Summer 2021

FIN301: Financial Management

Term Paper on

Marico Bangladesh Limited

Submitted By:
Abidur Rafi Hassan (20104050)
Adeeba Afreen Chowdhury (20104034)
Simeen Srabani (20104028)

Submitted To:
Mr. Ahmed Abir Chowdhury
Lecturer, BRAC Business School

Date of Submission: 14/08/2021

1
 Table of Contents

Executive Summary 3

Background of Marico Bangladesh Limited 4

Findings on Stock Price Trend Analysis 5

Findings on Ratio Analysis 7

Overall Analysis and Findings 22

Conclusion 26

2
Executive Summary

This paper breaks down the financial and stock price performance of one of the top 3 FMCG
companies currently operating in the country - Marico Bangladesh Limited. The reader will
be familiarised with the current state of the corporation that has been listed on the Dhaka
Stock Exchange since September 2009 and be given a thorough understanding of any
financial strength and weaknesses of this company by means of stock price trend analysis, a
time series analysis of its ratios as well as a comparative ratios analysis with two other large
FMCG companies operating in Bangladesh.

The analyses in this paper is done for the financial years of 2017-18, 2018-19, 2019-20 and
2020-21, the most recent of which was amidst the COVID-19 pandemic and therefore, the
paper also touches up on challenges faced and steps taken by the company in the face of these
trying times and evaluate whether or not they have been effective in maintaining their
business performance.

3
Background of Marico

Marico Limited’s journey in Bangladesh began in 1999 when the company decided to expand
their business operations overseas. Now, after 31 years of being launched in India, this
multinational corporation is one of Bangladesh’s top 3 FMCG companies. According to
Marico’s website, 1 out of 2 Bangladeshis use products produced by them everyday and their
brands are seen in 87% of the households.

Marico’s distribution channel is impressive. It has around 1.4 million retail stores that are
responsible for distributing their products. With almost 3800 employees, this business is
becoming more successful as each year passes by.

Marico Bangladesh provides a unique variety of brands catering to consumers' wellness, male
grooming and beauty needs. This company’s one of the most successful brands, Parachute
Hair Oils is considered the market leader in the hair oil industry. In addition to that, to cater to
consumers of different tastes, Marico has come up with VAHO (Value added hair oil) which
includes Nihar Naturals Oil (an affordable option), Livon (serum for dry hair) and many
more.

Furthermore, Marico owns Saffola , the edible oil which focuses on encouraging consumers
to lead healthy lifestyles in order to prevent heart diseases. From 2020 to 2021, Marico
launched various brands and expanded their product lines that contributed to their success.
On 7th April 2020, Mediker SafeLife was introduced with the aim of making no profit to
cater to consumer’s essential safety needs in the pandemic situation at the lowest price
possible. The company’s slogan is ‘Make A Difference’ which focuses on altering the lives of
consumers in a sustainable method and making it better.

4
Findings on Stock Price Trend Analysis

Trend Analysis Depicting Marico Bangladesh LTD’s closing prices from 31st May, 2020 to 31st March, 2021.

Marico’s fiscal year starts from April and ends in March. The first lockdown in Bangladesh
was imposed on March 26th to April 4th. Unfortunately, the closing prices from April to 30th
May are not shown due to the stoppage of stock market trading in Bangladesh during
Covid-19.

In 2020, from 31st May to 23rd July, the closing price remained the same at BDT 1,562.On
31st May, DSE officially started operating again after the general holiday extension of 7
times. A steady increase was seen from 24th July which led to a closing price of BDT
2005.90 on 24th August. The highest closing price was around BDT 2030 on 26th August.
After that day a small decrease was seen in the closing prices (around 10-25 BDT), and this
fluctuation was seen throughout the months of August and September. With the lockdown
being lifted on 1st September, the closing prices started improving.

October had a strong start at a price of BDT 2172.70. After this period, the closing price did
not fall below BDT 2000. On 18th October, the closing price was the highest around BDT
2336. Between November and December, the highest price was seen on 14th December 2021
(BDT 2354).

