A

Research Project

On
“A Study on Impact of Capital Structure on Value of A Firm With
Reference to Indian FMCG companies- HUL, Nestle and ITC. A review
of the selected Company’s Current Capital Structure and a
Recommendation on their Optimal Capital Structure”
Submitted to:

Kurukshetra University, Kurukshetra

In the partial fulfillment of the Degree of Master of Business Administration
(Session 2018-20)

Submitted To: Submitted by:

Kurukshetra University Misha
Kurukshetra Univ. Roll No-180175203

SETH JAI PARKASH MUKAND LAL INSTITUTE

OF ENGINEERING AND TECHNOLOGY
(Approved by AICTE, Affiliated to Kurukshetra University, Kurukshetra)

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 DECLARATION

I, Misha, MBA (Semester IV) of the Seth Jai Parkash Mukand Lal Institute of
Engineering And Technology, hereby declared that the research Project entitled “A
Study on Impact of Capital Structure on Value of A Firm With Reference to Indian
FMCG companies- HUL, Nestle and ITC. A review of the selected Company’s
Current Capital Structure and a Recommendation on their Optimal Capital
Structure” prepared by me and submitted in partial fulfillment of the requirement for the
degree of Master of Business Administration from Kurukshetra University.

This work done by me and the information provided in the study is authentic to the best
of any knowledge. This study has not been submitted to any other instruction or
university for the award of any other degree.

(Misha)

2
 SETH JAI PARKASH MUKAND LAL INSTITUTE OF
ENGINEERING & TECHNOLOGY
A SELF FINANCED ISO 9001:2008 CERTIFIED INSTITUTE

(APPROVED BY AICTE& AFFILIATED TO KURUKSHETRA UNIVERSITY,

KURUKSHETRA)

(CHHOTA BAANS), RADAUR – 135133 (YAMUNANAGAR)

// TO WHOM SO EVER IT MAY CONCERN//

This is to certify that Misha S/o Mr. bearing Roll No. …………………..
University Registration No. and class Roll No.180175203 a bonafide student
of MBA (4th semester), has completed his work on Research Project (CP-402) entitled “A
Study on Impact of Capital Structure on Value of A Firm With Reference to Indian
FMCG companies- HUL, Nestle and ITC. A review of the selected Company’s
Current Capital Structure and a Recommendation on their Optimal Capital
Structure”” under my supervision.
His work is original, satisfactory and fit for the purpose of further evaluation towards the
partial fulfillment for the award to the degree of Master’s Business Administration.

Dr. Vandana Mr. Rahul Sharma

Head (Assistant Professor)
Department of Management Department of Management

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 ACKNOWLEGEMENT

With immense pleasure I acknowledgement my gratitude to all persons whose guidance

have helped me in carrying out this project work.

I take this opportunity to express my profound sense of sincere and deep gratitude to
Mr. Rahul Sharma my mentor his constant supervision and above all extraordinary
encouragement during the entire course of the project.

It is my proud privilege to express my profound gratitude to the Head of Department Dr.

Vandana(H.O.D.) and the entire faculty of department, Seth Jai Prakash Mukand Lal
Institute of Engineering And Technology. The Knowledge and values inculcated have
proved to be of immense help at very start of my career.

I would like to express my gratitude to all my friends for their invaluable support and co-
operation during the course of the project.

Last but not the least I would express my gratitude to all the members of JMIT from
whom I got all the necessary help whenever required.

(Misha)

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 CONTENTS

Sr. No. Particulars Page No.

Declaration
Certificate
Acknowledgement
INTRODUCTION
Chapter – 1 1.1 Introduction the Industry
1.2 Introduction to the Company
1.3 Introduction to the Topic

Chapter – 2 Literature Review

Chapter – 3 Research Methodology

3.1 Objectives
3.2 Research Design
3.3 Data Source
3.4 Limitations of Study

Chapter – 4 Data analysis and Interpretation

Chapter – 5 5.1 Findings of Study

5.2 Suggestions
5.3 Conclusion

Chapter – 6 Annexure
6.1 Bibliography
6.2 Questioners

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INDUSTRY PROFILE

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 INDUSTRY PROFILE
FMCG SECTOR
Fast Moving Consumer Goods (FMCG) goods are all consumable items (other than
groceries/pulses) that one needs to buy at regular intervals. These are items which are
used daily, and so have a quick rate of consumption, and a high return.  FMCG can
broadly be categorized into three segments which are:
1. Household items as soaps, detergents, household accessories, etc,
2. Personal care items as shampoos, toothpaste, shaving products, etc and finally
3. Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft
drinks etc.
Global leaders in the FMCG segment are Nestlé, ITC, Hindustan Unilever Limited,
Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General
Mills, Pepsi, Gillette etc.

Overview
The burgeoning middle class Indian population, as well as the rural sector, present a huge
potential for this sector. The FMCG sector in India is at present, the fourth largest sector
with a total market size in excess of USD 13 billion as of 2012. This sector is expected to
grow to a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the
year 2025.
This sector is characterized by strong MNC presence and a well established distribution
network. In India the easy availability of raw materials as well as cheap labour makes it
an ideal destination for this sector. There is also intense competition between the
organised and unorganised segments and the fight to keep operational costs low.
 
A look at some factors that will drive growth in this sector:
 Increasing rate of urbanization, expected to see major growth in coming years.
 Rise in disposable incomes, resulting in premium brands having faster growth and
deeper penetration.
 Innovative and stronger channels of distribution to the rural segment, leading to
deeper penetration into this segment.
 Increase in rural non-agricultural income and benefits from government welfare
programmes.

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 Investment in stock markets of FMCG companies, which are expected to grow
constantly.
 
Some of the challenges this sector is likely to face are:
 Increasing rate of inflation, which is likely to lead to higher cost of raw materials.
 The standardization of packaging norms that is likely to be implemented by the
Government by Jan 2018 is expected to increase cost of beverages, cereals, edible oil,
detergent, flour, salt, aerated drinks and mineral water.
 Steadily rising fuel costs, leading to increased distribution costs.
 The present slow-down in the economy may lower demand of FMCG products,
particularly in the premium sector, leading to reduced volumes.
 The declining value of rupee against other currencies may reduce margins of
many companies, as Marico, Godrej Consumer Products, Colgate, Dabur, etc who import
raw materials.
 In conclusion:
This sector will continue to see growth as it depends on an ever-increasing internal
market for consumption, and demand for these goods remains more or less constant,
irrespective of recession or inflation. Hence this sector will grow, though it may not be a
smooth growth path, due to the present world-wide economic slowdown, rising inflation
and fall of the rupee.  This sector will see good growth in the long run and hiring will
continue to remain robust.

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COMPANY PROFILE

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 COMPANY PROFILE
Hindustan Unilever

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.

In December 2018, HUL announced its acquisition of Glaxo Smithkline's India business
for $3.8 billion in an all equity merger deal with 1:4.39 ratio. However the integration of
3800 employees of GSK remained uncertain as HUL stated there was no clause for
retention of employees in the deal.  In January 2019, HUL said that it expects to complete
the merger with Glaxo Smith Kline Consumer Healthcare (GSKCH India) this year.

Brands and products

HUL is the market leader in Indian consumer products with presence in over 20 consumer
categories such as soaps, tea, detergents and shampoos amongst others with over 700
million Indian consumers using its products. Sixteen of HUL's brands featured in
the ACNielsen Brand Equity list of 100 Most Trusted Brands Annual Survey (2014),
carried out by Brand Equity, a supplement of The Economic Times.

Food brands:

 Annapurna salt and atta

 Bru coffee
 Brooke Bond (3 Roses, TajMahal, Taaza, Red Label) tea
 Kissan squashes, ketchups, juices and jams
 Lipton tea
 Knorr soups & meal makers and soupy noodles
 Kwality Wall's frozen dessert
 Modern Bread, ready to eat chapattis and other bakery items

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 Magnum (ice cream)

Homecare Brands

 ActiveWheel detergent
 Cif Cream Cleaner
 Comfort fabric softeners
 Domestos disinfectant/toilet cleaner
 Rin detergents and bleach
 Sunlight detergent and colour care
 Surf Excel detergent and gentle wash
 Vim dishwash
 Magic – Water Saver

Personal Care Brands:

 Aviance Beauty Solutions

 Axe deodorant and aftershaving lotion and soap
 LEVER Ayush Therapy ayurvedic health care and personal care products
 Breeze beauty soap
 Clear anti-dandruff hair products
 Clinic Plus shampoo and oil
 Close Up toothpaste
 Dove skin cleansing & hair care range: bar, lotions, creams and anti-perspirant
deodorants
 Denim shaving products
 Fair & Lovely skin-lightening products
 Hamam
 Lakmé beauty products and salons
 Lifebuoy soaps and handwash range
 Liril 2000 soap
 Lux soap, body wash and deodorant
 Pears soap
 Pepsodent toothpaste

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 Pond's talcs and creams
 Rexona soap
 Sunsilk shampoo
 Sure anti-perspirant
 Vaseline petroleum jelly, skin care lotions
 TRESemmé

Water Purifier Brand:

 Pureit Water Purifier

Water purifier brand

Research facilities

The Hindustan Unilever Research Centre (HURC) was set up in 1966 in Mumbai, and
Unilever Research India in Bangalore in 1997. Staff at these centres developed many
innovations in products and manufacturing processes. In 2006, the company's research
facilities were brought together at a single site in Bangalore.

Sustainable living

Unilever launched Sustainable Living Plan in on 15 November 2010 at

London, Rotterdam, New York and New Delhi simultaneously.

Headquarters

Hindustan Unilever's corporate headquarters are located at Andheri (E), Mumbai. The

campus is spread over 12.5 acres of land and houses over 1,600 employees. Some of the
facilities available for the employees include a convenience store, a food court, an
occupational health centre, a gym, a sports & recreation centre and a day care centre. The
Campus is designed by Mumbai-based architecture firm Kapadia Associates.

The campus received a certification from LEED (Leadership in Energy and

Environmental Design) Gold is a 'New Construction' category, by Indian Green Building
Council (IGBC), Hyderabad, under licence from the United States Green Building
Council (USGBC)

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The company's previous headquarters was located at Backbay Reclamation, Mumbai at
the Lever House, where it was housed for more than 46 years.

Controversy
Mercury pollution

In 2001 a thermometer factory in Kodaikanal run by Hindustan Unilever was accused of

dumping glass contaminated with mercury in municipal dumps, or selling it on to scrap
merchants unable to deal with it appropriately.After protest by activists led by Dr Deepak
Malghan of IIM, Bangalore Hindustan Unilever admitted before court to being guilty in
the case in 2010.

