5 January 2015
GODREJ CONSUMER PRODUCTS FY14
The analysis of Godrej Consumer Products’ (GCPL) latest annual
report highlights higher free cash flows in FY14, backed by
improvement in working capital and lower capex. Further, GCPL has
cumulatively adjusted INR1.2b (11.7% of FY14 PBT) directly against
reserves. Excise and VAT receivables, forming part of loans and
advances, appear high at INR1.5b (5% of FY14 net worth) when
compared with peers due to slower receipt of refund of statutory
receivables by manufacturing units located in north-eastern states.
Free cash flows improved due to lower working capital
requirement and capex:
Consolidated operating cash flows grew
from INR8.2b in FY13 to INR11.3b in FY14 due to higher EBITDA
and lower working capital requirement. Working capital
requirement was lower, as cash conversion cycle improved from
35 days in FY13 to 27 days in FY14. Further, capex of INR6.5b
(FY13: INR9.5b) resulted in positive free cash flows.
Cumulative expenses of INR1.2b (11.7% of FY14 PBT) adjusted
In FY14, GCPL cumulatively adjusted revenue
expenses of INR1.2b (11.7% of PBT) directly through reserves on
account of the following:
1) In accordance with the scheme of amalgamation, trademarks
and brands for
are being amortized
over 20 years through reserves, with annual amortization of
INR527.5m (5.1% of PBT). Under IFRS, these brands are not
amortized and are merely tested for impairment.
2) Premium on redemption of debentures of INR245m (2.4% of
PBT) has been adjusted as permitted by the Companies Act.
3) On merger of wholly-owned subsidiaries, an amount of
INR434.5m (4.2% of PBT) was adjusted through reserves on
consolidation of financial statements.
Loans to ESOP trust w/off earlier; now recognized on recovery
During 1HFY15, GCPL recovered loans to ESOP Trust of
INR252.5m (4.8% of 1HFY15 PBT), which was earlier written-off
through reserves in FY11, in accordance with the scheme of
amalgamation. This was now recognized through P&L in 1HFY15.
Excise and VAT receivables higher than peers:
GCPL’s excise and
VAT receivables were INR1.5b (FY13: INR1.2b), 5% of FY14 net
worth (FY13: 4.7%). The receivables are high when compared to
peers due to delay in receipt of refund of excise duties from units
located in north-eastern states.
of annual report analysis
Cumulative expenses of
INR1.2b (11.7% of FY14
PBT) adjusted through
Loans to ESOP trust w/off
earlier; now recognized
on recovery of loan
Excise and VAT receivables higher than
Equity Shares (m)
52-Week Range (INR)
M.Cap. (INR b)/(USD b)
1,6,12 Rel. Perf. (%)
Financial summary (INR b)
Adj. EPS (INR)
EPS Gr. (%)
E: MOSL Estimates
Shareholding pattern (%)
Note: FII Includes depository receipts
Kalyaniwalla & Mistry, Chartered Accountants
ART will present a threadbare portrait of annual reports - statistical, strategic and structured. We believe ART's wide canvas - from accounting and auditing issues to
operating performance to management insights to governance matters - will help readers paint a clearer picture of the stock's investment worthiness.
(Ashish.Gupta@MotilalOswal.com); +91 22 3982 5544
(Piyush.Chaplot@MotilalOswal.com); +91 22 3312 4975
Investors are advised to refer through disclosures made at the end of the Research Report.