SECURITY ANALYSIS AND PORTFOLIO

MANAGEMENT
ASSIGNMENT

Course: Security Analysis and Portfolio Management

Semester: III
MBA Batch: 2024-26
D.O.S: 01-08-2025

Submitted by:
Shashvat Gupta 24021141116
Mayur Rai 24021141072
Ayush Sen 24021141030
Aksatha 24021141008
Nirupama C. H. 24021141083

Table Of Contents

1
S. Particulars
No.
1. Company Analysis of Sun Pharma
2. Ratio Analysis of Sun Pharma
3. Company Analysis of Hero Motor Corp.
4. Ratio Analysis of Hero Motor Corp.
5. Company Analysis of Grasim Industries
6. Ratio Analysis of Grasim Industries
7. Company Analysis of Tech Mahindra
8. Ratio Analysis of Tech Mahindra
9. Company Analysis of HUL
10. Ratio Analysis of HUL
11. Markowitz Model
12. Single Index Model
13. References

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Sun Pharma

Founded in 1983 and headquartered in Mumbai, Sun Pharmaceutical Industries has grown from a
niche player into one of the world’s largest specialty generics companies, with a presence in over
100 countries and leading positions in the U.S., Europe, and India. Scale has come through
disciplined acquisitions—most notably the 2015 Ranbaxy merger—and sustained investment in
R&D (about 6–7% of revenue) to build branded specialty franchises, especially in dermatology
and oncology.

In 2025, the company accelerated its specialty pivot: it agreed to acquire U.S.-based Checkpoint
Therapeutics for exposure to immuno-oncology (cosibelimab) and launched LEQSELVITM
(deuruxolitinib) for severe alopecia areata in the U.S. following a patent settlement. At the same
time, a $200 million U.S. antitrust settlement on generic pricing highlighted legal and pricing
risks that can pressure near-term earnings and sentiment—illustrating the twin forces of growth
catalysts and compliance headwinds.

Financially, Sun Pharma trades at large-cap pharma multiples (around mid-to-high 30s P/E
recently), with ROE near the mid-teens and very low leverage, signaling a solid balance sheet
and durable profitability. Brokerages remain constructive with upside targets, viewing the shift
toward higher-margin specialty assets as the key driver of long-term value, while acknowledging
U.S. generics volatility and litigation as the main variables. For a finance student, Sun Pharma is
a case study in using acquisitions and R&D to migrate up the value chain, balancing growth
optionality against regulatory and market risks.

Ratio Analysis Interpretation

The financial ratio analysis of each of the following five companies over the last three years
offers key insights into the company’s operational efficiency, profitability, liquidity, and
financial stability during a transformative period marked by strategic acquisitions, new product
launches, and regulatory challenges. These ratios help assess how well the company has
managed its core operations, capital structure, and shareholder value while navigating industry-
specific risks such as pricing pressure in generics and legal settlements. By examining trends

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across profitability margins, return ratios, leverage, and efficiency indicators, we can better
understand the companies’ evolving financial health and strategic positioning within the global
pharmaceutical landscape.

The following are the ratio analyses of Sun Pharma.

Liquidity Ratios

Ratios FY21 FY22 FY23 FY24 FY25

Liquidity Ratios
Current Ratio 1.03 3.36 1.97 0.96 1.45
Quick Ratio 0.54 1.36 0.71 -0.02 0.22

Liquidity ratios reflect the company’s ability to meet its short-term liabilities using its short-term
assets. The Current Ratio has shown significant fluctuations, rising sharply from 1.03 in FY21 to
3.36 in FY22—likely a result of conservative working capital management or a temporary build-
up of current assets. However, this ratio trends downward to 1.45 in FY25, which, while still
above the generally acceptable threshold of 1, indicates a tightening of liquidity. The spike in
FY22 could have stemmed from pandemic-related cash preservation, but the following
contraction suggests a rebalancing or redeployment of current assets into more productive
avenues.

The Quick Ratio, a more stringent liquidity measure (as it excludes inventories), tells a more
volatile story. It jumps from 0.54 in FY21 to 1.36 in FY22, indicating sufficient liquid assets to
cover liabilities. However, a dramatic dip into negative territory in FY24 (−0.02) suggests either
a large buildup of inventories or a steep fall in receivables/cash. By FY25, the ratio recovers
slightly to 0.22, but still indicates poor immediate liquidity. This deterioration must be
investigated—perhaps the firm increased inventory due to anticipated demand, or it could be a
signal of aggressive sales strategies requiring higher working capital tied in stock.

Together, these liquidity metrics reveal a company that experienced a period of high liquidity in
FY22, followed by gradual normalization. From a finance perspective, it’s essential to question
whether this declining trend will continue and if so, whether it could eventually stress the

4
company’s short-term financial obligations. Given the pharmaceutical industry’s sensitivity to R\
&D cycles and working capital requirements, these movements warrant close monitoring.

Leverage Ratios

Ratios FY21 FY22 FY23 FY24 FY25

Leverage Ratios
Debt to Equity Ratio 0.08 0.03 0.12 0.05 0.03
Total Debt Ratio 0.31 0.31 0.31 0.25 0.21
Proprietary Ratio 0.69 0.69 0.69 0.75 0.79
Interest Coverage Ratio 64.53 89.99 73.66 61.62 78.31

Leverage ratios assess a company’s capital structure and financial risk. Sun Pharma has
maintained Debt to Equity Ratios between 0.02 and 0.08 over the years—a remarkably low
range. This suggests a highly conservative capital structure with limited reliance on debt
financing. For a large-cap pharma company, this signals robust internal accruals and high self-
sufficiency in funding operations and capex. FY25 at 0.03 reaffirms Sun’s minimal financial
leverage, which insulates it from interest rate volatility and offers room for borrowing if a future
opportunity or acquisition arises.

The Total Debt Ratio remains stable at 0.31 until FY23, declining to 0.21 by FY25. This
consistent deleveraging further emphasizes Sun Pharma's low reliance on external debt. At the
same time, the Proprietary Ratio, which measures the proportion of total assets funded by
shareholders’ equity, remains strong and stable above 0.6 throughout. This reflects a well-
capitalized balance sheet, crucial for weathering industry-specific regulatory uncertainties and
litigation risks.

A standout metric is the Interest Coverage Ratio, which has remained exceptionally high—
between 61 and 99 over the years. This suggests that the company’s EBIT is more than sufficient
to cover interest expenses. Even though the ratio dipped from 99.73 in FY22 to 61.62 in FY24,
this still signals no material risk. For finance students, this combination of low leverage and high
coverage indicates that Sun Pharma operates with minimal financial risk and a strong ability to
service any debt obligations it may choose to take on in the future.

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Earnings Analysis

Ratios FY21 FY22 FY23 FY24 FY25

Earnings Analysis
Earnings Per Share 12.10 13.64 35.32 39.91 45.55
Book Value Per Share 301.0 265.3 247.2 212.8 206.2
(BVPS) 0 6 2 4 3
Dividend Per Share 6.50 9.00 10.50 12.50 15.50

Earnings ratios highlight the company’s capacity to generate value for shareholders. Sun
Pharma’s Earnings Per Share (EPS) has steadily risen from ₹12.10 in FY21 to ₹45.55 in FY25
—a nearly 4x increase. This strong and consistent growth trajectory is a clear indicator of
operational efficiency, scale economies, and perhaps product portfolio optimization. The
acceleration in earnings during FY23–FY25 likely aligns with new product launches, USFDA
clearances, and improved global market presence, including in specialty segments.

However, the Book Value Per Share (BVPS) shows a counterintuitive trend—declining from
₹301.06 in FY21 to ₹206.23 in FY25. This drop may seem concerning, but when viewed
alongside the rising EPS and dividend payouts, it could reflect higher dividend distributions and
possibly share buybacks or goodwill impairment. A shrinking BVPS amidst rising profitability is
often associated with a more asset-light model or higher payout policy.

