accounts. Like financial statements, one generally reads the model from the top to the bottom, or revenue through earnings and cash flows. memoir as a Guide When trying to divine the future, a good place to start is the past. Therefore, a good first step in building a model is to fully analyze a set of historical financial data and link projections to the historical data as a base for the model. If a company has generated gross margins in the 40% to 45% range for the past ten years, then it might be acceptable to assume that, with other things being equal, a margin of this level is sustainable into the future.Consequently, the historical track record of gross margin can become somewhat of a basis for a future income projection. Analysts are always smart to examine and analyze historical trends in revenue growth, expenses, capital expenditures and other financial metrics before attempting to project financial results into the future. For this reason, financial model spreadsheets usually incorporate a set of historical financial data and related analytical measures from which analysts derive assumptions and projections.Macro-economical Factor s 1. Mid-Quarter fiscal Policy Review June 2013Monetary and Liquidity MeasuresOn the basis of an assessment of the current macroeconomic situation, RBI has been decided to * keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of their net demand and time liabilities and * keep the policy repo rate under the runniness adjustment facility (LAF) unchanged at 7.25 per cent.Consequently, the work repo rate under the LAF will remain unchanged at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.25 per cent.2. The above monetary policy stance has been informed by the evolving growth-inflation dynamic, the balance of risks as well as recent developments in the external sector.3. Since the Reserve Banks yearbook Policy statement in May, global economic activity has slowed and risks remain elevated, most recently on account of uncertainty over policies of systemic central banks.On the domestic front, macroeconomic conditions rem ain weak, hamstrung by infrastructure bottlenecks, supply constraints, lacklustre domestic demand and subdued investment sentiment. Inflation hasmoderated as projected. However, height pressures on the way forward from the pass-through of rupee depreciation, recent increases in administered prices and persisting imbalances, especially relating to food, pose risks of second-round effects. As recent experience has shown, shifts in global market sentiment can trigger sudden preventative and reversal of capital from a broad swath of emerging economies, swiftly amplifying risks to the outlook. India is not an exception.Global Economy4. Global growth has been patchy and uneven. Among advanced economies (AEs), during Q1 of 2013, growth in US and Japan improved while that in the euro area contracted. Growth in most emerging and developing economies (EDEs) has been relatively resilient, although in some large emerging economies, sluggish external demand and stalled domestic investment are dragging down economic activity. Inflation has been easing in the AEs due to weak demand conditions. EDEs, however, present a mixed picture inflation remains elevated in the BRICS except China. Commodity prices, other than the price of crude, have generally dim in recent months.Domestic EconomyGrowth In May, the Central Statistics Office (CSO) reported Indias GDP growth in Q4 of 2012-13 of 4.8 per cent, a marginal improvement over the previous quarter. During the current financial year, the growth of industrial production decelerated to 2.3 per cent in April after picking up in the preceding month.All constituent categories of industry have slowed, with a persistent contraction in mining activity. The sharp weakening in the growth of capital goods production points to still damped investment demand whereas a pick-up in consumer non-durables could be indicative of a fragile return of consumer confidence. On the other hand, the services sector purchasing managers index rose in May on order flows. The onset of the south-west monsoon has been strong and on time.InflationHeadline WPI inflation eased for three months in succession with the May reading at 4.7 per cent, down from an average of 7.4 per cent in 2012-13. All constituent categories, barring food, have moderated. In the fuel category, coal and mineral oil prices declined, partly offsetting the upward(a) revision in administered prices of electricity. Non-food manufactured products inflation too ebbed, driven by metal prices which fell for the eighth successive month in response to softening of global prices. Still elevated food inflation, curiously in respect of cereals and vegetables, sustained upside pressures on overallinflation. Retail inflation, as measured by the new combined (rural and urban) CPI, edged down from an average of 10.2 per cent last fiscal year to 9.3 per cent in May.Liquidity Conditions Net average daily borrowings under the LAF have declined gradually, from 1.2 trillion in March 2 013 to 0.7 trillion in June 2013 so far (up to June 14) reflecting the sizable injection of primary liquidity through the reduction in the cash reserve ratio (CRR) in January, open market operations (OMO) purchases during Q4 of 2012-13, a significant reduction in the governments cash balances with the Reserve Bank as well as two OMOs of 0.2 trillion in the current financial year so far.External Factors The most significant development in the external sector has been the movement in the exchange rate. The rupee depreciated by 5.8 per cent against the US dollar during the current financial year up to June 14. It fell by 6.6 per cent during May 22-June 11 due to sell-off by foreign institutional investors, reflecting risk-off sentiment triggered by apprehensions of possible tapering off of numerical easing by the US Fed. While the trade shortfall has widened sharply due to a rushing in festival-related/seasonal gold imports, available evidence suggests that a moderation in gold imp orts could be underway in June. Capital flows, which met the external financing