Marico Bangladesh Limited ended the year (2020) strongly at a closing price of BDT 2138
which shows that the rough beginning of 2020 only slowed down the company for a few
months. From January to the end of February, the fluctuations were very minimal and all
closing prices were above BDT2000. This is when Bangladesh faced the least number of
cases and vaccination programs also took place. Sadly, in March, the growth was slowed

5
down due to the rapid increase in infections (Covid positive rate of 23%). The lowest closing
price for 2021 was seen on 31st March.

Comparison to Market Index

In this graph, it may look like Marico’s growth was lower than the mean growth of the market
but it actually grew at a rate slightly greater than the market. The net change in the market
index in this time period was BDT 1217.72, compared to a net change in stock price of
Marico of BDT 514.50. The net change in percentages showed a growth of the DSE of
29.99% and a growth of 32.93% for Marico Bangladesh Limited.

6
Findings On Ratio Analysis

Profitability Ratios
Gross Profit Margin

Marico Bangladesh Limited’s gross profit margin has been improving since 2017. Within the
last 5 years, the gross profit margin has increased by almost 13%. Even through COVID-19,
the gross profit rose by 17.7% in one year which led to an increase of gross margin by 1.08%.
According to a report by The Daily Star, multinational companies like Marico have
performed well due to having efficient management plans and better sources for their raw
materials.

Even in their annual report, Marico has given credit to their cost management practices and
new product launches for their success.

7
Net Profit Margin

Since 2017, the Net Margin for Marico has been increasing steadily. Net Profit for the year
ended increased by 17.5% in 1 year from 2020. Products related to the pandemic such as
hand sanitisers, hand-wash and germ protection soap helped to perform well.

For 2020-2021, since this company’s main focus is FMCG, these products helped the
organisation to bounce back even during the pandemic. Consumers around the world are used
to these products and these are household brands which is why the demand was not affected
that much. Also, because of the lockdown imposed by the government, many consumers
resorted to stockpiling necessary products to reduce their need of going out.

Marico claimed in their annual report that their revenue was driven mostly by the consumer
favourite Parachute Coconut Oil along with their expanded baby care products. This
company has always focused on improving their portfolio and on 7th April 2020, they
launched their hygiene brand, Mediker SafeLife which has contributed to their revenue and
success.

8
Return on Assets

Throughout the years, Marico is improving its profitability. The company’s return on assets
increased from 38.38% in 2017 to 55.65% in 2021. This shows that Marico is becoming
increasingly efficient, which makes it quite attractive to investors since with each taka it
spends on investment, profits are being raised accordingly.

Marico’s condition suggests that its managers are utilizing the capital resources efficiently to
generate profits. Return on assets can be increased through decreasing total assets or raising
profits.

For Marico, they have been maintaining and utilising assets throughout the years. Their
return on assets is driven mostly by rising profits. From 2019 to 2020, the profit increased by
BDT 462,000,000.

9
Return on Equity (ROE)

From 2018 to 2020, the Return on Equity has been increasing. In 2020, the ROE was almost
80% more than what it was in 2018. This suggests that Marico Bangladesh has been
becoming increasingly better at generating profit in relation to the investment it received
from its shareholders.

Unfortunately in the year 2021, the ROE saw a decrease for the first time in 4 years. It
slightly dipped to 189.95% from 191%. This suggests that the company has become slightly
less efficient at generating profits using the shareholder’s investment.

The pandemic posed an obstacle to various industries and Marico was also affected. Covid-19
did not allow Marico to perform as well as it normally does and for some firms in other
industries, this decrease in ROE has been larger. Marico good’s demand bounced back since
these were goods that were regularly used by consumers.