The Dividend Per Share consistently rises from ₹6.50 in FY21 to ₹15.50 in FY25, reflecting
both increased distributable profits and management confidence in cash flows. For investors, this
dividend growth signals reliability and shareholder orientation. Combined with rising EPS, the
company is clearly striking a balance between reinvestment and rewarding shareholders—an
attractive trait in a mature pharma business with predictable cash flows.

Profitability Ratios

Ratios FY21 FY22 FY23 FY24 FY25

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 Profitability Ratios
12.1 13.6
Net Profit Margin (%) 35.32 39.91 45.55
0 4
4.29 4.69 10.50 11.22 11.89
Return on Assets (%)
% % % % %
6.25 6.82 15.13 15.04 15.13
Return on Equity (%)
% % % % %

Profitability ratios provide insight into how well Sun Pharma is converting revenue into profits.
The Net Profit Margin has surged from 12.10% in FY21 to a very impressive 45.55% in FY25.
Such expansion is rare and indicates significant cost efficiencies, price realization, and
potentially a richer product mix with higher-margin specialty drugs. It also reflects the success of
strategic investments and possibly geographic or therapeutic diversification. Margins of this
magnitude can support aggressive R\&D, acquisitions, or sustained dividend growth.

Return on Assets (ROA) has also improved, moving from 4.69% in FY21 to 11.82% in FY25.
This suggests better utilization of total assets in generating net income. It may also indicate that
Sun Pharma has been optimizing asset turnover through strategic realignment or operational
efficiency—possibly phasing out low-margin divisions or improving receivables and inventory
management.

The most crucial metric from a shareholder perspective, Return on Equity (ROE), has also grown
from 6.25% to 15.13%. Although the ROE dipped slightly from its peak of 15.04% in FY24 to
15.13% in FY25, this still represents an efficient use of shareholders' capital. Given the low
leverage structure, such high ROE is all the more commendable as it is not artificially inflated by
debt. For finance students, this progression demonstrates how ROE can be organically improved
through rising margins and operational scale, rather than just financial leverage.

Valuation Ratios

Ratios FY21 FY22 FY23 FY24 FY25

Valuation Ratios
54.0 68.0
P/E Ratio 27.97 37.63 40.23
7 8
P/BV Ratio 2.17 3.50 4.00 7.06 8.88
Dividend Yield (%) 0.01 0.01 0.01 0.01 0.01

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Valuation ratios reflect how the market perceives the company’s future earnings and growth
potential. The Price-to-Earnings (P/E) Ratio fluctuated significantly, peaking at 68.08 in FY22
and declining to 40.23 in FY25. The FY22 spike likely reflects investor optimism during the
post-pandemic recovery, while the subsequent moderation implies earnings have caught up with
price. Despite the decline, a P/E of 40+ still suggests high market confidence in Sun Pharma’s
future cash flows, brand value, and pipeline strength.

The Price-to-Book Value (P/BV) Ratio shows a consistent increase, reaching 8.88 in FY25 from
2.17 in FY21. This rise, alongside declining BVPS, reflects strong market valuation even as book
value decreases—a signal of intangible assets like patents, brand equity, and goodwill playing a
larger role in value creation. High P/B ratios are typical in pharma companies with innovative
capacity, and in Sun Pharma’s case, indicate investor faith in its specialty product pipeline and
international growth.

Lastly, the Dividend Yield remains steady at a low 0.01 across all years. This can be interpreted
as the company choosing to reinvest heavily into growth rather than distribute large dividends—
a reasonable strategy for a firm still expanding in global markets. However, it also suggests that
market valuation has run ahead of dividend growth, compressing the yield. Investors are
therefore more interested in capital appreciation than just periodic income.

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Hero MotoCorp Ltd

Hero MotoCorp Ltd. is the world's largest manufacturer of two-wheelers, a title it has held
consistently for more than two decades. Headquartered in New Delhi, India, the company was
established in 1984 as a joint venture between Hero Cycles of India and Honda Motor Company
of Japan, under the brand name Hero Honda. The partnership was immensely successful and
transformed the Indian two-wheeler market by introducing fuel-efficient and reliable
motorcycles tailored to Indian road and income conditions.

In 2011, the joint venture came to an end, and the company was renamed Hero MotoCorp Ltd.
Since then, Hero has successfully transitioned from a partner-dependent manufacturer to a fully
independent entity, investing heavily in its own research and development capabilities. The
company established its state-of-the-art Centre of Innovation and Technology (CIT) in Jaipur,
Rajasthan, and the Hero Tech Centre in Germany to drive innovation in vehicle design,
performance, and sustainability.

Hero MotoCorp's product portfolio includes a wide range of motorcycles and scooters that cater
to the needs of diverse customer segments. Popular models such as the HF Deluxe, Passion,
Glamour, and Xtreme have earned the company strong brand loyalty, especially in the commuter
segment. Hero is known for producing affordable, fuel-efficient, and durable two-wheelers,
making mobility accessible to millions, particularly in semi-urban and rural India.

The company has a vast domestic sales and service network, with over 9,500 customer
touchpoints, and exports its products to more than 40 countries across Asia, Africa, Latin
America, and the Middle East. This wide distribution footprint makes Hero MotoCorp a truly
global player in the two-wheeler segment.

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In recent years, Hero has taken significant steps toward electric mobility, launching its EV brand
VIDA and unveiling its first electric scooter, VIDA V1. The company is also focusing on digital
transformation, advanced manufacturing (Industry 4.0), and environmentally sustainable
practices in line with global ESG trends.

Hero MotoCorp is listed on both the National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE) and is part of the Nifty 50 index. With a strong legacy, robust product lineup,
focus on innovation, and a growing global presence, Hero MotoCorp remains a leader and
pioneer in the two-wheeler industry.

Income Statement - Hero MotoCorp

Year Mar-21 Mar-22 Mar-23 Mar-24 Mar-25
Income Statement
Sales 30959.19 29551.28 34158.38 37788.62 40923.42
COGS 24537.3 23195.6 26875.19 28171.99 30529.87
Gross Profit 6421.89 6355.68 7283.19 9616.63 10393.55
Selling and admin 1699.6 1835.46 2007.04 2201.66 2489.79
Operating Profit (EBITDA) 4722.29 4520.22 5276.15 7414.97 7903.76
Depreciation 715.12 689.52 697.39 757.36 824.59
EBIT 4007.17 3830.7 4578.76 6657.61 7079.17
Interest 46.41 53.1 104.88 76.37 70.65
EBT 3960.76 3777.6 4473.88 6581.24 7008.52
Tax 913.27 729.06 1063.72 1348.04 1557.75
Profit 3047.49 3048.54 3410.16 5233.2 5450.77
Earnings Per Share (EPS) 152.527027 152.5795796 170.6786787 261.7908954 272.5385

Hero MotoCorp’s income statement over the five-year period shows a steady recovery and
improvement in overall financial performance, particularly in profitability and operational
efficiency.

Revenue (Sales):

The company’s sales revenue declined slightly in FY 2022 ( ₹29,551 Cr) compared to FY 2021
(₹30,959 Cr), likely due to pandemic-related demand slowdown and supply chain disruptions.
However, from FY 2023 onward, revenue shows a consistent growth trend, reaching ₹40,923 Cr
by FY 2025 — a clear indication of strong demand recovery, increased market penetration, and
possibly better product mix, including higher-value models.

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Cost of Goods Sold (COGS):

COGS follows a similar trend, decreasing in FY 2022 but gradually increasing thereafter.
However, the growth in sales has outpaced the rise in COGS, which implies improved gross
margins and better cost control in the later years. The company seems to have managed
production and raw material costs efficiently despite rising input prices.

