PESTEL ANALYSIS FMCG Sector

Political Factors

Investment approval of up to 100 per cent foreign equity in single brand

retail and 51 per cent in multi-brand retail
Initiatives like Food Security Bill and direct cash transfer subsidies reach
about 40 per cent of households in India
The minimum capitalisation for foreign FMCG companies to invest in India
is USD100 million

Economic Factor

Overall FMCG market expected to expand at a CAGR of 20.6 per cent to

USD103.7 billion during 2016F20F
Total consumption expenditure to reach nearly USD3600 billion by 2020
from USD1411 billion in 2014
The rural FMCG market expected to increase at a CAGR of 18.1 per cent to
USD100 billion during 201525F. The overall rural FMCG consumption
stands at USD18.92 billion in 2015
Rural Indias per capita disposable income is estimated to rise to USD631
in 2020 from USD516 in 2015E
The modern retail market is expected to grow from USD60 billion to
USD180 billion during 2015-2020F

Social Factors

Indias middle income population estimated to reach 267 million by 2016

from 160 million in 2011
Rising incomes and growing youth population have been key growth
drivers of the sector. Brand consciousness has also aided demand
First Time Modern Trade Shoppers spend is estimated to triple to USD1
billion by 2015
Tier II/III cities are witnessing faster growth in modern trade

Technological Factors

FMCG players in India are increasingly focusing on reducing their carbon

footprint by creating eco-friendly products. They generate the required
energy from renewable sources and earn CER credits for the same. In
India, organic skincare market is estimated to be around USD81.8 million
and growing at a rate of 20-25 per cent growth per year
Several companies have started innovating or customising their existing
product portfolios for new consumer segments. In 2015, Honitus from
Dabur performed well because of its unique non drowsy property.

Environmental Factors

Ecological: The ecological and environment aspects such as weather,

climate, & climate changes, which may especially affect industry such as
tourism, farming, & insurance. In FMCG Air conditioners demand increase
in summer season.

Environmental issues: Global warming is one of the major issue now-adays as external factor is becoming a significant issue for firms to
consider.
Many remedies have been taken to reduce Global warming. Environmental
regulations: Various regulations have been declared by government to
safeguard the environment. For example-no company should through its
waste in rivers.

Legal Factors

FSB would reduce prices of food grains for Below Poverty Line (BPL)
households, allowing them to spend resources on other goods and
services, including FMCG products.
This is expected to trigger higher consumption spends, particularly in rural
India, which is an important market for most FMCG companies
Government has initiated Self Employment and Talent Utilisation (SETU)
scheme to boost young entrepreneurs. Government has invested
USD163.73 million for this scheme

PEST ANALYSIS Media Sector

The Indian media industry has tremendous scope for growth in all the segments
due to rising incomes and evolving lifestyles. Media is consumed by audience
across demographics and various avenues such as television, films, out of home
(OOH), radio, animation and visual effect (VFX), music, gaming, digital
advertising, and print.
Political Factors

The Government of India has supported Media and Entertainment

industrys growth by taking various initiatives such as digitising the cable
distribution sector to attract greater institutional funding, increasing FDI
limit from 74 per cent to 100 per cent in cable and DTH satellite platforms,
and granting industry status to the film industry for easy access to
institutional finance.
The Union Cabinet has approved the model Shops and Establishment Act,
aimed at generating employment prospects by allowing cinema halls,
restaurants, shops, banks and other such workplaces to remain open
round the clock.
The Ministry of Information and Broadcasting (I&B) is working towards
promoting ease of doing business, which will ensure less regulation and
facilitate India to become the hub of media and entertainment industry.

Economic Factor

The Indian Media and Entertainment industry is on an impressive growth

path. The revenue from advertising is expected to grow at a CAGR of 13

per cent and will exceed Rs 81,600 crore (US$ 12.09 billion) in 2019 from
Rs 41,400 crore (US$ 6.14 billion) in 2014.
The largest segment, Indias television industry, is expected to maintain
its strong growth momentum led by subscription revenues, representing a
year-on-year growth of about 13.2 per cent to reach Rs 60,000 crore (US$
8.89 billion) in 2015.
The Foreign Direct Investment (FDI) inflows in the Information and
Broadcasting (I&B) sector (including Print Media) in the period April 2000
March 2016 stood at US$ 4.98 billion, as per data released by Department
of Industrial Policy and Promotion (DIPP).