requirement during April-May, moderated in June.Outlook At the global level, the International Monetary Fund (IMF) has warned of non-trivial risks of the global economy encountering a soft patch in the months ahead. On the domestic front, last years robust rabi production and the monsoon performance so far augur well for growth prospects. The spatial and temporal distribution of rainfall over the next three months will be crucial in find out the performance of agriculture. The continuing weakness in manufacturing activity needs to be urgently reversed. Key to reinvigorating growth is accelerating investment by creating a conducive environment for private investment, astir(p) project clearance and implementation and leveraging on the crowding-in role of public investment. On the inflation front, easing commodity prices at the global level and weaker pricing power of corporates at the domestic level are having a softening influence. Given that food inflation remains high, the inflation outlook will be influenced by concerted efforts to break food inflation persistence.The inflation outlook going forward will be determined by suppressed inflation being released through revisions inadministered prices, including the minimum erect prices (MSP) as well as the recent depreciation of the rupee. Softer global commodity prices and recent measures to dampen gold imports are expected to moderate the CAD in 2013-14 from its level last year. The main challenge is to reduce the CAD to a sustainable level the near-term challenge is to finance it through stable flows. The most recent number on the Centres fiscal deficit, at 4.9 per cent of GDP for 2012-13, has turned out better than expected and instils confidence in the Governments inscription to contain the fiscal deficit for 2013-14 at 4.8 per cent. Perseverance with this consolidation should help in mitigating the twin deficit risks to the outlook. These positive developments, which have been acknowledged by international credit rating agencies, should have a favourable impact on investor confidence.Current grudge Deficit (CAD) woes The Reserve Bank of India (RBI) in its monetary policy cut the cash-reserve ratio (CRR) and repo rates by 25 basis points (0.25%). But at the same time it made very clear the respective(a) risks that the Indian economy faces. While inflation is certainly one of the key risks, the other equally bedevilment factor is the current account deficit (CAD). Indeed, in the above chart shows, CAD (as a % of GDP) has been unceasingly increasing over five consecutive quarters from July-September 2011 (2QFY12) to July-September 2012 (2QFY13).This is bound to have an adverse impact on the stability of the countrys exchange rate at a time when domestic growth has also been slowing down. What is more, the rise in imports has largely been on account of fuel and gold imports. This is of more worrying to the RBI, than had the high CAD been on account of import of capital goods. Understanding Financial StatementIncome StatementAn income statement (US English) or profit and loss account (UK English) (also referred to as a profit and loss statement (P&L), revenue statement,statement of financial performance, earnings statement, operating(a) statement, or statement of operations) is one of the financial statementsof a company and shows the companys revenuesand expenses during a particular period.It indicates how the revenues (money received from the sale of products and services before expenses are taken out, also known as the top line) are transformed into the net income(the result after all revenues and expenses have been accounted for, also known as net profit or the bottom line). It displays the revenues recognized for a specific period, andthe costand expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes.The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time.Balance SheetIn financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, abusiness partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and self-will equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a companys financial condition. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business calendar year.A standard company balance sheet has three parts assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity.Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assetsor the net worth or capital of the company and according to the accounting equation, net worth mustiness equal assets minus liabilities.Another way to look at the same equation is that assets equal liabilities plus owners equity. Looking at the equation in this way shows how assets were financed either by borrowing money (liability) or by using the owners money (owners equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections equilibrate.Cash Flow StatementIn financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statementthat shows how changes inbalance sheetaccounts and income affect cash and cash equivalents, and breaks the summary down to operating, investing, and financing activities.Essentially, the cash flow statement is concerned with the flow of cash in and out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company,particularly its ability to pay bills. International Accounting Standard 7 (IAS 7), is the International Accounting Standardthat deals with cash flow statements.People and groups interested in cash flow statements include * Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses * potency lendersor creditors, who want a clear picture of a companys ability to repay * authorization investors, who need to judge whether the company is financially sound * Potential employees or contractors, who need to know whether the company will be able to afford compensation * Shareholders of the business.The cash flow statement is intended to 1. provide information on a firms liquidity and solvency and its ability to change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity3. improve the comparability of different firms operating performance by eliminating the effects of different accounting methods4. It indicates the amount, timing and probability of future cash flows.Working CapitalWorking capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital that is commonly used in valuation techniques such as DCFs (Discounted ca sh flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash.Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming in operation(p) expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.Horizontal AnalysisA procedure in fundamental analysis in which an analyst compares ratios or line items in a companys financial statements over a certain period of time. The analyst will use his or her discretion when choosing a particular timeline however, the decision is often based on the investing time horizonunder consideration.Formula,= current year-base yearbase year Vertical AnalysisVertical an alysis of financial statements is a technique in which the relationship between items in the same financial statement is identified by expressing all amounts as a percentage a total amount. This method compares different items to a single item in the same accounting period.The financial statements prepared by using this technique are known as common size financial statements.Trend AnalysisTrend Analysis is the practice of pile up information and attempting to spot a pattern, or trend, in the information. Although trend analysis is often used to predict future events, it could be used to estimate uncertain events in the past, such as how many old-fashioned kings probably ruled between two dates, based on data such as the average years which other known kings reigned.= Current year*100 Base yearDiscounted Cash Flow (DCF) AnalysisIn finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All futur e cash flows are estimated and discounted to give their present determine (PVs)the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question.Present value may also be expressed as a number of years purchase of the future undiscounted annual cash flows expected to arise.Using DCF analysis to suppose the NPV takes as input cash flows and a discount rate and gives as output a price the opposite processtaking cash flows and a price and inferring a discount rate, is called the yield.Discounted cash flow analysis is widely used in investment finance, real estate development, and corporate financial management.What is relative valuation? In relative valuation, the value of an asset is compared to the values assessed by the market for similar or comparable assets. To do relative valuation then, we need to identify comparable assets and obtain market values for these assets convert these ma rket values into standardize values, since the absolute prices cannot be compared This process of standardizing creates price multiples. compare the standardized value or multiple for the asset being analyzed to the standardized values for comparable asset, despotic for any differences between the firms that might affect the multiple, to judge whether the asset is under or over valuedInterpretation of DCF valuation and Relative valuation Review of LiteratureMostly financial modeling of dabur was done before by equity research analyst of various research agencies, mutual funds, investment banks and brokerage house. Generally they have done it quarterly and annually before and after the companys financial results.Justification and apt(predicate) BenefitsWhy financial modelingis important?Financial modeling acts as a useful tool which enables business options and risks to be estimated in a cost-effective way against various assumptions, recognize optimal solutions in estimating fin ancial returns and understand the effect of resource constraints thus leading to more effective business decisions. Financial modeling can be referred as an art and like any other art form, it requires constant practice and commitment to develop expertise in this area.In the present day world, many companies are becoming globally integrated with the international economy through the way of acquiring/establishing international operations. This calls for the requirement of strong financial models which can assist in performing the evaluation of every countrys operations, reflect on multiple currencies in their model, estimate varying capacity utilizations to estimate the optimal capacity under changeable industry demand-supply scenarios and similar more cases.Scope of Financial Modeling?Financial Modelling is a key skill with application in several areas withinbanking and finance industry as well as within corporations. In financialmodelling you learn to gather historical information on companies andanalyze company / industry performance on various financialparameters. This analysis is then used to build a companys financialmodel, which in turn is key to projecting a future financial performance.Based on this model companies investors can arrive at a suitableevaluation for the companies. Financial models are usually made for financing of a project intransactions like uvulopalatopharyngoplasty/PFI, Mergers & Acquisitions, Valuation ofbusinesses etc. across various industries & sectors which includes SolarPlants, Waste Management, Helicopter felt, Oil and Gas, Mining,Energy, Healthcare,Services & Education etc to measure out the viability ofthe project on various parameters.Key Financial of DaburObjectivesTo find out intrinsic value of dabur and take decision regarding investment in Dabur.Plan of Work and MethodologyPrepared a Sector Analysis Report for the FMCG sector Performed Historical Ratio Analysis of Dabur Prepared a Financial Model for Dabur by forecastin g its financials for the next five years (FY13E-FY17E) on the basis of a historical trend analysis and expected performance of the FMCG industry drivers. Estimated a Target Price for the stock of Dabur using a DCF Valuation Model as well as using Relative Valuation by peer comparison. Submitted a final Equity Research Report on Dabur with recommendations.References and Bibliographywww.investopedia.comwww.rbi.org.inwww.moneycontrol.comwww.equitymaster.comwww.bloomberg.comwww.bseindia.comwww.dabur.comwww.wikipedia.orgNielsen FMCG industry report