Skin lightening creams

Hindustan Unilever's "Fair and Lovely" is the leading skin-lightening cream for women in

India. The company had to cease television advertisements for the product in 2007.
Advertisements depicted depressed, dark-complexioned women, who had been ignored
by employers and men, suddenly finding new boyfriends and glamorous careers after the
cream had lightened their skin. In 2008 Hindustan Unilever made former Miss
WorldPriyanka Chopra a brand ambassador for Pond's, and she then appeared in a mini-
series of television commercials for another skin lightening product, 'White Beauty',
alongside Saif Ali Khan and Neha Dhupia; these advertisements, showing Priyanka's face
with a clearly darker complexion against the visibly fairer Neha Dhupia, were widely
criticised for perpetuating racism and lowering the self-esteem of women and girls
throughout India who were misled by HULN to believe that they needed to be white to be
beautiful.

Triclosan

Several academic papers have pointed out the firm's continued use of
the antibacterial agent Triclosan ('Active B') in India because it is under review by the
American Food and Drug Administration (US FDA).

Kumbh Mela ad

In March 2019 HUL's advertisement for its beverage Brooke Bond Red Label tea was
criticised on social media. A company tweet referred to the Kumbh Mela as a place where

13
elderly people get abandoned by their family members. This resulted in a severe backlash
in the form of an adverse hashtag trending on Twitter '#BoycottHindustanUnilever'.

Awards

The Institute of Competitiveness, India, has recognized Hindustan Unilever Limited’s

Project Shakti for ‘Creating Shared Value’ and bestowed upon the company the Porter
Prize for 2014. It ranked number one on the Forbes list of ‘Most Innovative Companies’
across the globe for 2014 and was ranked number three on Fortune India’s list of India’s
most admired companies in a list compiled with the help of a global management
consultancy Hay Group. It received an award from Dun & Bradstreet Corporate Awards
in 2014. and was Client of the Year at Effies 2013 – 2014. It also received an award as a
'Conscious Capitalist of the Year' at the 2013 Forbes India Leadership Awards. HUL won
12 awards overall with 4 Golds, 4 Silvers and 4 Bronzes at the 2013 Emvies Awards. In
2013, HUL ranked number two on the on Fortune India's 2013 '50 Most Admired
Companies list'. and was declared the fourth most Respected Company in India in a
survey conducted by Business World in 2013.

As per a 2015 Nielsen Campus Track-business school survey, Hindustan Unilever

emerged among the top employers of choice for B-school students graduating that year. It
has often been called a 'Dream Employer' for application by B-School students in India.

In 2012, HUL was recognised as one of the world's most innovative companies by
Forbes. With a ranking of number 6, it was the highest ranked FMCG
company. Hindustan Unilever Limited (HUL) won the first prize at FICCI Water Awards
2012 under the category of 'community initiatives by industry' for Gundar Basin Project,
a water conservationist initiative. Hindustan Unilever Limited won 13 awards at the
Emvies 2012 Media Awards organised by the Advertising Club Bombay in September
2012.

The company received four awards at the Spikes Asia Awards 2012, held in September.
The awards included one Grand Prix one Gold Award and two Silver Awards.

HUL's Chhindwara Unit won the National Safety Award for outstanding performance in
Industrial Safety. These awards were instituted by the Union Ministry of Labour and
Employment in 1965.

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HUL was one of the eight Indian companies to be featured on the Forbes list of World's
Most Reputed companies in 2007.

In July 2012 Hindustan Unilever Limited won the Golden Peacock Occupational Health
and Safety Award for 2012 in the FMCG category for its safety and health initiatives and
continuous improvement on key metrics.

Hindustan Unilever Limited is rated as best 3Ci Company which is registered with
National Industrial Classification Code 15140.

Pond's Talcum Powder's packaging innovation has secured a Silver Award at the
prestigious 24th DuPont Global Packaging Award, in May 2012. The brand was
recognized for cost and waste reduction.

In May 2012, HUL & Star Bazaar received the silver award for 'Creating Consumer
Value through Joint Promotional and Event Forecasting' at the 13th ECR Efficient
Consumer Response Asia Pacific Conference.

In 2011, HUL was named the most innovative company in India by Forbes and ranked
6th in the top 10 list of most innovative companies in the world.

Hindustan Unilever Ltd received the National Award for Excellence in Corporate
Governance 2011 of the Institute of Company Secretaries of India (ICSI) for excellence
in corporate governance.

In 2012, Hindustan Unilever emerged as the No. 1 employer of choice for B-School
students who will graduate in 2012. In addition, HUL also retained the 'Dream Employer'
status for the 3rd year running.

Hindustan Unilever ranked No. 2 in Fortune India's Most Admired Companies list, which
was released by Fortune India in partnership with the Hay Group. The company received
the highest scores for endurance and financial soundness.

HUL was ranked 47th in The Brand Trust Report 2014 published by Trust Research
Advisory. 36 HUL brands also featured in the list including Lux, Dove, Lipton, Vim,
Kissan, Bru, Rexona, Close Up, Clinic Plus, Pond's, Knorr, and Pepsodent among others.

HUL emerged as the top 'Dream Employer' as well as the top company considered for
application in the annual B-School Survey conducted by Nielsen in November 2010. This
was the second successive year that HUL has been rated as the top 'Dream Employer' in

15
 India. HUL has also emerged as the top employer of choice among the top six Indian
Institutes of Management (IIMA, B, C, L, K and I).

HUL won three awards at the 'CNBC Awaaz Storyboard Consumer Awards' in 2011 –
Most Recommended FMCG Company of the Year; Most Consumer Conscious Company
of the Year and Digital Marketer of the Year.

The company was felicitated in April 2010 for receiving the highest number of patents in
the year 2009 at Annual Intellectual Property Awards 2010.

In 2007, Hindustan Unilever was rated as the most respected company in India for the
past 25 years by Businessworld, one of India's leading business magazines. The rating
was based on a compilation of the magazine's annual survey of India's most reputed
companies over the past 25 years.

HUL is one of the country's largest exporters; it has been recognised as a Golden Super
Star Trading House by the Government of India.

Financial year 2017-18 saw many successes.

Learn about our accomplishments in driving innovation, continuous improvement, greater

performance and making sustainable living commonplace.

 HUL’s purpose-driven brand Surf excel bagged a Gold at the ‘WARC Prize for
Asian Strategy 2017’ for the Ramadan campaign ‘Madad Ek Ibadat’
 HUL’s brand, Surf excel’s Ramadan 2017 campaign, ‘Neki Ek Ibadat’ won a
Gold at the Indian Effies 2018, in the ‘Consumer Product’ category
 HUL’s local jewel, Hamam bagged a Silver at Effies 2018 for the
#GoSafeOutside campaign
 HUL’s Brooke Bond Red Label bagged a Silver at Effies 2018 for the brand’s
journey of #SwadApnepanka
 HUL’s Brooke Bond Red Label recognised at the Abby Awards for the purpose-
driven web-series ‘Breaking Barriers’
 HUL’s purpose-driven brands Lux, Lifebuoy, Rin, Clinic Plus, Fair & Lovely,
Dove, Closeup, Pepsodent, Vim, Surf excel, Pond’s, Sunsilk, Vaseline, Wheel and Taj

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 Mahal tea featured in the Economic Times Brand Equity’s list of India’s Most Trusted
brands 2017
 HUL won two Gold and two Silver medals and bagged the title of ‘Advertiser of
the Year’ at the Prime Time Awards 2017. In this year’s edition, our ‘RIN KBC’
campaign won Gold under two categories i.e. ‘Best use of entertainment Channel’ and
‘Best branded content on TV’. The ‘LUX Golden Rose Awards’ bagged a Silver under
the ‘Best integrated TV campaign’ and ‘Best use of entertainment Channel’ categories.
Winning in the marketplace
 HUL adjudged the Most Innovative Company in India, in Forbes’ list of The
World’s Most Innovative Companies, 2017
 HUL bagged ‘Exemplary Leadership Award in Cold Chain Industry’ at the 3rd
edition of the Cold Chain Industry Awards
 HUL recognised as the winner in the FMCG sector at the Dun & Bradstreet
Corporate Awards 2017. We won this award for the fourth consecutive year

Winning through continuous improvement

 HUL’s beverage factory in Kolkata received the prestigious CII National Food
Safety Award 2017 for outstanding achievements in food safety
 HUL’s Puducherry Home & Personal Care (HPC) factory secured the second
place at the Southern Region Environment, Health & Safety (EHS) Excellence Awards
2017 in the ‘Manufacturing - Others’ category organised by Confederation of India
Industry (CII)
 HUL’s Amli Factory was felicitated with the Platinum Award in the large-scale
manufacturing category, at the 6th FICCI Quality Systems Excellence Awards for
Industry
 HUL’s five factories won an award in the area of Safety and Environment from
National Safety Council
 HUL won an award for excellence in Energy Conservation and Management from
Maharashtra Energy Development Agency (MEDA), Confederation of Indian Industry,
Green Tech

Winning with people

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 HUL retained the ‘No.1 Employer of Choice’ title amongst key business schools
for the seventh year in a row
 HUL emerged as the Aon Best Employer of 2018
 HUL emerged winner at the Business Today’s Best Companies to Work for
awards in the Manufacturing sector
 HUL CEO Sanjiv Mehta declared the winner in the ‘CA Business Leader’
category at the 11th ICAI (The Institute of Chartered Accountants of India) Awards 2017
 The Institute of Company Secretaries of India (ICSI) conferred the Certificate of
Recognition to HUL for Excellence in Corporate Governance at its 17th National Awards
 HUL’s Puducherry HPC factory conferred with the FAME Excellence Award
2017 for excellence in promoting safety, health & environment practices and initiatives
towards employees and stakeholders
 HUL honoured with the National Award for ‘Excellence in Employee Relations’
at the EFI Summit organised by the Employers’ Federation of India (EFI)

Unilever Sustainable Living Plan

 HUL Mumbai Office felicitated with the ‘Platinum’ rating, and the IGBC Green
Existing Building - PLATINUM award by The Indian Green Building Council (IGBC)
 HUL received a Certificate of Appreciation for project Prabhat, for ‘HUL’s
responsible contribution to the society in 2016-17’, at ASSOCHAM’s 9th Global CSR
Summit
 HUL’s Project Prabhat declared the winner under ‘Community Development’
category at the ‘Social Change Awards’
 HUL adjudged the winner of The Confederation of Indian Industry(CII) –
National Award for Excellence in Water Management 2017 under the ‘Beyond the Fence’
category
 HUL won the ‘Green Marketer’ Award at the ‘Marquee Awards. Vim and
Lifebuoy adjudged winners in Home Care and Personal Care categories, respectively
 HUL’s factory units – Kolkata Beverages Factory and Etah Factory recognised for
their sustainability achievements by New Frontiers in Engineering, Science, and
Technology (NFEST) at its first International Conference

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Recent news 2020

Read the Investor Relations news for 2020

Notice of Postal Ballot
31-01-2020: Seeking approval of appointing Mr. Wilhelmus Uijen as Whole-time
Director of the Company.
Notice of the Board Meeting for December Quarter, 2019

13.01.2020: The meeting of the Board of Directors of the Company will be held on
Friday, 31st January, 2020 at Mumbai, inter-alia, to consider the Unaudited Standalone
and Consolidated financial results for the quarter ended 31st December, 2019.

