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Emami limited

Submitted by- Kamaldeep Tuteja


(FSB1)

1
Table of Contents
 Company Background
 Products
 Board of Directors
 Management and Analysis Report
 Competitor Analysis
 Shareholding Pattern
 Summary chart
 Promoters’ Shareholdings
 P&L Account and Balance Sheet
 Ratio Analysis
 Projections
 WACC
 FCFF and FCFE
 Conclusion- Why to invest in Emami Ltd. ?

2
Company Background-
Emami Limited is one of the leading and fastest growing personal and healthcare businesses in
India, with an enviable portfolio of household brand names such as BoroPlus, Navratna, Fair
and Handsome, Zandu Balm, Mentho Plus Balm, Fast Relief and Kesh King.
Established in 1974, Emami have a portfolio of over 300 products based on ayurvedic
formulations. Their current operations comprise more than 60 countries including GCC, Europe,
Africa, CIS countries and the SAARC. Over 121 Emami products are sold every second some
where around the world. Emami Limited, the flagship company of the Group, recorded a
turnover of Rs 2533 crore, 2016-17. They employ 3100 people, reach out to 40 lakh plus retails
outlets through a network of 3250 distributors and have invested in Eight plants, Four regional
offices, 1 overseas unit, Eight overseas subsidiaries and 33 distribution centres across India.
Emami acquired the heritage brand Zandu on the basis of huge business synergy between the
two brand portfolios.
Emami also acquired Ayurvedic Hair & scalp business of "Kesh King" as a business strategy.

Products-
For more than 35 years Emami has been innovating and launching brands meeting multiple
consumer needs, spanning across various income groups, for young to old and everyone in -
between. They are passionate about creating best in class and affordable brands in health and
personal care markets.

3
Product Name Category

Boroplus Antiseptic cream

Navratana Oil

Zandu balm Healthcare


Fair and Handsome
Fairness cream
Mentho plus balm
fast relief Healthcare

Zandu Sona Chandi Healthcare

Kesari Jivan Healthcare

Vasocare Petroleum Jelly

Zandu Healthcare Healthcare

7 Oils in One Oil

HE Deodrants

Diamond Shine Hair colour

Kesh King Haircare

4
Board of Directors

Designation Name
R S Agarwal
Chairman
Sushil K Goenka
Managing Director
R S Goenka
Whole-time Director
K N Memani
Director
Y P Trivedi
Director
Amit Kiran Deb
Director
S B Ganguly
Director
Mohan Goenka
Director
Aditya Vardhan Agarwal
Director
Harsh Vardhan Agarwal
Director
Priti A Sureka
Director
P K Khaitan
Director
M D Mallya
Director
Prashant Goenka
Director
Rama Bijapurkar
Director
C K Dhanuka
Independent Director
A K Joshi
Vice President & CS

5
Management & Analysis Report-

Capital Market

- Market Capitalisation of nearly Rs.24000 cr. (as on 31ST March 2017)

- Shareholders’ wealth increased more than 46 times and more than 10 times following
the public issue in March 2005 and QIP in July 2009 respectively.

Operations

- Direct reatail reach increased to 7.3 Lacs outlrts along with distributor strength of 3250.
- New unit at Pacharia, Guwahati, commenced operations in February 2017. Planned
outlay of Rs.300 cr.

Working Capital

- Average inventory holding increased from 23 days to 26 days.

- Average collection period decreased from 20 days to 14 days.

Brands

- Navratna Oil increased market share by 125bps at 61.1%.

