Hind Lever Leapfrogs To No 2 Position
After the merger of Ponds India, Hindustan Lever will leap into the ranks of Indias top 10 profitable companies from the current position of 16. Hindustan Lever, with a combined sales turnover of Rs 8,289 crore, will become the number two company in the country after Reliance Industries among private croporate giants.
With a combined gross profit of Rs 992.75 crore at the end of December, 1997, the companys ranking will move up to the 9th position according to gross profit and based on BS 1000 rankings.
Combined net profit of Rs 641.36 crore is likely to place Hindustan Lever at the 6th rank from the 14th position held last year. The company is unlikely to improve the assets ranking but it is likely to replace Indian Oil Corporation to become the number two company by market capitalisation in India.
The product scenario for Hindustan Lever would remained the same with soaps and detergent business remaining at the core. At number two will be the beverages business and at number three will be the personal products division.
During the year ended December , 1997, both Hindustan Lever and Pond's witnessed a growth rate of over 18 per cent in net sales income. Thanks to other income which rose by 55.7 per cent, Hindustan Lever, with improvement in profit margins, witnessed a 37.5 per cent rise in gross profit, and a rise of 40.6 per cent in net profit. Pond's, however, reported a marginal improvement in profit margins, and a 25.2 per cent rise in gross profit and 30.2 per cent growth in net profit.
The company consolidated its position in the domestic market despite severe competition from international as well as domestic players. It achieved growth rates ahead of the market by leveraging brand equities, continuous innovation and technological breakthroughs. The company targeted the mass base, and achieved volume growth by maintaining the price line. While volume grew over 17 per cent in soaps and detergents in the last two years, the average price realisation moved up 4 per cent.
It is clearly seen that HLLs growth has come through high volumes and by maintaining profitability. The company benefited from the merger with Brooke Bond Lipton, and firm tea prices improved gross profit margins (GPM) to 11.6 per cent in December, 1997, from 10 per cent in December, 1996. During December 1995, when most of the Indian corporates were raking up profits, HLL sGPM rose marginally to 11.80 per cent from 11.56 per cent in December, 1994.
Like HLL, Pond's, too, showed robust growth by increasing turnover. During the last five years, Pond's has maintained a sales growth of over 20 per cent. The gross and net profit also rose with sales turnover. In a competitive personal care market, Pond's has not only maintained profit margins at around 18 per cent during the last five years but has also increased it sales turnover to Rs 469.7 crore in 1997 from Rs 215.3 crore in 1993. Net profit, too, rose from Rs 22.47 crore in 1993 to Rs 61.11 crore in 1997.
As a Fera scrip, Hindustan Lever has beaten the BSE index quite convincingly. From Rs 165 in December, 1991, to Rs 1378 yesterday, the stock has appreciated by a whopping 735 per cent giving a CAGR of over 40 per cent. As against this, the 30-scrip BSE Sensex moved up from 1908.85 in December 1991 to 3293.89 - a jump of only 72.6 per cent at a CAGR of just nine per cent.