Gross Profit:

Gross profit steadily increases from ₹6,421 Cr in FY 2021 to ₹10,393 Cr in FY 2025, showing
Hero's ability to generate higher value from its products. This also suggests a shift towards better
pricing strategies and potentially a more premium product mix.

Operating Profit (EBITDA):

Operating profit improves significantly, especially in FY 2024 and FY 2025. From ₹4,722 Cr in
FY 2021, it jumps to ₹7,903 Cr in FY 2025, indicating strong operational efficiency and cost
management. This may reflect scaling benefits, digital transformation, or production
optimizations.

EBIT and EBT:

Earnings before interest and tax (EBIT) and before tax (EBT) both follow a strong upward trend.
EBIT nearly doubles from FY 2022 to FY 2025, confirming that core profitability has
strengthened, with Hero generating more income from operations before financing and tax.

Net Profit:

Net profit remains steady at ~₹3,048 Cr in FY 2021 and FY 2022, then rises to ₹5,451 Cr in FY
2025. The significant increase in FY 2024 and FY 2025 reflects strong financial recovery,
successful cost optimization, and perhaps better demand conditions post-COVID.

Earnings Per Share (EPS):

EPS grows from ₹152.52 in FY 2021 to ₹272.54 in FY 2025, demonstrating increasing

shareholder value. This also reflects higher profitability with stable equity structure.

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 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25
Profitability Ratios
EBITDA Margin 0.152532737 0.152961902 0.154461365 0.196222302 0.193135373
Earnings Per Share
(EPS) - 0.000344546 0.118620717 0.533823073 0.041054157
Profit Margin 0.098435715 0.103161014 0.099833774 0.138486137 0.133194391
ROE - 76.28978979 85.31798849 130.8954477 136.26925
ROA - 0.135620923 0.142582921 0.200101022 0.191993961

 The EBITDA margin remained stable at around 15% during FY21–FY23, indicating
consistent operational efficiency. A sharp improvement in FY24 and FY25 to over 19%
suggests that Hero MotoCorp significantly improved its cost management and operational
scale. This may reflect better pricing strategies, cost control measures, and product mix
optimization (possibly higher-margin products or segments).

 The net profit margin remained close to 10% for the first three years, showing reliable
profitability. A notable rise in FY24 and FY25 above 13% shows enhanced net-level
profitability, potentially driven by reduced non-operating costs, better tax efficiency, or
higher sales volumes. This indicates strong bottom-line performance and better
conversion of revenue into net profit.
 The EPS values seem off due to scaling (you had ₹152 to ₹272 in the income statement).
This shows strong value creation for shareholders, reflecting improved profitability and
stable capital structure. Consistent growth in EPS suggests good earnings retention and
efficient capital deployment.

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  ROE shows exceptionally high returns on shareholder capital, rising significantly over
the period. ROE over 130% in FY25 indicates Hero is generating tremendous profit
relative to its equity base. This could reflect efficient operations, strong profit growth, or
low equity capital relative to retained earnings. However, too high ROE may warrant
checking debt levels—though Hero is generally low-debt.

 ROA improved steadily, crossing 20% in FY24, which is excellent for a capital-intensive
company. This indicates Hero MotoCorp is using its assets efficiently to generate
earnings. Slight drop in FY25 is minor and likely due to asset expansion for future
growth (e.g., electric vehicle plants, R&D investment).

Mar-21 Mar-22 Mar-23 Mar-24 Mar-25

Growth ratios
-
Revenue Growth 0.045476319 0.155901876 0.106276703 0.082956192
EBITDA Growth -0.04279068 0.167233011 0.405375131 0.06591935
PAT Growth 0.000344546 0.118620717 0.534590752 0.041574945

The growth ratios of Hero MotoCorp over the five-year period reflect a clear financial journey—
beginning with contraction, followed by recovery, operational improvement, and finally
stabilization. Let's analyse this trajectory year by year:

1. FY2021 to FY2022: Contraction and External Shocks

 Revenue Growth: –4.55%

 EBITDA Growth: –4.28%

 PAT Growth: +0.03%

In FY22, Hero MotoCorp experienced a contraction in both revenue and EBITDA. This likely
stems from pandemic-related disruptions, including lockdowns, supply chain bottlenecks,
subdued rural demand, and rising input costs (especially for metals and logistics). Consumer
spending was conservative, and dealership operations may have been impacted. Despite this,
PAT growth was marginally positive, possibly due to effective cost savings, stable finance costs,
or deferred tax advantages, which slightly cushioned the bottom line.

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2. FY2022 to FY2023: Recovery Begins

 Revenue Growth: +15.59%

 EBITDA Growth: +16.72%

 PAT Growth: +11.86%

FY23 marks the initial stage of recovery. As the Indian economy reopened and consumer
demand revived, Hero saw a substantial recovery in its top line. The 15.6% increase in revenue
suggests improved domestic volumes and possibly moderate price hikes or better product mix.
EBITDA grew slightly faster than revenue, implying enhanced operational leverage—fixed costs
were spread across more units, improving profitability. PAT growth of nearly 12% shows
consistent financial performance, even if net margins might still be under pressure due to
inflationary trends or marketing spends.

3. FY2023 to FY2024: Operational Breakthrough

 Revenue Growth: +10.63%

 EBITDA Growth: +40.54%

 PAT Growth: +53.46%

This year represents a significant leap in profitability despite a moderate revenue increase. The
10.6% growth in sales is healthy but not extraordinary—however, EBITDA jumped by over
40%, signaling a drastic improvement in cost efficiency or pricing strategy. Hero may have
benefited from strategic sourcing, production optimization, or sales of higher-margin vehicles.
The PAT growth of 53.5% is even more impressive. This points to excellent bottom-line control
—low finance costs, improved operating margins, and possibly some deferred tax asset
realization or favourable taxation contributed to this spike. It reflects a phase of high financial
discipline and strategic gains.

4. FY2024 to FY2025: Stabilization Phase

 Revenue Growth: +8.30%

 EBITDA Growth: +6.59%

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  PAT Growth: +4.16%

In FY25, growth tapers off across all three metrics. Revenue growth slows to 8.3%, which is still
decent but indicates a mature phase or market saturation in key segments. The relatively lower
EBITDA growth (6.6%) compared to revenue may suggest rising costs or more aggressive
competitive pricing. PAT growth also decelerates to 4.2%, reflecting normalization of prior
extraordinary gains, and could also imply increased tax burden or reinvestment in R&D and
distribution networks (especially with the EV transition on the horizon). Still, the numbers
remain positive—indicating sustained but cautious financial expansion.

Mar-21 Mar-22 Mar-23 Mar-24 Mar-25

Liquidity Ratio
Current Ratio 0.279452122 0.239499971 0.285085264 0.278264035 0.299454093
Quick Ratio 0.167345844 0.149783754 0.182869371 0.182131194 0.198443506
Cash Ratio 0.024826321 0.018263622 0.024605514 0.038130668 0.02880197

Current Ratio (2021: 0.279 → 2025: 0.299)

Hero MotoCorp’s current ratio remained consistently below 0.30 over the five-year period,
indicating a persistent liquidity concern. A ratio this low means that the company had less than
₹0.30 in current assets to cover every ₹1 of short-term liabilities, showing a tight working
capital cycle. Although the figure slightly improved from 0.239 in 2022 to 0.299 in 2025, the
increase is marginal and not enough to change the risk profile. The consistently low ratio
suggests that the company might be heavily dependent on short-term borrowings, faster
inventory turnover, or efficient receivables collection to meet its day-to-day obligations. Such a
low buffer makes the firm vulnerable to any operational or cash flow disruptions.

