FINC/157

IBS Center for Management Research

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Financial Statement Analysis of Godrej Consumer Products Ltd
This case was written by D Satish and Priyesh Sinha, IBS Hyderabad. It was compiled from generalized experience, and is
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intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management
situation.
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 2019, IBS Center for Management Research. All rights reserved.

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 FINC/157

Financial Statement Analysis of Godrej Consumer

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Products Ltd
The Godrej Way is our compass. It is what centres, inspires and provides meaning
to everything that we do. You will continue to see it reflected in the choices we

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make, in our approach to value creation and how we become more ‘Good &
Green’.
– Nisaba Godrej, Executive Chairperson, Godrej Consumer Products Ltd

Godrej Consumer Products Limited (GCPL), a Mumbai-based Indian Fast Moving Consumer

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Goods (FMCG) Company, which had established itself as a leader in the soap, hair colorant,
toiletry, and liquid detergent product segments in India. Its popular brands included 'Cinthol',

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'Godrej Fair Glow', 'Godrej No.1', and 'Godrej Shikakai' in soaps, 'Godrej Powder Hair Dye',
'Renew', 'ColourSoft' in hair colorants, and 'Ezee' in liquid detergents. The company operated in 90
countries with 12000 employees and 1.15 bn consumers at the end of the financial year 2018.
GCPL was listed among Forbes’ 100 most innovative growth companies in 2016 and, for the first
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time, crossed the INR 98 bn mark in revenues for the financial year ending March 31, 2018, with a
market capitalization of INR 744 bn.

BACKGROUND: BUILDING ON STRATEGIC ACQUISITIONS

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GCPL was incorporated as a public limited company in November 2000 by its promoters, Godrej
Boyce Manufacturing Company. The company was formed by the transfer of the assets and
liabilities of the consumer product division of Godrej Soaps Limited along with 2 factories (at
Malanpur and Silvassa, India) and the marketing, selling, and distribution related facilities. During
the FY 2001–02, GCPL set up a new manufacturing facility at Guwahati (North East India) to
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manufacture hair color and toiletries. During the FY 2002–03, GCPL launched Godrej No. 1, an
Ayurvedic soap, and Godrej FairGlow Saffron in the southern states of Karnataka and Andhra
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Pradesh. The company also entered into the unbranded mehendi (henna) powder market with the
launch of a 100 per cent natural mehendi branded 'Godrej Nupur'.
The company grew by acquiring several brands and products which served the needs of the
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consumers. In May 2003, GCPL acquired the Snuggy brand of baby diapers for INR 5.9 crore
(INR 590 mn)and re-launched it as Godrej Snuggy baby diapers by setting up a manufacturing
plant in Baddi, Himachal Pradesh (North India).
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The company acquired foreign brands and products and expanded geographically to almost all
parts of the world. In October 2005, the company acquired 100% ownership in UK-based FMCG
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company Keyline Brands Ltd. This gave the company ownership of several strong international
brands and trademarks including Cuticura Erasmic and Apart in many countries. In September
2006, GCPL acquired the South African business of Rapidol UK with its subsidiary Rapidol
International, a hair color major. In March 2007, GCPL formed a 50:50 joint venture company
known as Godrej SCA Hygiene Ltd along with SCA Hygiene Products AB Sweden to manufacture
paper-based absorbent hygiene products, specifically sanitary napkins and baby diapers, in India,
Nepal, and Bhutan.

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 Financial Statement Analysis of Godrej Consumer Products Ltd

In April 2008, the company acquired a 100% stake in Kinky Group Properties Ltd., South Africa, a
leader in the hair care category in South Africa. On March 12, 2010, GCPL acquired Tura from the
Tura Group, a market-leading personal care company in Africa. In 2010, it also acquired the PT
Megasari Makmur Group and its distribution company in Indonesia that were involved in the
manufacture and distribution of household products. In 2010, GCPL acquired a 100% stake in
Issue Group, a personal care product company with a focus on hair care products. The Issue brand
enjoyed volume leadership in Argentina with a market share in excess of 20%. In June 2010,
GCPL acquired a 100% stake in Argencos, the No.1 hair styling spray company in Argentina, with

