financial analysis nestle

1. 1
REPORTON
FINANCIAL STATEMENT ANALYSIS OF
NESTLE INDIA LTD.
PREPAREDBY-
ASHWIN K (032)
JATIN KUMARMAHESHWARI (062)
LAKSHMI NARASIMHAN (072)
MILAN AGARWAL (081)
MISHANIGAM (172)
MONINTHAR KUMARNAYAK(082)

2. 2
TABLE OF CONTENTS
I. Purpose and Scope…………………………………………………………………..................... -2-
A. Objective of the Research ………………………………………………………………………..………….…. -2-
B. Data Sources ………………………………………………………………………………………………………….. -2-
C. Research Methodology …………………………………………………………………………..………..…….. -2-
II. Analysisof Financial Statements(RatioAnalysis)….……………………………… -3-
A. Balance Sheet ………………………………………………………………………………………..……….……… -3-
B. Income Statement …………………………………………………………………………………………...…….. -8-
C. Cash Flow Statement ………………………………………………………………………….………….………-10-
D. Financial Statement Ratios …………………..……………………………………………………………… -11-
E. Other important values …………………………………………………………………….….……………… -15-
III. Percentagecontribution tosales(2015)….…………………………………...…..…-17-
IV. SWOTAnalysis………………………………………………………………………………..……..-17-
V. Major Competitors………………………………………………………………………….……..-17-
VI. Results………………………………………………………………………………………………….-18-
A. Major and Minor Finding ………………………………………………………………………………..…....-18-
B. Conclusions …………………………………………………………………………………………………………..-18-
C. Projections …………………………………………………………………………………………………………...-19-
VII. WorksCited…………………………………………………………………………………….....-22-

3. 3
I. PURPOSE& SCOPE
A. Objective of the Research
The objective of this paper is to thoroughly analyze Nestle India Ltd’s financial
history and status for the last five years (2011 – 2015). Also, Nestle India’s future
growth and financial stability for the next two years will be examined (forecast for
2016-2017). Other important topics will be discussed which include: the growth in
net income, the growth in sales revenue, the growth in operating income, the
growth in assets, and the growth in various and significant costs. Moreover, MVA,
EVA, earnings per share, movements of the stock prices in the past, and the capital
structure of will be examined. To support the analysis, different relevant ratios will
be calculated for the company in order to estimate its current status, and also to
compare Nestle India Ltd. to Britannia Ltd.
B. Data Sources
Based on the sources cited above, the following tables were extracted or created:
• Nestle India Ltd’s Balance Sheet, Income Statement and Cash Flow Statement
• Comparative Historical Total Assets growth analysis
• Nestle India Ltd’s Asset Structure – Common Size
• Nestle India Ltd's 5 Yr. Common Size Balance Sheet
• Comparative Balance Sheet, Income Statement, Cash Flow Statement & Ratios
• Nestle India Ltd’s 5-year Average Ratio Report
C. Research Methodology
The financial analysis of Nestle India Ltd is based on evaluating company and
industry data from various sources. A trend analysis was performed using data for
the last five years, and presented in Excel charts and tables. A vertical analysis was
performed, which also involved an industry comparison. Common-size statements
were created, where each item was shown in percentage terms from a common
base. In the case of a firm’s assets, I treated the total assets as equalling 100.

4. 4
II. ANALYSIS &FINANCIAL STATEMENTS
Nestle’s fiscal year always ends in the end of December. The following results have
been collected and following graphs have been drawn and interpretations drawn:
A. BALANCE SHEET RATIOS
1. ASSET GROWTH:
 TOTAL ASSETS:-
The Total Assets of the company has decreased over the years and there has been a
decline in growth over the years with the exception of Dec-15 where it showed a
growth of 4.48% to the base year 2010.
2010 2011 2012 2013 2014 2015
0
10000
20000
30000
40000
50000
60000
70000
Asset Growth
Fixed Assets
Inventories
Cash&Bank
Loans&Adv
Trade Receivables
Current Assets
Total Assets

