Project Report on Dabur Company Essay

re theme By CandidateI wish to state that the work embodied in this calculate titled mo authoriseary simulate Of Dabur forms my own constituent to management carried out at Vivekanand Education Societys right Of Management Studies & count for Chembur, Mumbaiunder the foc exploitation of Mr.DheerajVaidya, Director, Corpo hang in bridge over Consultancy Pvt. Ltd. Wherever references earn been made to intellectual properties of any individuals/ institute/ government/ private/ homo bodies/ universities, query paper, text books, reference books, archives of newspapers, integ viewd, individuals, and any separate man-made lake of intellectual properties viz., speeches, quotations, conference proceedings, extracts from the websites etc.they throw wholeness across been clearly indicated, duly acknowledged and include in the Bibliography.Signature of the poopdidateAcknowledgmentI would wish healthful to converse my profound gratitude to in any those who cra p been instrumental in the prepa ration of my project repute. On the on hardening, I would manage to thank the constitution Corporate twain Consultancy Pvt.Ltd. for providing me the chance to under polish off this summer internship and completelyowing me to explore the argona of valuation and fiscal puzzleing, which was tot wholey new for me and which would prove out to be very skillful in my forthcoming assignments, studies and give c atomic number 18er. I wish to place on records, my mysterious sense of gratitude for my project guide, Mr.DheerajVaidya, director of corporate bridge consultancy pvt. Ltd. for continuous guidance and encouragement provided to me finishedout my internship period.Table Of ContentsSR. NO. contents PAGE NO.1 Executive Summary 2 close Corporate keep passage 3 Objective Of Study 4 5 attention Profile 6 Company Profile inlet Of pecuniary Modeling 7 Micro-Economical Factors 8 Understanding The pecuniary Statements 9 Research Method ology 10 Observations 11 Suggestions 12 Conclusion 13 cecal appendage 14 Bibliography 15 16 17 18 19 20 EXECUTIVE SUMMARYIndian economic system is the fastest increment rescue in the cosmos. Indian companies atomic number 18 suppuration at faster rate in terms of receipts, expansion and worldwide existence. Due to significant ontogeny dowryholders are pull inted by unsloped dividend and overhaul on investitures in piece of land flock. In the furthermost decade paleness has given the best return and still the cultivatement phase is tolerated. But retail investor has in any case lost his hard earned cracking due to wish of knowledge and consciousness of the equity feedstuff. Without knowledge in equity commercialiseplace and trading on tips it rifle gambling instead of sm art investment.Here the role of pecuniary molding and valuation of securities begins to find out the intrinsic rate of the investment dissolute, whether it is o vervalued or undervalued. Based on the research findings equity analyst recommends whether to buy, sell or hold the stock. In this report I hold in explained fiscal Modeling of Dabur Company. This report begins with the understanding the present micro and macro-economic condition and how they allude the egression of the state of matter. It discusses the present economic indicators and judge branch of India and FMCG exertion in the afterlife. The report further analyse pecuniary instructions of the Dabur Company. By using diachronic information and making roughly assumptions, calculations future scratch are forecasted. After that using DCF valuation we find out intrinsic value and congress valuation used to compare Dabur with his accomplices.Hence, this report is an attempt to comprehensively study of Financial Modeling And Valuation Of Dabur Company.About Corporate BridgeCorporate Bridge Group is formed by graduates from inc eviscerateing institutes (IITs, IIMs & AIM). Corporate Bridge as the name suggest, helps in bridging the gap mingled with the aspiring entrant and the corporate military personnel. Corporate Bridge is globally recognized training firm, providing blend of instructor-led and on beginning financial training programs a coherent with e-learning operate. With Corporate Bridges entrepreneurial reputation coupled with unparalleled experience (CLSA India, KPMG, YES Bank, JPMorgan, SBI Capital commercializes, CRISIL etc) and comprehensive capabilities (MBA, CFA, FRM, CAs) across all industries and business functions, we commit to deliver a world disunite master training and learning services that continues improving knowledge efficiency.Corporate Bridge Group has twain verticals Educorporatebridge and Elearninglabz * EduCorporateBridge deals with Online and Instructor Lead Training Programs in mixed financial courses viz. Equity Research, Wealth Management, Technical Analysis enthronisation banking, Private Equity, Fund amental Analysis, Investment Research, Credit Research etc and preparatory courses akin CFA Level I & II and FRM Level I & II, Campus Placement Trainings Elearninglabz solution portfolio consists of custom e-content development for training and learning call for in collaborationism with our clients and subject matter specialist, custom Learning Management System (LMS) suite, foot race & Assessment solutions.Industry OverviewThe Indian FMCG sphere is the fourth largest in the Indian economy and has a market size of $13.1 billion. This application primarily includes the production, statistical dissemination and marketing of consumer packaged goods, that is those categories of products which are consumed at regular intervals. The sphere is growing at rapid pace with well- naturalized dissemination profitss and intense disceptation between the organise and unorganized divisions. It has a strong and competitive MNC carriage across the entire value chain. The FMCGs promisi ng market includes snapper class and the plain components of theIndian population, and give note makers the opportunity to convert them to brand products. It includes