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 ITC LTD

ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West

Bengal. Its diversified business includes five segments: Fast Moving Consumer
Goods (FMCG), Hotels, Paperboards, Paper & Packaging and Agri Business.  In 2012-
13, ITC's annual turnover was over US$ 7 billion and at the end of the same year,
its market capitalisation was US$ 45 billion. It employs over 25,000 people] at more than
60 locations across India and is part of Forbes 2000 list.

ITC claims that it is the only company in the world of comparable dimensions to be
Carbon Positive, Water Positive and Solid Waste Recycling Positive. ITC Limited
completed 100 years on 24 August 2010.

History

Change in name: ITC was formed on 24 August 1910 under the name Imperial Tobacco
Company of India Limited. Later the name was changed to India Tobacco Company
Limited in 1970 and then to I.T.C. Limited in 1974. Finally, the company changed its
name to 'ITC Limited' on September 2001.

The earlier decades of the company's activities centered around the tobacco industry.
Since 1964 conclusive epidemiological evidence of the deadly effects of tobacco
consumption has led to a sharp decline in official support for producers and
manufacturers of tobacco, in spite of its large contribution to the agricultural, fiscal,
manufacturing and exporting sectors of the economy. Viewing the changes in the
business dynamics in the tobacco industry, the company starting looking to other venues
for earning revenue. In 1970s, it started to enter non-tobacco businesses and in the same
period it started reducing the foreign equity holding in the company to 40%.

In 1975, the company entered Hotel business with the acquisition of a hotel in Chennai
which was rechristened 'ITC-Welcomgroup Hotel Chola'. In 1979, ITC entered the
Paperboard business by promoting ITC Bhadrachalam Paperboards Limited,which today

20
has become the market leader in India In 1985, ITC set up Surya Tobacco Co. in Nepal as
an Indo-Nepali and British joint venture. Since inception, its shares have been held by
ITC, British American Tobacco and various independent shareholders in Nepal. In 2002,
Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya
Nepal Private Limited. ITC's first rural mall, christened 'ChoupalSaagar' was inaugurated
in August 2004 at Sehore. On the rural retail front, 24 'ChoupalSaagars' are now
operational in the 3 states of Madhya Pradesh, Maharashtra and Uttar Pradesh.

In 2000, ITC forayed into the Greeting, Gifting and Stationery products business with the
launch of Expressions range of greeting cards. A line of premium range of notebooks
under brand Paperkraft was launched in 2002. To reach a wider student population, a
range of notebooks was launched under brandClassmate in 2003. “Classmate” over the
years has grown to become India’s largest notebook brand. Years 2007 - 2009 saw the
launch of Children Books, Slam Books, Geometry Boxes, Pens and Pencils under the
“Classmate” brand. In 2008, ITC repositioned the business as the Education and
Stationery Products Business and launched India's first environment friendly premium
business paper under the “Paperkraft” brand. “Paperkraft” offers a diverse portfolio in the
premium executive stationery and office consumables segment.

ITC also entered the Lifestyle Retailing business with the Wills Sport range of casual
wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later
expanded its range to include Wills Classic formal wear (2002) and Wills Clublife
evening wear (2003).

In 2000, ITC spun off its information technology business into a wholly owned
subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging
opportunities in IT and IT-enabled services area.

ITC's foray into the Foods business began in August 2001 with the introduction
of Kitchens of India ready-to-eat Indian gourmet dishes. In 2002, ITC entered the
confectionery and staples segments with the launch of the brands Mint-o and Candyman
confectionery and Aashirvaadatta (wheat flour). 2003 witnessed the introduction of
Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing
branded snacks category with Bingo! in 2007.

In 2002, ITC entered Safety Matches business with acquisition of WIMCO Limited. ITC
now markets safety matches brands like iKno, Mangaldeep and Aim. ITC's entered

21
Agarbattis (incense sticks) business in 2003. ITC's popular agarbattis brands include
Spriha and Mangaldeep.

ITC introduced Essenza Di Wills, a range of fragrances and bath & body care products
for men and women in July 2005. The company launched 'Fiama Di Wills' range of
Shampoos, Shower Gels and Soaps in 2007. The Company also launched the 'Superia'
range of Soaps and Shampoos in the mass-market segment in 2007 and Vivel De Wills
&Vivel range of soaps and shampoos in 2008.[

Products and Brands

Gold Flake cigarettes

Tobacco products

Cigarettes: In 2012-13, ITC earned a revenue of Rs. 27,136 crores from the business of
Cigarettes (56% of total revenue). In the same year, this segment contributed to profits of
Rs. 8,694 crores (82% of total profits).ITC Ltd sells 80 percent of the cigarettes in the
India, where 275 million people use tobacco products. Its major cigarette brands are W.D.
& H.O. Wills, Gold Flake Kings, Gold Flake Premium,Gold Flake Super Star, Navy
Cut,Insignia, India Kings, Classic (Verve, Menthol, Menthol Rush, Regular,Citric Twist,
Mild& Ultra Mild), 555, Benson & Hedges, Silk Cut,  Scissors, 
Capstan, Berkeley, Bristol, Lucky Strike, Players, Flake and Duke & Royal.

22
Other businesses

 Foods: ITC is India's largest seller of branded foods with sales of over Rs. 4,600
crore in 2012-13. It is present in 4 categories in Foods business: Staples, Snack
Foods, Ready To Eat Foods and Confectionery.

Its major food brands are Kitchens of India; Aashirvaad, Mint-o, Sunfeast

biscuits, Candyman, Bingo! chips, Yippee! andSunfeast Pasta.

 Lifestyle Apparel: Wills Lifestyle and John Players brands. Wills Lifestyle was

accorded the ‘Superbrand’ status and John Players was included in the top 10 ‘Most
Trusted Apparel Brands 2012’ by The Economic Times.

 Personal Care: (Fiama Di Wills, Vivel, Essenza Di

Wills, Superia and Engage brands in perfumes, haircare and skincare)

 Stationery: Classmate, PaperKraft and Colour Crew brands. Launched in
2003, Classmate became the largest notebook brand in India in 2007.

 Safety Matches and Agarbattis: Ship, i Kno and Aim brands of matches;

Mangaldeep Incense Sticks (agarbattis).

 Hotels: ITC's hotels (under brands including WelcomHotel) have evolved into

being India's second largest hotel chain with over 90 hotels throughout India. ITC is
also the exclusive franchisee in India of two brands owned by Sheraton International
Inc.- The Luxury Collection and Sheraton which ITC uses in association with its own
brands in the luxury 5 star segment. Brands in the hospitality sector owned and
operated by its subsidiaries includeFortune Park Hotels and WelcomHeritage Hotels.

 Paperboard, Specialty Paper, Graphic and other Paper;

 Packaging and Printing for diverse international and Indian clientele.

 Infotech (through its fully owned subsidiary ITC Infote

23
Major Awards 2016-17
ITC won the prestigious Porter Prize 2017 for 'Excellence in Corporate Governance and
Integration' and for its exemplary contribution in 'Creating Shared Value'.
Chairman Mr Y C Deveshwar was conferred Lifetime Achievement Awards 2016 by
leading media organisations, CNBC TV18 and Business Standard.
Chairman Mr Y C Deveshwar was conferred the prestigious Banga Bibhushan award, the
highest civilian honour instituted by the Government of West Bengal.
ITC Limited was the only Corporate to receive the India Today Safaigiri Award 2016 in
the 'Corporate Trailblazer' category.
ITC was named India's 'Buzziest' Corporate brand in a survey conducted by Afaqs!, a
leading media portal. Several of ITC's FMCG brands - Sunfeast, Bingo!, YiPPee!, Vivel,
Engage, Fiama and Savlon also featured in the honours list in their respective categories.
ITC Limited won two 'ASSOCHAM Waste Management Excellence Awards 2017' in the
'Best Corporate Initiative in Swachh Bharat Abhiyan' and 'Best Outreach Strategy in
Waste Management' categories.
ITC was conferred the prestigious 'Best Practices Award' for Sustainable Development
Goals (SDGs) by the United Nations Global Compact Network India (UN-GCNI). ITC
received the Award for its Integrated Natural Resource Management - Watershed
Development and Afforestation initiatives.
ITC Grand Bharat, Gurugram, was ranked No. 1 Resort in Asia by the Conde Nast
Traveler USA Readers' Choice Awards 2016, for the second consecutive year.
The ITC Green Centre in Manesar has once again been awarded Platinum Rating under
Leadership in Energy and Environmental Design (LEED®) for 'Existing Building
Operation and Maintenance' by 'US Green Building Council (USGBC)'.
ITC Limited won the Intel AIM Corporate Responsibility Award, 2016, accorded by the
Asian Institute of Management-RVR CSR Center and the Asia Inc Forum.
24
ITC Maurya was awarded the 'Smartest 5 Star Hotel Building in India' by the Network 18
& Honeywell Smart Building Awards 2016.
ITC was adjudged the 'Best in Supply Chain Sustainability' at the Asian Corporate
Sustainability Summit 2016.
ITC's Packaging and Printing Division was declared the 'Green Printing Company of the
Year 2016' by PrintWeek India.
ITC's Paperboards Unit in Bhadrachalam was the first integrated Pulp and Paper Unit to
receive the prestigious CII Green Co Platinum Rating.
ITC's Paperboards & Specialty Papers Business was adjudged the 'Winner' under the
'Process Innovation Leadership' category in the Manufacturing sector at Frost &
Sullivan's Project Evaluation and Recognition Programme (PERP).
ITC won the FICCI Water Awards 2016 in the 'Community Initiatives by Industry'
category. Also won FICCI CSR Award 2016 for Environment Sustainability and Health,
Water & Sanitation programmes.
The ITC Factory in Saharanpur received the FICCI Award 2016 for 'Excellence in Water
Management (Industrial Water Use Efficiency category)'. Also, received the CII National
Award 2016 for Excellence in Water Management, and was identified as a 'Noteworthy
Water Efficient Unit'.
The ITC Factory in Bengaluru was recognised as 'Excellent Energy Efficient Unit' at the
17th National Award for Excellence in Energy Management, 2016, by the Confederation
of Indian Industry (CII).
The ITC Factory in Pune was recognised as 'Future Ready Factory - Platinum Award -
FMCG Sector, Mega Large Business' at the India Manufacturing Excellence Awards
(IMEA) by Frost and Sullivan.
The ITC Factory in Munger won the CII National Supply Chain and Logistics Excellent
Awards 2016.
The latest Randstad Brand Research Survey findings recognised ITC Limited as India's
most attractive employer in the FMCG Sector.
ITC Infotech won the Asia Pacific HRM Congress Awards 2016, presented by Times
Ascent, in the categories of 'Managing health at work' and 'Talent management and its
impact on employee engagement'.