5. 5
Year 2011 2012 2013 2014 2015
Total Assets 44017.8 51639.2 63142.7 58195 60804.6
Percentage
Growth%
72.00 17.31 22.27 -7.83 4.48
Total Current Assets:
Current assets have increased over the years with the exception of Dec-14 where it
displayed a dip in growth of -15% in 2014. The growth for the past year has been
high showing 26% in 2015 compared to its previous year.
Year 2011 2012 2013 2014 2015
Total Current
Assets
12903.4 14901.2 23017.2 19636.7 24796.1
Percentage
Growth
23% 15% 54% -15% 26%
2. ASSET STRUCTURE:
2010 2011 2012 2013 2014 2015
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
AssetStructure Analysis
Fixed Assets
Inventories
Cash&Bank
Loans&Adv
Trade Receivables
Current Assets

6. 6
The current assets form a significant portion of the total assets as FMCG companies
do not have lot of Non-Current assets. Inventories form a major portion of the
current assets over the years, contributing to 35% of it on an average. Inventories
are valued at the lower of cost and net realisable value. Cost is computed on a
weighted average basis. The percentage of trade receivables has been increasing
very slightly over the years indicating the company is not providing much on credit.
In the non-current assets, long term loans have not changed significantly. Cash and
bank balance has been increasing on an average of 8 to 9 %.
3. LIABILITIES AND EQUITY GROWTH:
Total liabilities and Equity has increased over the years. Out of the liabilities and
Equity, trade payables forma major part contributing to over 35-45% over the years.
Long term provisions include Provision for employee benefits (pension, medical,
compensated absences and others).Provision for income tax (net of advance tax)
and other provisions (including for statutory levies etc.
2011 2012 2013 2014 2015
0
10000
20000
30000
40000
50000
60000
70000
Liability & Equity Growth
ShareholdersFund
Longterm Borrowings
Other Current Liabilities
Longterm Provisions
Trade Payables
Current Liabilities
Total Liabilities

7. 7
TOTAL LIABILITIES:
Total Liabilities havedecreased over the years showing a growth of 22.907%in the
year ending 2013.Thegrowth has been around -8% for the year ending 2014 and
and started to increaseby 4% by the end of 2015.
Year
2011 2012 2013 2014 2015
Total Capital And
Liabilities
44017.8 51639.2 63142.7 58195 60804.6
Percentagegrowth
72% 17% 22% -8% 4%
RESERVES AND SURPLUS:
There was an increasein the reserves and surplus over theyears till 2014. The
reserves and surplus growth has declined marginally in the year ending 2015 when
compareto the year before.
Year
2011 2012 2013 2014 2015
Reserves and
Surplus
11775.41 17019.9 22723.3 27407.9 27214.2
4. FINANCIAL STRUCTUREANALYSIS:
2011 2012 2013 2014 2015
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
Financial Structure Analysis
Shareholders Fund
Long Term Debt
Other Current Liabilities
Long Term Provisions
Trade Payables
Current Liabilities

8. 8
In the period 2011 – 2015, NestleEquity/ Shareholders fund keeps increasing which
denotes its strong financial stability. Nestle is able to finance its operations with both
Current& Other CurrentLiabilities but in the main formof Trade Payables. The
company made provisions for Long termunder Long term Provisions.
B. PROFIT AND LOSS RATIOS
1. INCOMESTATEMENTGROWTH:
REVENUES:
During the analysed period the amount of Total Revenues increased successively till
2014 which showed a positive trend but there was a sharp decline in 2015 which
went below 2012. The net sales increase was high in 2011 which was 20% and there
after it followed a slower increase growth of 11%, 9%, 8% & finally went to negative
17%.
2010 2011
2012
2013
2014
2015
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
INCOMEGROWTH
net sales
cogs
gross income