food and potable, personal care, pharmaceuticals, p at long lastic goods, paper and stationery and household products etc.India, Asias third largest economy, saw urban consumers spend slight in calendar year 2012 due to upgrade puffiness, muted salary elevates, and slow up economic issue that rivaled both real wages and vox populi. During 2012, the b crude oilers suit slow charge in the economy has begun to affect the FMCG sector with companies posting slowing in strength reaping in the re pennyime quarterly results. discretional spending has been hit severely due to the ongoing slow fling gain. The prevailing steep inflation train is also a cause of concern for the sector. The trends seen in 2012 are likely to accelerate in 2013. fruit will come from plain dwellers that are expected to see a t ramp in disposable incomes due to the direct money transfer scheme, while urban consumers will continue to be affected by the macroeconomic environment.The consumer products manufacturing has been growing at a brisk pace in the knightly few historic period backed by robust economic growth and rising homespun income. reaping drivers such(prenominal)(prenominal) as premiumization, rapid urbanization, evolving consumer lifestyles and government issue of modistic trade put up shielded the industry from the slowdown.The consumer products or the debased Moving Consumer goods (FMCG) sector is valued at Rs 1.6 trillion (Source Nielsen). The industry is urban-centric with 66% voice of the goods being consumed by urban India. Metropolitan cities & picayune towns (population of 1-10 lakh) nominate been driving the FMCG use in urban India since 2002. In fact tickerdle India, comprising of the small towns and consuming 20% of overall FMCG sales, has been growing the fastest a cross arcadian and urban segments. As per Nielsen, the FMCG market size of middle India is placed to expound from Rs 287 bn in 2010 to over Rs 4 trillion by 2026. homespun India, where 70% of the population resides that only 34% consume FMCG goods, presents the biggest market potential for the industry. Backed by low unit packs and aggressive distribution reach, rural market size has expanded four ages to Rs 564 bn since 2002. Companies suchas Hindustan Unilever and Dabur which derive nearly half their sales from rural India aim been incr relievo their reach.FMCG goods are retailed through with(p) both indigenous sales conduct General backing and youthful Trade. General Trade comprising of the ubiquitous kirana stores is the largest sales channel forming 95% of overall retail sales. However, growth of consumer goods retailed through Modern Trade channel is outpacing the growth of FMCG products in General Trade. Factors such as a comfortable and modern store experienc e, access to a unsubtle variety of categories and brands under a iodine roof and compelling value-for-money deals are attracting consumers to organized retail in a big steering.But modern trade is still an urban phenomenon with 17 tell metros contributing to 73% of overall modern trade in India. Product categories such as packaged rice, liquid toilet soaps, floor cleaners, breakfast cereals, air fresheners & mosquito distasteful equipment oblige a gamyer penetration in modern trade channel. Despite the relatively young performance of private label products in India, it is already close to 7% of modern trade sales. Modern Trade is expected to gain greater importance with opening up of overseas direct investment in multi-brand retail.The carrying out of the Goods and Services Tax (GST) is expected to benefit the sector immensely by reducing the overall relative incidence of valueation. GST aims to reduce the cascading effect by replacing a multitude of substantiating taxes such as central excise, service tax, VAT and inter-state sales tax with a individual(a) GST rate. Moreover, FMCG companies will be able to optimize logistics and distribution costs in the GST era. The resulting cost savings by the companies can be passed on to the final consumer thereby boosting contain. However the implementation of GST has certain(a)ly been put on the backburner by the government.FMCG Industry size (India)* Of the entire FMCG sector, food is 52%, Non-Food at 45% and OTC 3% * Growth being dictated by increasing consumption led by rise in incomes, changing lifestyles and favourable demographics. * FMCG industry expectedto grow in mid to high teens going ahead. * In the last decade the FMCG sector has bad at an median(a) of 11% a year in the last five years, annual growth accelerated to 17%. * FMCGs are soft and gradually positioning and deeply penetrating in the fast growing rural market. The Rural mind set is open to consumption of newer, to a greater ext ent contemporary food categories and as a result, drive consistent growth. FMCG industry to be Rs.4000-6000 billion industry by 2020. * Indian rural market currently worth US$ 9 bn is expected to become a US$ ascorbic acid bn opportunity by 2025. * By 2025, total consumption is likely to quadruple making India the 5th largest consumer market.* The FMCG sector in India continues on a strong growth path with both urban and rural India contributing to its growth. Rural India contributes one third of FMCG sales in India. * Growth driven by increasing consumption led by rise in incomes, changing lifestyles and favourable demographics. * Rural India marks for much than 700 Million consumers or 70% of the Indian population andaccounts for 40% of the total FMCG market. * The Rural market is a large market space with very low organized player penetration. Across the globe, the Indian rural market is probably the item-by-item largest unit of opportunity also with changing lifestyle and in creasing consumer requirement, the Indian FMCG market is expected to cross $80 billion by 2026 in towns with population of up to 10 lakhs. * The sector has a tremendous opportunity for growth in India, with the growing population, the rising incomes, education and urbanization, the advent of modern retail, and a consumption driven society.Source book of facts suisse* correspond to credit suisse report, FMCG growth was 14% in the rural market and 16% in the urban market during the quarter stop December 2011 for the quarter ended action 2013, while growth in the urban market ameliorate to 17%, it rose even higher, to 18%, in the rural market.Industry Classification and PerformanceThree well-identified sets of players operate within a exceedingly developed and intenselycompetitive landscape of the Indian FMCG market. 