- Brand extension Cool Talcum Powder gain market share by 40bps to 25.6%

- Kesh King gained market share by 180bps to 32.1%

6
Competitor Analysis-

Name Market Cap. Sales Net Profit Total Assets


(Rs. cr.) Turnover

HUL 303,813.26 31,890.00 4,490.00 6,287.00

Godrej Consumer 73,208.86 4,748.10 848.03 4,501.49

Dabur India 60,076.66 5,369.84 998.33 3,914.13

Marico 41,501.29 4,850.75 842.70 3,024.65

P and G 31,577.80 2,320.40 432.73 526.12

Colgate 29,783.79 3,981.82 577.43 1,107.21

Emami 25,580.39 2,340.75 346.37 1,827.32

Gillette India 21,195.22 1,733.60 253.08 500.61

Godrej Ind 18,764.02 1,500.09 -145.24 4,028.11

Bajaj Corp 7,065.25 792.54 220.96 516.75

Jyothy Labs 6,852.73 1,631.97 202.05 694.80

JHS Svendgaard 278.38 105.48 21.98 134.88

GKB Ophthalmics 34.91 38.32 0.63 36.70

7
Shareholding Pattern-

Category of shareholders 2013 2014 2015 2016 2017

(A). Promoter & Promoter Group


1. Resident Individuals / HUF 10.42 10.36 10.22 8.95 8.94
2. Resident Body Corporates/ 60.15 60.44 60.63 61.74 61.74
others
3. Foreign Body Corporates 2.17 1.94 1.89 2.05 2.06
Total Promoter Shareholding 72.74 72.74 72.74 72.74 72.74

(B). Public Shareholding


1. Institutions
a. Mutual Funds/UTI 1.94 1.47 1.04 2.72 4.80
b. Financial Institutes/Banks 0.08 0.04 0.03 0.05 0.06
c. Qualified Foreign Investor 16.69 16.47 4.55 16.33 13.77
d. Any others 11.79 0.15
Sub-Total (1) 18.71 17.99 17.42 19.09 18.78

2. Non-Institutions
a. Body Corporate 4.58 5.21
b.i. Individuals (Nominal Share 3.54 3.65
Capital <= Rs.100,000)
b.ii. Individuals (Nominal Share 0.19 0.19 4.32 3.76 3.81
Capital > Rs.100,000)
c. Any Others (Trusts, NRI, etc.) 0.25 0.23 5.53 4.41 4.67
Sub-Total (2) 8.55 9.28 9.85 8.17 8.48
Total Public Shareholding (B) 27.26 27.26 27.26 27.26 27.26

(C). Shares held by Custodians - - - - -


Total (A)+(B)+(C) 100.00 100.00 100.00 100.00 100.00

8
Summary Chart-
100%

90%

80%

70%

60%
Public- Non-Institution
50%
Public- Institution
40% Promoters
30%

20%

10%

0%
2013 2014 2015 2016 2017

Promoters’ Shareholding:-

Name of the Shares pledged or otherwise


Total Shares held
Shareholder encumbered

As a %
of
As a % of grand
% of Total
Number grand total Number total
shares held
(A) + (B) + (C) (A) +
(B) +
(C)

Diwakar Viniyog Private Limited 33,771,887 0 13,889,846 41.13 -

Suntrack Commerce Private


33,136,016 0 12,757,380 38.5 -
Limited

Bhanu Vyapaar Private Limited 27,791,381 0 10,991,967 39.55 -

RAVIRAJ VINIYOG 13,886,007 0 3,379,000 24.33 -

PRABHAKAR VINIYOG 13,199,961 0 2,480,000 18.79 -

Suraj Viniyog Private Limited 12,957,139 0 2,908,000 22.44 -

9
Tmt Viniyogan Limited 4,866,580 0 1,580,000 32.47 -

Rajkumar Goenka 773,982 0 - - -

Avishi Sureka 700,000 0 - - -

Radheshyam Goenka 683,638 0 - - -

P&L account-

Emami
Standalone Profit & -------------------
Loss account in Rs. Cr. ------
-------------
Mar 17 Mar-16 Mar-15 Mar-14 Mar-13 CAGR

12 mths 12 mths 12 mths 12 mths 12 mths

INCOME
Revenue From 2337.87 2426.21 2066.07 1738.13 1661.91 9%
Operations [Gross]
Less: Excise/Sevice 39.57 39.2 39.53 33.05 34.82
Tax/Other Levies
Revenue From 2298.3 2387.01 2026.54 1705.08 1627.09
Operations [Net]

Other Operating 2.88 4.5 4.1 0 0


Revenues
Total Operating 2301.17 2391.51 2030.64 1705.08 1627.09 9%
Revenues
Other Income 45.19 32.76 95.82 62.46 57.2

Total Revenue 2346.36 2424.27 2126.46 1767.54 1684.29 9%


EXPENSES

10
Cost Of Materials 644.53 606.22 589.53 543.97 539.18 5%
Consumed

Purchase Of Stock-In 164.05 184.2 141.66 134.21 162.34


Trade
Changes In Inventories -13.2 -20.09 13.02 -24.18 -8.09
Of FG,WIP And Stock-
In Trade