Quick Ratio (2021: 0.167 → 2025: 0.198)

The quick ratio shows a similar trend, hovering below 0.20 throughout the period. Since this
ratio excludes inventory, it gives a more accurate picture of the company’s ability to meet
liabilities using truly liquid assets like cash and receivables. A quick ratio of 0.167 in 2021 and
only a modest improvement to 0.198 in 2025 implies that Hero MotoCorp had less than ₹0.20 in
liquid assets for every ₹1 of current liabilities. This highlights a liquidity gap and suggests that a
significant portion of the company’s current assets is tied up in inventory, which may not be

15
easily converted to cash. It also reflects limited immediate-paying capacity, increasing reliance
on inventory liquidation or short-term financing to stay operational.

Cash Ratio (2021: 0.0248 → 2025: 0.0288)

The cash ratio remained critically low across all five years, starting at 0.0248 and ending at
0.0288. Even at its peak in 2024 (0.0381), the company held less than ₹0.04 in cash and cash
equivalents for every ₹1 of current liabilities. This indicates an extremely low cash reserve
position and suggests that Hero MotoCorp operates with minimal liquidity cushion. While this
may be a sign of efficient cash utilization or strong credit terms with suppliers, it also places the
company at risk during periods of cash flow interruptions or unexpected expenses. The lack of a
cash buffer means that the firm would likely struggle to manage obligations without relying on
receivables collections or short-term loans.

Mar-21 Mar-22 Mar-23 Mar-24 Mar-25

Leverage Ratios
Debt To Equity 14.61511512 15.14439439 14.19914936 15.16783392 17.49825
Debt To Asset 0.025286531 0.026922302 0.023729535 0.023187201 0.024653826
Interest Coverage Ratio 86.34281405 72.14124294 43.65713196 87.17572345 100.2005662

Debt-to-Equity Ratio (2021: 14.61 → 2025: 17.50)

The debt-to-equity ratio for Hero MotoCorp remained exceptionally high across all five years,
starting at 14.61 in 2021 and rising further to 17.50 by 2025. This means that for every ₹1 of
shareholder equity, the company carried over ₹14 to ₹17 of debt — an unusually leveraged
position. The year-on-year fluctuations suggest that the firm has maintained a capital structure
highly dominated by debt, either through long-term borrowings or current liabilities outweighing
retained earnings and reserves. While high leverage can boost returns during growth, such levels
significantly raise financial risk, especially during market downturns or periods of declining
earnings.

Debt-to-Asset Ratio (2021: 0.025 → 2025: 0.0246)

Despite the high debt-to-equity ratio, the debt-to-asset ratio stayed very low, ranging between
0.023 and 0.026 over five years. This indicates that only about 2.5% of total assets were financed

16
through debt, suggesting a strong asset base backed largely by equity or internally generated
funds. The combination of a low debt-to-asset and high debt-to-equity ratio reflects a capital
structure with relatively few liabilities but a thin equity base, which exaggerates leverage when
measured against equity alone. It implies that even though absolute debt is low, the company’s
equity capital is not proportionately large.

Interest Coverage Ratio (2021: 86.34 → 2025: 100.20)

Hero MotoCorp’s interest coverage ratio remained exceptionally strong, increasing from 86.34 in
2021 to over 100 in 2025, despite a dip to 43.65 in 2023. This indicates the firm consistently
generated enough EBIT to cover interest obligations more than 40 to 100 times over, reflecting
very low interest burden and excellent debt servicing capacity. Even in 2023, when the ratio fell,
it was still far above safe benchmarks (typically 3–5). This suggests that although the company
appears highly leveraged on paper (in equity terms), its actual interest obligations are minimal,
likely due to low-cost or short-term borrowings, and strong profitability.

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Grasim Industries overview

Grasim Industries Limited, a flagship company of the Aditya Birla Group, ranks amongst the top
publicly listed companies in India. Incorporated in 1947, it started as a textiles manufacturer in
India. Today, it has evolved into a leading diversified player with leadership presence across
many sectors. It is a leading global producer of Cellulosic Fibres, Diversified Chemicals, Fashion
Yarn and Fabrics producer in India. Implementing next phase of transformational growth
journey, the company has entered paints business under the brand name ‘Birla Opus’. Out of the
six plants to be set-up for manufacturing decorative paints across pan India locations, five plants
have commenced operations.

Leveraging the Group synergies, Grasim has launched ‘Birla Pivot’, the B2B online marketplace
for building materials. Through its subsidiaries, UltraTech Cement, Aditya Birla Capital and
Aditya Birla Renewables, it is also India’s prominent cement producer, leading diversified
financial services player and clean energy solutions player. Grasim was awarded the prestigious
Economic Times Conscious Corporate Award 2024, for its pioneering leadership in
Environmental, Social, and Governance (ESG) practices, exemplifying the unwavering
commitment to being a force for good. At Grasim, there is an endeavour to create sustainable
value for 45,000+ employees, 2,52,000+ shareholders, society, and customers. The company
reported consolidated net revenue of ₹1,48,478 Cr. and EBITDA of ₹20,023 Cr. in FY 2025.
The developments of Grasim Industries in recent years are mentioned below,

Grasim’s private label paint brand, Birla Opus, launched in Feb 2024 with ₹10,000 crore capex.
Within a year, it captured ~6.8% market share, challenging Asian Paints and expanding
aggressively

Birla Pivot, the B2B e-commerce platform launched in early 2023, crossed ₹1,000 crore in
revenue within the first year. It targets the fragmented construction materials supply chain and
plans pan-India expansion to 6,000 towns by FY2025.

18
UltraTech Cement (Grasim’s subsidiary) increased its cement capacity from ~150 MTPA to
~183 MTPA by FY2025 and aims ~190 MTPA by 2026–27, benefitting from scale, logistics
network, and green energy use (~32% renewables in mix).

Grasim's Q4 FY25 net profit rose 9% YoY to ₹1,496 crore, with positive investor sentiment and
dividend announcement of ₹10/share

Ratios Interpretation

1. Liquidity Ratios (2021–2025)

2025 2024 2023 2022 2021

Liquidity
Ratio

1.253 1.049 1.157 1.284 1.284

Current Ratio 4 1 9 5 6
0.737 0.614 0.672 0.844 0.960
Quick Ratio 6 9 6 6 6
2.260 2.017 2.068 1.852 2.230
Cash Ratios 2 9 0 9 7

Grasim Industries has shown fluctuating liquidity ratios over the five-year period. The Current
Ratio, which measures the company’s ability to cover short-term obligations, remained relatively
stable from 2021 to 2023 (around 1.15–1.28), but saw a dip in 2024 to 1.05 before recovering
slightly in 2025 to 1.25. This indicates moderate short-term solvency. The Quick Ratio, which
excludes inventory from current assets, also decreased from 0.96 in 2021 to a low of 0.61 in
2024, indicating increasing reliance on inventory to cover liabilities—a less liquid form of asset.
The Cash Ratio has been strong and rising, particularly in 2025 (2.26), suggesting that the firm
maintains a healthy cash buffer relative to liabilities, likely due to prudent cash management or
lower short-term obligations.

2. Activity Ratios (2021–2025)

2025 2024 2023 2022 2021

Activity Ratio

19
 13.807 14.304 16.167 13.744 5.758
Account Receivable ratio 9 8 1 1 8
Payables or creditors turnover 0.000
ratio 0.0000 0.0000 0.0000 0.0000 0
4.628
Inventory ratio 5.4615 4.8679 5.6542 5.7788 8
17.269 23.031 11.891 8.435
Working capital turnover ratio 5 6 0 7.9252 0
1.157
Total Asset Turnover Ratio 1.5898 1.6093 1.8105 1.7209 0

The Activity Ratios of Grasim Industries highlight its efficiency in utilizing assets. The Account
Receivable Turnover Ratio has increased significantly from 5.76 in 2021 to 13.81 in 2025,
suggesting improved collection efficiency. However, the Creditors Turnover Ratio is recorded as
zero, which either indicates no credit purchases recorded or missing data—this should be
investigated for accuracy. The Inventory Turnover Ratio has remained fairly stable, showing
moderate efficiency in inventory usage. The Working Capital Turnover Ratio shows an
increasing trend from 8.44 in 2021 to 17.27 in 2025, suggesting enhanced efficiency in using
working capital to generate sales. Lastly, the Total Asset Turnover Ratio has gradually improved,
reflecting the firm’s increasing effectiveness in generating revenue from total assets.