9. 9
COSTOF GOODS SOLD:
The COGS growth was 16% in 2011 & till 2013 the growth was very small and again
in 2014, the growth was 15% and then declined to negative 25% in 2015 which is
mainly because of fluctuations in sales.
GROSS INCOME:
The Gross incomewas high initially in 2011 which was 24% and then the growth was
less and went low in 2014 which was only 3% and finally followed a similar pattern
of Revenues & COGS and declined to 10%.
SELLING, GENERAL AND ADMINISTRATIVEEXPENSES:
According to the overall growth these expenses also increased till 2014 with total
increase of 57% and then declined in 2015 by 15% compared to 2014.
EBITA:
Earnings BeforeInterest, Taxes, Depreciation and Amortization increased from 2010
till 2014 with slower growth rate but declined tremendously in 2015 which went
below 2010 from 12,789.3 million in 2010 to 11,641.8 million in 2015.
2010
2011
2012
2013
2014
2015
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
IncomeGrowth
total expense EBITA income tax net income

10. 10
INCOMETAX:
The growth in the amount of income taxes reflects the growth in Nestle’s operating
income. The income taxes also followed a similar pattern of increasing till 2014 and
then declined drastically in 2015 from 2014 with 58% which was below 2010. This
means company managed to keep taxes as low as possible in recently.
NET INCOME:
There was very little growth in Net income for Nestle till 2014, which again
drastically declined in 2015 at 52% ratecompared to 2014. TheNet income 2010
was 8,186.6 million and in 2015 itwas 5,632.7 million which shows 31% decline.
C. CASH FLOW STATEMENT RATIOS
(i) Net Cashfrom Operating Activities
The net cash flow fromoperating activities saw an increasefrom2011 till 2013
which was followed by a decline till 2015. Thenet cash fromoperating activities saw
an overalldecline of 5.19% from115.817 billion (2009) to 109.81 billion (2015).
115.817
169.338
179.64
164.402
109.81
-155.523
-94.083
-44.094 -43.17
-7.048
32.31
-51.316 -58.012
-163.528
-49.832
-4.439
23.939
77.534
-42.296
52.93
2011 2012 2013 2014 2015
-200
-150
-100
-50
0
50
100
150
200
Cash Flow Growth
Net Cash from OperatingActivities
Net Cash used in InvestingActivities
Net Cash used in FinancingActivities
Net change in cash and cash
equivalents
All figuresinbillions

11. 11
(ii) Net Cashusedin Investing Activities
The net cash used in investing activities has seen a significant decreasein
outflow of cash for investing activities. The reason could be also attributed to the
increasein interestand dividends received. Overallthe cash outflow used for
investing activities decreased by 95.47%.
(iii) Net Cashusedin Financing Activities
The net cash used in financing activities rosefrom32.32 billion (2011) and
posted negative numbers for the next 4 years indicating cash outflow. Ittouched the
peaks in 2014 with -163.528 billion.
(iv) Net change inCash and Cash Equivalents
There was a negativechange in cash for 2 years 2011 and 2013 with the
figures being 4.439 billion and 42.296 respectively. Thepeak change was recorded in
2013 with 77.354 billion.
D. FINANCIAL STATEMENT RATIOS
1.) LIQUIDITY RATIOS
(i) Current Ratio:
Defined as the ratio of current assets and current liabilities, the current
ratio shows the ability of the company to meet its short-term liabilities and
obligations. Therefore, the current ratio is better if greater than 1 because
the company should have greater current assets as compared to current
liabilities. 2:1 is the standard current ratio.
2015 2014 2013 2012 2011
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
CURRENT RATIO
QUICK RATIO
DEBT TO EQUITY

12. 12
Nestle’s current ratio has been improving over the years. In the recent
years, it has been close to 2:1. Hence, Nestle gives an indication of good
performance.
(ii) Quick Ratio:
This is the ratio of quick assets to the current liabilities. It is clear from the
graph that the quick ratio has risen at a steady rate. The ratio is close to
1:1, which is the standard quick ratio. This is a positive sign, meaning
Nestle had no problems in meeting its short-term obligations.
(iii) Debt to Equity:
This ratio indicates the financial leverage of the company. The graph
indicates that the company is using neither too much debt to finance its
operations, nor the company is not leveraging. The declining trend of ratios
(0.7 to 0.1) indicates the lesser application of debt to finance the assets.
2.) ASSET MANAGEMENT RATIOS
(i) Inventory Turnover Ratio:
The company’s inventory turnover has remained almost the same over the
years.
Indicating the number of times the inventory is sold or used in a year. In
the recent years, this ratio has declined a little, which is a good indicator
and shows that the company has been able to sell its goods faster.
2015 2014 2013 2012 2011
0
20
40
60
80
100
120
INVENTORY TURNOVER
ASSET TURNOVER
DEBTORS TURNOVER