Employee Benefit 194.96 172.44 144.1 123.68 100.05 18%


Expenses
Finance Costs 57.62 53.75 4.9 3.89 6.1 75%

Depreciation And 304.67 252.23 31.48 93.8 123.29 25%


Amortisation Expenses

Other Expenses 571.82 793.78 632.12 500.19 486.79

Total Expenses 1924.45 2042.52 1556.81 1375.55 1409.65 8%

Profit/Loss Before 421.91 381.75 569.65 391.99 274.64 11%


Exceptional,
ExtraOrdinary Items
And Tax

Exceptional Items 0 0 7.33 59.81 0

Profit/Loss Before Tax 421.91 381.75 576.98 451.79 274.64 11%

Tax Expenses-
Continued Operations

Current Tax 75.24 66.42 98.13 79.81 55 8%

11
Less: MAT Credit 14 0 0 0 0
Entitlement

Deferred Tax 13.63 -12.39 7.6 -8.89 -0.82

Tax For Earlier Years 0.68 0.05 -0.38 -17.36 -1.22

Total Tax Expenses 75.54 54.08 105.35 53.56 52.96 9%

Profit/Loss After Tax 346.37 327.67 471.63 398.23 221.68 12%


And Before
ExtraOrdinary Items

Profit/Loss From 346.37 327.67 471.63 398.23 221.68 12%


Continuing Operations

Profit/Loss For The 346.37 327.67 471.63 398.23 221.68 12%


Period

15% 14% 23% 23% 14%


PAT MARGIN

CASH PROFIT 651.04 579.9 503.11 492.03 344.97

12
Balance sheet-

Emami
Standalone Balance --------------
Sheet ----- in Rs.
Cr. ---------
----------
Mar 17 Mar-16 Mar-15 Mar-14 Mar-13 CAGR

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND
LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 22.7 22.7 22.7 22.7 15.13 11%


Total Share Capital 22.7 22.7 22.7 22.7 15.13 11%
Reserves and Surplus 1689.86 1328.2 1189.46 906 762.18 22%
Total Reserves and 1689.86 1328.2 1189.46 906 762.18
Surplus
Total Shareholders 1712.56 1350.9 1212.16 928.69 777.31 22%
Funds
NON-CURRENT
LIABILITIES
Long Term Borrowings 0 300 0 15.03 27.19 -100%
Deferred Tax Liabilities 43.71 0 12.39 4.79 13.68
[Net]
Other Long Term 12.94 14.68 16.3 11.81 8.79
Liabilities
Long Term Provisions 22.03 28.08 23.35 16.48 6.84
Total Non-Current 78.68 342.76 52.04 48.11 56.5

13
Liabilities
CURRENT LIABILITIES
Short Term Borrowings 134.7 360 8.38 1.31 16.36 69%
Trade Payables 148.62 185.76 126.58 114.61 82.27 16%
Other Current Liabilities 356.69 57.44 58.51 46.88 54.9
Short Term Provisions 23.73 206.2 98.2 120.88 164.64
Total Current Liabilities 663.74 809.41 291.68 283.67 318.16 20%
Total Capital And 2454.97 2503.07 1555.87 1260.47 1151.98
Liabilities
ASSETS

NON-CURRENT ASSETS

Tangible Assets 669.82 443.52 391.39 365.87 307.47 21%


Intangible Assets 1237.66 1498.4 32.56 7.79 67.03 107%
Capital Work-In- 11.33 54.8 22.67 8.27 43.91 -29%
Progress
Intangible Assets Under 8.61 5.45 2.29 0.17 0.2 156%
Development
Other Assets 44.9 0 0 0 0
Fixed Assets 1972.32 2002.18 448.92 382.09 418.6 47%
Non-Current 94.83 7.08 7.08 7.09 7.24 90%
Investments
Long Term Loans And 4.3 109.4 40.88 40.09 30.58 -39%
Advances
Other Non-Current 40.08 0.74 0.01 0.01 0.01 696%
Assets
Total Non-Current 2111.53 2119.39 496.89 429.28 456.44 47%
Assets
CURRENT ASSETS
Current Investments 33.32 11.92 494.65 289.22 156.34 -32%
Inventories 169.2 143.14 118.45 136.62 112.26 11%
Trade Receivables 34.13 52.01 56.9 75.22 80.48 -19%
Cash And Cash 8.53 72.56 326.09 264.84 279.09 -58%
Equivalents
Short Term Loans And 10.08 104.05 62.89 65.28 67.36 -38%
Advances
OtherCurrentAssets 88.18 0 0 0 0
Total Current Assets 343.44 383.68 1058.98 831.18 695.54 -16%
Total Assets 2454.97 2503.07 1555.87 1260.47 1151.98 21%

