Godrej vs Marico (In Commodity Products)
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Transcript of Godrej vs Marico (In Commodity Products)
Godrej Vs Marico (Commodity Products)
Group 2 Members:Nishant Bangar Harshad Jain Vaibhav Chaudharauy Sunil SavrikarAadesh JainVishakha Aggrawal
EXECUTIVE SUMMARY
Presentation deals with Godrej’s present
Market situation
Risk
Overall Organization
Judgment regarding whether to go for Meager & Acquisition
Valuation of acquiring company
Where are they positioned, market capitalization, their product offerings, market segmentation, geographic distribution (International, Domestic, Rural & urban)
Analysis of Merger & Acquisition on the basis of
Discounted Cash Flows
FCFF & FCFE
Sensitivity Evaluation
Industrial Comparison
Godrej Limited (Consumer Products)
Company Analysis Board of Directors & Management Stock Price Valuations of last 2 years
About Godrej
Adi Godrej Vivek Gambhir NisabaChairman M.D. Executive Director
Godrej group
Nadir Godrej Bharat Doshi Jamshyd Godrej D. Shivakumar Tanya Dubash Ireena VittalA. Mahendran Narendra Ambwani Aman Mehta Omkar Goswani Bala Balachandran
VisionGodrej in every home &
work place
FoundersArdeshir Godrej Pirojsha Godrej
HQMUMBAI
Founded 1897
Values Integrity Trust To serve respect Environment
Brand Architecture
Home care
• Goodnight, HIT, Godrej Aer, Ezee, Air freshener Stella
Personal wash
• Godrej No.1, Cinthol, Cuticura, Proteket
Hair Care
• Godrej Expert, Godrej Nupur, Godrej Renew, Ilicit, 919’
Product Basket
Godrej Product Portfolio
48%
30%
11%6% 5%
Product Portfolio
Home Care
Personal Wash
Hair Care
Others
Export
Market Segmentation for Godrej
55%
15%
16%14%
Segmentation
Asia
Africa
LatAM
UK
Financials
Financials 2013 2014
Earning per Share(INR) 20.27 22.39
P/E 32 38.2
Sales Growth % 31.7% 14.6%
Net Debt Equity ratio 62.1 45.9
Dividend Yield (%) 0.8 0.6
Marico Limited
Company Overview Stock Price Valuation (Last 2 years) Board of Directors & Management
Marico Vision & Mission 2020
VISION
Consumer : For they are the reason we exist
Membership : For a sense of ownership empowers us
Excellence : For it unleashes our potential
Wealth : for it hinges our growth
Innovation : For it gives wings to ideas
MISSION
The Marico Innovation foundation’s mission is to provide the nation with first: A belief that innovation is possible and is the way to leapfrog India into the center stage of global business leadership and second: A framework to leverage innovation for quantum growth.
Head Office
Santa Cruz(East), Mumbai
Founder
Harsh Marawal
Founded
1987
Brand Architecture
Edible Oil
• Saffola
• Sweekar
Hair care
• After Shower & Livon
• Medicer
• Parachute, Slik n Shine, & shanti Amla
Kaya Skin Clinic
• India's best skin care clinic and proven best skin care treatment center,Cosmetics, skin care products, Recova, Dr. Lips
Other Products
• Setwet
• Zatak
• Revive
• Marico Innovations
Marico’s Product Portfolio
Coconut oil (Parachute & Nihar), 32%
Saffola, 16%International25%, 25%
Value Added Hair Oil, 18%
Others, 5%Youth Brands, 4%
Financials
Financials 2013 2014
Earning Per Share (INR) 5.6 7.5
P/E 45.0 33.6
Sales Growth % 14.7 2.0
Net Debt Equity Ratio 0.3 0.1
Dividend Yield % 0.2 1.6
Marico’s Group Structure
Marico’s Basket
Marico’s Basket
Why to Choose Marico?
How Marico will handle our weakness
Qualitative comparison with respect to industry
Quantitative Comparison with respect to industry
Qualitative Analysis
What Makes Marico different from others?