13. 13
(ii) Asset Turnover Ratio:
Measuring the ratio of net sales and total assets, this ratio indicates the
utilisation of the assets of the company towards its sales. The graph does
not show a very good picture of the utilisation of assets as the ratio has
been very low and constant all over.
(iii) Debtors Turnover Ratio:
It shows the efficiency of the company to use its assets. A high ratio in the
graph shows that the company’s collection of accounts receivable is
efficient and it runs on cash basis.
3.) PROFITABILITY RATIOS
(i) Return on Equity:
This is the ratio of Net Incomeand Shareholders’ equity and shows how
many dollars of profit a company generates with each dollar of
shareholders’ equity. With growth companies, there is generally a
higher ratio. However, the graphs shows a declining trend of this ratio
which means that the company has not been earning sufficient cash
against the shareholder’s funds.
2015 2014 2013 2012 2011
0
10
20
30
40
50
60
70
80
RETURN ON EQUITY
RETURN ON CAPITAL
EMPLOYED
RETURN ON ASSETS
NET PROFIT MARGIN

14. 14
(ii) Return on Capital Employed:
With the ratio of EBIT and Capital employed, this ratio measures the
profitability of the company and the efficiency with which it employs its
capital, i.e. the total of shareholders’ equity and debt liabilities. A higher
ratio shows a better utilisation of capital. However, the graph shows a
falling trend. In 2015 this ratio is as low as 12 approx. Thus, Nestle is not
putting its capital to the best use and has got opportunities for
improvement.
(iii) Return on Assets:
The ratio of net income and total assets shows how efficiently the
management is utilising its assets towards the generation of earnings.
This ratio has not fluctuated too much over the 5 years, however in
2015 it declined significantly, which is not a good sign as it shows that
Nestle has not been able to earn optimum earnings on the assets
employed.
(iv) Net Profit Margin:
Itshows therevenue earned, against the sales made, after deducting all
operating expenses, interest, taxes, etc. The graph shows a significant
decline in this ratio in 2015 which is a bad indicator.
4.) MARKET VALUE RATIOS
2015 2014 2013 2012 2011
0
20
40
60
80
100
120
140
EPS
DPS
P/E
MP/BV

15. 15
(i) Earnings Per Share (EPS):
Itshows theearnings made per share of the company. Nestle had a nice
record of EPS for the 4 years, however in 2015 it declined significantly
which is a bad signal for the company. It might not attract the investors.
(ii) Dividend Per Share (DPS):
The dividend paid per share of company has recorded a good show till
previous years but declined in 2015 due to fall in EPS. This is not a good
signal but can also be seen in the sense that company might be using
more part of its earnings for reinvesting in the business rather than
distributing as dividends.
(iii) Price/ Earnings Ratio:
The ratio of market price and earnings per share shows the rising trend
of P/E ratio is a good news for the company because this means the
company has a high standing in the market as compared to what it
actually values.
(iv) Market Price to Book Value Ratio:
This ratio has declined over the years which means what market
standing the company has in comparison to its book value has declined
but is all the way a good number.

16. 16
E. OTHER IMPROTANT VALUES
 Calculationof Tax Rate:
PBT= 8136.3
TAX= 2503.6
TAX RATE= 2503.6*100/8136.3 = 30.77%
Year 2016-15 2015-14 2014-13 2013-12 2012-11
Tax Rate 30.77 33.23 33.43 31.22 30.72
 WeightedAverage Cost of Capital (WACC):
WACC (2016) =E/E+D * Cost of Equity + D/E+D * Cost of Debt * (1-tax rate)
Year 2015 2014 2013 2012 2011
WACC 9.01 5.05 5.42 3.37 0.00
As of today, Nestle India Ltd's weighted average costof capital is N/A. Nestle India
Ltd's return on capital invested is 136.10%.