14
OTHER ADDITIONAL
INFORMATION

CONTINGENT
LIABILITIES,
COMMITMENTS

Contingent Liabilities 109.31 137.17 116.95 107.48 93.37

CIF VALUE OF IMPORTS

Raw Materials 23.18 21.07 9.25 7.73 6.69


Capital Goods 18.74 61.17 11.92 12.35 2.09

EXPENDITURE IN
FOREIGN EXCHANGE
Expenditure In Foreign 4.84 6.17 5.95 6.64 11.89
Currency

REMITTANCES IN
FOREIGN CURRENCIES
FOR DIVIDENDS

Dividend Remittance In 378.85 - - - -


Foreign Currency
EARNINGS IN FOREIGN
EXCHANGE
FOB Value Of Goods 73.06 100.64 100.48 83.75 85.16
Other Earnings 18.01 1.32 0.55 - 1.62
BONUS DETAILS
Bonus Equity Share 13.18 13.18 13.18 13.18 5.62
Capital
NON-CURRENT
INVESTMENTS

Non-Current 94.36 32.54 34.17 20.78 19.04


Investments Quoted
Market Value
Non-Current 0.47 3.39 3.39 3.39 3.55
Investments Unquoted
Book Value

15
CURRENT INVESTMENTS

Current Investments - - - - -
Quoted Market Value

Current Investments 33.32 11.93 496.51 294.67 157.77


Unquoted Book Value

22696761 22696761 22696761 22696761 22696761


Number of equity shares 9 9 9 9 9

Ratio Analysis
1. Receivables Turnover Ratio (RTO)

This ratio indicates the number of times company convert’s its receivables (debtors) into cash.

80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
-10.00
2017 2016 2015 2014 2013
Debtors Turnover 68.75 46.61 37.37 23.50 20.93
YoY sales 0.47 0.25 0.59 0.12
YoY Rec. -0.34 -0.09 -0.24 -0.07

16
2 . Inventory Turnover Ratio (ITO)
This ratio indicates the number of times inventory of the company is converted into sales.

6.00
5.00
4.00
3.00
2.00
1.00
0.00
-1.00
2017 2016 2015 2014 2013
Inventory turnover 3.81 4.24 4.98 3.98
YoY COGS 0.06 0.03 0.08 0.01
YoY Avg Invt. 0.18 0.21 -0.13 0.22

3. Payable Turnover Ratio (PTO)


This ratio indicates the number of times creditors of the company are paid.

3.5
3
2.5
2
1.5
1
0.5
0
-0.5
2017 2016 2015 2014 2013
Payable Turnover
2.51 3.2 2.6 2.1 2.06
Ratio (PTO)
YoY COGS 0.06 0.03 0.08 0.01
YoY Avg Pay. -0.20 0.47 0.10 0.39

17
4.Cash Cycle-
Cash Cycle tells us about the cash requirement of the company, i.e. the number of days for
which company’s cash is tied-up.

180
160
140
120
100
80
60
40
20
0
2017 2016 2015 2014 2013
Cash Cycle 165 171 129 106 96
RTO days 5.31 7.83 9.77 15.53 17.44
ITO days 94.51 85.00 72.33 90.42 74.95
Payables days 84.16 111.84 78.37 76.90 55.69

5. Other Activity Ratio

6.00
4.00
2.00
0.00
-2.00
-4.00
-6.00
-8.00
2017 2016 2015 2014 2013
Total Asset Turnover
1.23 1.25 5.02 4.73 4.50
Ratio
Working Capital Turnover
-7.33 -5.69 2.77 3.23 4.46
Ratio
Capital Turnover Ratio 1.37 1.47 1.75 1.87 2.09

18
6. Quick Ratio

Quick Ratio indicates the firm’s ability to meet its CL using Quick Assets (CA – Inventory). Higher
the ratio better for the company.

