PINAK CHATTERJEE

Roll No- 23PGDM087

INDIVIDUAL ASSIGNMENT
Section B
FINANCIAL International Management Institute
Kolkata

MANAGEMENT
CORE
COURSE CODE- FIN1106
SUBMITTED TO – Dr.Chanchal Chatterjee
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Contents-
Sl.No. TOPICS PAGE NUMBER

1 About Colgate Palmolive (INDIA) Ltd 2

2 Cost Of Capital(WACC) 3-4

3 Dividend Per Share 4-6

4 Debt Equity Ratio 6-7

5 WACC and Debt Equity Ratio Relation 8-9

6 DPS and Debt Equity Ratio Relation 9-11

7 Borrowings 11-15

8 Capital Budgeting Decision 15-16

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About Colgate Palmolive (India) Ltd :

Colgate-Palmolive, around the world has earned a place in more households than any other
brand. The same is true for Colgate-Palmolive (India). Colgate-Palmolive (India) Ltd is a
personal care and oral care company.
The company operates under a single reportable segment, Personal Care (including Oral
Care), which includes soaps, cosmetics, toilet preparations, and other products. The company
manufactures oral-care products, such as toothpaste, toothbrushes, whitening products, and
mouthwash solutions. Personal care products include body wash, hand soaps, skincare, and
hair care. The household-care products include dishwasher substances.

Objective of the Report: The Aim of this report is to find an analysis of WACC, Dividends
per share, debt-equity ratio, the relation between WACC and debt-equity ratio, relation
between DPS and Debt Equity ratio. Following this, the next task would be to find the
different kinds of borrowings of the company and its financing activities. Lastly, it would aim
to find the method used by Colgate Palmolive (INDIA) Ltd to make its capital budgeting
decisions.

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A. Cost of Capital

Cost Of Capital
YEAR
(WACC)

31-03-2023 9.0378

Age
border31- 9.2042
03-2022

31-03-2021 8.3653

SOURCE: Bloomberg(CLGT IS Equity)Colgate Palmolive (INDIA)Ltd

Cost Of Capital (WACC)

9.4
9.2 9.2042
9 9.0378
8.8
r%

8.6
8.4 8.3653
8.2
8
7.8
01-01-2021 01-01-2022 01-01-2023

31-03-2021 31-03-2022 31-03-2023

r% 8.3653 9.2042 9.0378

Financial Year

Analysis:

✓ Financial Cost Efficiency: A lower WACC generally indicates that the company is able
to fund its operations and growth at a lower overall cost. Conversely, a higher WACC
suggests that the company is facing higher costs for capital.
✓ Market Conditions: Fluctuations in the WACC might reflect changes in interest rates,
market conditions, or shifts in the company's capital structure.

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Interpretation:

✓ 2021 to 2022 Increase: The significant rise in the WACC between 2021 and 2022
suggests that the company may have faced higher costs when raising capital or
borrowing during that period. This increase in costs could have been caused by
changes in interest rates or modifications to the company's capital structure, leading
to more expensive financing options overall.
✓ 2022 to 2023 Decrease: The decrease in the WACC observed between 2022 and 2023
indicates a shift from the previous trend. This decline could suggest that the company
has succeeded in reducing its overall cost of capital, possibly by securing less expensive
financing or optimizing its capital structure.

Conclusion:

✓ The Weighted Average Cost of Capital (WACC) is a metric that represents the
company's cost of financing over time. When the WACC decreases, as observed
between 2022 and 2023, it could indicate better financial management by the
company or a more favorable financing environment.
✓ Understanding the factors that influence fluctuations in capital cost provides insight
into financial strategies, market conditions, and access to affordable capital for
operations and growth initiatives.

B. Dividends Per Share

Dividends Dividend
Year
Paid Per share
2021 92,111.20 38
2022 1,05,718.85 40
2023 1,05,745.18 39
SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

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YEAR WISE DIVIDEND PAID

1,10,000.00
1,05,745.18 1,05,718.85
1,05,000.00
AXIS TITLE

1,00,000.00

95,000.00 92,111.20
90,000.00

85,000.00
Dividends Paid
2023 1,05,745.18
2022 1,05,718.85
2021 92,111.20
AXIS TITLE

2023 2022 2021

Observations:

• Total Dividends Paid: It is found that there is an increase in total dividends paid from
2021 to 2022 and a slight increase from 2022 to 2023. This signifies a general trend of
growing dividends over the years.
• Dividend Per Share: The dividend paid per share was Rs. 38 in 2021, which increased
to Rs. 40 in 2022, and then the dividend per share decreased slightly to Rs. 39 in 2023.
Although the overall dividends increased, the per-share amount saw a small decrease
in 2023 compared to the previous year.