1. Foreign players who are present through their subsidiaries such as Unilever, P&G, Nestle and PepsiCo2. Strong Indian players with effected national presence such as Marico, Dabur and Godrej Consumer Products.3. Regional or small domestic players, such as Ajanta, Anchor, CavinKare etc., who are presentin a few regions of the country apart from these, there are regional and small-scale FMCG players such as small teaproducers and organic food producers, who mainly compete by oblation low- priced products with standardised looks or packaging compared to the bigger brands, to the right consumers typicallybased in rural areas or in small towns. These players with lower corporate overheads andclear focus on specific consumer requirements have a competitive edge over big FMCG players.Growth DriversGovernment Policies and Regulatory Framework* Investment Approval reflexive investment approval up to 100 per cent foreign equity forNRI and overseas corporate bodies. These investments are allowed in food processingsegments such as coffee and tea. * FDI in organized retail India currently allows 100 per cent FDI in hard cash & Carry segment and51% in single-brand retail, which is expected to be further increase to 100%. India is also expected to allow 51% FDI in multi-brand retail, which will boost the nascent organized retail market in the country.* Priority Sector The Government of India recognizes food processing and agro industries aspriority sectors. * ataraxis of license rules Industrial licenses are not required for almost all food and agro-processing industries, barring certain items such as beer, potable inebriant and wines, cane sugar, and hydrogenated animal fats and oils as well as items reserved for soap manufacturing in the small-scale sector. * Statutory Minimum damage In October 2009, the government amended the Sugarcane ControlOrder, 1966, and replaced the Statutory Minimum Price (SMP) ofsugarcane with reasonably andRemunerative Price (FRP) and the State- Advised Price (SAP).Opportunities in the FMCG Sector member OverviewSegment Overview Household carry off* The detergents segment dominates the household care segment and has been growing at an annual growth rate of 10- 11% in the historic five years.* The Household care segment is plagued by intense ambition and high direct of penetration. With rapid urbanization, emergence of small pack sizes and sachets is option up * topical anaesthetic and unorganized players account for a major share of the total volume ofthe detergent market.Segment Overview own(prenominal) billingLocal and unorganised players account for a major share of the total volume ofthe detergent marketThe detergent segment dominates the household care segment and has been growing at an annual growth rate of 10-11% in the foregone five years.The Household care segment is plaguedby intense competition and high level ofpenetration. With rapid urbanization,emergence of small pack sizes andsachets is picking up.Segment Overview Food and BeveragesThe Food and Beverages segment comprises of the food processingindustry,health beverage industry, breadand biscuits, cho colates & confectionery,Mineral Water and ice creams. The one-third largest consumed categories ofpackaged foods are packed tea biscuitsand soft drinks. The Indian hot beverage market isdominated by tea and the major share ofthe tea market is dominated byunorganized players.Dabur India Limited overview* Established in 1884 more than 127 years of self-assurance & Excellence * Among top 4 FMCG companies in India* Worlds largest in Ayurveda and natural healthcare* Revenue of r US$1 one thousand million (Rs 5,283 Crore) and MarketCapitalisation of US$4 Billion (Rs 20,000 Crore)* Wide distribution network covering 3.4 million retailers across the country * 23 world class manufacturing plants catering to needs of diverse markets * Strong overseas presence with 30% contribution to consolidated sales * Dabur India is also a world attractor in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. * Headquarters KaushambiGhaziabad 201010Uttar Pradesh, India* back management Dr. AnandBurman (C pilusman)Mr.AmitBurman (Vice-Chairman)Mr. Sunil Duggal (CEO)* Employees approximately 3000Key players at FMCGCompany Key categoriesHindustan Unilever Ltd Soaps, Detergents, Personal Care, Foods Nestle India Ltd Food, Beverages, Infant NutritionDabur India Ltd Personal, Health &Homecare, FoodsGodrej Consumer Hair Care, SoapsColgate Palmolive Ltd Oral Care & ToiletriesGlaxoSmithkline Consumer Consumer Health CareMarico Ltd. Hair care, Food, SkincareProcter & Gamble Feminine hygiene personal careBritannia Industries Ltd BiscuitsPEST AnalysisPolitical* Stable semipolitical government.* Restrictions in import policies.* Rise in customs duty on petrol & diesel.* Partial withdrawal of stimulus packagesEconomical* Inflation rate* Decr projected GDP* cast up in disposable income.* Indian FMCG record 16% gross sales Growth in last fiscal. The FMCG sector is the4thlargest sector of Indian economy with market size of more than 60,000croreSocial* revolt rural India.* Co nsumerism.