3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
-0.50
-1.00
2017 2016 2015 2014 2013
Quick Ratio 0.26 0.30 3.22 2.45 1.83
YoY Quick asset -0.28 -0.74 0.35 0.19
YoY CL -0.18 1.77 0.03 -0.11

7. Profit Margin

Profit Margin Here company’s various profit (EBITDA, EBIT, EBT & EAT) margins are displayed.

0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
2017 2016 2015 2014 2013
EBITDA Margin 0.34 0.29 0.30 0.32 0.25
EBIT Margin 0.21 0.18 0.29 0.27 0.17
EBT Margin 0.18 0.16 0.28 0.26 0.17
Net Profit Margin 0.15 0.14 0.22 0.23 0.13
YoY Sales 0.47 0.25 0.59 0.12 0.00

19
8. DuPont Analysis

DuPont Analysis gives an overall view of the company’s performance. It indicates company’s
profitability, efficiency, how well can it pay its interest & taxes and lastly how well a company is
utilising shareholder’s fund. Thus, indicating how much profit company has made using
shareholder’s fund (ROE).

2.50
2.00
1.50
1.00
0.50
0.00
Operating Capital Financial Financial
Tax Effect ROE (A x B
Profit Turnover Cost Ratio Structure
Ratio (E) x C x D x E)
Margin (A) (B) (C) Ratio (D)
2017 0.20 1.37 0.88 1.00 0.82 0.20
2016 0.18 1.79 0.88 0.82 0.86 0.20
2015 0.27 1.75 0.99 1.00 0.82 0.39
2014 0.26 1.90 0.99 0.98 0.88 0.42
2013 0.17 2.17 0.98 0.97 0.81 0.28

Company’s current financial position can be understood with above final statements and ratios.
We can use further use these information to make projection for next five(5) years with the
help of CAGR and sales.

20
Projections – March 2018 – 2022

Projected Profit & Loss


account ------------------- in Rs. Cr. -------------------
Mar 17 CAGR Mar-18 Mar-19 Mar-20 Mar-21 Mar-22

12 mths

INCOME
Revenue From Operations
[Gross] 2337.87 7% 2503.0 2679.8 2869.1 3071.8 3288.8
Less: Excise/Sevice Tax/Other
Levies 39.57 3% 40.6 41.6 42.7 43.8 45.0

Revenue From Operations


[Net] 2298.3 7% 2462.7 2638.8 2827.5 3029.7 3246.4

Other Operating Revenues 2.88

Total Operating Revenues 2301.17 7% 2466.4 2643.4 2833.2 3036.5 3254.5

Other Income 45.19 -5% 43.1 41.1 39.2 37.4 35.7


Total Revenue 2346.36 7% 2507.2 2679.1 2862.7 3059.0 3268.7

EXPENSES

Cost Of Materials Consumed 644.53 4% 668.0 692.2 717.4 743.4 770.5

Purchase Of Stock-In Trade 164.05 0% 164.4 164.7 165.1 165.4 165.8

Changes In Inventories Of
FG,WIP And Stock-In Trade -13.2 10% -14.6 -16.1 -17.7 -19.5 -21.5

Employee Benefit Expenses 194.96 14% 222.8 254.6 290.9 332.5 379.9

Finance Costs 57.62 57% 90.3 141.5 221.7 347.4 544.3

Depreciation And Amortisation


Expenses 304.67 20% 365.1 437.5 524.3 628.3 752.9

Other Expenses 571.82 3% 590.5 609.9 629.8 650.4 671.7

Total Expenses 1924.45 6% 2048.1 2179.6 2319.7 2468.7 2627.3

21

Profit/Loss Before
Exceptional, ExtraOrdinary
Items And Tax 421.91 9% 459.74 500.9591 545.8753 594.8187 648.150481
Profit/Loss Before
Exceptional, ExtraOrdinary
Items And Tax 421.91 9% 459.74 500.9591 545.8753 594.8187 648.150481