3. Leverage Ratios (2021–2025)

2025 2024 2023 2022 2021

Leverage Ratio

Debt Ratio 0.3024 0.2971 0.2448 0.2238 0.2148

Debt to Equity Ratio 1.4335 1.4226 1.3242 1.2884 1.2736
Interest Coverage 494.228 1914.401 2730.285 2946.573 1010.370
Ratio 3 1 6 3 1
173.265
Debt to capital Ratio 3 165.8370 115.5909 106.4897 89.2964

Grasim’s Leverage Ratios reflect a consistent use of financial leverage. The Debt Ratio increased
modestly from 0.21 in 2021 to 0.30 in 2025, showing a moderate rise in debt levels relative to
assets. The Debt to Equity Ratio also climbed from 1.27 to 1.43, indicating slightly increased
financial risk but still within manageable limits. The Interest Coverage Ratio spiked to over

20
2,900 in 2022 but dropped drastically to 494 in 2025, implying that while the company can cover
its interest obligations, its earnings before interest have become more volatile. The Debt to
Capital Ratio also rose significantly, peaking at 173 in 2025, which indicates a higher proportion
of debt in the capital structure and may raise concerns about long-term solvency if the trend
continues.

4. Profitability Ratios (2021–2025)

2025 2024 2023 2022 2021

Profitability Ratio
13.606 19.723
Profit Margin ratio 8.0364 1 15.1085 3 13.9836
-
Operating Profit ratio 3.7730 2.7484 6.1558 9.8692 1.5213
14.788
Net Profit ratio 0.6784 3.7008 7.9911 4 7.4138
Return on Asset ratio 0.4374 1.7629 4.2387 4.9109 1.7892
Return on Investment ratio 0.3899 1.8141 4.5229 6.2763 2.1072
Return on capital employed
ratio 0.3304 1.6435 3.9846 5.3033 1.8013
Return on Equity ratio 0.3899 1.8141 4.5229 6.2763 2.1072

Grasim’s Profitability Ratios demonstrate notable volatility. The Profit Margin Ratio declined
sharply from a peak of 19.72% in 2022 to just 8.03% in 2025, and the Operating Profit Ratio
even turned negative in 2025 (-3.77%), signalling a concerning decline in operating efficiency.
The Net Profit Ratio mirrors this trend, dropping from 14.79% in 2022 to a mere 0.68% in 2025,
suggesting deteriorating bottom-line profitability. Returns on various capital components
(Assets, Investments, Capital Employed, Equity) also declined sharply in 2025 after peaking
between 2022–2023. This downward trend may be attributed to increasing costs, inefficiencies,
or reduced revenue growth, necessitating further strategic review by management.

5. Market Valuation Ratios (2021–2025)

21
 2025 2024 2023 2022 2021
Market Test or Valuation
Ratio

16.126 23.175
Earnings per share ratio 1.5583 7.1189 7 4 6.8764
Dividend per share ratio 4.9087 4.9489 4.9939 4.4984 1.9957
210.100 20.335 12.745
Dividend payout ratio 6 45.8305 5 0 19.0602
Dividend yield ratio 0.2447 0.2407 0.2408 0.2169 0.0962
858.742 190.432 84.440 58.764 198.171
Price earnings ratio 1 4 3 8 3
Market to book value ratio 6.8328 6.9587 7.6588 7.3955 8.3683

Market Value per share 2730.8

Valuation ratios offer insight into market perception. Earnings per Share (EPS) declined sharply
from 23.18 in 2022 to 1.56 in 2025, showing reduced profitability per share. However, Dividend
per Share has been relatively stable, suggesting a stable dividend policy even during earnings
declines. The Dividend Payout Ratio skyrocketed in 2025 to 210%, meaning the company paid
out more in dividends than it earned—this could be unsustainable. The Dividend Yield Ratio
remained low and stable. Surprisingly, the Price-Earnings (P/E) Ratio surged to 858.74 in 2025,
likely due to a falling EPS while the share price stayed high—this points to potential
overvaluation. The Market to Book Value Ratio remained elevated, showing investors’
continued confidence, but the divergence from fundamentals suggests the market may be
optimistic beyond earnings performance.

22
Tech Mahindra

Tech Mahindra Limited, a part of the Mahindra Group, is one of India’s leading multinational
information technology services and consulting companies. With a global footprint across more
than 90 countries, the company specializes in digital transformation, business process
outsourcing, and next-generation technology services. As the technology sector continues to
evolve with advancements in AI, cloud computing, and 5G, Tech Mahindra has positioned itself
as a key player, delivering innovative solutions across industries such as telecom, BFSI,
healthcare, and manufacturing.

Evaluating the company’s financial performance through key ratios provides critical insights into
its operational efficiency, profitability, leverage, and liquidity over time. This report analyzes
Tech Mahindra’s financial ratios over the past five years, highlighting trends in how effectively
the company utilizes its resources, manages its working capital, and sustains shareholder value in
a competitive and rapidly changing market environment.

Ratio Analysis

Liquidity Ratios

Narration Mar- Mar- Mar- Mar- Mar-

23
 21 22 23 24 25
LIQUIDITY RATIO

Current Ratio 1.71 1.65 1.81 1.86 1.82

Current Asset 20,228 24,583 27,388 25,875 27,082
Current Liabilities 11,836 14,911 15,163 13,943 14,880

Quick Ratio 1.71 1.65 1.80 1.85 1.82

Cuurent Asset 20,228 24,583 27,388 25,875 27,082
Inventory 24 40 24 38 39
Prepaid Expense 0 0 0 0 0
Current Liabilities 11,836 14,911 15,163 13,943 14,880

Tech Mahindra’s liquidity position has remained consistently strong over the past five years. The
current ratio has hovered between 1.65 and 1.88, while the quick ratio mirrors this due to
negligible inventory and prepaid expenses, indicating that the company primarily holds liquid
current assets. These values suggest the firm is comfortably placed to meet short-term
obligations without any liquidity stress. A ratio above 1.5 across years also reflects efficient
working capital management without excess idle current assets.

Leverage Ratios

LEVERAGE RATIOS
Mar- Mar- Mar- Mar- Mar-
Narration 21 22 23 24 25
Debt-Equity Ratio 0.01 0.01 0.00 0.00 0.00
Long Term Debt 166 142 129 102 0
Shareholder's Equity 24,865 26,886 27,925 26,669 27,362

Debt to total asset ratio 0.37 0.39 0.39 0.38 0.38

14736. 17529. 17902. 16479. 16905.
Total Debt 9 8 7 7 1
Total Asset 39,602 44,416 45,827 43,149 44,267

Proprietary Ratio 0.63 0.61 0.61 0.62 0.62

Shareholder's Equity 24,865 26,886 27,925 26,669 27,362
Total Asset 39,602 44,416 45,827 43,149 44,267

24
 Interest Coverage Ratio 35.21 46.83 20.80 9.22 18.57
Earnings before interest and Tax
(EBIT) 6,127 7,615 6,771 3,617 5,975
Interest 174 163 326 392 322

From a leverage perspective, Tech Mahindra has followed a highly conservative financing
approach. The debt-equity ratio has consistently remained as low as 0.00 to 0.01, indicating near-
zero reliance on long-term debt and a capital structure dominated by shareholder equity.
Similarly, the debt to total asset ratio fluctuates modestly around 0.37–0.39, mostly due to the
presence of short-term liabilities rather than borrowings. The proprietary ratio further reinforces
the firm’s self-reliant stance, with values well above 0.6 throughout, signifying that more than
60% of its assets are financed by equity.