25
 NESTLE LTD.

Nestlé S.A. (French pronunciation: [nɛsle]; English /ˈnɛsleɪ/, /ˈnɛsli/) is a

Swiss multinational food and beverage company headquartered in Vevey, Switzerland. It
is the largest food company in the world measured by revenues.

Nestlé's products include baby food, bottled water, breakfast cereals, coffee,

confectionery, dairy products, ice cream, pet foods, and snacks. 29 of Nestlé's brands
have annual sales of over 1 billion Swiss francs (about $1.1
billion), including Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer's, Vittel,
and Maggi. Nestlé has around 450 factories, operates in 86 countries, and employs around
328,000 people. It is one of the main shareholders of L'Oréal, the world's
largest cosmetics company. On 4 September 2013, software and search-engine
giant Google announced that they would be naming the next Android release, version 4.4,
after the ever-popular chocolate wafer "KitKat" with Nestle's legal permission. Nestlé,
confirming the team-up, announced the distribution of around 50 million KitKats
worldwide, featuring the Android mascot in the covers.

Nestlé was formed in 1905 by the merger of the Anglo-Swiss Milk Company,

established in 1866 by brothers George Page and Charles Page, and FarineLactée Henri
Nestlé, founded in 1866 by Henri Nestlé. The company grew significantly during the
First World War and again following the Second World War, expanding its offerings
beyond its early condensed milk and infant formula products. The company has made a
number of corporate acquisitions, including Crosse & Blackwell in 1950, Findus in
1963, Libby's in 1971, Rowntree Mackintosh in 1988, and Gerber in 2007.

Nestlé has a primary listing on the SIX Swiss Exchange and is a constituent of the Swiss

Market Index. It has a secondary listing on Euronext. In 2011, Nestlé was listed No. 1 in

26
the Fortune Global 500 as the world's most profitable corporation. With a market
capitalization of $233 billion, Nestlé ranked No. 9 in the FT Global 500 2013.

History

Henri Nestlé

Nestlé's origins date back to 1866, when two separate Swiss enterprises were founded that
would later form the core of Nestlé. In the succeeding decades, the two competing
enterprises aggressively expanded their businesses throughout Europe and the United
States.

In August 1867, Charles (US consul in Switzerland) and George Page, two brothers
from Lee County, Illinois, USA, established the Anglo-Swiss Condensed Milk Company
in Cham, Switzerland. Their first British operation was opened at Chippenham, Wiltshire,
in 1873.

27
A 1915 advertisement for "Nestlés Food", an early infant formula.

In September 1866, in Vevey, Henri Nestlé developed a milk-based baby food, and soon

began marketing it. The following year saw Daniel Peter begin seven years of work
perfecting his invention, the milk chocolate manufacturing process. Nestlé's was the
crucial cooperation that Peter needed to solve the problem of removing all the water from
the milk added to his chocolate and thus preventing the product from developing mildew.
Henri Nestlé retired in 1875 but the company under new ownership retained his name
as SociétéFarineLactée Henri Nestlé.

In 1877, Anglo-Swiss added milk-based baby foods to their products and in the following
year the Nestlé Company added condensed milk so that the firms became direct and fierce
rivals.

In 1905, the companies merged to become the Nestlé and Anglo-Swiss Condensed Milk
Company, retaining that name until 1947 when the name Nestlé Alimentana SA was
taken as a result of the acquisition of Fabrique de Produits Maggi SA (founded 1884) and
its holding company Alimentana SA of Kempttal, Switzerland. Maggi was a major
manufacturer of soup mixes and related foodstuffs. The company’s current name was
adopted in 1977. By the early 1900s, the company was operating factories in the United
States, United Kingdom, Germany, and Spain. The First World War created demand for
dairy products in the form of government contracts, and, by the end of the war, Nestlé's
production had more than doubled.

28
Nestlé felt the effects of the Second World War immediately. Profits dropped from
US$20 million in 1938, to US$6 million in 1939. Factories were established in
developing countries, particularly in Latin America. Ironically, the war helped with the
introduction of the company's newest product, Nescafé ("Nestlé's Coffee"), which became
a staple drink of the US military. Nestlé's production and sales rose in the wartime
economy.

The logo that Nestlé used until 1966.

After the war, government contracts dried up, and consumers switched back to fresh milk.
However, Nestlé's management responded quickly, streamlining operations and reducing
debt.

The 1920s saw Nestlé's first expansion into new products, with chocolate-manufacture
becoming the company's second most important activity.

Louis Dapples was CEO till 1937, when succeeded by Édouard Muller till his death in
1948.

The end of World War II was the beginning of a dynamic phase for Nestlé. Growth
accelerated and numerous companies were acquired. In 1947 Nestlé merged with Maggi,
a manufacturer of seasonings and soups. Crosse & Blackwell followed in 1950, as
did Findus (1963), Libby's (1971) and Stouffer's (1973).

29
Diversification came with a shareholding in L'Oréal in 1974. In 1977, Nestlé made its
second venture outside the food industry, by acquiring Alcon Laboratories Inc.

In 1984, Nestlé's improved bottom line allowed the company to launch a new round of
acquisitions, notably American food giant Carnation and the British confectionery
company Rowntree Mackintosh in 1988, which brought the Willy Wonka brand – among
others – to Nestlé.

The Brazilian president, Lula da Silva, inaugurates a factory in Feira de Santana(Bahia),

in February 2007.

The first half of the 1990s proved to be favourable for Nestlé. Trade barriers crumbled,
and world markets developed into more or less integrated trading areas. Since 1996, there
have been various acquisitions, including San Pellegrino (1997), Spillers Petfoods (1998),
and Ralston Purina (2002). There were two major acquisitions in North America, both in
2002 – in June, Nestlé merged its U.S. ice cream business into Dreyer's, and in August a
US$2.6 billion acquisition was announced of Chef America, the creator of Hot Pockets.
In the same time-frame, Nestlé came close to purchasing the iconic American
company Hershey's, one of its fiercest confectionery competitors, although the deal
eventually fell through. Another recent purchase included theJenny Craig weight-loss
program, for US$600 million.

In December 2005, Nestlé bought the Greek company Delta Ice Cream for €240 million.
In January 2006, it took full ownership of Dreyer's, thus becoming the world's largest ice
cream maker, with a 17.5% market share.

In November 2006, Nestlé purchased the Medical Nutrition division of Novartis

Pharmaceutical for $2.5B, also acquiring, in 2007, the milk-flavouring product known
as Ovaltine.

30
In April 2007, returning to its roots, Nestlé bought US baby-food manufacturer Gerber for
$5.5 billion.

In December 2007, Nestlé entered into a strategic partnership with a Belgian chocolate
maker, Pierre Marcolini.

Nestlé agreed to sell its controlling stake in Alcon to Novartis on 4 January 2010. The
sale was to form part of a broader US$39.3 billion offer, by Novartis, for full acquisition
of the world’s largest eye-care company.

On 1 March 2010, Nestlé concluded the purchase of Kraft Foods's North American frozen
pizza business for $3.7 billion.

In July 2011, Nestlé SA agreed to buy 60 percent of Hsu Fu Chi International Ltd. for
about $1.7 billion. On 23 April 2012, Nestlé agreed to acquire Pfizer Inc.'s infant-
nutrition unit for $11.9 billion. Before the acquisition, there was a 'bidding war' between
the three shareholders Nestlé, Mead Johnson Nutritionand Danone. Each of the
companies held a share, with Nestlé holding the biggest share (17%) (Johnson held 15%,
Danone 13%).

As of 28 May 2013, Nestlé has announced that it will expand R&D in its research center
in Singapore. With a primary focus on health and nutrition, Nestlé is investing $4.3
million in its Singapore center, creating 20 jobs for experts in related R&D fields. In 2013
Nestle Nigeria successfully pioneered and implemented the use of compressed natural gas
as a fuel source to power their Flowergate factory.

31
INTRODUCTION TO THE TOPIC

32
 INTRODUCTION TO THE TOPIC

CAPITAL STRUCTURE:

Finance is a important input for any type of business and is needed for working capital
and for permanent investment. The total funds employed in a business are obtained from
various sources. A part of the funds are brought in by the owners and the rest is borrowed
from others-individuals and institutions. While some of the funds are permanently held in
business, such as share capital and reserves (owned funds), some others are held for a
long period such as long-term borrowings or debentures, and still some other funds are in
the nature of short-term borrowings: The entire composition of these funds constitute the
overall financial structure of the firm. You are aware that short-term funds keep on
shifting quite often. As such the proportion of various sources for short-term funds cannot
perhaps be rigidly laid down. The firm has to follow a flexible approach. A more definite
policy is often laid down for the composition of long-term funds, known as capital
structure. More significant aspects of the policy are the debt equity ratio and the
dividend decision. The latter affects the building up of retained earnings which is an
important component of long-term owned funds. Since the permanent or long-term funds

33
often occupy a large portion of total funds and involve long-term policy decision, the
term financial structure is often used to mean the capital structure of the firm.

There are certain sources of long-term funds which are generally available to the
corporate enterprises. The main sources are: share capital (owners' funds) and long-term
debt including debentures (creditors' funds). The profit earned from operations are
owners' funds-which may be retained in the business or distributed to the owners
(shareholders) as dividend. The portion of profits retained in the business is a rein-
vestment of owners' funds. Hence, it is also a source of long-term funds. All these sources
together are the main constituents of the capital of the business, that is, its capital
structure.