Exceptional Items 0

Profit/Loss Before Tax 421.91 9% 459.74 500.9591 545.8753 594.8187 648.150481

Tax Expenses-Continued
Operations

Current Tax 75.24 6% 80.11 85.28708 90.80305 96.67578 102.92832

Less: MAT Credit Entitlement 14

Deferred Tax 13.63

Tax For Earlier Years 0.68

Total Tax Expenses 75.54 7% 81.10 87.07001 93.47907 100.3599 107.747198

Profit/Loss After Tax And


Before ExtraOrdinary Items 346.37 9% 378.71 414.0624 452.7188 494.9841 541.195313

Profit/Loss From Continuing


Operations 346.37 9% 378.71 414.0624 452.7188 494.9841 541.195313

Profit/Loss For The Period 346.37 9% 378.71 414.0624 452.7188 494.9841 541.195313

PAT MARGIN 0.150519084 2% 0.15 0.15664 0.159793 0.163009 0.16629079

CASH PROFIT 651.04 14% 739.22 839.3406 953.0232 1082.103 1228.6665

OTHER ADDITIONAL
INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) 15.26 -7% 14.26 13.32941 12.45773 11.64306 10.8816636

Diluted EPS (Rs.) 15.26 -7% 14.26 13.32941 12.45773 11.64306 10.8816636
VALUE OF IMPORTED AND
INDIGENIOUS RAW
MATERIALS

Imported Raw Materials 0 -100% 0.00 0 0 0 0

Indigenous Raw Materials 0 -100% 0.00 0 0 0 0

STORES, SPARES AND LOOSE


TOOLS

22
Indigenous Stores And Spares 0 -100% 0.00 0 0 0 0

DIVIDEND AND DIVIDEND


PERCENTAGE
Projected Balance sheet
Emami

Projected Balance Sheet ------------------- in Rs. Cr. -------------------


Mar 17 CAGR Mar-18 Mar-19 Mar-20 Mar-21 Mar-22

12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 22.7 8% 24.62 26.70 28.96 31.40 34.06
Total Share Capital 22.7 8% 24.62 26.70 28.96 31.40 34.06
Reserves and Surplus 1689.86 17% 1981.57 2323.64 2724.75 3195.11 3746.66

Total Reserves and Surplus 1689.86 17% 1981.57 2323.64 2724.75 3195.11 3746.66
Total Shareholders Funds 1712.56 17% 2005.65 2348.91 2750.91 3221.71 3773.09

NON-CURRENT LIABILITIES 0.00 0.00 0.00 0.00 0.00


Long Term Borrowings 0 -100% 0.00 0.00 0.00 0.00 0.00

Deferred Tax Liabilities [Net] 43.71 26% 55.14 69.56 87.76 110.71 139.66
Other Long Term Liabilities 12.94 8% 13.98 15.10 16.32 17.63 19.05
Long Term Provisions 22.03 26% 27.84 35.17 44.44 56.15 70.95
Total Non-Current Liabilities 78.68 7% 84.07 89.82 95.97 102.55 109.57
CURRENT LIABILITIES 0.00 0.00 0.00 0.00 0.00
Short Term Borrowings 134.7 52% 205.35 313.04 477.22 727.50 1109.05
Trade Payables 148.62 13% 167.28 188.28 211.92 238.53 268.48
Other Current Liabilities 356.69 45% 518.60 754.01 1096.28 1593.92 2317.45
Short Term Provisions 23.73 -32% 16.11 10.93 7.42 5.04 3.42
Total Current Liabilities 663.74 16% 768.90 890.72 1031.83 1195.31 1384.68
Total Capital And Liabilities 2454.97 16% 2856.05 3322.67 3865.51 4497.04 5231.76