The interest coverage ratio, though on a declining trend—from 46.83 in FY21 to 19.27 in FY24
—remains significantly robust. This shows Tech Mahindra generates ample EBIT to cover its
interest obligations multiple times over, reducing any risk of financial distress. Overall, the
firm’s low leverage and high liquidity offer strong financial stability, making it resilient to
external shocks and attractive from a creditworthiness standpoint.

Profitability Ratios

PROFITABILITY RATIO
Narration Mar-21 Mar-22 Mar-23 Mar-24 Mar-25
Gross Profit Ratio 0.26 0.24 0.22 0.19 0.21
Sales 37,855 44,646 53,290 51,996 52,988
Cost of Goods sold (COGS) 28,012.77 33,930.96 41,566.36 42,116.36 41,860.76

Operating Profit Ratio 0.16 0.17 0.13 0.07 0.11

EBIT 6,127 7,615 6,771 3,617 5,975
Sales 37,855 44,646 53,290 51,996 52,988

Net Profit Ratio 0.12 0.12 0.09 0.05 0.08

Earnings After Tax (EAT) 4,428 5,566 4,831 2,358 4,252
Sales 37,855 44,646 53,290 51,996 52,988

Operating Expense Ratio 0.08 0.07 0.08 0.10 0.08

Selling & Admin Expense 3028.408 3125.22 4263.216 5199.55 4239.064
Sales 37,855 44,646 53,290 51,996 52,988

25
 Operating Ratio 0.82 0.83 0.86 0.91 0.87
COGS 28,012.77 33,930.96 41,566.36 42,116.36 41,860.76
Operating Expense 3028.408 3125.22 4263.216 5199.55 4239.064
Sales 37,855 44,646 53,290 51,996 52,988

Return on Asset Ratio 0.11 0.13 0.11 0.05 0.10

EAT 4,428 5,566 4,831 2,358 4,252
Total Assets 39,602 44,416 45,827 43,149 44,267

Return on Capital Employed 0.22 0.26 0.22 0.12 0.20

EBIT 6,127 7,615 6,771 3,617 5,975
Total Caplital Employed 27,766 29,504 30,665 29,206 29,387
Total Asset 39,602 44,416 45,827 43,149 44,267
Current Liabilities 11,836 14,911 15,163 13,943 14,880

Return on Equity 0.18 0.21 0.17 0.09 0.16

EAT 4,428 5,566 4,831 2,358 4,252
Shareholder's Equity 24,865 26,886 27,925 26,669 27,362

45.7 57.2 49.6 24.1 43.4

Earnings per Share 3 8 0 4 3
EAT 4,428 5,566 4,831 2,358 4,252
96.8 97.1 97.4 97.6 97.9
Number of equity share (at beginning of year) 3 8 1 8 0

Earnings Yield 0.05 0.04 0.05 0.02 0.03

45.7 57.2 49.6 24.1 43.4
EPS 3 8 0 4 3
991.4 1,499.4 1,101.8 1,248.1 1,418.2
Market Price per share 5 5 5 0 5

Dividend Yield Ratio -1.77 -2.65 -3.87 -3.14 -2.73

DPS -1,759 -3,981 -4,263 -3,917 -3,877
991.4 1,499.4 1,101.8 1,248.1 1,418.2
Market Price per share 5 5 5 0 5

Dividend Payout Ratio -38.47 -69.51 -85.95 -162.28 -89.28

DPS -1,759 -3,981 -4,263 -3,917 -3,877
45.7 57.2 49.6 24.1 43.4
EPS 3 8 0 4 3

Price to Earnings Ratio 21.68 26.18 22.22 51.71 32.66

Market Price per share 991.4 1,499.4 1,101.8 1,248.1 1,418.2

26
 5 5 5 0 5
45.7 57.2 49.6 24.1 43.4
EPS 3 8 0 4 3

Return on Investment 0.11 0.13 0.11 0.05 0.10

EAT 4,428 5,566 4,831 2,358 4,252
Total Assets 39,602 44,416 45,827 43,149 44,267

The profitability ratios of Sun Pharma show a moderate decline in margins across the five-year
period. Gross Profit Ratio fell from 0.26 to 0.21, suggesting higher input costs or pricing
pressures. Operating and Net Profit Ratios also narrowed, indicating reduced operational
efficiency and profitability. While the Operating Expense Ratio remained stable at around 0.08,
the Operating Ratio increased, peaking at 0.91, further confirming rising costs relative to sales.

Return-based metrics like ROA, ROCE, and ROE showed a downward trend, suggesting
declining efficiency in generating profits from assets, equity, and capital employed. ROE
declined from 0.18 to 0.16, while ROCE dropped from 0.26 to 0.20. Earnings per Share (EPS)
shrank from ₹65.73 to ₹43.43, reflecting reduced profitability available to equity shareholders.
Earnings Yield also decreased, with Dividend Yield and Payout Ratios remaining negative,
highlighting that dividends paid exceeded earnings.

Despite the dip in earnings, Sun Pharma’s P/E Ratio rose from 21.68 to 32.66, implying that
investor sentiment and valuation remained strong, potentially due to future growth expectations.
However, Return on Investment also dropped from 0.11 to 0.10, which aligns with the decline in
overall efficiency and profitability. The data suggests the company may need to control
operational costs and improve margins to enhance shareholder value going forward.

Activity Ratios

ACTIVITY RATIO
Narration Mar-21 Mar-22 Mar-23 Mar-24 Mar-25
Current Asset Turnover Ratio 1.87 1.82 1.95 2.01 1.96
Sales 37,855 44,646 53,290 51,996 52,988
Current Asset 20,228 24,583 27,388 25,875 27,082

Fixed Asset Turnover Ratio 4.20 3.02 3.57 3.74 3.79

Sales 37,855 44,646 53,290 51,996 52,988

27
 Fixed Assets 9,019 14,784 14,932 13,903 13,982

Total Asset Turnover Ratio 0.96 1.01 1.16 1.21 1.20

Sales 37,855 44,646 53,290 51,996 52,988
Total Assets 39,602 44,416 45,827 43,149 44,267

Inventory Turnover Ratio

Sales 37,855 44,646 53,290 51,996 52,988
Average Inventory 30 32 32 31 38.5

Debtor Turnover ratio 4.56 4.26 4.29 4.28 4.62

Sales 37,855 44,646 53,290 51,996 52,988
Average Debtors 8,305 10,483 12,408 12,142 11,474

Activity ratios evaluate how efficiently a company utilizes its assets to generate revenue. In the
case of Grasim Industries, the Current Asset Turnover Ratio has remained relatively stable,
moving from 1.87 to 1.96 over five years. This suggests consistent efficiency in deploying short-
term assets to generate sales. Similarly, the Fixed Asset Turnover Ratio has shown a positive
trend, increasing from 4.20 to 3.79 after a slight dip, indicating improving efficiency in the use of
fixed assets to drive revenue. The Total Asset Turnover Ratio, which combines both, has also
improved from 0.96 to 1.20, reflecting an overall increase in asset productivity.

The Inventory Turnover Ratio remained relatively flat between 30 and 32 during FY20 to FY23,
with a notable increase to 38.5 in FY24. This uptick indicates better inventory management and
faster inventory movement, which is critical for operational efficiency. Efficient inventory
handling implies lower holding costs and reduces the risk of obsolescence. This improvement
aligns with the rise in sales over the same period, suggesting a streamlined supply chain and
stronger demand response.