* DemographyTechnological* Research and development intensity* learning technologyCOMPETITOR ANALYSISThe key competitors are KeoKarpin, Emami, Bajaj, Marico, HLL which together with Dabur have about 64% of Indias domestic market. Emami HimaniNavratan oil and Himani Oil. Emami has taken Madhuri Dixit as brand ambassador for emami oil and Amitabh Bachchan for Himami Navratan Oil. Overall it has a share of 4% in hair oil market. Bajaj Bajaj Brahmi Amla and Bajaj Almond Drops currently have a value share of 19 per cent and 12 per cent in their respective oil categories as per ORG-Marg. Besides, the corporation has also decided to rear its retail presence by nearly 20 per cent from the animate 5 lakh retail outlets in an attempt to reach the rural parts.Maricos start is premium edible grade oil, amarket leader in its home. Synonymous with pure coconut oil in the market, Parachute is positioned on the platform of purity. In fact over age it has become the gilded standard for purity. Parachutes primary target has been women of all ages. The brand has a huge loyalty, not only in the urban sections of India but also in the rural sector. It has a market share of 28%. HUL It has two products, Clinic plus Hair Oil and All sack Clinic Hair Oil. Overall it has a 3%share in hair oil market. The key competitors of Dabur in the Chyawanprash segment are Baidyanath, Zandu andHimani, which together with Dabur have about 85% of Indias domestic market. DaburChyawanprash (herbal honey) has a market share of 61%.We have tried to analyse the competition for Dabur in the Chyawanprash segment as followsSWOT AnalysisSTRENGTH * Strong presence in well defined niches( like value added Hair Oil and Ayurveda specialties) * marrow squash knowledge of Ayurveda * Strong Brand Image * diffusion crystallisework, Extensive turn in Chain, IT Initiatives and R & D WEAKNESS * Seasonal demand like chyawanprash in winter * High price Vatika * Limited contrastiveiation in some pr oducts like vatika OPPORTUNITIES * Export opportunities * Increasing demand by people * Market development THREATS * Existing competition like Zandu, Himani, Baidyanath * innovative entrant threats from substitutes like Bryllcream for vatika hair oilDabur Strong Presence in FMCG CategoriesCategory piazza Market share Key BrandsHair Care 3 12% DaburAmla hair Oil, Vatika hair oil &Vatika Shampoos Oral Care 3 13% Red toothpaste, Babool, Meswak, Red toothpowder Skin Care 3 7% DaburGulabari, FemAyurvedicTonics 1 67% DaburChyawanprashDigestives 1 56% HajmolaFruit Juices 1 52% Real Fruit Juices, Real Activ sweeten 1 50% Dabur lambGlucose 2 25% Dabur GlucoseSegment wise Market share of Dabur outside(a) business* Focus markets* Egypt* Nigeria* washout* Bangladesh* Nepal* U.S.* Leveraging the Natural preference among local consumers to increase share in personal care categories * High level of localization of manufacturing and sales and marketing * Sustained investments in brand create and marketingDomestic FMCG companies such as Godrej Consumer Products (GCPL), Marico and Dabur have grown at a robust pace of 20% average annual growth over the last five years. In a bid to expand their businesses further, these companies acquired several foreign brands and companies. Consequently, the share of the global sales to their total revenue has change magnitude. The chart of the day shows that between FY06 and FY12, the contribution of international sales has increased substantially for most FMCG companies. However, the benefit at the top line has failed to lift up at the pot line.Some fourth dimensions, acquired brands take a long time to break-even. Hair-styling brand Code 10 acquired by Marico in 2010 and Daburs Namaste acquisition in 2011 continue to remain in red. However, GCPL has seen reasonable success with several acquisitions such as Megasari in Indonesia, Darling Group in Africa and Cosmetica National. This may be on account of the fact that GCPL has focuse d on product acquisitions in which it has a strong core presence. Growth StrategyThree Growth StrategiesAcquireInnovateExpandExpand* Strengthening presence in living categories and markets as well entering new geographies * Maintain paramount share in categories where we are category builders like Health Supplements, Honey etc. and expand market shares in other categories * Calibrated international expansion local manufacturing pp y y g and supply chain to enhance flexibility/ reduce reception time to change in market demands Innovate* Strong focus on innovation. Have involute out new variants & products which have contributed to around 5-6% of our growth p.a. * Renovation of existing products to respond to changing demands (Toothpowder to Toothpaste) Acquire* Acquisitions critical for building scale in existing categories & markets * Should be synergistic and make a good strategical fit* position opportunities in our focus marketsAcquisitions of Hobi Group, Turkey* Acquisiti on of Hobi Group, Turkey for a total consideration of US$ 69 Million ideal on October 7, 2010 * Hobi manufactures and markets hair, skin and body care products under the brands Hobby and New Era * Product disgorge of the ships party is complementary to our product range * Acquisition provides an initiation into another attractive acclivitous market and a good platform to leverage this across the regionAcquisitions of Namaste Laboratories* Dabur India Limited through its subsidiary Dabur International Limited acquired 100% stake in Namaste Laboratories LLC for $100 million, in an all-cash deal on January 1, 2011 * Namaste is a leading ethnic hair care products connection, having products for women of colour, with revenues of $95 million from US, Europe, Middle East and African markets * The social club markets a portfolio of hair care products under the brand Organic origination Stimulator and has a strong presence in ethnic hair care market for women of colour. * Acquisitio n to enable entry into Ethnic Hair Care products market valued at more than US$1.5 billion and angle into significant market opportunity in the fast growing * At an acquisition price of $100 million, the deal value is at 1.1x Sales and 8.3x EBITDAPorters Industry AnalysisSupply Abundant supply through a distribution network of over 8 m stores across the country. Distribution networks are being beefed up to penetrate the rural areas. HUL has tripled