Social Factors

Although there has been a significant shift from traditional to digital

media, monetization is still a problem
Historically, there has been low acceptance of animation by the
mainstream audience in India. However, the demand for outsourcing has
kept the talented few in the country engaged

Technological Factors

Over the years, with consumer media consumption patterns gradually

shifting toward digital platform, digital media has become an important
component of the M&E industry.
Consumers have gone beyond traditional TV sets, radio sets, newspapers
and magazines for media and are increasingly using modern electronic
devices.
This has resulted in the increased demand for skilled professionals such as
app developers, software testers, programmers.
Most players fail to capitalize on the power of digital platforms and
replicate the same content (available on traditional platforms) without any
innovation
Changes including digitisation, growth in multilingual markets, new
technologies and convergence, require additional skill sets.

AUTOMOBILE INDUSTRY

Political factors- The Indian automobile industry has attracted many investors. All
these are pooled in three main regions despite the expansive size of the country. This
is due to the fact that these areas are more developed as compared to other regions.
The government has a hand in this because it has invested in the development of these
regions.
Politically speaking, the automobile industry has greatly benefited from the
government of India. The government has set up bodies which help the automobile
industry in carrying out research and development. These bodies also maintain a
monitoring system for the automobile industry.
Economic factors - India has also been experiencing economic growth at an average
6% and the automobile industry contributes 22% to the GDP of the country. This
makes it a very important income generating activity for the country. This growth has

rippled its way to create consumers as there is a huge growing middle class in India.
This class of people is increasingly purchasing automobiles and this is evident in the
increased sales of certain vehicles in the past decade.
Without economic growth, India would not be able to attract as many foreign
investors in the automobile industry. It is thus important for the country to sustain this
upward growth as it will affect all its manufacturing industries.
Additionally, the price of certain crucial commodities has also influenced the
automobile. Crude oil and petroleum products always affect the automobile industries.
Rise in the world market price of these products makes things expensive and this
trickles down to automobile manufacture as well as maintenance.
Social factors - India is fast becoming an automobile industry hub because of its large
population. This forms a bustling market for the manufacturers. The tastes of the
populations may vary but manufacturers always take note of the fast selling
automobiles and create appropriate designs. For instance, in the past three years, there
has been a surge of two-wheeler vehicles because of their convenience in the country.
Many automobile industries have created these vehicles for domestic consumers.
Technological factors - The automobile industry has grown because there are several
technological inventions. These are used not only in manufacture of the vehicles but
also to reduce expenses for the vehicle buyers. The government is also helping in
research and development to ensure that both producers and consumers are happy and
encouraged to invest in the automobile industry.
Environmental factors - Environmental factors have influenced automobile industry
in India because more investors are opting to manufacture environmental friendly
vehicles. These include, vehicles that consume less fuels and emit less fumes. There
are also some investors that have chosen to manufacture the electric vehicle in a bid to
conserve energy and also the environment.
Legal factors - Legal factors have played a role in the recent expansion of the Indian
automobile industry. This is because the industry is extremely incentivized with
investors being given 100% foreign direct investment pass. There are also zero taxes
for the investors who ship the cars to other countries from their manufacturing bases
in India. By easing the legal rules affecting the industry, the government of India has
encouraged varied automobile companies to set up shop in the country.

BANKING INDUSTRY

Political factors - The ruling government and the Ministry of Finance play a decisive
role in contributing to the rules and regulations of the industry. A huge turning point
came in 1991, under the Narsimha Committee opened the doors for the Foreign Direct
Investments (FDI) in the country thus boosting the economy and uplifting the banking
industry. This served as a platform for the future decision making of the rules and
regulations and law enforcement for RBI and other financial regulatory bodies. The
relaxation of some regulations allowed the major foreign banking corporations to
enter the developing Indian economy through mergers or independent setup.
Economic factors - Nationalization of the banking sector helped farmers and small
industries in India to directly access credit facilities, efficient short and long term loan

