Unilever in India: Managing Working Capital

Abstract

Unilever''s Indian subsidiary, Hindustan Lever Limited (HLL) is the country''s largest FMCG (fast moving consumer goods) company. It has brands spread across 20 distinct consumer categories. HLL holds a place of pride in the Unilever global system. In India, HLL is known for its tight management of working capital and the company has been operating with a negative working capital since 2000. But the management realises that as competition intensifies, there is still scope for improving operational efficiency and cutting working capital needs.

Today's market is very dynamic and increasingly competitive. We have confidence in our strategy and are learning to grow even in declining markets.

M.S. Banga, Chairman, HLL

In 2004, Unilever's Indian subsidiary, Hindustan Lever Limited (HLL), was the country's largest fast moving consumer goods (FMCG) company. The company touched the lives of two out of three Indians and generated a combined volume of about 4 million tones and sales of Rs.10,000 crores. In 2002, the leading business magazine, Forbes Global, had once rated HLL as the best consumer household products company worldwide. Far Eastern Economic Review had rated HLL as India's most respected company.

BACKGROUND NOTE

In the summer of 1888, visitors to the Kolkata harbor noticed crates full of Sunlight soap bars, embossed with the words "Made in England by Lever Brothers". With it, began an era of marketing branded FMCG goods in India. Lifebuoy was introduced in 1895 and other famous brands like Pears, Lux and Vim followed. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937.

In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HLL in November 1956. After HLL became one of the first among MNC subsidiaries in India to offer its equity to the Indian public, Unilever, which gradually divested its stake in HLL, held a 51.55% stake in the company. The rest of the shareholding was distributed among 380,000 individual shareholders and financial institutions.

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        Case Code   FINA009
   Case Length    10 Pages
              Period    1888 - 2004
 Organization     Unilever, Hindustan Lever Limited (HLL)
        Pub Date     2004
Teaching Note    Not Available
     Countries    India
      Industry    Packaged Goods

Issues

Unilever in India, Managing Working Capital

Unilever in India; Hindustan Lever Limited (HLL); Working capital; Banga; Fast moving consumer goods; Market value added; Economic value added; Financials; Balance sheet; Profit and loss; Dell; Finance case; Operational efficiency; Working capital needs

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.