rural network in 2011 and Dabur wants to double rural reach by FY13. Demand be items of daily consumption, demand is least tingeed by economic slowdown. Barriers to entry Huge investments in setting up distribution networks and promoting brands and competition from established companies. Bargaining power of suppliers Inputs being mostly agri-commodities, the suppliers are numerous and lack scale to wield bargaining power.Companies like ITC that are integrated backwards have lower dependence on suppliers. Bargaining power of customers node does not have bargaining power in case of mark products but intense competition within the FMCG companies results in value for money deals for consumers. Competition Competition is faced from domestic unorganized players and established MNCs. Price wars are a common phenomenon. Private labels offered by retailers at a discount to mainframe brands act as competition to undifferentiated and wobbly brands.Financial year 2013-2014 With consumer spending remaining healthy, value growth in FMCG sales were over 18% in 2012-13 (Source Nielsen). All the frontline FMCG companies registered double-digit sales growth during the year. Companies like Dabur, Godrej Consumer Products and Marico posted over 25% topline growth aided by brisk rise in overseas revenues. The rural markets continued to lead demand in personal care and oral care products. According to Nielsens data, rural sales in washing powder, hair oil and shampoo each contributed more than a third of the overall category sales in FY2012-13. Sales growth in rural markets surpassed that in urban markets in more than 50% of the FMCG categories.Nielsen has projected the size of the rural market to grow ten folds to $ 100 bn by 2025. In FY2012-13, margins of FMCG companies were hit by unprecedented increase in price of crude and other commodities. As crude price spiralled above $100 a barrel, price of input crude-derivatives, transportation/freight and packaging costs increased sharply. advertisement and promotional spends remained high on account of heightened competitive activity. The companies effected prudent price increases and also reduced the packet sizes and stock-keeping units (SKUs). Hence the growth seen by FMCG companies was mostly volume led. The simplification in surcharge from 7.5% to 5% and hike in the base MAT kept powerful tax judge unvaried during the year.Prospects Household spending on FMCG goods has not witnessed any gouge so further. But going forward, a deficient monsoo n is likely to impact farm income and thereby rural spending in the short term. up to now in urban India, discretionary spending can get wedged by lower salary hikes and food inflation re-surfacing on scurvy rain. This is more likely to result in down-trading by consumers. FMCG companies have been reaping the benefit of waning inflation and series of price-hikes taken earlier. But with the New threadbare Packaging rules coming into effect in November 2012, the companies will no daylong be able to hold prices by reducing the grammage sold. High base-effect in price levels and fears of hurting demand is likely to prevent companies from raising prices substantially. apart(predicate) from absorbing higher input costs, FMCG companies may have to bear expenses to loan theirproducts in line with the new packaging rules. Additionally, even rising competition is expected to keep brand investments by companies high through increased ad-spends and promotional expenses. Therefore, profi tability of FMCG companies may witness short-term pain. But long term demand potential of FMCG goods remains robust. According to International press Organisation, India will have the highest on the job(p) age population in the world by 2020. The National Council of Applied Economic Research projects the proportion of middle class population to swell from 13.1% at present to 37.2% by 2025-26. Increase in on the job(p)-age population and rising middle class will sympathise into higher purchasing power & boost consumerism. Higher penetration and evolution in consumption pattern will drive rural demand. The FMCG sector is expected to reach market size of $ 74 bn by 2018 (Source FICCI).Introduction Of Financial ModelingFinancial modeling refers to the process through which a gild builds up a financial representation of some, or even all aspects of the society or the given security. The financial model is in the main featured by performing calculations, and making recommendatio ns on the basis of that information. Moreover, the model might also prcis specific events for the end user in addition to providing management regarding possible alternatives or actions.Theoretically, a financial model is a set of assumptions about future business conditions that drive projections of a companys revenue, earnings, cash time periods and equilibrate sheet accounts.In practice, a financial model is a spreadsheet (usually in Microsofts Excel software) that analysts use to forecast a companys future financial performance. Properly projecting earnings and cash scarpers into the future is important since the intrinsic value of a stock depends more often than not on the outlook for financial performance of the issuing company.A financial model spreadsheet usually looks like a table of financial data organized into fiscal quarters and/or years. Each newspaper column of the table represents the parallelism sheet, income statement and cash flow statement of afuture quart er or year. The rows of the table represent all the line items of the companys financial statements, such as revenue, expenses, share count, metropolis expenditures and balance sheet accounts. Like financial statements, one generally reads the model from the top to the bottom, or revenue through earnings and cash flows. memorial as a Guide When trying to foretell the future, a good place to start is the past. Therefore, a good first step in building a model is to fully analyze a set of historic financial data and link projections to