sanctions and has helped reduce the unemployment rate and further increase the
profitability of the money lenders. Interest rates for certain loans are lower than the
market rates. For example food and agriculture related business and services. This has
led to many nationalized banks giving more importance to social priorities than profit
maximization. Reduction in Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio
(CRR) has helped the banking sector to increase efficiency. Liberalization has
encouraged competition in the interest rate and services provided by many banks and
financial regulatory bodies.
Social factors - In spite of the recent downturn in the global economy India was able
to attain a growth rate of 8.8 % in the first quarter 2010. That means the industry and
the agriculture sectors that form the majority of the working population are supplying
huge amount of their disposable incomes to banking and investment corporations to
further increase their profits. This change is much obvious in the Cooperative banks
and domestic banks regulated by RBI where deposits, repayment of loans, sanction of
new loans improved significantly, enhancing industry profitability. Since 1991, due to
the outburst of multiple opportunities in national and international industrial and
service sectors, the urban and the semi-urban cities have witnessed an increase in
educated, high earning individuals who are well associated with their income and
investments. Since 2001 the changes in banking norms, stable and long term
understanding between the commercial and cooperative banks have helped the
banking sector achieve 51% of compounded annual rate based on growth, asset
quality and profitability.
Technological factors - Technology is always seen as a building block for any
industry or economy. With the arrival of the foreign banks and financial corporations,
the public, private and cooperative sectors have witnessed a revolutionary support and
competition in its technology. As a result of this many banks such as Housing and
Finance Corporation (HDFC), ICICI, State Bank of India, Central bank, Union Bank,
J&K bank, and all major cooperative banks have revolutionized their various banking
products and services. Services like internet and telephone banking, online investment
and loan proposals, personalized and premium banking services are available 24 hours
a day. Large numbers of ATM outlets have all helped increase the profitability and
efficiency of their service providers. As a result the year 2001-02 saw 20.83% private
sector banks achieving efficiency of more than 100%, and year 2003-04 saw 26.92%
private sector banks having productivity of more than 100%. The growth in industrial
and outsourcing sectors have boosted foreign exchanges and remittances. This has
produced a fluent and rich source of income for the banking industry.
Environmental factors - The finance and banking sector is one of the most advanced
and rapidly growing sectors in Indian economy. The concentration in banking industry
is due to certain core principles, standardization, regulating and supervising of the
sector.
This has created a frantic race to stay at the top. To overcome their competitors almost
all banks and finance corporations have adopted social responsibility measures or
environmental concerns. Banks like SBI, HDFC, ICICI etc. have undertaken various
public and corporate issues seriously and have allocated a sizeable amount of their
income on public and environment issues. Recently, the Ministry of Finance and
Corporate Affairs in India have set out core elements of CSR for companies and

corporations to address. The president speaking at India Corporate Week has urged
finance and industrial corporations to assist the government in various programmes
designed for rural economic development.
Legal factors - Banking Regulations Act in 1949 and the Reserve Bank of India Act
in 1934 are the major regulations in Indian banking industry. All Indian banks trade
and work in accordance to the guidelines of RBI. Due to liberalisation and influence
of World Trade Organisation, Indian banking industry adapted to the global banking
standards. Indian banks and finance corporations follow the regulations of the Basel
Committee, International Monitory Fund (IMF) and International Bank for
Reconstruction and Development (IBRD).