Interpretation:

✓ Overall Growth: There is a noticeable increase in the total amount of dividends paid,
indicating a positive trend., indicating the company's potential growth or stability in
generating profits over the years.
✓ Per-Share Performance: While the total dividends increased, the decrease in dividend
per share from 2022 to 2023 could imply a potential change in the number of
outstanding shares or a shift in the dividend distribution strategy.
✓ Financial Health: Consistent dividend payments over the years often suggest a
financially healthy company, Further investigation into the company's financial

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situation and dividend distribution may be warranted due to the slight decrease in
dividend per share in 2023..

In summary, the company appears financially sound, consistently paying dividends. However,
the change in dividend per share from 2022 to 2023 may indicate a shift in strategy or
circumstances affecting the per-share distribution.

C.Debt to Equity Ratio

Debt to
Year Equity
Ratio
March 31, 2021 0.08

March 31, 2022 0.05

March 31, 2023 0.04

SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

Debt to Equity Ratio

0.09
0.08
0.08
YEar wise debt equity ratio

0.07
0.06
0.05
0.05
0.04
0.04
0.03
0.02
0.01
0
March 31, 2021 March 31, 2022 March 31, 2023
Debt to Equity Ratio 0.08 0.05 0.04
Axis Title

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Interpretation:

✓ Decreasing Trend: The trend shows a decreasing Debt to Equity Ratio over the years.
A lower Debt to Equity ratio generally indicates that the company relies less on
borrowed funds (debt) and more on shareholder equity to finance its operations.
✓ Financial Health: A declining Debt to Equity Ratio often suggests improved financial
health, as the company may be reducing its debt or increasing equity, both of which
can contribute to greater stability and better financial standing.
✓ Stability and Efficiency: A lower debt-to-equity ratio could signify better stability and
operational efficiency, as the company is less burdened by interest payments and
financial obligations associated with high levels of debt.

Analysis:

✓ Improving Financial Position: The decrease in the Debt-to-Equity Ratio from 0.08 in
2021 to 0.04 in 2023 indicates a positive trend. It suggests that the company has been
managing its capital structure more efficiently, potentially paying off debts or boosting
shareholder equity.
✓ Investor Confidence: A decreasing Debt to Equity Ratio could positively influence
investor confidence as it indicates a lower financial risk due to reduced reliance on
debt financing.
✓ Business Strategy: The company may focus on reducing debt, generating cash flow, or
optimizing capital structure to support growth or strengthen financial position.

Conclusion:

The declining trend in the Debt-to-Equity Ratio over the last three years indicates that the
company is moving in a positive financial direction. However, it's important to also consider
other financial metrics and factors that may be affecting the company's operations in order to
gain a comprehensive understanding of its overall financial health and strategy. Generally, a
decreasing Debt to Equity Ratio suggests that the company may be in a potentially healthier
and more stable financial position.

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D. WACC and Debt Equity Ratio Relation

Debt to
Year WACC Equity
Ratio

31-03-2021 8.365 0.08

31-03-2022 9.204 0.05
31-03-2023 9.038 0.01
SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

WACC and Debt Equity Ratio Relation

9.4 0.09
9.2042
9.2 0.08 0.08
9.0378

DEBT TO EQUITY RATIO

9 0.07
0.06
8.8
WACC

0.05 0.05
8.6
8.3653 0.04 0.04
8.4
0.03
8.2 0.02
8 0.01
7.8 0
01-01-2021 01-01-2022 01-01-2023
31-03-2021 31-03-2022 31-03-2023
r% 8.3653 9.2042 9.0378
Debt to Equity Ratio 0.08 0.05 0.04

FINANCIAL YEAR

r% Debt to Equity Ratio

Interpretation:

➢ Cost of Capital Trend: The Cost of Capital (r%) shows some fluctuation over the three
years, experiencing an increase from 2021 to 2022 and then a slight decrease in 2023.
➢ Debt-to-Equity Ratio Trend: The Debt-to-Equity Ratio displays a decreasing trend over
the same period, gradually declining from 0.08 in 2021 to 0.04 in 2023.

Relationship Between Cost of Capital and Debt Equity Ratio:

➢ Inverse Relationship: There's usually a connection between the cost of capital and the
debt-to-equity ratio. When a company has a higher debt-to-equity ratio, it means they

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have more debt than equity, which leads to higher leverage and potentially higher risk.
This increased risk is why financing costs are higher, resulting in a higher cost of capital.
➢ Observation: In this scenario, as the debt-to-debt-equity ratio decreased over the
years, the cost of capital initially increased from 2021 to 2022 and then slightly
decreased in 2023.
➢ Potential Link: The Debt-to-Equity Ratio decrease suggests lower financial risk and a
stronger capital structure, contributing to the slight decrease in the Cost of Capital in
2023.