ASSETS 0.00 0.00 0.00 0.00 0.00

NON-CURRENT ASSETS 0.00 0.00 0.00 0.00 0.00


Tangible Assets 669.82 17% 782.69 914.58 1068.69 1248.77 1459.20
Intangible Assets 1237.66 79% 2217.52 3973.14 7118.70 12754.61 22852.49
Capital Work-In-Progress 11.33 -24% 8.64 6.59 5.03 3.83 2.92
Intangible Assets Under
Development 8.61 112% 18.27 38.78 82.30 174.66 370.66
Other Assets 44.9
Fixed Assets 1972.32 36% 2689.14 3666.47 4999.01 6815.85 9292.99
Non-Current Investments 94.83 67% 158.63 265.36 443.88 742.53 1242.09
23
Long Term Loans And
Advances 4.3 -32% 2.90 1.96 1.33 0.90 0.60
Other Non-Current Assets 40.08
Total Non-Current Assets 2111.53 36% 2868.40 3896.57 5293.29 7190.65 9768.12
Advances 4.3 -32% 2.90 1.96 1.33 0.90 0.60
Other Non-Current Assets 40.08
Total Non-Current Assets 2111.53 36% 2868.40 3896.57 5293.29 7190.65 9768.12
CURRENT ASSETS
Current Investments 33.32 -27% 24.46 17.95 13.18 9.67 7.10
Inventories 169.2 9% 183.67 199.37 216.42 234.93 255.02
Trade Receivables 34.13 -16% 28.75 24.22 20.40 17.18 14.47
Cash And Cash Equivalents 8.53 -50% 4.25 2.11 1.05 0.52 0.26
Short Term Loans And
Advances 10.08 -32% 6.89 4.72 3.22 2.21 1.51
OtherCurrentAssets 88.18
Total Current Assets 343.44 -13% 298.23 258.98 224.89 195.29 169.58
Total Assets 2454.97 16% 2856.05 3322.67 3865.51 4497.04 5231.76

OTHER ADDITIONAL
INFORMATION 0.00 0.00 0.00 0.00 0.00

CONTINGENT LIABILITIES,
COMMITMENTS 0.00 0.00 0.00 0.00 0.00

Contingent Liabilities 109.31 3% 112.81 116.42 120.15 124.00 127.97

CIF VALUE OF IMPORTS


Raw Materials 23.18 28% 29.72 38.11 48.86 62.64 80.32

Capital Goods 18.74 55% 29.06 45.06 69.88 108.36 168.03


EXPENDITURE IN FOREIGN
EXCHANGE

Expenditure In Foreign
Currency 4.84 -16% 4.04 3.38 2.82 2.36 1.97

REMITTANCES IN FOREIGN
CURRENCIES FOR
DIVIDENDS
Dividend Remittance In
Foreign Currency 378.85
EARNINGS IN FOREIGN
EXCHANGE
FOB Value Of Goods 73.06 -3% 70.85 68.72 66.64 64.63 62.68
Other Earnings 18.01 62% 29.16 47.20 76.40 123.68 200.22
BONUS DETAILS
Bonus Equity Share Capital 13.18 19% 15.63 18.53 21.98 26.07 30.91

NON-CURRENT
INVESTMENTS
Non-Current Investments
Quoted Market Value 94.36 38% 129.96 178.99 246.52 339.54 467.64
Non-Current Investments
Unquoted Book Value 0.47 -33% 0.31 0.21 0.14 0.09 0.06

CURRENT INVESTMENTS

Current Investments Quoted


Market Value - 24
Current Investments
Unquoted Book Value 33.32 -27% 24.41 17.89 13.11 9.60 7.04
WACC-

Sr. No. Calculation of Cost of Equity as per CAPM


A Risk Free Rate of Return 6.85%
B Stock Beta (Thomson Rueters) 1.21
C Country Risk Premium 0.02
D Equity Risk Premium 4.15%
E Cost of Equity (CAPM) 14.29%

Sr. No. Calculation of WACC as per CAPM


1 Cost of Equity 14.29%
2 Equity Weightage (Book Value) 100%
3 Weighted Cost of Equity 14.29%

4 Cost of Debt 6.25%


5 kD (Net of Tax) 0.00%
6 Debt Weightage (Book Value) 0.00%
7 Weighted Cost of Debt 0.00%

Weighted Average Cost of


8 14.29%
Capital

E/D Value Weightage


Equity 1,713 100%
Debt 0 0%
1,713

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FCFF & FCFE-
FCFF

FCFF is the acronym of Free Cash Flow to Firm. FCFF is the cash flow generated by the firm
before debt payment but after reinvestment needs and taxes. FCFF helps in estimating the
value of the entire firm, by discounting the projected FCFF using WACC.

FCFF is the cash flow available to the suppliers of capital after all operating expenses (including
taxes) are paid and working and fixed capital investments are made.