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its brand `Roby'. In 2011, GCPL acquired a 51% stake in Darling Group Holdings that sold hair
extension products and operated in 14 countries across sub-Saharan Africa.
On March 31, 2011, GCPL merged with Godrej Household Products Ltd. (GHPL), which
consolidated GCPL's position in the Indian FMCG space and made it a company with the largest

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home grown home and personal care portfolio in India.
In 2012, GCPL acquired a 60% stake in Cosmetica Nacional, a market leading hair colorant and
cosmetics company in Chile. In 2015, it acquired 100% of the business of Frika Hair (Pty)
Limited, a hair extension firm in South Africa. In 2016, GCPL’s subsidiary acquired a majority
stake in the Kenyan business Canon Chemicals Limited (Canon). Canon manufactured and

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distributed personal and home products and its major brand was Valon petroleum jelly. In 2016,
the company acquired Nature LLC USA through a wholly-owned subsidiary of the company.
Nature LLC (SON) was a leading company of hair care products for women of African descent.

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This acquisition brought GCPL to the forefront in serving the hair care needs of women of African
descent. Again in 2016, GCPL acquired Hair Credentials Zambia and started its Zambian
operations.
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In the year 2017, GCPL acquired a 100% stake in Weave Senegal, a company that manufactured
and marketed hair and skin care products in Senegal. Powered by the acquisitions, the company’s
annual report 2018 showed that it was No 1 in household insecticides and room fresheners in India
and Indonesia and No 1 in liquid detergents in India. The company stood first in wet wipes in
Indonesia and second in soaps in India under the personal care product category. In the hair care
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category, it was number 1 in hair dyes in India and in ethnic hair colors and hair extensions in Sub
Saharan Africa and number 2 in hair dyes in Argentina and Chile. These acquisitions also
contributed significantly to the company’s top line and bottom line. Refer to Table 1 for market
information of GCPL.

INDUSTRY SCENARIO
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The FMCG industry, the fourth largest sector in the Indian economy, was divided into 3 segments
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– Food & Beverages, Health Care, and Household and Personal Care. At the end of 2018, the Food
& Beverage segment had 20% of the market share, Health Care took 30% of the markets share,
while Household and Personal Care had 50%1. According to IBEF, Indian Brand Equity
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Foundation, the FMCG market in India grew at a CAGR of 27.86% in FY 2018 and was expected
to touch $103.7 bn in the year 2020 from $52.75 bn in the year 2018.
The phenomenal performance of the industry was due to an increase in income and consumption
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levels among Indians and the growth in the younger population who were brand conscious. One of
the thrust areas for the FMCG segment was to exploit the low penetration level of the rural market
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and the increasing rural incomes supported by direct cash transfer schemes introduced by the
central government and some state governments. The rural market had 45% and the urban market
55% of the FMCG market share in FY 20182 but the rural consumption was set to pick up faster
and was expected to grow to $220 bn by the year 2025 from a level of $ 23.6 bn for the year 2018.
To cater to the projected demand, the companies had been expanding their manufacturing
capacities in different geographical regions to cut down time and cost of logistics. The companies
had also been using technology and the internet to reduce operational and logistics costs. The

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 Financial Statement Analysis of Godrej Consumer Products Ltd

tremendous growth of online retailers like Amazon and Flipkart had contributed to the increase in
sales of FMCG products. Online FMCG sales, which stood at $20 bn in 2017, was expected to
touch $45 bn by the year 20203.
FMCG companies used various strategies to fight competition. Some companies used combination
offers to sell more products by offering n+1 products at the cost of n. Companies also offered
products online while most of them had tied up with online retailers and groceries to sell their
products. Companies also used customer data and analytics to launch products catering to specific
needs and wants. Companies which worked on innovative products, premium products, and

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intelligent sourcing and formed joint ventures, went online and penetrated the growing rural
markets were expected to have a competitive edge.
GCPL with its focus on household and personal care was the 7th largest FMCG player in terms of
sales in India behind ITC, Hindustan Unilever Limited (HUL), Nestle India, Britannia Industries,

