Abstract

The case is based on the Maggi crisis faced by Nestlé India in 2015. On June 5, 2015, India’s central food regulator, the Food Safety and Standards Authority of India (FSSAI), placed a ban on the production and sale of Maggi noodles across the country based on government lab tests that showed excess amounts of lead and monosodium glutamate (MSG) in the product. The company had to recall products worth Rs 3.2 billion and destroy 30,000 tonnes of noodles. The crisis wiped out nearly Rs. 100 billion from Nestlé's market capitalization. The company reported its first loss in 17 years at Rs.644 million in the April-June 2015 quarter. The ban had a huge impact on the financials of the company.The present case uses the backdrop of the Maggi crisis to analyze the financial performance of Nestlé India.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• To calculate and interpret all categories of financial ratios – liquidity, solvency, profitability, activity, and valuation.
• To observe these ratios over a period of time and comment on the trend of financial performance.
• To understand the Maggi crisis and evaluate its impact on the company financials.
• To analyze a company’s financial performance for a particular year and to compare it with the peer group and industry average.
• To prepare and interpret comparative and common size financial statements.

Keywords

Financial Statement Analysis, Ratio Analysis, Liquidity Ratios, Solvency Ratios, Activity Ratios, Profitability Ratios, Market Valuation Ratios, Maggi crisis, Common Size statement, Comparative statement