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Corporate Finance By Group:5Ankit Saklani- 13P125Ashima Tayal- 13P130 Jain Himanshu Hemant- 13P143 Kaushik Trilok Nihalani- 13P148Rattan Preet Singh- 13P161Shahshank Shukla- 13P166Risk and Return Analysis

Cost of Equity was calculated using the weekly beta and Risk free rate: 8.86% and Market premium of 10.55%

For the cost of debt we use the spread from table on FIMMDA website based on their ratingsUnsystematic RiskITC: 80% of the PAT for the company comes from Cigarettes segmentHigh taxes on cigarettes have increased the cases of smuggling

Marico: Overly reliant on oil (hair and cooking) segmentExposure to international markets is up to 22% of revenues

Emami: 17% of revenues from international marketsraw material imports are from Africa

Debt Equity RatioITC0Marico0.33Emami0.06Systematic Risk for FMCGRestriction on pack sizes Economic recessionExchange fluctuations Investment Returns

ITC:The growth in RoE and RoCE is almost constantDifference in RoE and RoCE is due to the taxes paid by ITC as cigarette are taxed heavilyLarge chunk of money received as income from dividend and interest on current investmentsMarico:Engaged in aggressive Greenfield expansion fueled mostly by debtHence RoE and RoCE values been very erraticSince 2005, 12 brand acquisitionsMost investments been made in Purchase of Fixed assets or Purchase of investmentsEmami: Acquired Zandu Pharmaceutical Ltd in 2009RoE and RoCE went down in 2010 as acquisition was funded by a mix of debt and equityMost investments made in FA or InvestmentsAcquisition of a manufacturing facility in Egypt (2012) ands Bangladesh (2013)Capital Structure

ITC: Being a market leader can dictate terms to both suppliers and retailersThus, debt requirement is very lowFollows NOI based approach for Capital StructureMarico: driven by debt to support acquisitionsreflected in the high debt-equity ratioIn 2012-13 decided to put a hold on acquisitions EmamiD/E reached a high value of 1.49 in 2009 due to acquisition of ZanduCurrently 0.06%, which is in line with the industryCash Flow from OperationITC: cash flows (from operations) consistently increasingMarico: cash flows experienced a jump in 2011-12 after it acquired Personal care arm of Paras pharmaceuticalsEmami: erratic cash flows due to drastic changes in receivablesDividend Strategy

ITC: Payout ratio consistently high as does not have much investment opportunities Reached the maturation stage in lifecycle Giving return to the investors in the form of high dividendsIn 2010 to mark 100th year of operations paid dividend payout ratio of 109.63% probably funded by Reserves and SurplusesMarico: Extensive expansion mode since 2005In 2008 declared that will be lot more conservative with the dividend and try to retire the debt on booksIn 2013 brought down Debt Equity ratio to 0.33 and increased the dividend to Re. 1Emami: Dividend increasing since 2009In 2012 total dividend was increased to 800% as become totally debt free in that year which include Special dividend of 400%In 2013, normal dividend of 800% as felt confident of maintaining itWorking Capital

ITC: a sudden reduction in creditor days in 2011-12Since then, the cash conversion cycle for ITC has become positive before that, it was negative And net change in Current Investments has also been negative impacting the treasury operations for the companyMarico: sudden increase in Inventories for the year 2011-12 on account of the acquisition Paras Pharmaceuticals That was the reason that the Cash Conversion Cycle of Marico became positive since 2010-11

Emami: working capital has been negative for all the five yearsTrade Payables have been falling consistently and that has impacted the Cash Conversion CycleThere has been a gradual increase in inventory as well in the 5 year periodThank You