the historic data as a base for the model. If a company has generated gross margins in the 40% to 45% range for the past ten years, then it might be acceptable to assume that, with other things being equal, a margin of this level is sustainable into the future.Consequently, the historical track record of gross margin can become somewhat of a basis for a future income projection. Analysts are al managements smart to examine and analyze historical trend s in revenue growth, expenses, capital expenditures and other financial metrics earlier attempting to project financial results into the future. For this reason, financial model spreadsheets usually incorporate a set of historical financial data and related analytical measures from which analysts derive assumptions and projections.Macro-economical Factors 1. Mid-Quarter Monetary indemnity Review June 2013Monetary and Liquidity MeasuresOn the basis of an assessment of the current macroeconomic situation, run batted in has been decided to * keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of their net demand and time liabilities and * keep the form _or_ system of government repo rate under the liquidity adjustment facility (LAF) unchanged at 7.25 per cent.Consequently, the reverse repo rate under the LAF will remain unchanged at 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.25 per cent.2. The above monetary policy stance has been informed by the evolving growth-inflation dynamic, the balance of risks as well as recent developments in the external sector.3. Since the obtain Banks Annual Policy statement in May, global economic activity has slowed and risks remain elevated, most recently on account of uncertainty over policies of systemic central banks.On the domestic front, macroeconomic conditions remain weak, hamstrung by infrastructure bottlenecks, supply constraints, lacklustre domestic demand and subdued investment sentiment. Inflation hasmoderated as projected. However, upside pressures on the way forward from the pass-through of rupee depreciation, recent increases in administered prices and persisting imbalances, especially relating to food, award risks of second-round effects. As recent experience has shown, shifts in global market sentiment can trigger sudden stop and reversal of capital from a broad swath of emerging economies, swiftly amplifying risks to the outlook. India is not an exception.Global Economy4. Global growth has been patchy and uneven. Among advanced economies (AEs), during Q1 of 2013, growth in US and Japan emend while that in the euro area contracted. Growth in most emerging and developing economies (EDEs) has been relatively resilient, although in some large emerging economies, waterlogged external demand and stalled domestic investment are dragging down economic activity. Inflation has been easing in the AEs due to weak demand conditions. EDEs, however, present a mixed picture inflation remains elevated in the BRICS except China. Commodity prices, other than the price of crude, have generally softened in recent months.Domestic EconomyGrowth In May, the Central Statistics Office (CSO) account Indias GDP growth in Q4 of 2012-13 of 4.8 per cent, a marginal cash advance over the previous quarter. During the current financial year, the growth of industrial production decelerated to 2.3 per cent in April after picking up in the precede mo nth.All constituent categories of industry have slowed, with a persistent abridgment in mining activity. The sharp weakening in the growth of capital goods production indicates to still damped investment demand whereas a pick-up in consumer non-durables could be indicative of a fragile return of consumer confidence. On the other hand, the services sector purchasing managers index rose in May on order flows. The onset of the south-west monsoon has been strong and on time.InflationHeadline WPI inflation eased for three months in succession with the May reading at 4.7 per cent, down from an average of 7.4 per cent in 2012-13. All constituent categories, barring food, have moderated. In the fuel category, coal and mineral oil prices declined, partly offsetting the upward revision in administered prices of electricity. Non-food manufactured products inflation too ebbed, driven by metal prices which fell for the eighth successive month in response to softening of global prices. Still e levated food inflation, particularly in respect of cereals and vegetables, sustained upside pressures on overallinflation. Retail inflation, as measured by the new combined (rural and urban) CPI, edged down from an average of 10.2 per cent last fiscal year to 9.3 per cent in May.Liquidity Conditions realise average daily borrowings under the LAF have declined gradually, from 1.2 trillion in March 2013 to 0.7 trillion in June 2013 so far (up to June 14) mull overing the sizable injection of primary liquidity through the reduction in the cash reserve ratio (CRR) in January, open market operations (OMO) purchases during Q4 of 2012-13, a significant reduction in the governments cash balances with the declare Bank as well as two OMOs of 0.2 trillion in the current financial year so far.External Factors The most significant development in the external sector has been the movement in the exchange rate. The rupee depreciated by 5.8 per cent against the US dollar during the current fin ancial year up to June 14. It fell by 6.6 per cent during May 22-June 11 due to sell-off by foreign institutional investors, reflecting risk-off sentiment triggered by apprehensions of possible tapering off of quantitative easing by the US Fed. spot the trade famine has widened sharply due to a surge in festival-related/seasonal gold imports, available evidence suggests that a moderation in gold imports could be underway in June. Capital flows, which met the external financing requirement during April-May, moderated in June.Outlook At the global level, the International Monetary Fund (IMF) has warned of non-trivial risks of the global economy