Grasim’s Debtor Turnover Ratio has steadily improved from 4.56 to 4.62, pointing to stronger
credit management and quicker collection cycles. This reflects improved operational cash flows
and potentially better credit terms with customers. While the gains are incremental, they are
consistent, reinforcing the company’s ability to manage receivables effectively and convert them
into cash faster, which contributes positively to its working capital cycle.

28
 HUL
Hindustan Unilever Limited (HUL) is India’s largest fast-moving consumer goods (FMCG)
company, operating as a subsidiary of the global giant Unilever. With a legacy spanning over 90
years, HUL serves millions of households across India through a wide portfolio of daily-use
products in categories like personal care, home care, foods, beverages, and health & wellness.
Iconic brands such as Dove, Lux, Surf Excel, Lifebuoy, Pond’s, Brooke Bond, and Lipton fall
under its umbrella. The company has a pan-India distribution network and reaches over 9 million
retail outlets, making it a household name across both urban and rural markets. Its business
model focuses on brand leadership, product innovation, supply chain efficiency, and deep
consumer insights.

Over the past five years, HUL has demonstrated consistent growth, with a revenue CAGR of
approximately 9.7% and net income CAGR of 9.6%. Earnings per share (EPS) grew from
₹33.85 in FY2021 to ₹45.30 in FY2024. However, operating margins slightly declined from
24.6% to 23.0% during the same period, due to rising raw material and distribution costs. Net
profit margins have also compressed from 17.3% to 16.8%. Despite these margin pressures,
HUL remains fundamentally strong with near-zero debt, high return on capital employed
(averaging ~30%), and one of the highest dividend payout ratios in the sector.

29
In recent years, HUL has faced challenges in terms of slowing urban volume growth and
intensifying competition from agile, digitally native brands like Mamaearth and Nykaa. Its
market share dipped from around 95% to 90.7%, showing the impact of evolving consumer
preferences and pricing sensitivity. The company’s stock currently trades at a P/E ratio of
approximately 51–52×, which is slightly below its five-year average but still represents a
valuation premium due to its strong brand equity and predictable cash flows.

Looking ahead, HUL is undergoing a strategic reset with the appointment of Priya Nair as CEO
and MD starting August 2025. Her leadership is expected to bring a renewed focus on product
innovation, digital transformation, and premiumization—especially in the beauty and personal
care segment. If executed well, these initiatives could position HUL for a more dynamic and
competitive future in the evolving FMCG landscape.

Ratio Analysis

1. Market Value Ratios

HUL's Price-to-Earnings (P/E) ratio has steadily declined from 71.46 in FY21 to 49.84 in FY25,
indicating a gradual normalization of investor expectations. While the company still commands a
premium valuation, this trend reflects either rising earnings or a more cautious market sentiment
toward future growth. A declining P/E can also mean the stock is becoming more attractive to
value investors, especially if earnings continue to grow.

The Dividend Yield shows a dip from 1.19% in FY21 to a low of 0.90% in FY22, followed by
a consistent rise back to 1.17% in FY25, suggesting a strong commitment to shareholder returns.
The upward trend in later years reflects improved profitability or increased dividend payouts,

30
positioning HUL as a reliable dividend-paying stock — a trait highly appreciated by income-
focused investors.

2. Profitability Ratios

 HUL’s Return on Assets increased steadily from 11.63% in FY21 to 13.33% in FY25,
indicating that the company is becoming more efficient in utilizing its total assets to
generate profit. Despite a slight dip in FY24, the overall upward trajectory reflects sound
asset management and operational efficiency — a positive sign for long-term
sustainability.
 Return on Investment rose from 16.77% in FY21 to an impressive 21.56% in FY25,
showcasing a robust improvement in the company’s ability to generate profits from
shareholders’ funds. This consistent upward trend highlights the trustworthiness of HUL
as an investment, with management effectively translating invested capital into solid
returns.
 ROCE shows a healthy rise from 16.77% in FY21 to 20.86% in FY25, confirming that
HUL has been effectively utilizing both equity and debt to drive profitability. Although
there’s a minor slowdown in FY24, the rebound in FY25 reflects the company’s strategic
control over its capital structure and efficient use of long-term funds.
 HUL’s ROE surged from 34.02% in FY21 to 45.31% in FY25, indicating exceptional
profitability from shareholders' equity. This consistently high and growing ROE signals

31
 strong financial health and the company’s capacity to reward its equity investors with
increasing returns, making it a darling for long-term shareholders.

3. Leverage Ratios

 HUL’s debt-to-equity ratio increased gradually from 0 in FY21 to 0.033 in FY25,

reflecting a slight rise in the company’s use of debt. Despite this increase, the ratio
remains extremely low, indicating that HUL continues to operate with minimal financial
leverage and maintains a conservative capital structure. This approach reduces financial
risk and underscores strong internal funding capabilities.
 The total asset-to-debt ratio dropped from 67.60 in FY22 to 48.46 in FY25, revealing a
gradual increase in debt levels over the years. Although the ratio is declining, it still
demonstrates a highly favorable coverage of debt by assets, suggesting that HUL remains
in a strong solvency position with a significant buffer to cover liabilities using its total
asset base.
 HUL's interest coverage ratio peaked at 124.10 in FY23 and later dropped to 37.58 in
FY25. While this reflects a decline, the company still maintains a high ability to service
its interest obligations. The ratio suggests that HUL generates ample operating profit to
comfortably meet its debt servicing needs, maintaining strong creditworthiness and
minimal default risk.
 HUL’s operating profit margin declined from 24.77% in FY21 to 23.52% in FY25,
showing a modest but consistent contraction. This trend may reflect rising input costs,
pricing pressures, or increased operating expenses. Despite the decline, the margins

32
 remain relatively healthy for the FMCG industry, suggesting that the company continues
to manage its core operations effectively, though with slightly reduced operational
efficiency over the years.

 The net profit margin hovered steadily around 17%, starting at 17.00% in FY21 and
marginally dipping to 16.87% in FY25. The near-flat trend indicates that HUL has
managed to preserve its bottom-line profitability despite minor fluctuations in cost
structures or tax impacts. This stability in net margins suggests robust financial control
and a consistent ability to convert revenue into net income.

4. Activity Ratios
 HUL’s inventory turnover ratio moved from 13.14 in FY21 to 14.30 in FY25, showing
an overall improvement in how efficiently the company converts its inventory into sales.
After a slight dip in FY22, the ratio picked up momentum in FY23 and FY24, peaking at
15.39, before moderating slightly. The high turnover reflects strong product demand and
efficient inventory management, which is crucial for an FMCG player with fast-moving
goods.
 The asset turnover ratio increased from 0.684 in FY21 to 0.790 in FY25, highlighting
HUL’s improving ability to generate revenue from its asset base. The steady rise until
FY23 shows enhanced asset utilization, although the ratio slightly dipped in FY24 and
remained nearly stable in FY25. Overall, this points to a well-balanced operational
strategy where HUL is effectively converting its assets into revenue without
overextending its capital base.

33
 Markowitz Model

The Markowitz Model, developed by Harry Markowitz in 1952, revolutionized portfolio theory
by introducing the concept of diversification to reduce investment risk. It is based on the premise
that an investor can optimize a portfolio by carefully selecting the proportions of various assets,
considering not just the expected return of each asset but also how they correlate with each other.

The core idea is to maximize expected return for a given level of risk or minimize risk for a
given level of expected return. The model relies on mean-variance optimization, where the
expected return is the mean, and the standard deviation (or variance) represents the risk. Through
efficient diversification—choosing securities that don’t move exactly in tandem—investors can
construct a portfolio that offers a better risk-return trade-off than any individual security on its
own.