10
Profitability At A Glance

As shown in the graph, Marico Bangladesh Limited had been experiencing a slow and steady
growth in their gross profit margin, net profit margin and return on assets over the past 4
fiscal years. In comparison to this, they boasted significantly healthy growth in their figures
for return on equity. However, regardless of what the rate of growth was in these profitability
figures, all of their growths stagnated in the year 2020-21 which had started on April 1st
2020, right after the first lockdown announced by the Bangladeshi government.

11
Asset Management Ratios
Average Age of Inventory

From 2018 to 2020, the average number of days it took Marico to sell its inventory decreased
from 132 days to 120 days. With Marico being increasingly successful and being one of the
top FMCG producers in Bangladesh, the demand for their goods did not allow the inventory
to stay in the warehouse for long.

Unfortunately in 2021, the average age of inventory rocketed to 143 days. This suggests that
Marico was taking a long time to sell the inventory. The reason behind this is Covid-19 which
did not allow consumers to go to convenience stores and purchase products produced by
Marico. Most consumers resorted to ordering online to conform to safety regulations imposed
throughout the world.

Furthermore, because of unemployment in the nation (5.33% in 2020), consumer income

12
Average Collection Period

In 2018, the average collection period of Marico stood at 0, which suggests that the buyers
took no time to pay their bills. The company was quite efficient in the collection process and
this created a positive impact for their profitability.

However, since 2019, the average collection period has risen to 2 days. This number is not a
lot, compared to other industries and the reason for this small change is due to the worsening
condition of the economy during the pandemic.

13
Average Payment Period

In 2018, the average payment period was around 62 days. Within one year, it dropped to
45days, which suggests that Marico was taking less time to pay its vendors for purchases
made on credit. In 2019, it rose to 64 days, which was more than what was in 2018 and in
2021, it took Marico nearly 74 days to pay its dues.This might indicate that Marico was not
being able to take full advantage of the credit terms provided to them by their suppliers.

With increasing sales, Marico is needing to produce more products and to earn a profit, it
needs to pay the suppliers quickly to receive discounts and maintain healthy relationships
with the suppliers. Marico needs to focus on improving the average payment period.

14
Total Asset Turnover

In the last 4 years, Marico has been becoming increasingly efficient in generating revenue
from its assets. In 2018, it was around 1.9 which later slightly increased to 1.94 in 2019. The
increase continued which led to the asset turnover ratio of 2.09 in 2021. This improvement
suggests that Marico is becoming better at managing the firm’s assets every year and this will
make the company seem attractive to investors.

One of the reasons behind this is the rise in revenue Marico has been enjoying for the past
few years. In 2021, Marico’s revenue grew by 15.4%. Assets were also increased, but at a
much slower rate than the revenue.

15
Liquidity Ratios
Current Ratio

The current ratio is one that has deteriorated over the course of these 4 years. This, although
usually a cause for concern, has still remained above 1 and therefore, the company is at the
borderline of not being certain in their ability to pay off their short-term liabilities with the
current assets in hand. Marico needs to quickly work on improving this ratio to avoid running
into issues with debt repayments since there is no real assurance on how much of their
inventory will be sold.

16
Quick (Acid-Test) Ratio

The quick ratio of Marico showed signs of slight improvement between the years ended
March 2018 to March 2020 with the ratio going up from 0.73 to 0.91 in the first year, and
from 0.91 down to 0.74 in the next. However, things have taken a turn for the worse in the
year ended March 2021 since the quick ratio of 0.53 shows that without relying on their sales,
Marico is set to be able to pay back just half of their short-term debt.

17
Debt Management Ratios
Debt-Equity Ratio

In 2018, the Debt-Equity Ratio was around 1.99 which later rose to 2.51 in 2019. In 2020, it
rose by 0.10, but it later fell to 2.54 in 2021. The debt-to-equity ratio gives an image of the
proportion of equity and debt a company is using to finance its total assets.

In 2018, the debt-to-equity ratio shows a figure of 1.99, which suggests that the company
may not have taken enough advantage of its financial leverage to increase profit. In 2019, the
company started making better use of its financial leverage.

