Understanding and Analyzing the Financial Statements of Colgate-Palmolive (India) Ltd.

Case Code: FINC212
Case Length: 11 Pages
Period: 2020 - 2022
Pub Date: 2024
Teaching Note: Available

Price: Rs.400
Organization: Colgate Palmolive (India) Ltd
Industry: Business & Consumer Services
Countries: India
Themes: Financial Analysis, Accounting and Control, Valuation, Industry Analysis

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

Colgate-Palmolive (India) Ltd, (CPIL) one of India’s oldest personal care fast moving consumer goods (FMCG) companies, achieved a major milestone in 2022 with its sales crossing Rs.50,000 mn. It recorded a modest profit growth of 4.1%. But the financial performance of CPIL was overshadowed by a record dividend payment of Rs 40 per share. CPIL had steadily increased its dividend payout from 2019–20, reaching100 percent for the year 2021– 22.

Despite constantly innovating and building some of the biggest brands, CPIL witnessed a lower rate of sales and profit than its peers. The company was also facing huge competition from other global majors as well as from companies like Patanjali and Dabur which had positioned themselves as green and as using natural ingredients. At the same time, the company had also seen a reduction in fixed assets and capital expenditure. The case would help to analyze the following questions: Does the reduction in Plant and Machinery and capital investments in the last 3 years mean anything to the company’s growth prospects? Also, does the steady increase in Dividend Payout, reaching 100 % in FY 2021-22, mean the company is maturing? Does this payment of all the surplus to its shareholders mean no major investments are needed in R&D and that there is no need for funds to set up additional facilities to manufacture and cater to the growing consumer base? Or, is CPIL depending on its parent company Colgate Palmolive to launch new products which it will then market in India by paying a certain royalty to Colgate Palmolive? Does the analysis of the financial statements and conducting a vertical and horizontal analysis reveal a certain trend which would not only reveal past performance but also help predict the company’s immediate future performance?