Fundamental Analysis for Constructing Portfolio

ZEE ENTERTAINMENT
Key Ratios
Margin Ratio
EBDITA MARGIN
NET PROFIT MARGIN
PROFITABILITY
RATIO
ROACE
ROANW
ROAA

DUPONT
ANALYSIS
PAT/PBT
PBT/EBIT
EBIT/NET SALES
NET SALES/TOTAL
ASSETS
TOTAL
ASSETS/EQUITY
ROE
P/E

2016

2015

2014

2013

2012

27.95

30.49

33.53

33.60

28.82

20.42

24.27

25.10

24.96

22.21

26.40

26.45

29.78

28.41

23.74

24.42

27.67

39.14

19.10

16.35

31.47

26.74

20.31

35.15

31.24

0.65
1.00
0.32

0.69
1.00
0.35

0.66
1.01
0.38

0.67
1.00
0.37

0.67
1.00
0.33

0.68

0.61

0.65

0.64

0.62

1.22
0.17

1.22
0.18

1.19
0.19

1.20
0.19

1.18
0.16

51.95

47.83

34.21

31.41

25.06

Inventory Turnover Ratio

3.15

2.84

2.75

2.68

2.22

Asset Turnover Ratio

0.87

0.80

0.84

0.81

0.75

Beta

0.74

Future Outlook
The ZEEL management maintains that the advertising spend will continue to
grow in double digits going ahead and it will be able to outperform the industry.
ZEELs management has confirmed the sale of sports business to Sony Pictures
Network India (SPN) in an all cash deal of Rs2,600 crore ($385 million). The deal
will improve the balance sheet strength and ZEEL will be in a much more
comfortable position to accelerate inorganic or strategic investments.
Sports business was a dampener in ZEELs portfolio: The sports business had
been the weakest link in ZEELs portfolio since its launch in FY2006. The sports
business had hardly delivered any profit. On the completion of the deal, all the
rights will be transferred to SPN.
Post the appointment of Mr. Amit Goenka, Zee has significantly increased focus
on international operation. It launched a movie channel in Philippines and is
slated to launch an FTA channel in Germany in 1HFY17. The company also
launched its ad-based Video-ondemand platform OZEE this quarter.

HUL
KEY RATIOS
Margin Ratio
EBDITA MARGIN
NET PROFIT MARGIN
PROFITABILITY
RATIO
ROACE
ROANW
ROAA

DUPONT
ANALYSIS
PAT/PBT
PBT/EBIT
EBIT/NET SALES
NET SALES/TOTAL
ASSETS
TOTAL
ASSETS/EQUITY
ROE
P/E

2016

2015

2014

2013

2012

17.91

16.9

15.97

15.51

14.88

12.76

14

13.8

14.7

12.16

160.3

148.75

147.59

163.63

95.42

110.73

115.87

118.04

142.01

76.62

17.04

17.22

15.15

12.37

16.25

0.70
1.00
0.17

0.70
1.00
0.19

0.77
0.99
0.17

0.77
0.99
0.19

0.78
1.00
0.15

2.39

2.35

2.23

2.32

2.08

3.84
1.11

3.66
1.16

3.97
1.18

4.31
1.42

3.12
0.77

46.07

43.21

33.76

26.54

32.89

Inventory Turnover Ratio

13.61

12.57

10.76

10.8

9.21

Asset Turnover Ratio

8.63

8.8

9.42

8.34

7.17

Beta

0.36

Future Outlook
Hindustan Unilever (HUL) is Indias largest FMCG Company with strong presence
in personal care, home care and packaged food segments in India. The company
is a market leader in the personal wash, detergent and shampoo segments in
India.
With strong cash generation ability, the company has a strong balance sheet
among its FMCG peers. Also, return ratios continue to remain high.
With improving business fundamentals the downside risk in the stock price is
limited.

An increase of more than 20 per cent in income of nearly 10.8 million government employees
and pensioners would bring in additional cash flow to market as spending power of such
households would go up which will boost the sales of FMCG Product.
Good Monsoon is another important aspect which will boost the sales of FMCG
Product.
With the companys increasing focus towards premiumisation (launch of liquid
detergents, Magnum, Sunsilk Keratin range, Lipton Green Tea, Bru Gold,
flavoured tea bags, etc), the revenue and margin growth would continue to
remain healthy with a revival in discretionary demand.