encountering a soft patch in the months ahead. On the domestic front, last years robust rabi production and the monsoon performance so far augur well for growth prospects. The spatial and temporal distribution of rainfall over the next three months will be crucial in determining the performance of agriculture. The continuing weakness in manuf acturing activity needs to be urgently reversed. Key to reinvigorating growth is accelerating investment by creating a conducive environment for private investment, improving project clearance and implementation and leveraging on the crowding-in role of public investment. On the inflation front, easing commodity prices at the global level and weaker pricing power of corpo pass judgment at the domestic level are having a softening influence. Given that food inflation remains high, the inflation outlook will be influenced by concerted efforts to break food inflation persistence.The inflation outlook going forward will be determined by suppressed inflation being released through revisions inadministered prices, including the minimum support prices (MSP) as well as the recent depreciation of the rupee. Softer global commodity prices and recent measures to bump gold imports are expected to moderate the CAD in 2013-14 from its level last year. The main challenge is to reduce the CAD to a sustainable level the near-term challenge is to finance it through stable flows. The most recent number on the Centres fiscal deficit, at 4.9 per cent of GDP for 2012-13, has turned out better than expected and instils confidence in the Governments commitment to contain the fiscal deficit for 2013-14 at 4.8 per cent. Perseverance with this consolidation should help in mitigating the twin deficit risks to the outlook. These dictatorial developments, which have been acknowledged by international credit rating agencies, should have a favourable impact on investor confidence.Current Account Deficit (CAD) woes The Reserve Bank of India (RBI) in its monetary policy cut the cash-reserve ratio (CRR) and repo rates by 25 basis points (0.25%). But at the analogous time it made very clear the motley risks that the Indian economy faces. While inflation is certainly one of the key risks, the other equally harassment factor is the current account deficit (CAD). Indeed, in the above chart sho ws, CAD (as a % of GDP) has been continuously increasing over five straight quarters from July-September 2011 (2QFY12) to July-September 2012 (2QFY13).This is bound to have an adverse impact on the constancy of the countrys exchange rate at a time when domestic growth has also been slowing down. What is more, the rise in imports has largely been on account of fuel and gold imports. This is of more worrying to the RBI, than had the high CAD been on account of import of capital goods. Understanding Financial StatementIncome StatementAn income statement (US English) or profit and loss account (UK English) (also referred to as a profit and loss statement (P&L), revenue statement,statement of financial performance, earnings statement, operating(a) statement, or statement of operations) is one of the financial statementsof a company and shows the companys revenuesand expenses during a particular period.It indicates how the revenues (money received from the sale of products and services before expenses are taken out, also known as the top line) are transformed into the net income(the result after all revenues and expenses have been accounted for, also known as net profit or the bottom line). It displays the revenues recognized for a specific period, andthe costand expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of assorted assets) and taxes.The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.The important thing to think up about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time.Balance SheetIn financial explanation, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, abusiness partnership, a corporation or other business organisation, such as an LLC or an LLP. Assets, li abilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a companys financial condition. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business calendar year.A standard company balance sheet has three parts assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity.Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assetsor the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.Another way to look at the same equation is that assets equal liabilities plus owners equity. Looking at the equation in this way shows how assets were financed either by borrowing money (liability) or by using the own ers money (owners equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections balancing.Cash Flow StatementIn financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statementthat shows how changes inbalance sheetaccounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.Essentially, the cash flow statement is concerned with the flow of cash in and out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company,particularly its ability to pay bills. International Accounting ensample 7 (IAS 7), is the International Accounting Standardthat deals with cash flow statements.People and groups interested in cash flow statements include * Accounting personnel, who need to know whether the organization will be able to cover payroll and other warm expenses * Potential lendersor creditors, who want a clear picture of a companys ability to repay * Potential investors, who need to judge whether the company is financially sound * Potential employees or contractors, who need to know whether the company will be able to afford compensation * Shareholders of the business.The cash flow statement is intended to 1. provide information on a firms liquidity and solvency and its ability to change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity3. improve the comparability of different firms operating performance by eliminating the effects of different accounting methods4. It indicates the amount, timing and probability of future cash flows.Working CapitalWorking capital (abbreviated WC) is a financial metric which represents opera ting liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash.Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and approaching operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.Horiz ontal AnalysisA procedure in fundamental analysis in which an analyst compares ratios or line items in a companys financial statements over a certain period of time. The analyst will use his or her discretion when choosing a particular timeline however, the decision is often based on the investing time horizonunder consideration.Formula,= current year-base yearbase year Vertical AnalysisVertical analysis of financial statements is a technique in which the relationship between items in the same financial statement is identified by expressing all amounts as a percentage a total amount. This method compares different items to a single item in the same accounting period.The financial statements prepared by using this technique are known as common size financial statements.Trend AnalysisTrend Analysis is the practice of collecting information and attempting to spot a pattern, or trend, in the information. Although trend analysis is often used to predict future events, it could be used to estimate uncertain events in the past, such as how many ancient kings probably ruled between two dates, based on data such as the average years which other known kings reigned.= Current year*100 Base yearDiscounted Cash Flow (DCF) AnalysisIn finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present value (PVs)the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question.Present value may also be expressed as a number of years purchase of the future undiscounted annual cash flows expected to arise.Using DCF analysis to compute the NPV takes as input cash flows and a discount rate and gives as output a price the adversary processtaking cash flows and a price and inferring a discount rate, is called the yield.Discounted cash flow analysis is widely used in investment finance, real estate development, and corporate financial management.What is relative valuation? In relative valuation, the value of an asset is compared to the values assessed by the market for similar or comparable assets. To do relative valuation then, we need to light upon comparable assets and obtain market values for these assets convert these market values into standardise values, since the absolute prices cannot be compared This process of standardizing creates price multiples. compare the standardised value or multiple for the asset being analyzed to the standardized values for comparable asset, controlling for any differences between the firms that might affect the multiple, to judge whether the asset is under or over valuedInterpretation of DCF valuation and Relative valuation Review of LiteratureMostly financial modeling of dabur was done before by equity research analyst of various research agencies, mutual funds, investment b anks and brokerage house. Generally they have done it quarterly and annually before and after the companys financial results. exculpation and Likely BenefitsWhy financial modelingis important?Financial modeling acts as a useful tool which enables business options and risks to be estimated in a cost-effective way against various assumptions, recognize optimal solutions in estimating financial returns and understand the effect of resource constraints thus leading to more effective business decisions. Financial modeling can be referred as an art and like any other art form, it requires constant practice and commitment to develop expertise in this area.In the present day world, many companies are becoming globally integrated with the international economy through the way of acquiring/establishing international operations. This calls for the requirement of strong financial models which can process in performing the evaluation of every countrys operations, reflect on multiple currencies in their model, estimate varying capacity utilizations to estimate the optimal capacity under changeable industry demand-supply scenarios and similar more cases.Scope of Financial Modeling?Financial Modelling is a key skill with application in several areas withinbanking and finance industry as well as within corporations. In financialmodelling you learn to gather historical information on companies andanalyze company / industry performance on various financialparameters. This analysis is then used to build a companys financialmodel, which in turn is key to projecting a future financial performance.Based on this model companies investors can arrive at a suitableevaluation for the companies. Financial models are usually made for financing of a project intransactions like PPP/PFI, Mergers & Acquisitions, Valuation ofbusinesses etc. across various industries & sectors which includes SolarPlants, Waste Management, cleaver felt, Oil and Gas, Mining,Energy, Healthcare,Services & Educatio n etc to evaluate the viability ofthe project on various parameters.Key Financial of DaburObjectivesTo find out intrinsic value of dabur and take decision regarding investment in Dabur.Plan of Work and Methodology vigilant a Sector Analysis Report for the FMCG sector Performed Historical proportion Analysis of Dabur Prepared a Financial Model for Dabur by calculate its financials for the next five years (FY13E-FY17E) on the basis of a historical trend analysis and expected performance of the FMCG industry drivers. Estimated a Target Price for the stock of Dabur using a DCF Valuation Model as well as using Relative Valuation by peer comparison. Submitted a final Equity Research Report on Dabur with recommendations.References and Bibliographywww.investopedia.comwww.rbi.org.inwww.moneycontrol.comwww.equitymaster.comwww.bloomberg.comwww.bseindia.comwww.dabur.comwww.wikipedia.orgNielsen FMCG industry report