Capital structure

The combination of a company's long-term debt, specific short-term debt, common

equity, and preferred equity; the capital structure is the firm's various sources of funds
used to finance its overall operations and growth. Debt comes in the form of bond issues
or long-term notes payable, whereas equity is classified as common stock, preferred
stock, or retained earnings. Short-term debt such as working capital requirements also is
considered part of the capital structure.

This lecture will explore the determinants of the mix of debt and equity the firm uses to
finance its operations We will first explore the situations under which capital structure is
irrelevant to a firms operations. Examining these situations will allow us to explore how
the following factors influence the mix of debt and equity a firm uses to finance its
operations.
• TAXES
• RISK
• FINANCIAL SLACK
• ASSET CHARACTERISTICS

• COSTS OF FINANCIAL DISTRESS.

Capital Structure is referred to as the ratio of different kinds of securities raised by a firm
as long-term finance. The capital structure involves two decisions-Type of securities to be
issued are equity shares, preference shares and long term borrowings (Debentures).

34
Relative ratio of securities can be determined by process of capital gearing. On this basis,
the companies are divided into two-

Highly geared companies- Those companies whose proportion of equity capitalization is

small.

Low geared companies- Those companies whose equity capital dominates total
capitalization.

For instance - There are two companies A and B. Total capitalization amounts to be Rs.
20 lakh in each case. The ratio of equity capital to total capitalization in company A is Rs.
5 lakh, while in company B, ratio of equity capital is Rs. 15 lakh to total capitalization

FACTORS AFFECTING CAPITAL STRUCTURE:

1) Cash Flow Position:

While making a choice of the capital structure the future cash flow position should be
kept in mind. Debt capital should be used only if the cash flow position is really good
because a lot of cash is needed in order to make payment of interest and refund of capital.

(2) Interest Coverage Ratio-ICR:

With the help of this ratio an effort is made to find out how many times the EBIT is
available to the payment of interest. The capacity of the company to use debt capital will
be in direct proportion to this ratio.

It is possible that in spite of better ICR the cash flow position of the company may be
weak. Therefore, this ratio is not a proper or appropriate measure of the capacity of the
company to pay interest. It is equally important to take into consideration the cash flow
position.

(3) Debt Service Coverage Ratio-DSCR:

This ratio removes the weakness of ICR. This shows the cash flow position of the
company.

35
This ratio tells us about the cash payments to be made (e.g., preference dividend, interest
and debt capital repayment) and the amount of cash available. Better ratio means the
better capacity of the company for debt payment. Consequently, more debt can be utilised
in the capital structure.

(4) Return on Investment-ROI:

The greater return on investment of a company increases its capacity to utilise more debt
capital.

(5) Cost of Debt:

The capacity of a company to take debt depends on the cost of debt. In case the rate of
interest on the debt capital is less, more debt capital can be utilised and vice versa.

(6) Tax Rate:

The rate of tax affects the cost of debt. If the rate of tax is high, the cost of debt decreases.
The reason is the deduction of interest on the debt capital from the profits considering it a
part of expenses and a saving in taxes.

For example, suppose a company takes a loan of 0ppp 100 and the rate of interest on this
debt is 10% and the rate of tax is 30%. By deducting 10/- from the EBIT a saving of in
tax will take place (If 10 on account of interest are not deducted, a tax of @ 30% shall
have to be paid).

(7) Cost of Equity Capital:

Cost of equity capital (it means the expectations of the equity shareholders from the
company) is affected by the use of debt capital. If the debt capital is utilised more, it will
increase the cost of the equity capital. The simple reason for this is that the greater use of
debt capital increases the risk of the equity shareholders.

Therefore, the use of the debt capital can be made only to a limited level. If even after this
level the debt capital is used further, the cost of equity capital starts increasing rapidly. It
adversely affects the market value of the shares. This is not a good situation. Efforts
should be made to avoid it.

36
(8) Floatation Costs:

Floatation costs are those expenses which are incurred while issuing securities (e.g.,
equity shares, preference shares, debentures, etc.). These include commission of
underwriters, brokerage, stationery expenses, etc. Generally, the cost of issuing debt
capital is less than the share capital. This attracts the company towards debt capital

CAPM
A model that describes the relationship between risk and expected return and that is used
in the pricing of risky securities.
Capital Asset Pricing Model (CAPM)

The general idea behind CAPM is that investors need to be compensated in two ways:
time value of money and risk. The time value of money is represented by the risk-free (rf)
rate in the formula and compensates the investors for placing money in any investment
over a period of time. The other half of the formula represents risk and calculates the
amount of compensation the investor needs for taking on additional risk. This is
calculated by taking a risk measure (beta) that compares the returns of the asset to the
market over a period of time and to the market premium (Rm-rf).
The CAPM says that the expected return of a security or a portfolio equals the rate on a
risk-free security plus a risk premium. If this expected return does not meet or beat the
required return, then the investment should not be undertaken. The security market line
plots the results of the CAPM for all different risks (betas).
Using the CAPM model and the following assumptions, we can compute the expected
return of a stock in this CAPM example: if the risk-free rate is 3%, the beta (risk measure)

37
of the stock is 2 and the expected market return over the period is 10%, the stock is
expected to return 17% (3%+2(10%-3%)

REVIEW OF LITERATURE

38
 REVIEW OF LITERATURE

Yermack, D. L. (2019)studied the rationale of debt equity ratio in various public

enterprises and suggested a number of factors that ought to be considered while
deciding on the debt equity ratio of a particular public enterprise. Among other
things, he evolved a model for determining the debt equity ratio, taking into account
factors like assets structure, gestation period, pricing policy and degree of monopoly
or competitiveness. The result of the study largely supported that asset structure
systematically affects the capital structure of the firms.

UppalJamshedYunas (2018) made an empirical investigation of debtand taxes in a

multi-period framework, developed a multi-period model of capital structure choice
when firms are faced with uncertain cash flows. He employed OLS regression using
a pooled sample of 19 years of time series and cross-sectional data of 431
companies. The result of the study largely supported the hypothesis that taxes
systematically affect capital structure policies and bond market equilibrium. Tests
using pooled data indicated no significant relationship between growth and financial
leverage. The study also presented evidence that factors other than taxes such as
asymmetric information; agency costs affected the financial leverage choice. This

39
suggests that different capital structure theories may compliment rather than compete
with each other.
Ellis, C. (2017)examined a sample of 155 large industrialfirms for the to study the
relationship between debt ratio and age of the firm, profitability, operating risk, asset
composition and non-debt tax shield. He found that debt ratio was negatively
correlated to age of the firm, profitability and non-debt tax shield. The asset
composition and profit growth were found to be positively associated with debt
equity ratio.
Koralekar (2017) analyzed the capital structure of the manufacturingcentral public
enterprises started. The study concluded that the pattern of capital structure of
manufacturing public enterprises was not uniform irrespective of their industry class,
profitability and size. This study reveals that the capital structure was different
within the groups of industry class, profitability or size, due to different debt
proportions in their financing. Reduction in the share of government loans,
insignificant increase in raising of funds from foreign sources and introduction of
new sources of finance like bonds and deposits were noticed as a part of the trend in
the financing of the public enterprises.
Friend, I., & Lang, L. H. (2016)analysed the ownership structure of US
andJapanese manufacturing firms. The relationship between leverage, capital
structure and profitability were studied by applying correlation analysis. The study
found that leverage was negatively correlated with profitability both in US and Japan
during the study period.

NazeerMazhar (2016) conducted a study to examine the extent to whichvariation of

corporate debt ratios can be significantly explained by some specific factors like
growth, firm size, asset composition, profitability, dividends, operating leverage and
industry class. The study employed linear-regression model on a pooled time-series
and crosssectional data. He also used one-way analysis of variance in order to find
mean debt ratio differences both among and within the industries. Profitability was
found to be negatively related to debt ratio. Firm size was found to be positively
associated to the use of debt. Dividend payments, asset composition and operating
leverage in general were found to be unrelated to corporate debt. Industry class was
not found to be significant determinant of a firm‟s use of debt capital.

40
Titman, S., & Wessels, R. (2015)studied the effect of business risk oncorporate
capital structure and found that there is no single method or technique that enables a
company to hit the optimal capital structure. He further elaborated that capital
structure is not amenable to neat structured solution. Further, he found that capital
structure is very sensitive decision, which can ultimately change the density of the
business enterprise.

Sinha (2015)
made an attempt to explain the variations in capitalstructure across industries in India
on the basis of capital structure theories using data from Reserve Bank of India
Survey of finances of public and private limited companies. The results are broadly
consistent with the theory. The most significant explanatory variables for the capital
structure patterns are the measures of asset type and profitability.
Ghanbari (2015)studied the prime objective regarding the financialdecision of
corporate firms. After studying the empirical evidence of capital structure and its
impact on cost of capital and the overall market value of a firm, an attempt has been
made to estimate the cost of capital of Indian industries and analyzed the possible
relationship between capital structure and cost of capital. This resulted that, there is
an inverse relationship between pre-tax weighted average cost of capital and the
capital structure of a firm. The irrelevancy theorem of Modigliani and
Miller does not seem to hold good for Indian industries.

Jones, W. H. (2014)examined the factors affecting capital structure. He foundthat

factors like profitability, liquidity, size and asset structure have a bearing on the
design of the capital structure of the firm. These factors differ from one industry to
another industry and even from one firm in the same industry.

Chakraborty, I. (2013)examined the performance of BIFR by analyzing 472 cases

disposed of by BIFR.The study attributed the prolonged decision making process of
BIFR, its nature of power which are more of a persuasive than of directive and to the
approach of respective state governments as the prominent stake holder. The study
opined that BIFR may be viewed as successful institution by evaluating and

41
apprehending its performance in terms of disposal of cases that have been
successfully survived.

Gropp, R., & Heider, F. (2010) analyzed the market performance of 131 sample
firms emerging from bankruptcy. The study was mainly based on the controlled firm
approach indicated that firms emerging from bankruptcy generated abnormal returns
varying from 24.6% to 138.8% depending on various expected returns models.