FCFF = EBIT – Taxes + Depreciation (non-cash costs) – Capital Spending – Increase in Net
Working Capital – Change in Other Assets + Terminal Value

FCFE

FCFE is the acronym of Free Cash Flow to Equity. FCFE is the cash flow after taxes, reinvestment
needs, and debt cash flows. Using FCFE, one can directly calculate the value of equity by
discounting the projected FCFE by the cost of equity.

It is the cash flow available after all operating expenses, interest, and principle repayments
have been made and necessary investments in working capital and fixed capital have been
made.

FCFE = EBIT – Interest – Taxes + Depreciation (Non-Cash Costs) – Capital Expenditures –


Increase in Net Working Capital – Principal Debt Repayments + New Debt Issues + Terminal
Value

FCFE = FCFF – Interest expense * (1 – tax) + Increase in debt

Valuation VFirm = FCFF/(WACC – g) VEquity = VFirm – Value of debt VEquity = FCFE/(Cost


of Equity – g)

2017 2016 2015 2014 2013


EBIT 479.53 435.5 581.88 455.68 280.74
Taxes 75.54 54.08 105.35 53.56 52.96
Non Cash Expenses 304.67 252.23 31.48 93.8 123.29
Capital Spending 2416.2 2371.62 528.37 523.08 579.73
-
Increase in NWC 105.43 1193.03 219.79 170.13 377.38
Change in Other
Assets 1120.58 1616.66 72.9 -2.08 141.73
Interest 57.62 53.75 4.9 3.89 6.1

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FCFF 4350.87 3428.9 1329.07 1187.05 1449.91
FCFE 8645.865 6281.95 1840.385 1391.508 1766.866

Conclusion – Why Invest in Emami Ltd. –


Key takeaways from Emami’s (HMN) FY17 annual report:
-Innovation remained the key focus area in FY17
-Took much-needed efforts to boost direct reach via Project Race/Project Dhanush
-Continued to emphasize on growing the Kesh King franchise
-Healthy operating cash flow growth, led by reduction in other asset

Right portfolio, low penetration, focused spending brighten growth


Potential
-80% of the portfolio comprises high-demand problem-solving products, and the
remaining 20% is discretionary products. This insulates the company from
volumes risk in an adverse consumer environment.

-Penetration is low in many categories. We note that HMN is the dominant


player in its leading categories, which puts it at the forefront to drive category
growth.

-Brands like Fair & Handsome (now with a wide men’s personal care portfolio)
are available in only 1.4m out of the 4.3m outlets that HMN reaches across the
country. Balms is another category, where penetration is low at 36% (Zandu
balm reaches only 1.6m outlets, andMentho Plusonly 1.2m outlets).

-While Zandu is already strong with its balms and Chyawanprash products, it can
also emerge as a strong Ayurvedic products brand. Management believes that
the company’s strength lies in its ability to validate product efficacy on the basis
of data derived from systematic scientific research at NABL and Ministry of
AYUSH accredited laboratories.

-HMN spends more on R&D than most FMCG companies in India; it incurred
INR231m (0.99% of sales) in FY17.

New launch momentum stays robust


-Over the past five years, the company has introduced more than 25 products,
variants and extensions.

-Some of the prominent new launches in FY17 were Boroplus Perfect Touch
Cream, Navratna Almond Cool Oil, Navratna i-Cool Talc, Fair & Handsome 100%

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Oil Clear Instant Fairness Face Wash, He Respect deodorant, He Range of
perfumes and deodorants, Kesh King Ayurvedic Medicinal Oil with blend of
coconut oil, and He ‘On-the-Go’ Waterless Face Wash.

Valuation and view


-Despite significant near-term challenges due to likely higher sales disruption
following GST implementation (as it has high wholesale channel dependence v/s
peers), we believe that HMN remains a credible long-term play due to (a)
expected healthy growth in the existing product categories, where it has
dominant market share, (b) demonstrated ability to leverage on its innovative
ability, customer understanding and distribution reach to turnaround
acquisitions, (c) best-of-breed R&D and A&P spend, innovative products and
ability to back-up innovation with strong marketing and (d) efforts toward
improving its direct distribution reach.

-Valuations at 31.6x FY19E EPS are inexpensive relative to peers. We like the
company’s healthy long-term earnings growth prospects and return ratios in the
mid-30s.

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