Stong Brand Equity
Robust Distribustion Chain & brand Recal
Fast grievances and Redressal
Higher Preference in distributors For Marico Compared to others in market
Fastest growing in market & Highly competitive
Rural Expansion
Shift in control – Promoter led to Team of Professionals
Focus on Dividend pay out & Organic Growth
Differentiating Order Management software
Growth Driven by value added products
Quantitative Analysis
Companies (FMCG) Stance- Buy/Sell Upside/ Downside (Percentage)
EPS GrowthFY 14-16(Percentage)
EV/EBITDA (X)FY- 15
HUL Sell -24 12 26.6
Nestle Sell -23 15 22.7
Dabur Sell -26 14 25.8
Godrej consumer Sell -27 16 23.2
GSK Consumer Sell -12 17 N.A
Marico Buy 6 21 18.4
ITC Sell N.A 16 N.A
VALUATION
FY15 FY16 FY17 FY18 FY19
EBIT 12033 14999 16929 20325.50976 24407.12499
Other Pre tax income 702 787 881 978.97234 1087.839776
total ebit 12735 15786 17810 21304.48209 25494.96476
tax expense 2408 3065 3500 4412.434017 5469.712773
pbt 12041 15323 17498 22062.17009 27348.56387
tax rate 0.19998339 0.200026105 0.20002286 0.2 0.2
post tax ebit 10188.21153 12628.38791 14247.59287 17043.58568 20395.97181
d&a 809 858 906 952.6485636 1001.698991
capex -1809 -1858 -1858 -1858 -1858
chance in net working capital -890 -1572 -1572 -1572 -1572
free cash flow to firm 10078.21153 13200.38791 14867.59287 17710.23424 21111.6708
net interest income/expense -694 -463 -313 0 0
post tax interest -555.2115273 -370.3879136 -250.3928449 0 0
net debt -6263 -3000 -3000 0 0
free cash flow to equity 3260 9830 11617.20002 17710.23424 21111.6708
TV 0 0 0 0 276864.9261
Total 10078.21153 13200.38791 14867.59287 17710.23424 297976.59691.108540179 1.228861329 1.362242158 1.510100166 1.6740067099091.426469 10741.96706 10914.06016 11727.85398 178002.0327
FIRM VALUE 220477.3404NET DEBT 21987EQUITY VALUE 198490.3404
SENSITIVITY ANALYSIS
220477.3404 8.80% 9.80% 10.85% 11.80% 12.80%
0% 215805.3884 191757.2832 171278.4076 156068.6372 142484.2895
1% 237755.147 208599.7033 184349.5326 166672.1466 151117.9354
2% 266160.717 229760.6927 200373.2437 179439.6376 161350.4045
3% 304361.3111 257145.5026 220477.3404 195108.8311 173671.1327
4% 358478.8195 293973.3503 246447.8054 214795.7665 188792.0263
5% 441079.2269 346146.1345 281290.9679 240272.977 207790.0722
FIRM VALUE
198490.3404 8.80% 9.80% 10.85% 11.80% 12.80%
0% 193818.3884 169770.2832 149291.4076 134081.6372 120497.2895
1% 215768.147 186612.7033 162362.5326 144685.1466 129130.9354
2% 244173.717 207773.6927 178386.2437 157452.6376 139363.4045
3% 282374.3111 235158.5026 198490.3404 173121.8311 151684.1327
4% 336491.8195 271986.3503 224460.8054 192808.7665 166805.0263
5% 419092.2269 324159.1345 259303.9679 218285.977 185803.0722
EQUITY VALUE
Transaction ConsiderartionsShareholder’s structure
• This involves the payment of the acquiring company's equity, issued to the stockholders of the target, at a determined ratio relative to the target’s value.
• The issuance of equity may improve the acquirer’s debt rating thereby reducing future cost of debt financings.
• There are transaction costs and risks in terms of a stockholders meeting (potential rejection of the deal), registration (if the acquirer is public), brokerage fees, etc. That said, the issuance of equity will generally provide more flexible deal structures.
• This will involve the payment of the Marico's equity, issued to the stockholders of Godrej, at a determined ratio relative to the Godrej’s value.
• The issuance of equity may improve the Marico’s debt rating thereby reducing future cost of debt financings.
• There will be transaction costs and risks in terms of a stockholders meeting (potential rejection of the deal), registration (if the acquirer is public), brokerage fees, etc. That said, the issuance of equity will generally provide more flexible deal structures.
Risk Factors
Macro Factors
Misgauging Strategic fit & Loss of competitive advantage
Over Dependence on other party
Cultural & organizational Misfit
Lacking in evaluation of Marico’s Culture
Lack of communication & coordination
Pursuing personal goals
Lack of importance to customer
Foreign exchange risk
Misfit with subsidiaries & holding
Risk Mitigation
In depth & fair Valuation of both organization
Training of staff & orientation program
Focus on coordination & collectivism
Avoid currency risk by hedging
Incentive to motivate staffs
Using communication system & IT technology
Vertical integration or Horizontal Integration
Consider cost factors & Quality improvement
Industry Overview
FMCG is 4th largest sector of Indian Economy
Market size of FMCG is Estimated to grow to USD74 billion in 2018 approx.
Rural 16% rise & urban 12% rise
FMCG beta – 0.64
CAGR – 14.7% to touch USD 110.04 Billion in Period 2012-20
Market Capitalization To reach USD 135 billion
Incremental Pick up in Consumption Volumes
Influences – Currency fluctuation