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Dabur, and Marico in the year 2018. Refer to Table 2 for key parameters comparing GCPL with
select Indian FMCG players.
Table 1: Market Information of Godrej Consumer Products Ltd (In INR)
2016 2017 2018

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Market Price per share 460.27 557.13 729.10
No of Outstanding Shares 34,05,00,726 34,06,00,816 68,13,00,000
Dividend Paid
Book Value Per share
5.50
286.45 O 5.75
382.75
15.00
204.94
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Source: Compiled by the authors from various published sources

Table 2: Indian FMCG industry Comparables (Figures in INR thousands)

Particulars GCPL HUL P&G
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Net Revenue 10,04,45,490 35,54,50,000 6,68,32,000

Net Profit 1,63,41,800 5,21,40,000 97,50,000
Total Equity 6,25,83,100 7,28,10,000 5,13,26,000
Total Debt 2,38,03,200 0.00 2,07,78,000
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Current Assets 5,16,76,800 11,66,00,000 2,33,20,000

Current Liability 4,16,48,000 8,88,70,000 2,82,37,000
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Total Assets 13,96,27,100 17,86,20,000 11,83,10,000

Earnings Per share 19.79 24.08 4.20
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PE ratio 33.00 72.57 25.18

Source: Compiled by the authors from various published sources
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FINANCIAL REVIEW
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GCPL’s focused strategy targeting the household and personal care segment enabled it to deliver
competitive profitable growth. Sales for the year increased by 9% on a comparable basis, while
EBITDA increased by 12% led by robust gross margin expansion. Growth in EPS was 25% for the
FY 2018. (Refer to Exhibit 1 for GCPL Income Statement, to Exhibit II for GCPL’s Balance sheet,
and to Exhibit III for GCPL’s Cash Flow Statement). The company declared a dividend of Rs 10
for the financial year 2018, which resulted in a payout of 50%. In Africa, GCPL concentrated on
putting strong talent in place, creating the Africa center in Dubai, and scaling up local

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 Financial Statement Analysis of Godrej Consumer Products Ltd

manufacturing along with launching the wet hair portfolio. In Indonesia, the company concentrated
on reinvigorating the innovation engine and laying the groundwork for a significant transformation
of the go-to market approach.
In India, the company worked on developing a very strong digital marketing base, re-architecting
distribution, and strengthening its analytics capability. Indian business sales grew at 7% on a
comparable basis based on the volume growth of 6%. Secondary sales grew at 10% in the year
2018, which was much higher than the primary growth and was led by initiatives to increase the
channel partners’ ROI. Consistent profit growth was delivered by the company despite its

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investing in brands and increasing marketing spend in the belief that these investments would
strengthen its brands and were important for accelerating growth in the future. Post introduction of
Goods and services tax (GST) in India, GCPL spent time re-architecting its distribution approach
by giving it a much stronger go-to market approach.

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BUILDING FOR THE FUTURE

GCPL had been building on its strong performance since 1010. The company was banking on its 7
pillars to take it into the future. It was aiming to extend its leadership in its core categories and
geographies where it was in the top position. The company was focusing on accelerating

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innovation and renovation. The new products it had launched between 2013 to 2018 had
contributed to 20% of its global growth and 30% of growth in India.

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The company had framed a two-pronged approach to innovation – building on and extending its
leadership positions in current categories through new formats and democratization and pursuing
attractive adjacencies and creating new vectors of growth to broaden its portfolio. The company had
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developed a state-of-the-art Research & Development center at its headquarters in Mumbai. It was
also working on strategic global partnerships to leverage on cutting-edge technology and processes.
The company had worked on digital power by creating a team of digital markers across
geographies who shared ideas and learnings. The company had also developed a dedicated facility
to evaluate real-time brand performance and to monitor and engage in social conversations with
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the consumer.
The company was building a future ready sales system. The sales team saw a smooth transition to
the Goods and Services Tax in India while augmenting its overall reach. The company had also
strengthened direct distribution to over 1.2 million outlets in India by driving availability in a
cluster of outlets through a shopper insight-based visibility program. Besides, GCPL had revamped
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and aligned its sales structure to respond to the market challenges in Indonesia.
GCPL was working on making its supply chain best in class. It was introducing best practices
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across geographies to become more agile and make its supply chain demand driven. The company
was concentrating on the Theory of Constraints, Total Productive Maintenance, Lean, Six Sigma,
and Low-Cost Automation. GCPL was spending money on enhancing its manufacturing capacity
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across geographies, piloting the Internet of Things in manufacturing and logistics.