Rahel Falk (2009) studied the sickness in the Indian manufacturing industry and
tested the theoretical model which has addressed the political economy of industrial
sickness in India. According to this study politicians benefit from, and accordingly
pay for sickness. More so he has concluded that sickness law certainly provides
several ways for the firm/stake holders to find advantages in sickness and thereby to
get rid of their financial responsibility.
The study by Rosemary and Omkarnath (2009) documented the trends and
patterns of industrial sickness during pre and post reform period and critically
evaluated the performance of BIFR, in line with changed policy framework. The
study revealed that the massive sickness in SSI sector during pre reform period but it
has shown significant reduction during the post reform period except a spurt due to
recession. The study also found out that there has been a significant rise in the
sickness of non SSI units after recession in 1997. The study further observed that
introduction of SARFAESI Act 2002 gives exclusive rights to the banks regardless
of reference to BIFR and has undermined the role of BIFR in reorganizing the viable
industrial units which in turn, has exposed that a structural change in BIFR function
is needed.
Dybvig, P. H., & Zender, J. F. (2008). undertook an empirical analysis of post
bankruptcy performance. They have examined stock returns and operating
performance of 101 firms that emerged as “no longer sick” from the BIFR
proceedings. As per the short term and long term analysis of market performance
using various expected return models and estimates, shows no sign of significant
abnormal returns in comparison to the results from the US market. The US market
analysis indicates that the market for stocks of four quarters earning of the similar

42
kind of company is informationary efficient. On the other hand, the analysis of
operating performance of the Indian sample firms is evident that they are neither
making superior operating margin nor utilizing the assets efficiently after emerging
from BIFR proceedings. They had also raised doubts about the efficiency of BIFR
proceedings and it may be possible that the proceedings may allow inefficient firm to
reorganize and survive.

Schiantarelli, F., & Siregar, M. G. (2004).restructuring should be viewed as part of

a broader transformation in the organization of ownership and managerial control of
the corporation. A conclusion is drawn that considerable managerial discretion
remains in shaping company response to the restructuring pressure. Although market
and organizational factors are sure to act as constraints, top management, whether
relatively autonomous nonowning management group or an owner – dominated
management, retains an important independent capacity to exercise strategic choice.

Christopher and Neill Marshal (2004) conducted a study on Corporate

Restructuring in the Financial Services Industry and contended that large firms
transmit the dynamics of contemporary restructuring and in turn, establish a
symbolic relationship with places. The paper concludes that closer market integration
results in divergent organizational forms, with district geographical expressions.

In a study conducted by John, Lang and Netter (2003) found that, the market for
corporate control had an enormous impact on management decision making and the
restructuring of firms in response to changing economic conditions. They found that
37% of a sample of large firms with poor performance underwent a change in
corporate control.
However, for various reasons, it is unlikely that in the foreseeable future the market
for corporate control will be a major force in disciplining management.

Kovenock, D., & Phillips, G. M. (2003). on Corporate Restructuring, they have

concluded that Financial restructuring, when accompanied with investment in key
strategic activities, can be effective for the firm.

43
Bethel and Liebeskind (2002), they concluded that block holder ownership is
associated significantly with corporate restructuring, suggesting that many managers
restructured their corporations during when pressured to do so by large shareholders.

RESEARCH METHODOLOGY
AND OBJECTIVES

44
 OBJECTIVES OF THE STUDY

 A study on impact of capital structure on value of a firm with reference to Indian

FMCG companies- HUL, Nestle and ITC.
 A review of the selected company’s current capital structure and a
recommendation on their optimal capital structure.
 To study the impact of profitability on total debt to equity ratio.
 To study the impact of size of the firm on total debt to equity ratio.
 To study the impact of liquidity on total debt to equity ratio.
 To study the impact of asset structure on total debt to equity ratio.

45
 RESEARCH METHODOLOGY
Research is a systematic and continues method of defining a problem, collecting the facts
and analyzing them, reaching conclusion forming generalizations.
Research is defined as “a scientific & systematic search for pertinent information on a
specific topic”. Research is an art of scientific investigation. Research is a systemized
effort to gain new knowledge. It is a careful inquiry especially through search for new
facts in any branch of knowledge. The search for knowledge through objective and
systematic method of finding solution to a problem is a research.

THE RESEARCH PROCESS

46
 1
OBSERVATION
Broad area of research interest identified

7
4
3 DATA COLLE
THEORETICAL FRAMEWORK
PROBLEM DEFINITIONVariables clearly identified and labelled 5 ANALYSIS AND INT
6
Research Problem Delineated GENERATION OF HYPOTHESES
SCIENTIFC RESEARCH DESIGN

8
DEDUCTI
Hypotheses substantiated? Rese
2
PRELIMINARY DATA GATHERING
Interviewing Literature Survey

NO Yes

10 11
9 Report Presentation
Managerial decision making
Report writing

RESEARCH DESIGN:-

Research Design is the conceptual structure with in which research is conducted.

Research Design includes and outline of what the researcher will do form writing the
hypothesis and its operational implication to the final analysis of data. A research design
is a framework for the study and is used as guide in collection and analyzing the data

TYPES OF RESEARCH DESIGN

47
 TYPES OF RESEARCH
DESIGN

EXPLORATORY RESEARCH
DESCRIPTIVE & DIAGONOSTIC RESEARCH
EXPERIMENTAL
DESIGN RESEARCH DESIGN

PURPOSE OF THE STUDY Descriptive

TYPE OF INVESTIGATION Causal

STUDY SETTING Non contrived

TIME HORIZON Cross sectional

SAMPLE & SAMPLING DESIGN

A sample design is a definite plan for obtaining a sample from the sampling
frame. It refers to the technique or the procedure that is adopted in selecting
the sampling units from which inferences about the population is drawn.
Sampling design is determined before the collection of the data.

Following questions have to be considered while sampling design-

48
  What is the relevant population?

 What is the parameter of interest?

 What is the sampling frame?

 What is the type of sample?

 What sample size is needed?

 How much will it cost?

DATA COLLECTION
After the research problem has been identified and selected the next step is to gather the
requisite data. While deciding about the method of data collection to be used for the
researcher should keep in mind two types of data. primary and secondary.

49
SECONDARY DATA
The Secondary data are those which have already been collected by someone else
and which have already been passed through the statistical tool. Methods of
collection of Secondary data are:-
 Journals,
 Websites
 Books.

LIMITATIONS OF THE STUDY

In spite of best efforts of the investigator the study was subjected to following

limitations:-

50
 Study of secondary sources: It is only the study of interim reports and secondary

data present on different websites so not much reliable as primary data.

 Based on monetary information only : Analysis is based only on monetary

information and not on non monetary factors.

 Sample Size : The sample size to be analyzed is only 1year, which may not be

fully represented of the universe.

 Non coverage of certain aspects : Due to confidential nature of some documents

the same is not available for the study.

51
 DATA ANALYSIS
AND INTERPRETATION

ANALYTICAL TOOLS

1.Capital Asset Pricing Model (CAPM)

A model that describes the relationship between risk and expected return and that is used
in the pricing of risky securities.
Capital Asset Pricing Model (CAPM)

52
 YEAR Hindustan Nestle ITC LTD
unilever
BETA E.R BETA E.R BETA E.R
2019 0.51 10.59% -0.15 5.95% 0.186 8.30%

2) Cost of capital:
A calculation of a firm's cost of capital in which each category of capital is
proportionately weighted. All capital sources - common stock, preferred stock, bonds and
any other long-term debt - are included in a WACC calculation. All else equal, the
WACC of a firm increases as the beta and rate of return on equity increases, as an
increase in WACC notes a decrease in valuation and a higher risk.

The WACC equation is the cost of each capital component multiplied by its proportional
weight and then summing:

Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate
3) Value of the firm:

Enterprise value (EV), Total enterprise value (TEV), or Firm value (FV) is an

economic measure reflecting the market value of a whole business. It is a sum of claims
of all claimants: creditors (secured and unsecured) and equityholders (preferred and

53
common). Enterprise value is one of the fundamental metrics used in business
valuation, financial modeling, accounting, portfolio analysis, etc.

EV equation

Enterprise value =

common equity at market value (this line item is also known as "market cap")
+ debt at market value (here debt refers to interest-bearing liabilities, both long-
term and short-term)
+ minority interest at market value, if any[2]
+ preferred equity at market value
+ unfunded pension liabilities and other debt-deemed provisions
- cash and cash equivalents
- "extra assets", assets not required to run the business
- investments in associated companies at market value

ITC LTD
  Current Optimal
Debt to Capital 1.75% 30.00%
Cost of capital 8.94% 8.78%
$193,192,67 $194,645,51

Enterprise value 9 6
Value per share $345.00 $346.84

54
INTERPRETATION:

 ITC’s current capital structure has very less leverage for a mature company

(1.75% debt to total capital)

 Since the cost of debt for ITC is less than its cost of capital, it is advisable for ITC

to increase its debt in the overall capital structure

 We suggest an increase of debt from current 1.75% to 30%

 This increase in debt capital will provide enough leverage to ITC and will help

increasing its Enterprise value to the tune of Rs. 1 billion

 It may also bring up the share price value of ITC to Rs. 346.84, which is very

close to its current stock price but in an inflated stock market

NESTLE LTD

  Current Optimal

Debt to Capital 4.95% 0.00%

Cost of capital 7.55% 7.50%

Enterprise value $481,452,000 $490,441,056

Value per share $4,903.00 $4,996.64

55
INTERPRETATION:
 NESTLE’s current capital structure has leverage of around 5%

 Since the cost of debt for Nestle is not less than its cost of capital, it is advisable

for Nestle to decrease its debt in the overall capital structure

 We suggest an decrease of debt from current 4.95% to 0%

 This decrease in debt capital in overall capital structure will help increasing its

Enterprise value to the tune of Rs. 9 billion

 It may also bring up the share price value of Nestle to Rs. 4,996, which is very

close to its current stock price but in an inflated stock market

HUL LTD

  Current Optimal

Debt to Capital 1.29% 40.00%

Cost of capital 9.30% 9.15%

$94,811,99 $95,469,12
Enterprise value 6 0

Value per share $605.00 $608.04

56
INTERPRETATION:

 HUL’s current capital structure has very less leverage for a mature company

(1.29% debt to total capital)

 Since the cost of debt for HUL is less than its cost of capital, it is advisable for

HUL to increase its debt in the overall capital structure

 We suggest an increase of debt from current 1.29% to 40%

 This increase in debt capital will provide enough leverage to HUL and will help

increasing its Enterprise value to the tune of Rs. 5 billion

 It may also bring up the share price value of HUL to Rs. 608, which is very close

to its current stock price but in an inflated stock market

ANALYTICAL TOOL
RATIO ANALYSIS

A RATIO

A ratio is the mathematical relationship between two quantities in the form of a fraction
or percentage.

RATIO ANALYSIS

57
Ratio analysis is essentially concerned with the calculation of relationships which after
proper identification and interpretation may provide information about the operations and
state of affairs of a business enterprise. The analysis is used to provide indicators of past
performance in terms of critical success factors of a business. This assistance in decision-
making reduces reliance on guesswork and intuition and establishes a basis for sound
judgment.