Summary:

✓ The inverse relationship between the Cost of Capital and Debt to debt-to-equity ratio
seems to hold true based on the provided data.
✓ A declining Debt to Equity Ratio might suggest better financial health and reduced
financial risk for the company, potentially influencing a decrease in the cost of capital
observed in 2023.
✓ The link between these two metrics suggests that managing the capital structure by
reducing reliance on debt could potentially lead to a reduction in the cost of capital,
contributing to improved financial conditions for the company.

Determining the cost of capital is not solely dependent on the company's capital structure.
Other factors such as market conditions, interest rates, and overall financial strategy also have
a significant impact.

E. DPS and Debt Equity Ratio Relation

Debt Equity Dividend

YEAR Ratio Per Share
2021 0.08 38
2022 0.05 40
2023 0.04 39
SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

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DPS and Debt Equity Ratio Relation

1 2 3
0.09 0.08 40.5
0.08 40

DIVIDEND PER SHARE

40
0.07
39.5
0.06 0.05
0.05 0.04 39 39
DEBT EQUITY RATIO

0.04 38.5
0.03
38 38
0.02
0.01 37.5
0 37
1 2 3
Debt Equity Ratio 0.08 0.05 0.04
Dividend Per Share 38 40 39
AXIS TITLE

Debt Equity Ratio Dividend Per Share

Interpretation:

✓ Debt Equity Ratio Trend: Over the three years, the company's reliance on debt relative
to equity for financing its operations has reduced, as reflected by the clear decreasing
trend in the Debt Equity Ratio.
✓ Dividend Per Share Trend: The Dividend Per Share increased in 2022 but slightly
decreased in 2023.
✓ Relationship Between Debt Equity Ratio and Dividend Per Share:
✓ Inverse Relationship: In finance, the Debt Equity Ratio is an important indicator of a
company's financial leverage. A higher ratio usually means that the company has taken
on more debt, which can increase its financial risk. To manage this risk, the company
may decide to conserve cash by reducing dividend payouts, which can be used to pay
off debts or invest in growth opportunities.
✓ Observation: In this scenario, the Dividend Per Share initially increased (from 2021 to
2022) and then slightly decreased in 2023 as the Debt Equity Ratio decreased from
2021 to 2023.
✓ Potential Impact: The decrease in equity ratio indicates a stronger financial position
for the company. This could initially increase investor confidence and lead to higher
dividends, as observed from 2021 to 2022. However, the slight decrease in Dividend
Per Share in 2023 could indicate a shift in the company's priorities. It may be focusing

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on reinvesting in the business or managing a balance between dividends and other

financial obligations.

Summary:

✓ The declining Debt Equity Ratio indicates that the company's financial stability has
improved and its financial risk has reduced.
✓ Initially, the increase in the Dividend Per Share from 2021 to 2022 may have been
driven by the company's improved financial position.
✓ In 2023, the Dividend Per Share shows a slight decrease despite the Debt Equity Ratio
continuing to decrease. This might indicate that the company has made a strategic
decision to balance between dividend payouts and other financial needs, such as
reinvestment or debt management.
✓ The relationship between the Debt Equity Ratio and Dividend Per Share can be
intricate and influenced by several factors beyond these two metrics. However, a
general trend suggests a possible correlation between a decreasing debt ratio and the
company's dividend policy. This could indicate a shift in priorities regarding capital
allocation.
✓ F. Borrowings-

Colgate Palmolive (India) LITD shows now kinds of borrowings , that is, no short term
borrowings and no long term borrowings.But, after thorough research it can be stated that
the company has cerrain lease liabilities.

The Company has lease contracts for various items of plant and equipments, vehicles, offices
and residential buildings.Leases of plant and equipment has lease term of 10 years, while
other leases have lease terms ranging from 2 years to 9years.The Company's obligations
under its leases are secured by the lessor’s title to the leased assets. The Company haslease
contracts that includes extension option, however the lease term in respect of such extension
option is not definedin the contract.The Company also has certain leases with lease terms of
12 months or less and leases of low value. The Company applies
the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.