Whirlpool
Key Ratios
2015

2014

2013

2012

2011

10.39
%

8.65%

8.56%

8.32%

11.06
%

6.09%

4.63%

4.57%

4.29%

6.32%

67.12
%
39.31
%
12.64
%

47.10
%
25.24
%
10.42
%

38.78
%
20.69
%

32.16
%
16.61
%

9.22%

7.83%

40.25
%
22.99
%
11.39
%

Margin Ratio
EBDITA MARGIN
NET PROFIT
MARGIN
PROFITABILITY
RATIO
ROACE
ROANW
ROAA

DUPONT
ANALYSIS
PAT/PBT
PBT/EBIT
EBIT/NET SALES
NET SALES/TOTAL
ASSETS
TOTAL
ASSETS/EQUITY
ROE

0.70
1.00
0.09

0.71
0.99
0.06

0.71
0.98
0.07

0.68
0.98
0.07

0.69
0.98
0.09

1.80

1.82

2.02

2.25

2.08

2.02
0.23

2.12
0.17

2.24
0.21

2.42
0.25

3.11
0.39

4.9068
72
0.5438
74

3.3972
87
0.2841
92

3.6286 4.0751
02
79
0.3146 0.3592
52
63

4.5467
62
0.4822
83

VALUATION
RATIO
EV/EBITDA
EV/NET SALES
Beta

EPS
DPS
BVPS
PE

1.23

FY11
9.19
0.00
23.37
28.88

FY12
6.85
0.00
27.12
29.04

FY13
10.07
0.00
48.67
21.87

FY14
9.69
0.00
58.33
23.85

FY15
16.59
0.00
72.18
44.32

FY16
18.10
0.00
92.31
38.79

Future Outlook

Whirlpool operates in only one segment of White Goods. Gross domestic sales in value terms
grew by 19.6% and overall sales grew by 19.3%.
Whirlpool is engaged in the business of many product lines where in Refrigerator segment
account 62% of WILs annual revenue followed by washing machine (21%), Air conditioners
(6%), Microwave ovens (2%) and spares & accessories (4%).
Decline in oil prices, reduction of commodity prices, moderation in inflation, modest
reduction in interest rates, and stability of currency fluctuations are some of the factors which will
affect positively in case of whirlpool India limited.
Company is focusing on new technologies like Air Conditioners are seeing greater technology
changes, inverter technology being a case in point, which is now 10% of the split air conditioner
market, and still growing.
Another important factor is Free Trade Agreements that India has entered with Thailand, South
Korea and ASEAN, and brands with manufacturing base there are able to bring in such products
with relative ease.
Whirlpool is working on expanding its brand presence in Tier 2 and 3 towns which will help in
increasing in its overall revenue.

 The NDA government has been striving hard to revive the economy by unleashing slew of
reforms across the corners like make in India, however still it has not materialized into growth.
But the expectation is countrys economic growth has hit the trough and the growth revival is just
a matter of time before the reforms start delivering results.
Maruti Suzuki Limited
2012
58.17
58.17
7.5