The figure of 2020 shows the highest figure of debt-to-equity ratio which suggests that the
company was relying mostly on debts to finance its business operations. Marico was the most
indebted in that year and it had a greater use of its financial leverage. However, this might
mean that Marico was at risk of not being able to generate enough cash to pay debts. In 2021,
the risk was decreased by 0.07.

18
Interest Coverage Ratio

In 2018, the interest coverage ratio stood around 491.82. This suggests that in the past 4
years, in 2018, Marico was the most capable of fulfilling its interest obligations. A high
interest coverage ratio made Marico attractive to creditors and investors. However, this might
also mean that Marico did not take risks at all and was very conservative. Marico was not
borrowing enough in that year.

In 2019, the interest coverage ratio decreased to 193.59 which later decreased by 76.85. The
interest coverage ratio was later improved to 290.49.

19
Market Ratios
Earnings per Share

From 2018 to 2021, the earnings per share of Marico has been increasing. Within the last 4
years, the EPS has almost doubled. From 2019 to 2020, the EPS was increased by 2.00. A
higher EPS over the years has made this company more attractive to its investors since this
indicates greater value. This suggested that Marico’s business has outstanding growth
prospects in the future.

Over the years, the net income of Marico has risen, which has led to an increase in EPS. Even
during the pandemic, Marico performed quite well. The high EPS suggests that the company
was profitable enough to pay money to its shareholders, which may have led to an increase in
dividend.

20
Price-to-Earnings Ratio

The Price-To-Earnings Ratio for Marico has decreased from 22.82 in 2018 to 21.05 in 2021.
In 2019, the ratio first fell to 22.42 before falling further to 18.6 in the year ended March
2020. Since this ratio measures how much an investor has to pay to expect BDT 1 in earnings
as a shareholder, the net decrease in it could make investing in this company be seen as more
lucrative.

21
DuPont Analysis

Year Ended Return on Assets (ROA) Return On Equity (ROE)

31st March 2018 36.77% 110.05%

31st March 2019 44.21% 155.39%

31st March 2020 52.84% 190.70%

31st March 2021 53.65% 189.95%

Break Down of Return On Assets (ROA)

31st March 2018 21. 02% × 1. 75 36.77%

31st March 2019 23. 08% × 1. 92 44.21%

31st March 2020 27. 01% × 1. 96 52.84%

31st March 2021 27. 49% × 1. 95 53.65%

There has been consistent growth in the Return on Assets for Marico Bangladesh Limited. As
shown in the table, this growth is owed to the fact that between the first two years, there had
been a significant improvement in the total asset turnover, going from 1.75 to 1.92
accompanied by a commendable improvement in the net profit margin from 21.02% to
23.08%. The rest of the years of increase in ROA is owed to how Marico managed to
maintain their total asset turnover at that level while making slight improvements in the net
profit margin that too despite there being a global pandemic in the last of those years.

22
Break Down of Return On Equity (ROE)
Year Ended ROA Financial Leverage ROE

31st March 2018 36. 77% × 2. 99 110.05%

31st March 2019 44. 21% × 3. 51 155.39%

31st March 2020 52. 84% × 3. 61 190.70%

31st March 2021 53. 65% × 3. 54 189.95%

The return on equity figures showed an impressive rise each year between the years ended
March 2018 to March 2020 with the ratio climbing up by about 45% each year. This was
owing to the fact that Marico had managed to bump up both the ROA and the financial
leverage figures over this time period. However, this trend of growth came to an end in the
year ended March 2021 when the ratio dipped for the first time in this 4-year period from
190.70% to 189.95%. While this is a decrease by a very small degree, we can see upon
inspecting the ROA and financial leverage elements, it was the financial leverage falling by
0.07 that caused the ROE to dip in the year.

23
Comparative Analysis of Ratios
Marico Bangladesh Limited runs their financial years from April to March, whereas ACI and
ACMLPRAN run theirs from July to June. The annual reports of ACI and PRAN for the year
ended June 2021 are not yet available online. Therefore, this comparative analysis will be
using ratios calculated and taken from the annual reports of the year ended June 30 2020 for
the two other companies to compare with the figures of Marico from the report of the year
ended March 31 2020.

