MOSL: ANNUAL REPORT THREADBARE (ART) | GODREJ CONSUMER PRODUCTS FY17-Subsidiaries drag the superior standalone return ratios
​ANNUAL REPORT THREADBARE (ART) | GODREJ CONSUMER PRODUCTS FY17: Subsidiaries drag the superior standalone return ratios
GCPL’s FY17 annual report analysis highlights subdued organic revenue growth of 4% to INR91b and PBT growth of 7% to INR16b. The muted performance can be primarily attributed to subsidiaries, which reported revenue growth (adjusted for acquisitions) of mere 3% and PBT decline of 11%. Subsidiaries in Indonesia, the UK and Africa (Darling) continued delivering a healthy performance. Other subsidiaries lacked momentum, which, coupled with high working capital requirements at subsidiaries, led to significantly lower consolidated return ratios (ROCE of 17% and ROE of 27%) compared to standalone return ratios (ex-investment in subsidiaries: ROCE of 62% and ROE of 63%). Cash conversion cycle for the consolidated entity improved to 19 days (FY16:31 days), primarily driven by the standalone operations (improved to -59 days v/s -40 days in FY16). This led to a healthy improvement in OCF to 18.3b (FY16: INR8.7b). FCF post interest stood at INR0.7b (FY16: INR-1.3b), primarily on account of the SON and Canon Chemicals acquisitions, which led to an increase in intangibles to INR71b (135% of NW).
Subsidiaries drag superior return ratios of standalone business: Consolidated return ratios (ROCE of 17% and ROE of 27%) are significantly lower than the standalone return ratios (ex-investment in subsidiaries- ROCE of 62%; ROE of 63%). This, in our view, is primarily on account of the relatively weak performance and the high capital intensity (working capital requirements) of subsidiaries.
Acquisitions drive earnings growth for subsidiaries: Organic consolidated revenue grew 4% (v/s total 10% growth) and PBT grew 6% (v/s total 12%). Organic revenue growth in constant currency terms was 6%. This was primarily dragged by subsidiaries, which reported (adjusted for acquisitions) revenue growth of mere 4% and a PBT decline of 11%. Africa (Darling), the UK and Indonesian subsidiaries exhibited a healthy performance, though.
Godrej Consumer Products is a consumer goods company, manufacturing and marketing Household and Personal Care products. Co. is engaged in the manufacture and sale of soaps, cosmetics and detergents. Co.'s Personal Care products include Godrej No.1 - soaps; Cinthol - soaps, deodorants, talcs and shower gels; Godrej protekt - washes, a hand sanitiser and a personal mosquito repellent spray; and Godrej expert - creme hair colour in a sachet, powder hair colour with a unique gel technology, and herbal hair colour. Co.'s home care products include Good Knight - mosquito repellents; HIT - household insecticides; Godrej aer - home and car air fresheners; and Godrej Ezee - liquid detergents.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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