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As at As at As at
March 31, March 31, March 31,
2021 2022 2023
Lease Liabilities (in lakhs) (in lakhs) (in lakhs)
Non current 7,735.57 6,901.41 5,674.06
Current 1,403.95 1,403.95 1,222.09
SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

Lease Liabilities
9,000.00 1,450.00
NON-CURRENT LEASE LIABILITIES

7,735.57
8,000.00

CURRENT LEASE LIABILITIES

6,901.41 1,400.00
7,000.00
5,674.06 1,350.00
6,000.00
5,000.00 1,300.00
4,000.00 1,250.00
3,000.00
1,200.00
2,000.00
1,000.00 1,150.00

0.00 1,100.00
As at As at As at
March 31, 2021 March 31, 2022 March 31, 2023
(in lakhs) (in lakhs) (in lakhs)
Non current 7,735.57 6,901.41 5,674.06
Current 1,403.95 1,403.95 1,222.09
AXIS TITLE

Non current Current

Thereby, it can be stated that the company has funded its financing activities majorly through
equity and that is the soleful reason of having less debt to equity ratio.

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Equity Share Capital

1.Authorised Equity Share Capital:

Equity Share
Number of Capital (par value
shares in Lakhs)
As at April 1,
2023 1,37,00,00,000 13,700.00
As at April 1,
2022 1,37,00,00,000 13,700.00
As at April 1,
2021 1,37,00,00,000 13,700.00
SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

2.Issued, Subscribed and Paid-up:

Equity Share
Number of Capital (par value
Year shares in Lakhs)
As at April 1,
2023 27,19,85,634 2,719.86
As at April 1,
2022 27,19,85,634 2,719.86
As at April 1,
2021 27,19,85,634 2,719.86
SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

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3.Other Equity

As at March As at March As at March

31, 2023 (in 31, 2022 (in 31, 2021 (in
lakhs) lakhs) lakhs)
Securities Premium Account 1,279.93 1,279.93 1,279.93
General Reserve 38,437.13 38,437.13 38,437.13
Share Options Outstanding
Account -451.13 222.3 -37.65
Retained Earnings 1,29,652.64 1,30,808.54 74,187.03
1,68,918.57 1,70,747.90 1,13,866.44
SOURCE: Financial Reports of 2023-2022, 2022-2021 and 2021-2020 of Colgate Palmolive (INDIA) Ltd

✓ Authorized Equity Share Capital:

The share capital of the company has remained unchanged for the last three years (01.04.2021-
01.04.2023) at 1,37,00,00,000 shares with a nominal value of 13,700.00 Lakh. This indicates
that the company has not requested additional permission to issue shares during this period.

✓ Issued, Subscribed and Paid-up:

The number of shares issued, subscribed and paid up also remained unchanged during the three
years at 27,19,85,634 shares with a face value of 2,719.86 lakhs. This indicates that the
company has not issued new shares or bought back old ones.

✓ Other Equity:
• Securities Premium Account:

The securities payment account has remained stable at 1279.93 lakhs for three years. This
account usually represents the premium received from issuing shares in excess of their par
value. Stability refers to a consistent pricing strategy or the absence of recent large overpricing
issues.

• General Reserve:

Total reserve has remained flat at 38,437.13 lakhs over the last three years. General funds are
created to strengthen the financial position of the company and are not specifically reserved for

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anything. The stability of this fund shows a consistent approach to preserve profits for future
needs.

• Share Options Outstanding Account:

The external account of stock options fluctuated and decreased from 222.3 lakhs (31 March
2022) to -451.13 lakhs (31 March 2023). A negative value may indicate that some options were
exercised or expired during the year, resulting in a reduction of debt.

• Retained Earnings:

Retained earnings increased from ₹ 74,187.03 lakh (as on March 31, 2021) to ₹ 1,29,652.64
lakh (as on March 31, 2023). This means that the company has kept a significant portion of its
profits over the years. Accumulated profits can be used for future investments, debt repayment
or dividend distribution.

• Total Other Equity:

Those other shares total 1,68,918.57 lakhs (as on March 31, 2023) against 1,70,747.90 lakhs
(as on March 31, 2022) and 1,13,866.44 lakhs (as on March 31, 2021). The general increase
indicates a positive development in the company and stock position.

Conclusion:

The annual accounting report and financial operations related to the company's shares show
stable and rational financial management. The consistency of the principal, issued and paid-in
capital indicates that the share issue has been measured. The stability of inventories and the
positive development of accumulated profits reflect a sound financial strategy that contributes
to the general financial condition of the company. Fluctuations in the stock option out-of-
pocket account are typical for companies that offer stock options to employees and are not
necessarily cause for concern.

G.Capital Budgeting decisions-

As per the financial reports of 2023-2022 , 2022-2021 and 2021-2020 of Colgate Palmolive
(India) Ltd-

Current financial assets and current financial liabilities have fair values that approximate their
carrying amounts due to their short-term nature. Non-current financial assets and non-current

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financial liabilities have fair values that approximate to their carrying amounts as it is based
on the net present value of the anticipated future cash flows.
Therefore, the Capital Budgeting decision adopted by Colgate Palmolive (INDIA) Ltd is
NPV (Net Present Value).

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