GCPL was fostering an agile and high-performance culture4. The company sought to foster an
inspiring workplace with an agile and high-performance culture to attract, develop, and retain the
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best global talent. The company had a 120-year old proud legacy built on strong values of trust,
integrity, and respect for others. At the same time, its exciting and ambitious growth plans had
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allowed it to offer unparalleled career opportunities relatively early on in the employee’s career.
In order to promote a more inclusive world, GCPL aimed to become more ‘Good & Green’. As a
part of its India initiative, the company was contributing to achieving zero waste to landfill, carbon
neutrality, and a positive water balance, while reducing specific energy consumption and
increasing the use of renewable energy. The company expressed the hope that building on these
pillars would help it to develop a competitive advantage, resulting in strong financial performance
and in delivering value to the shareholders.

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 Financial Statement Analysis of Godrej Consumer Products Ltd

Exhibit I:
Godrej Consumer Products Ltd Consolidated Income Statement
for the year ended March 2018
As at March As at March
31,2017 31,2018
(Amount in (Amount in
Crore) Crore)

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Revenue
I Revenue from Operations 9,608.80 9,936.99
II Other Income 75.3 107.55

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III Total Income (I + II) 9,684.10 10,044.54
IV Expenses
Cost of Materials Consumed 3,801.91 3,646.23
Purchases of Stock-in-Trade 463.94 572.13

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Changes in Inventories of Finished Goods, Stock-in-
Trade and Work-in-Progress -133.33 56
Excise Duty
Employee Benefits Expense O 340.89
988.46
93.72
1,057.41
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Finance Costs 145.22 160.74
Depreciation and Amortization Expense 141.57 155.68
Other Expenses 2,249.21 2,444.39
Total Expenses 7,997.87 8,186.30
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V Profit before Exceptional Items, Share of Net

Profits of equity accounted
investees and Tax (III-IV) 1,686.23 1,858.24
VI Share of net Profits of equity accounted investees (net
of income tax) 0.82 1.08
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VII Profit before Exceptional Items and Tax (V+VI) 1,687.05 1,859.32
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VIII Exceptional Items (net) 0.08 179.56

IX Profit Before Tax (V+VI) 1,687.13 2,038.88
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X Tax Expense
(1) Current Tax 369.17 392.5
(2) Deferred Tax 9.99 12.2
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Total Tax Expense 379.16 404.7

XI Profit for the year Before Minority Interest (IX-X) 1,307.97 1,634.18
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Share of Profit / (Loss) in Associate Company

Minority Interest
Profit for the Year 1,307.97 1,634.18
Source: 2018 Annual Report of GCPL

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 Financial Statement Analysis of Godrej Consumer Products Ltd

Exhibit II:
Godrej Consumer Products Ltd Consolidated Balance Sheet
for the Year Ended March 2018
As at March 31,2017 As at March 31,2018
(Amount in Crore) (Amount in Crore)
ASSETS

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1. Non-current Assets
(a) Property, Plant, and Equipment 942.58 1,066.36
(b) Capital work-in-progress 95.11 82.08

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(c) Goodwill 4,662.56 4,718.87
(d) Other intangible assets 2,477.75 2,529.77
(e) Intangible assets under development 2.32 1.8
(f) Investments in asociates 35.24 36.32

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(g) Financial Assets
(ii) Other Investments
(iii) Loans
(iv) Others
O 216.51
19.28
5.35
105.2
18.87
9.57
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(h) Deferred tax assets (net) 96.28 100.04
(i) Other non-current assets 59.77 64.89
(j) Non-current Tax Assets (Net) 45.73 61.26
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Total Non-Current Assets 8,658.48 8,795.03