 Profitability-

Profitability

2019 2018 2017 2016

HUL 0.3906944 0.172406 0.147186 0.19867
Nestle 0.164768 0.228976 0.180528 0.199629
ITC 0.140046 0.169934 0.128301 0.113555

58
 0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

INTERPRETATION-
Profitability of HUL increased to 0.39 in 2019 while profitability of Nestle & ITC
remains almost stable in last 4 years.

 Size of the firm-

Size of firm
2019 2018 2017 2016
HUL 3.79646124 3.972809 3.874075 3.870145
Nestle 3.8497 3.7722 3.7235 3.633
ITC 3.8797 3.8114 3.7708 3.7221

59
 4

3.9

3.8

3.7

3.6

3.5

3.4

INTERPRETATION-
Size of the firm of the Nestle & ITC has continuously increased from last 4 years while
HUL size of the firm it increased for 3 years and in 2019 it falls down to 3.7.

 Liquidity-

Liquidity
2019 2018 2017 2016
HUL 1.09332175 2.037284 1.426678 1.432949
Nestle 3.72478 3.583359 3.49265 2.907291
ITC 2.310665 2.146451 3.25057 3.848898

60
 4

3.5

2.5

1.5

0.5

INTERPRETATION-
Liquidity position of the HUL remains almost at the same level while liquidity position of
Nestle continuously increased from last 4 years but liquidity of ITC decreased.

 Asset Structure-

Asset structure
2019 2018 2017 2016
HUL 0.40953 0.25847 0.379934 0.330184
Nestle 0.389314 0.26469 0.201554 0.128551
ITC 0.518228 0.440242 0.347781 0.437345

61
 0.6

0.5

0.4

0.3

0.2

0.1

INTERPRETATION-
Asset Structure of HUL has improved and asset structure of Nestle has increased
continuously from last 4 years while that of ITC remains constant.

 Total Debt To Equity Ratio-

Total Debt To Equity Ratio

2019 2018 2017 2016

HUL 1.23 0.82 0.9 1.15

Nestle 0.04 0.09 0.18 0.1

ITC 0.18 0.11 0.11 0.09

62
 1.4

1.2

0.8

0.6

0.4

0.2

INTERPRETATION-
Total debt to equity ratio of 1:1 is considered to be ideal. None of the company is
having ideal ratio.

63
 FINDINGS,
SUGGESTIONS AND
CONCLUSION

FINDINGS

1. There is impact of Independent Variable i.e. cost of capital on Dependent Variable

i.e. value of the firm to the extent of 52% and Rest by other factors and there is
significant impact of cost of capital on value of firm i.e. less than .05 of itc ltd
2. There is impact of Independent Variable i.e. cost of capital on Dependent
Variable i.e. value of the firm to the extent of 72% and Rest by other factors and
there is significant impact of cost of capital on value of firm i.e. less than .05 of
hul ltd.

64
 3. There is impact of Independent Variable i.e. cost of capital on Dependent Variable
i.e. value of the firm to the extent of 50.5% and Rest by other factors and there is
significant impact of cost of capital on value of firm i.e. less than .05 of nestle ltd.

SUGGESTIONS

We strongly recommend that firms (both highly and lowly geared) should take into
cognizance the amount of leverage incurred because it is a major determinant of firm’s
performance, this is obvious in both the highly geared and lowly geared firms.
Although the general notion is that FMCG companies should have low leverage but it is
not a rule and below is our few recommendations:

65
 1. Companies under study are low geared and we suggest that we should
increase the leverage for each company as the cost of debt for them is low
2. We base our decisions on two factors:
 Enterprise value
 Stock Price
3. We can deduce from the study that increasing leverage can help these
companies in reducing their cost of capital and thus increasing the value of
these firms
4. Firms can also employ the use of cheap finance sources instead of
expensive fixed interest bearing debts.
5. As a caveat we suggest status quo on fixed rate debt and not floating rate
debt

CONCLUSION

Policy implications are the probable outcomes resulting from the implementation of

various recommendations given by the researcher. Researcher suggested that various

66
policies to organization which researcher think that if they implemented in the right

manner increase the earnings of the firm which in turn increases the goodwill of the

firm. If the goodwill of firm is good in the market, then it will raise funds for

company. According to researcher the following are the policy implications:

1. Researcher suggested that HUL should invest more on purchase of current

assets as compared to fixed assets because it is beneficial for company to

increase the liquidity of firm.

2. Since 1:1 is considered to be ideal ratio none of the organization is having

ideal ratio it is either high or low.

3. From results and findings it is clear that correlation of all the firms with

profitability is moderate so firms must try to increase the profitability level.

4. Overall profit of ITC after tax is decreasing so it must try to increase the

profits or must atleast maintain the stability.

5. Maintaining optimum mix of Debt-Equity in their capital structure

67
 BIBLIOGRAPHY

BIBLIOGRAPHY
BOOKS:-
1. Sekran Uma, (Edition 4th) “Research Methods for Business”:
2. Nargundkar Rajendra, (Edition-3rd ) “Marketing Research”:
3. Cooper R. Donald, (Edition-8th) “Business Research Methods”.

68
 4. Mittal R.K., (Edition-6th) “Management Accounting & Financial Management”.
5. James C. Van Horne, (Edition 11th)“Financial Management Policy”.
6. Gupta Shashi K. and Sharma R. K., (Edition-6th)
7. Kothari C.R., (II Revised Edition),“Research Methodology Methods and
Techniques”.
8. Chandra Prasanna (7th Edition) “Financial Management”.
9. Goel D.K Goel Rajesh, (2008 Edition),“Management Accounting and Finance
Management”.
10. Guruswamy S. (Edition-2nd),“Financial services & system”
11. Pandey I.M., (Edition-3rd) “Financial Management”.
12. Jain T.R. and Aggarwal S.C., (Edition-3rd) “Statistics for MBA”.-
13. Khan M.Y., (Edition-5th) “Financial Management”.-
14. Bhalla V.K, (Edition-9th)“Working capital management”.
15. Periosamy.P., (Edition-2nd) “Financial Management”.
JOURNALS:-
16. Dhankar S Raj and Boora S Ajit, (July-September 1996), “Cost of Capital,
Optimal Capital Structure and Value of Firm” “The Journal Of Finance”.
17. BRAV OMAR ,( February 2009)Vol. LXIV, No.1, “Access to Capital, Capital
Structure and Funding of the Firm” “Journal of Finance”.

18. Gill Amarjit, (December 2011)”, Vol. 28 No.4, “The effect of Capital Structure
on Profitability” “International Journal of Management”. -

19. Pindado Julia And Chabela De La Torre ;(2010),“Capital Structure: New

Evidence from the Ownership Structure”“International Review of Finance
20. Lemmon L.Michael and ZenderF.Jaime ,(2010),Vol. 45(5), “Debt Capacity and
Capital Structure Theories” “Journal of Financial & Quantitative Analysis”.

21. Varadi Kata (2009), “Relationship Between Industry and Capital structure from
an Asymmetric Information Perspective” “International Journal of Management
Cases”.
22. Muzir Erol, (August 2011).Vol.11 No.2, “Triangle Relationship among Firm
Size, Capital Structure Choice and Financial Performance” “Journal of
Management Research”

69
 23. RaiyaniR.Jagdish,(November 2011),Vol.4 (11), “The impact of Financial
Analysis on Capital Structure Decisions in Selected Indian Industries” “Advances
in Management”:

Magazines:-
24. Sharma S.G, “The Management accountant”
25. Phuskele Preeti “ICFAI Reader 2009”
26. Luther C.T.Sam,“The Management accountant (October 2007)”
27. VeniDr. P ,“The Management accountant (December 2002)”
28. Mahesh Chand Garg,“The Management accountant (February 2002)”
29. Verma Dheeraj, “Business World (26 April, 2010)”
30. Chand S.R, “Proficient (January 2010)”
31. Kaushik Chakroborthy,”ICFAI READER(March 2010)”
Websites
32. http://money.rediff.com/companies/hul-ltd//balance-sheet.
33. http://www.moneycontrol.com/financials/htc

34. http://timesofindia.indiatimes.com/topic/hul

35. http://economictimes.indiatimes.com/nestle-ltd/stocknews/companyid-10506.cms.

36. http://www.nestle.com/

37. http://www.business-standard.com/stockpage/stock_details.php?stk_id=500179

38. http://en.wikipedia.org/wiki/itc

39. www.investopedia.com/terms/w//capital structure sp

40. http://www.investorwords.com/733/capital structur

ANNEXURE
BALANCE SHEET OF ITC LTD
Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

70
Total Share 790.18 781.84 773.81 381.82 377.44
Capital
Equity Share 790.18 781.84 773.81 381.82 377.44
Capital
Share 0.00 0.00 0.00 0.00 0.00
Application
Money
Preference 0.00 0.00 0.00 0.00 0.00
Share Capital
Reserves 21,497.6 17,957.0 15,126.1 13,628.1 13,302.5
7 0 2 7 5
Revaluation 0.00 53.05 53.34 54.39 55.09
Reserves
Networth 22,287.8 18,791.8 15,953.2 14,064.3 13,735.0
5 9 7 8 8
Secured Loans 0.00 1.77 1.94 0.00 11.63
Unsecured 66.40 77.32 97.26 107.71 165.92
Loans
Total Debt 66.40 79.09 99.20 107.71 177.55
Total 22,354.2 18,870.9 16,052.4 14,172.0 13,912.6
Liabilities 5 8 7 9 3
Mar '19 Mar '18 Mar '17 Mar '16 Mar '15

12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 16,679.1 13,926.3 12,765.8 11,967.8 10,558.6
7 4 2 6 5
Less: Accum. 5,469.83 4,819.66 4,420.75 3,825.46 3,286.74
Depreciation
Net Block 11,209.3 9,106.68 8,345.07 8,142.40 7,271.91
4
Capital Work in 1,487.79 2,572.06 1,333.40 1,008.99 1,214.06
Progress
Investments 7,060.29 6,316.59 5,554.66 5,726.87 2,837.75
Inventories 6,600.20 5,637.83 5,267.53 4,549.07 4,599.72
Sundry Debtors 1,163.34 986.02 907.62 858.80 668.67
Cash and Bank 3,615.00 140.50 98.77 120.16 68.73
Balance
Total Current 11,378.5 6,764.35 6,273.92 5,528.03 5,337.12
Assets 4

71
Loans and 2,881.47 1,952.54 2,173.89 1,929.16 2,150.21
Advances
Fixed Deposits 0.00 2,678.43 2,144.47 1,006.12 963.66
Total CA, Loans 14,260.0 11,395.3 10,592.2 8,463.31 8,450.99
& Advances 1 2 8
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current 6,404.43 6,108.60 5,668.10 4,619.54 4,121.59
Liabilities
Provisions 5,258.75 4,411.07 4,104.84 4,549.94 1,740.49
Total CL & 11,663.1 10,519.6 9,772.94 9,169.48 5,862.08
Provisions 8 7
Net Current 2,596.83 875.65 819.34 -706.17 2,588.91
Assets
Miscellaneous 0.00 0.00 0.00 0.00 0.00
Expenses
Total Assets 22,354.2 18,870.9 16,052.4 14,172.0 13,912.6
5 8 7 9 3

Contingent 2,122.83 2,533.61 2,228.40 258.73 261.36

Liabilities
Book Value (Rs) 28.21 23.97 20.55 36.69 36.24

Profit & Loss For ITC Ltd.