17. 17
 Market Value Added(MVA):
(Number of common shares outstanding * Current stock price) - Investors supplied
capital
Investors suppliedcapital is the sumof book values for Equity, Debt and Preferred
stock
This amount represents the difference between the money Nestle’s shareholders
have invested in the company since its founding – including retained earnings –
versus thecash they could get if the company was sold at that point
.
 Economic Value Added(EVA):
EVA = EBIT*(1-Tax Rate) – (Total Net Operating Capital)*(WACC)
Total Net Operating Capital =Cash & Equivalents + AR + Inventories +Net
Property+Plant & Equipment + AP
Nestle India’s EVA= 816.92*(1-0.30) – (242.77*9.01) = -1615.51

18. 18
This amount shows the extent to which Nestle India has increased the shareholder
value. The negative figure reflects a decline in the shareholder value.
Itcan be seen from the data that Nestle India’s stock pricehas shown a sufficient
increase in the years. There has been a line of trend of increase in the marketprice.
However, in 2015 end the prices declined significantly. But it has shown signs of
recovery in the first quarter of 2016. Theshareprices went down in 2015 becauseof
the fall in sales and profits of the company. The company is now improving its
performanceand recovering its profits and shareprices.
 Macroeconomic Variables
Many macro-economic factors, which are beyond the company’s control, may affect
Nestle’s financial conditions and operating results. The company is subjectto risks
associated with laws, regulations, and industry standards. Economic conditions,
political events, tax laws, inflation, unemployment rates, etc. can adversely affect
company’s operations. Also, considering thefact that the company derives a large
portion of its revenue fromabroad, Nestle’s business is subjectto the risk of
international operations. The stock market as a whole may experience (as it
happened in the past) extreme price and volumefluctuations that may affect
Nestle’s marketprice, regardless of its operating performance.

19. 19
III. PERCENTAGECONTRIBUTION TO SALES IN 2015:
The above pie chartshows the sharethat each product type of Nestle India
contributes to the total sales of the company. Hereit is evident that Milk Products
hold the largestsharein the total sales followed by Prepared Dishes and cooking
aides, chocolate and confectionery, while beverages hold the smallest sharein the
total sales of Nestle India. Thus, the company earns the highest volume of sale from
the Milk Products and Nutrition sector.
IV. SWOT ANALYSIS

20. 20
V. MAJOR COMPETITORS
This graph shows thatNestle has earned the mostand got the top position in terms
of the total sales in comparison to its major competitors like Pepsi, Unilever, etc.
However, in profitmargin, the company lagged behind many competitors like Pepsi,
Cadbury, Unilever, etc. This shows thatalthough the company manages to make
high sale volume, but the profit value is less because of which the profit margin is
low in comparison to other companies.
 COMPARISON WITH MAJOR COMPETITORS:
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
Market Cap
Total Assets

21. 21
These two graphs show theperformanceof Nestle India in comparison to the
competitors. Fromthe aboveinformation we can interpret that it stands at the top
position in terms of the marketcap and sales turnover. This means that Nestle
India’s performanceis quite good as compared to its competitors. However, keeping
in mind the high sales turnover, the profit of the company is not high enough. Thus,
we can say that although the company is making high sales, but its profitmaking
strategy is not good due to which it earns low profits.
VI. RESULTS
A. MAJOR & MINOR FINDINGS
Based on the findings in the trend and common size analysis, Nestle India’s overall
performancehas been above averageover the years but in 2015 itdeclined to some
extent and the performancebecame averagein this year. However, therehave been
signs of improvement in the coming years.
Analysis of company’s Balance Sheet showed that Nestle India’s growth in Total
Assets, Common Equity, and Retained Earnings was aboveindustry average.
Analysis of company’s IncomeStatement showed that Nestle India’s growth in Net
Sales, and Gross Incomewas aboveits competitors.
Analysis of company’s Cash Flow Statement showed that Nestle India’s Net Cash
Flow fromOperating Activities was abovethe industry average, and that resulted in
a positive Net Change in Cash although cash has been used in both investing as well
as financing activities.
-1000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Net Profit
Sales Turnover