2. Current Assets
(a) Inventories 1,412.50 1,577.72
(b) Financial Assets
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(i) Investments 681.79 855.76

(ii) Trade receivables 1,028.74 1,245.50
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(iii) Cash and cash equivalents 895.05 898.02

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(iv) Bank balances other than (iii)

above 17.61 62.19
(v) Loans 3.61 2.89
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(vi) Others 190.04 199.11

(c) Other current assets 142.22 326.49
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4,371.56 5,167.68
(d) Non-current Assets held for sale 6.49
Total Current Assets 4,378.05 5,167.68
Total Assets 13,036.53 13,962.71

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 Financial Statement Analysis of Godrej Consumer Products Ltd

As at March 31,2017 As at March 31,2018

(Amount in Crore) (Amount in Crore)
EQUITY AND LIABILITIES
1. Equity
(a) Equity Share capital 34.06 68.13
(b) Other Equity

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Equity attributable to the owners of the
parent 5,267.89 6,190.18
Non-controlling interest

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Total Equity 5,301.95 6,258.31
2. Liabilities
Non-current Liabilities
(a) Financial liabilities

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(i) Borrowings 3,108.25 2,380.32
(ii) Other financial liabilities
(b) Provisions
(c) Deferred tax liabilities (net)
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80.57
286.11
753.95
98.24
304.72
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(d) Other non-current liabilities 1.05 2.37
Total Non-Current Liabilities 4,387.22 3,539.60
3. Current Liabilities
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(a) Financial Liabilities

(i) Borrowings 232.55 140.51
(ii) Trade payables 1,723.90 2,356.85
(iii) Other financial liabilities 1,022.64 1,285.39
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(b) Other current liabilities 302.54 311.36

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(c) Provisions 58.14 47.82

(d) Current tax Liabilities (Net) 7.59 22.87
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Total Current Liabilities 3,347.36 4,164.80

Total Equity And Liabilities 13,036.53 13,962.71
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Source: 2018 Annual Report of GCPL

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 Financial Statement Analysis of Godrej Consumer Products Ltd

Exhibit III:
Godrej Consumer Products Ltd Consolidated Statement of Cash Flow
for Year Ending March 2018
Mar 18 Mar 17
(Amount in (Amount in
Crore) Crore)
Cash and Cash Equivalents at Beginning of the year 895.05 612.59

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Net Cash from Operating Activities 1,723.35 1,860.22
Cash Flow From Operating Activities

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Net Profit before Tax & Extraordinary Items 1,859.32 1,687.05
Adjustment For
Depreciation 155.68 141.57
Interest (Net) 92.24 104.41

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Dividend Received 0.00 0.00
P/L on Sales of Assets -4.35 -1.84
P/L on Sales of Invest
Prov. & W/O (Net) O -18.54
17.89
-9.07
14.01
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P/L in Forex 29.06 15.68
Fin. Lease & Rental Charges 0.00 0.00
Others 15.77 -4.83
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Total Adjustments (PBT & Extraordinary Items) 287.75 259.93

Op. Profit before Working Capital Changes 2,147.07 1,946.98
Cash Generated from/(used in) Operations 2,131.53 2,287.60
Net Cash Used in Investing Activities -339.79 -2,243.25
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Net Cash Used in Financing Activities -1,384.01 664.65

Net Cash Used in Financing Activities -1,384.01 664.65
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Net Inc/(Dec) in Cash and Cash Equivalent -0.45 281.62

Cash and Cash Equivalents at End of the year 894.60 894.21
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Source: 2018 Annual Report of GCPL

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End Notes:
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1
Care Ratings, Professional risk Opinion. http://www.careratings.com/upload/NewsFiles/SplAnalysis/
FMCG_July%202017.pdf
2
FMCG Sector - Steady growth on the cards?, https://www.indiainfoline.com/article/general-blog/fmcg-
sector-steady-growth-on-the-cards-119031500246_1.html
3
Fast Moving Consumer Goods (FMCG), Hem Securities Limited, https://www.hemsecurities.com/
upload/docs/indian-fmcg-sector-reportpdf_489712.pdf
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2018 Annual Report of GCPL