(Rs in Cr)
Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Income :
Operating Income 29,901.2 25,090.1 21,120.8 18,567.4 14,985.8
7 1 3 5 1
Expenses
Material Consumed 11,595.6 9,783.89 8,292.71 7,588.23 6,234.66
1
Manufacturing Expenses 550.11 1,087.99 982.25 801.13 797.00
Personnel Expenses 1,387.01 1,265.41 1,178.46 1,014.87 903.37

72
 Selling Expenses 0.00 1,673.54 1,437.91 1,238.24 1,067.83
Adminstrative Expenses 5,741.03 2,357.47 2,091.01 1,864.54 1,133.48
Expenses Capitalised 0.00 0.00 -60.54 -71.88 -72.55
Cost Of Sales 19,273.7 16,168.3 13,921.8 12,435.1 10,063.7
6 0 0 3 9
Operating Profit 10,627.5 8,921.81 7,199.03 6,132.32 4,922.02
1
Other Recurring Income 938.70 612.05 647.91 496.27 422.80
Adjusted PBDIT 11,566.2 9,533.86 7,846.94 6,628.59 5,344.82
1
Financial Expenses 86.47 87.02 78.11 90.28 47.65
Depreciation 795.56 698.51 655.99 608.71 549.41
Other Write offs 0.00 0.00 0.00 0.00 0.00
Adjusted PBT 10,684.1 8,748.33 7,112.84 5,929.60 4,747.76
8
Tax Charges 3,265.79 2,737.08 2,287.69 1,965.43 1,565.13
Adjusted PAT 7,418.39 6,011.25 4,825.15 3,964.17 3,182.63
Non Recurring Items 0.00 149.20 127.85 48.78 3.41
Other Non Cash 0.00 2.51 35.21 48.65 81.52
adjustments
Reported Net Profit 7,418.39 6,162.37 4,987.61 4,061.00 3,263.59
Earnigs Before 9,390.98 6,711.63 5,049.52 4,919.74 3,992.01
Appropriation
Equity Dividend 4,148.46 3,518.29 3,443.47 3,818.18 1,396.53
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Dividend Tax 705.03 570.75 558.62 634.15 237.34
Retained Earnings 4,537.49 2,622.59 1,047.43 467.41 2,358.14
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N NESTLE LTD\

Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Sources of funds
Owner's fund
Equity share capital 96.42 96.42 96.42 96.42 96.42
Share application money - - - - -
Preference share capital - - - - -
1,177.5

Reserves & surplus 1,701.99 4 759.00 484.85 376.93

Loan funds

73
 Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Secured loans 0.24 0.84 - - 0.82
Unsecured loans 1,049.95 970.03 - - -
2,244.8

Total 2,848.60 2 855.41 581.27 474.17

Uses of funds
Fixed assets
2,552.2 1,854.7

Gross block 4,368.68 1 0 1,640.79 1,404.85

Less : revaluation reserve - - - - -
Less : accumulated depreciation 1,164.41 976.46 841.96 744.59 651.85
1,575.7 1,012.7

Net block 3,204.27 5 4 896.20 752.99

1,418.6

Capital work-in-progress 344.08 4 348.91 79.63 109.17

Investments 364.86 134.37 150.68 203.26 34.90
Net current assets
1,333.0 1,094.7

Current assets, loans & advances 1,250.71 3 0 903.36 836.86

2,216.9 1,751.6

Less : current liabilities & provisions 2,315.32 6 1 1,501.18 1,259.75

-

Total net current assets 1,064.61 -883.93 -656.91 -597.82 -422.89

Miscellaneous expenses not written - - - - -
2,244.8

Total 2,848.60 2 855.41 581.27 474.17

Notes:
Book value of unquoted investments - 134.37 150.68 203.26 34.90

74
 Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Market value of quoted investments - - - - -
Contingent liabilities 103.86 - - 63.07 84.90
Number of equity sharesoutstanding

(Lacs) 964.16 964.16 964.16 964.16 964.16

Profit loss account

(Rscrore)

Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Income
Operating income 8,334.53 7,490.82 6,260.21 5,141.90 4,328.65
Expenses
Material consumed 3,817.04 3,614.71 3,084.51 2,472.64 2,122.74
Manufacturing expenses 370.89 416.30 330.11 252.92 233.21
Personnel expenses 663.38 546.46 433.44 432.38 314.58
Selling expenses - 691.84 623.14 516.55 449.40
Adminstrative expenses 1,625.19 683.55 543.60 452.03 371.77
Expenses capitalised - - - - -
Cost of sales 6,476.50 5,952.86 5,014.80 4,126.52 3,491.70
Operating profit 1,858.03 1,537.96 1,245.42 1,015.39 836.95
Other recurring income 31.03 46.20 36.46 27.63 32.91
Adjusted PBDIT 1,889.06 1,584.16 1,281.87 1,043.02 869.86
Financial expenses 26.60 9.06 1.07 1.40 1.64

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 Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Depreciation 277.15 153.33 127.75 111.27 92.36
Other write offs - - - - -
Adjusted PBT 1,585.31 1,421.77 1,153.04 930.35 775.86
Tax charges 484.69 426.38 326.45 261.97 238.74
Adjusted PAT 1,100.62 995.39 826.60 668.37 537.12
Non recurring items -32.69 -33.85 -7.93 -13.37 -3.03
Other non cash adjustments - - - - -
Reported net profit 1,067.93 961.55 818.66 655.00 534.08
Earnigs before appropriation 1,724.82 1,296.05 961.19 755.11 546.60
Equity dividend 391.76 392.22 467.62 467.62 409.77
Preference dividend - - - - -
Dividend tax 75.86 75.39 77.20 79.47 69.64
Retained earnings 1,257.20 828.43 416.37 208.02 67.19

HUL LTD

Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Sources of funds
Owner's fund
Equity share capital 216.25 216.15 215.95 218.17 217.99

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 Mar '19 Mar '18 Mar '17 Mar '16 Mar '15
Share application money - - - - -
Preference share capital - - - - -
Reserves & surplus 2,457.77 3,296.78 2,443.57 2,364.68 1,842.85
Loan funds
Secured loans - - - - 144.65
Unsecured loans - - - - 277.30
Total 2,674.02 3,512.93 2,659.52 2,582.85 2,482.79
Uses of funds
Fixed assets
Gross block 3,868.95 3,564.35 3,531.50 3,581.96 2,881.73
Less : revaluation reserve - - - 0.67 0.67
Less : accumulated depreciation 1,576.05 1,416.88 1,362.40 1,419.85 1,274.95
Net block 2,292.90 2,147.47 2,169.10 2,161.44 1,606.11
Capital work-in-progress 215.64 215.45 288.76 273.96 472.07
Investments 2,330.66 2,438.21 1,260.67 1,264.08 332.62
Net current assets
Current assets, loans & advances 6,673.27 6,157.14 6,444.13 5,818.89 6,040.04
Less : current liabilities & provisions 8,838.45 7,445.34 7,503.14 6,935.52 5,968.06
- - - -
Total net current assets 2,165.18 1,288.20 1,059.01 1,116.63 71.98
Miscellaneous expenses not written - - - - -
Total 2,674.02 3,512.93 2,659.52 2,582.85 2,482.79
Notes:
Book value of unquoted investments 515.87 153.38 108.91 466.46 317.30
Market value of quoted investments 1,982.78 2,469.28 1,279.49 953.58 71.09
Contingent liabilities 894.21 1,009.23 922.92 468.49 417.26
Number of equity sharesoutstanding
(Lacs) 21624.72 21615.12 21594.72 21816.87 21798.76

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Income :
Operating Income 25,805.04 22,118.64 19,689.91 17,769.12 20,504.28
Expenses
Material Consumed 13,597.49 11,832.45 10,199.25 8,984.50 10,945.71
Manufacturing Expenses 402.05 922.37 825.99 656.53 598.71
Personnel Expenses 1,318.34 1,095.54 961.27 936.30 1,152.12
Selling Expenses 0.00 3,705.28 3,811.55 3,262.12 3,277.74
Adminstrative Expenses 6,483.41 1,237.80 1,227.36 1,131.97 1,565.05
Expenses Capitalised 0.00 0.00 0.00 0.00 0.00
Cost Of Sales 21,801.29 18,793.44 17,025.42 14,971.42 17,539.33
Operating Profit 4,003.75 3,325.20 2,664.49 2,797.70 2,964.95
Other Recurring Income 606.90 162.35 254.81 144.36 174.94
Adjusted PBDIT 4,610.65 3,487.55 2,919.30 2,942.06 3,139.89
Financial Expenses 25.15 1.24 0.24 6.98 25.32
Depreciation 236.02 218.25 220.83 184.03 195.30
Other Write offs 0.00 0.00 0.00 0.00 0.00
Adjusted PBT 4,349.48 3,268.06 2,698.23 2,751.05 2,919.26
Tax Charges 1,177.04 785.28 573.87 648.36 572.94
Adjusted PAT 3,172.44 2,482.78 2,124.36 2,102.69 2,346.32
Non Recurring Items 608.40 200.97 184.67 55.37 101.60
Other Non Cash adjustments 15.83 7.65 -3.06 43.97 48.53
Reported Net Profit 3,796.67 2,691.40 2,305.97 2,202.03 2,500.71
Earnigs Before Appropriation 5,570.63 3,927.00 3,108.16 2,678.36 2,693.95
Equity Dividend 3,999.99 1,620.94 1,410.60 1,417.94 1,634.51
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Dividend Tax 655.69 262.96 231.36 238.03 277.79
Retained Earnings 914.95 2,043.10 1,466.20 1,022.39 781.66

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