• OUTLOOK ARENA
  • VIEWS ON NEWS
  • MAY 18, 2001

Nirma: Bottomline blues

Nirma is set to declare its results today. While the FMCG sector as a whole struggled to show even single digit topline growth in FY01, Nirma's nine month period ended December 2000 clocked a 47% growth in topline. Its operating margins saw a hefty 1060 basis points growth.

(Rs m)9m FY009m FY01Change
Sales Turnover10,60015,59247.1%
Other Income25485-66.5%
Total expenditure8,27910,52727.2%
Operating Profit (EBDIT)2,3215,065118.2%
Operating Profit Margin (%)21.9%32.5% 
Interest155731371.6%
Depreciation242997312.0%
Profit before Tax2,1812,1970.7%
Tax251183-27.1%
Profit after Tax/(Loss)1,9302,0144.4%
Net profit margin (%)18.2%12.9% 
No. of Shares (eoy) (m)59.859.8 
No. of Shares (eoy) (m)33.979.4 
Diluted number of shares (m)79.479.4 
Diluted earnings per share*32.433.8 
*(annualised)   
Current P/e ratio 12.4 

Nirma manufactures and sells detergents (cakes and powders), soaps, soap intermediates (alfa olefin sulphonate- AOS). A pioneer in introducing low-cost detergents through low-cost inputs and low overheads (production in the unorganised sector), it has by passed MNCs like HLL, P&G to become the market leader (in terms of volumes) in this price-sensitive industry. In value terms, Nirma holds 16% market share in the branded detergents segment.

Nirma has consistently improved both its topline and bottomline year after year. In fact, its turnover has spurted at a compounded annual growth rate (CAGR) of 21% in the last three years. Its net profits have grown at a CAGR of 24%, underlining the companyís consistency in perform. Compared to this its biggest rival, Hindustan Leverís (HLL) turnover has grown at CAGR of 14% during the same period. Its profits however, have grown at an impressive rate of 35%.

In the nine month period FY01, Nirma has been hit by rising interest and depreciation costs. The company's net profit has grown by a mere 4% during the period. This has affected the company's valuations. The stock has nearly halved since January this year.

While the company's backward integration into manufacturing linear alkyl benzene and N-Paraffin (both raw materials) has helped it control costs to gain an edge in this price sensitive sector, it has also meant ballooning interest and depreciation costs. The backward integration looks positive for the company in the long term given its 'value for money' business motto.

If Nirma continues its blazing turnover growth, the company is likely to be back on the growth track in bottomline terms sooner rather than later.

At the current market price of Rs 421, the stock trades at a P/E multiple of 12.4x its annualised nine month FY01 earnings.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407