22. 22
B. CONCLUSION
Based on the performed analysis, Nestle India is financially healthy and strong. The
company’s growth has been extraordinary during the past five years. In the recent
year the performance has degraded to some extent but the company has wide
opportunities to recover. Nestle India is able to finance its operations by current
liabilities only. It also has a strong base to meet its current liabilities. Its financial
structure is outstanding. Nestle India has quite significant amount of long-term
obligation; however its ability to meet its short-term and long-term obligation is
good, which makes the company very financially independent. Revenues and Net
Income are increasing each year.
Retained Earnings reached Rs.5632 million in 2015, which is an indicator for the
financial power of Nestle India. Due to the fact that sales are constantly increasing,
and backed by Rs.5000 million (2015) in Cash and equivalents, the company can
afford future acquisitions.
During the years, Nestle India substantially improved in its key measures of
profitability but declined in the year 2015; however it has a very high brand value
and sufficient accumulation of assets and revenues which makes it easy for the
company to recover in future.
In terms of ROA, ROE, and profit margins, Nestle India strengthened financially and
now has better ratios than its competitors and the overall computer hardware
industry. Based on the above facts it can be concluded that Nestle India has been
doing well over the years, declined in 2015, but has shown signs of improvement in
the first two quarters of 2016 and has further opportunities of growth.
C. PROJECTION
The future for Nestle India looks great. The company has significant momentum in
its favour: massivebrand power, innovativeproductdesign, and a strong portfolio
that leverages individual products to boostdemand of other products. We believe
that Nestle India will continue in the futurewithout a long-term debt. I also assume
that there will be no significantchange in capital expenditures and net working
capital. Due to the constantdevelopment of innovative technologies, it is highly
likely that Nestle India’s revenues willcontinue to grow in the future. Ithas been
forecasted that the revenues will grow. Following forecasts arefor 2016, 2017 and
2018:

23. 23
Annual Income Statement Data
Actuals in M INR Estimates in M INR
Fiscal
Period December
2013 2014 2015 2016 2017 2018
Sales 90 619 98 063 81 233 95 382 110 344 125 500
Operating
income(EBITDA)
19 683 21 301 16 810 19 922 23 620 27 351
Operating profit (EBIT) 16 384 17 926 13 338 16 846 20 357 23 682
Pre-Tax Profit(EBT) 16 780 17 744 8 136 17 592 21 506 25 230
Net income 11 171 11 847 5 633 11 676 14 334 16 800
P/E ratio - - - 48,8 39,9 33,7
EPS ( INR ) 116 123 58,4 122 150 177
Dividend per
Share( INR)
48,5 63,0 48,5 75,2 93,0 113
Yield - - - 1,26% 1,56% 1,90%
Reference price ( INR) 5965.6 5965.6 5965.6
We expect Nestle India to demonstratehigher earning margins than its competitors
in the next few years, as they are moving into small consumer electronics, as well as
remaining in the lower margin personalcomputer sector.
I don’t foreseea major drop in Nestle India’s stock pricein the near future. Instead,
we believe that Nestle India’s stock pricewill continue to grow, reflecting the high
future growth and profitability expectations. We feel that Nestle India will continue
to succeed in the future, and will continue to outperformits peers.

24. 24
VII. WORKS CITED
http://www.4-traders.com/NESTLE-INDIA-LIMITED-9058921/financials/
https://markets.ft.com/data/equities/tearsheet/forecasts?s=NESTLEIND:NSI
http://www.moneycontrol.com/financials/nestleindia/balance-sheetVI/NI
www.nestleindia.com/investors
http://finance.google.com/finance?
http://quote.morningstar.com/Quote/Quote.aspx?pgid=hetopquote&ticker
http://stocks.us.reuters.com/stocks/overview.asp?symbol
http://www.smartmoney.com/eqsnaps/?story=snapshot&symbol
http://tobsefin1.swlearning.com
http://finance.yahoo.com/q?s