Since the quick ratio disregards the value of the inventories, it makes it a better rule of thumb
to compare this ratio to get an idea of which company is doing better in this aspect since it is
a measure of the ability to pay off short-term debts even in a case of failed sales of inventory
at hand. Though only by a small margin, Marico is nonetheless outperforming both ACI and
PRAN when it comes to liquidity.

24
Here, the other two companies can be seen to be really struggling. While ACI is in real
trouble with their ROE falling down to a negative 18.14% this year, PRAN is not seen to be
doing particularly better. Compared to them, investors of Marico Bangladesh would be
delighted with the way the business has performed relative to the others.

Again, ACI is seriously struggling here, with their EPS at -18.45% while PRAN is doing
better relative to ACI at 5.70% and Marico again, doing volumes better than them both with
their EPS at 84.01%.

25
 Conclusion

With all of these things considered, Marico’s performance has been commendable, with them
exceeding expectations on many fronts such as their hold over their profitability and market
ratios while facing a global pandemic and several cases of a nation-wide lockdown. The feat
is even more impressive when one sees the stark contrast between some of Marico's financial
ratios and those of their rivals.

On top of all this, even the performance of their stock prices was impressive since they not
only experienced appreciated prices on the Dhaka Stock Exchange but actually grew more in
the past financial year than the market in general, meaning they were one of the relatively
more attractive companies to investors.

All this goes to show how well Marico Bangladesh Limited has done in these 4 years,
especially when the COVID-19 pandemic broke out. They found effective solutions and
remained adaptive to the environment which paid off well for them in almost all aspects of
their operations, minus their liquidity position and the average age of inventories.

26
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ALJAZEERA. (2021). Bangladesh starts COVID vaccination drive. Retrieved from

Habib, A. (2021). Most multinationals draw bigger profits. The Daily Star. Retrieved from
https://www.thedailystar.net/business/economy/news/most-multinationals-draw-bigger-profits-2141936

Mahmud, N. (2020). Bourses to remain closed until May 30. Dhaka Tribune. Retrieved from
https://www.dhakatribune.com/business/stock/2020/05/16/bourses-to-remain-closed-until-may-30

Mahmud, N. (2021). Bangladesh’s consumer sentiment is back. And Marico will attest to that. Dhaka
Tribune. Retrieved from
https://www.dhakatribune.com/business/stock/2021/01/27/bangladesh-s-consumer-sentiment-is-back-
and-marico-will-attest-to-that

Mamun, S. (2020). Coronavirus: Bangladesh declares public holiday from March 26 to April 4. Dhaka
Tribune. Retrieved from
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Mamun, S. (2021). Experts: Bangladesh’s second Covid wave has peaked, situation likely to improve
in May. Dhaka Tribune. Retrieved from
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peaked-situation-likely-to-improve-in-may

Masum, O. (2021). Declining infection rate drives hopes of curbing COVID spread in Bangladesh.
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Munni, M. (2021). Bangladesh's 2020 jobless rate up at 5.3pc: ILO. The Financial Express. Retrieved
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The Business Standard. (2020). Govt decides not to extend general holidays further. Retrieved from
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r-state-minister-85870

The Business Standard. (2020). Marico launches Mediker SafeLife hand sanitizer, handwash.
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h-70111

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 Appendix

Source of Closing Stock Prices of Marico Bangladesh for the years 2017-18, 2018-19,
2019-20 and 2020-21:

Source of DSE market index figures for the year 1st April 2020 till 31st March 2021:

28
Source of figures of Marico Bangladesh Limited for the years ended March 2018, March
2019, March 2020 and March 2021:

29
30
31
32
33
Source of figures of ACMLPRAN for the year ended June 2020:

34
Source of figures of ACI for the year ended June 2020:

35