2013
81.76
81.76
8

margin ratio
EBITDA margin
EBIT margin
Pre tax margin

6.2
5.51
5.36

8.59
6.55
6.15

10.56
7.87
7.5

12.09
9.27
8.88

13.68
10.15
10.01

Performance
ratio
ROA
ROE
ROCE

7.74
10.9
13.85

9.68
14.11
17.34

9.6
13.97
17.77

11.49
16.55
21.42

12.39
17.79
25.31

Valuation ratio
EV/EBITDA
EV/net sales

11.26
1.05

7.64
0.89

10.09
1.37

14.57
2.21

11.74
1.92

0.7619
05
0.9749
25
0.0618
59
2.1878
62

ROE

1.071
0.1076
68

0.7997
66
0.9403
29
0.0729
74
2.1828
77
1.0747
73
0.1287
54

0.7606
94
0.9541
26
0.0877
43
1.9282
71
1.0803
27
0.1326
63

0.7623
35
0.9594
02
0.1015
44
2.0921
86
1.0076
02
0.1565
63

0.6995
26
0.9876
82
0.1145
79
2.1320
79
1.0028
66
0.1692
67

P/E

17.040
03

13.890
16

16.047 29.756
21
1

24.576
09

EPS
Adj. EPS
DPS

2014
2015
94.47 126.07
94.47 126.07
12
25

2016
155.59
155.59
35

DU pont analysis
PAT/PBT
PBT/EBIT
EBIT/NET SALES
NET SALES/TOTAL
ASSETS
TOTAL
ASSETS/EQUITY

Beta
Future Outlook

1.79

The recently launched premium hatchback Baleno has received a strong

response, which will help Maruti to expand its market share in the segment. Also,
the company recently entered the compact sports utility vehicle (SUV) space
with the launch of Vitara Brezza and has received an encouraging response.
Maruti is poised to reap the benefits of an increase in discretionary spending
from the 7th Pay Commission pay-out. The commencement of the first phase of
the Gujarat plant with a 2.5 lakh capacity is scheduled in Q4FY17. The
management plans to double its sales and premium distribution network
(NEXA) in order to achieve its target of doubling the domestic volumes over the
next five years.
In Q4FY16, MSILs volumes grew 4% YoY to 360,402 units. These were lower QoQ
as sales were impacted by ~10,000 units due to reservation agitation.
Sales realisation grew by 8.2% YoY, resulting in net sales growth of 12.5% YoY.
Other operating income was higher 6.8% YoY and 19.7% QoQ to Rs3.8bn. As a
result, total income increased 12.3% YoY to Rs153.1bn.
Vitara Brezza is the first model where MSIL is paying royalty denominated in
rupee terms. The royalty rate is also lower since the product has been jointly
developed by MSIL and Suzuki.

Yes Bank
Margin Ratio

2016

2015

2014

2013

2012

Interest Expended / Interest

Earned

66.26

69.86

72.79

73.25

74.38

NET PROFIT MARGIN

18.76

17.32

16.2

15.68

15.48

Management Efficiency
Ratio
92.35
ROLTF
18.41
ROANW
327.84
ROAA

94.12

134.67

137.76

131.32

17.16

22.71

22.39

20.89

279.6

197.48

161.94

132.49

Net Interest Income / Total

Funds

3.03

2.85

2.61

2.57

2.44

Loans Turnover

0.16

0.18

0.19

0.2

0.17

Beta
Future Outlook

2.16

YES has built significant capacity for the next phase of growth. Its branches and
employee base have doubled in three years and quadrupled in five years.
Along with capacity building, YES has sourced talent from leading private/foreign
banks to scale up the retail business and increase overall balance sheet
granularity. Its focus is on building retail assets largely from liability customers.
Retail, small businesses and mid-corporate banking would be the key drivers of
overall loan growth. Strong corporate relationships (market share gains) built
during the current cycle will drive asset-light fees.

Across businesses, senior level management teams are already in place. With the
increasing scale of business, junior level workforce is coming on board, leading to
increase in manpower by 4x over five years.
CASA ratio up from 10% in FY11 to 28% in FY16; expected to touch 40%
YES has run pilot projects for various retail assets and now offers the entire
gamut of products (ex-cards) under its roof.
Cross-selling opportunities and benefit of low cost deposits would be one of the
key advantages for YES.
Portfolio Optimization

Average & Annualized return

Avg.
return
Annuali
zed
return

hul
zeel
0.10
0.14
%
%
23.78
%

34.54
%

Whirlp
ool

Marut YES
i
Bank
0.14
0.15
0.13%
%
%
32.74
%

35.56
%

38.72
%

Variance/Covariance Matrix

hul
zeel
Whirlpool
Maruti
YES Bank

hul
zeel
Whirlpool Maruti YES Bank
0.000237
3.3532E- 1.74848E 4.46E- 7.75392E
597
05
-05
05
-05
3.3532E- 0.000378 7.96877E 8.67E- 0.000137
05
419
-05
05
577
1.74848E 7.96877E 0.000439
6.9E- 0.000130
-05
-05
422
05
953
4.46108E 8.67279E 6.90422E 0.0003 0.000175
-05
-05
-05
06
966
7.75392E 0.000137 0.000130 0.0001 0.000645
-05
577
953
76
802

Output from solver for plotting the portfolio frontier

St.Dev

1.54%
1.44%
1.34%
1.25%
1.18%
1.13%
1.09%

E[r]

23.78%
22.00%
20.00%
18.00%
16.00%
14.00%
12.00%

hul
100.00
%
92.41%
83.88%
75.34%
66.81%
58.27%
49.74%

zeel
0.00%
1.91%
5.08%
7.67%
10.26%
12.85%
15.44%

Whirlpo
ol

Maruti

0.00%
5.68%
8.08%
10.05%
12.02%
13.99%
15.96%

0.00%
0.00%
2.96%
6.93%
10.91%
14.88%
18.85%

YES Bank
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%