EXPECTED EXPECTED
SECURITIES WEIGHTS E(R)*Wts
RETURN RISK

-
TECH MAHINDRA -0.006161% 1.67% 0.2 0.00123%
HINDUSTAN -
UNILEVER -0.034556% 1.22% 0.2 0.00691%
-
GRASIM INDUSTRIES -0.003932% 1.46% 0.2 0.00079%
-
HERO MOTOCORP -0.080964% 1.60% 0.2 0.01619%
SUN PHARMA 0.002831% 1.25% 0.2 0.00057%

Expected Return and Risk

TECH GRASIM HERO SUN

SECURITIES MAH. HUL IND. MOTO. PHARMA
TECH MAHINDRA 0.000280 0.000013 0.000068 0.000069 0.000036
HINDUSTAN UNILEVER 0.000013 0.000148 0.000017 0.000043 0.000014
GRASIM INDUSTRIES 0.000068 0.000017 0.000213 0.000082 0.000059

34
HERO MOTOCORP 0.000069 0.000043 0.000082 0.000256 0.000053
SUN PHARMA 0.000036 0.000014 0.000059 0.000053 0.000155

Correlation Matrix

Portfolio Return -0.02%

Portfolio Variance 1.25%

Portfolio Risk 11.18%

Portfolio Expected Return

The portfolio return of -0.02456% suggests a negative expected return, which is a cause for
concern. This implies that, based on historical data and expected values, the portfolio is
anticipated to incur a slight loss over the evaluation horizon. The major contributing factors here
are the negative expected returns from four out of the five stocks. Hero MotoCorp (-0.08096%)
and Hindustan Unilever (-0.034556%) are the largest detractors. In contrast, only Sun Pharma
offers a positive return (0.002831%), which is not strong enough to counterbalance the negatives
from the rest.

This outcome underlines the importance of selective stock picking rather than merely equal-
weighting securities. Equal weighting dilutes the impact of outperformers and exaggerates the
drag of underperformers. Thus, unless there's a compelling diversification motive or expectation
of mean reversion, relying on such allocations in a bearish-return environment could prove
counterproductive.

Portfolio Risk (Variance and Standard Deviation)

Your portfolio variance is 0.0000785, leading to a standard deviation (portfolio risk) of 0.89%,
which is relatively moderate. This level of risk appears to be in line with the individual stock
volatilities, which mostly hover between 1.22% and 1.67%. Importantly, despite negative

35
returns, the risk level is contained, indicating that the diversification benefit is working,
particularly through low or negative covariances among the assets.

The covariance matrix shows relatively low inter-stock covariances, with the highest being
around 0.000280 (Tech Mahindra with itself) and the inter-security covariances being
significantly lower. This supports the idea that the chosen securities do not move perfectly in
tandem, and hence combining them results in a portfolio with reduced overall volatility
compared to the sum of individual risks.

Diversification Effectiveness and Implications

One of the key goals of the Markowitz model is to maximize return for a given level of risk or
minimize risk for a given return. In this case, although your portfolio exhibits a favorable level of
diversification (with only 0.89% standard deviation), the return aspect falls short. This illustrates
a classic issue in passive diversification: while it may smooth out volatility, it doesn’t guarantee
superior returns. The fact that Sun Pharma alone had a positive return hints at asymmetry in
security performance, and a re-weighting strategy (e.g., risk parity or return-weighted) could
significantly improve overall expected return.

Another implication is that you’ve not used constraints like “minimum return requirement” or
“maximum risk tolerance” in this iteration. Integrating such constraints in a solver-based
portfolio optimization could yield better configurations, especially if Sun Pharma or other
positive-return stocks are allowed higher weights.

Final Observations

 Your current portfolio is well-diversified but inefficient, as seen from the negative
expected return.
 Sun Pharma stands out as the only contributor to positive return, but with equal weights,
its potential is not fully capitalized.
 The low portfolio standard deviation is a testament to effective risk dispersion, yet return-
maximizing goals are unfulfilled.

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  Future iterations of this analysis could explore efficient frontier plotting, Sharpe ratio
analysis, and use of optimization tools (like Solver or Python’s SciPy library) to
dynamically reallocate based on either return maximization or risk minimization goals.

The Single Index Model

The Single Index Model (SIM), developed by William Sharpe, is a practical simplification of the
Markowitz portfolio theory. It assumes that asset returns are linearly related to the returns of a
common market index, typically represented by a benchmark like the Nifty or Sensex in the
Indian context. Rather than requiring covariances between every possible pair of securities, SIM
streamlines risk estimation by relating each asset's return to one single factor — the market. The
key components of this model are the asset’s alpha (stock-specific return), beta (market
sensitivity), residual/error variance (unsystematic risk), and the market variance (systematic
risk).

SIM helps investors decompose total risk into systematic (non-diversifiable) and unsystematic
(diversifiable) components, allowing for smarter diversification. It is particularly useful when
dealing with a large number of securities, as it simplifies correlation matrices and computational
complexity while retaining practical relevance in estimating a portfolio’s risk-return profile.

Interpretation of Portfolio Return and Risk

Based on your SIM analysis, the portfolio comprising Tech Mahindra, Hindustan Unilever,
Grasim Industries, Hero MotoCorp, and Sun Pharma — each equally weighted — yields an
expected portfolio return of -0.02% and a portfolio standard deviation (risk) of 11.18%. These
figures are central to assessing the risk-reward trade-off offered by this specific combination of
assets.

The negative expected return of -0.02% implies that, based on current market data and the
regression coefficients derived from the model, the portfolio is not expected to generate a
positive return over the time horizon considered. This is largely attributable to the presence of
negative or weak expected returns in four out of the five selected securities, notably Hero
MotoCorp (-0.08%) and Hindustan Unilever (-0.03%), which drag down the aggregate portfolio
return. Even though Sun Pharma provides a marginally positive return, it is not sufficient to

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offset the collective drag imposed by the others. This may be a reflection of bearish sentiment,
macroeconomic headwinds, or underperformance in the constituent sectors. As a result, from a
reward standpoint, this portfolio is presently unattractive unless there are compelling qualitative
reasons to expect a reversal in the outlook for these firms.

However, this needs to be balanced against the portfolio risk, which stands at a significant
11.18%. This figure represents the annualized standard deviation of portfolio returns and
captures both market-related (systematic) and firm-specific (unsystematic) volatility. The fact
that the risk is relatively high while the return is negative indicates an unfavorable risk-return
profile. According to Modern Portfolio Theory, a rational investor should only accept higher risk
if it is adequately compensated by higher expected returns. In this case, however, investors are
assuming risk without any such payoff — a situation that undermines the attractiveness of the
portfolio and violates the efficient frontier principle.

The model also implicitly accounts for beta-weighted exposure to market risk, which affects the
risk profile significantly. If some stocks (like Hero MotoCorp or Tech Mahindra) carry higher
beta values, they will amplify the market-driven risk component of the portfolio, particularly
during downturns. Furthermore, the residual risks (non-market variability) estimated through the
regression analysis suggest that the unsystematic risks have not been effectively diversified
away, possibly due to similar risk drivers across the selected companies — a weakness that could
be mitigated by broadening the diversification beyond a single industry cluster or adding more
fundamentally strong, low-beta stocks.

Final Perspective

In summary, your SIM-based analysis reveals that the constructed portfolio is risk-heavy and
return-negative, which is not aligned with optimal investment principles. The expected return of
-0.02% fails to reward the investor for enduring a relatively high standard deviation of 11.18%,
pointing to the need for either rebalancing the asset weights or replacing underperforming stocks
altogether. From an academic and practitioner’s viewpoint, this exercise underscores the
importance of pairing quantitative outputs with qualitative judgment, and affirms that even
seemingly diverse portfolios can underperform when stock selection and macro conditions are
not favorable.

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For a follow-up, you may consider conducting a Sharpe Ratio analysis or re-estimating the
portfolio after excluding the worst-performing assets or introducing decorrelated assets to
enhance both return and diversification potential. The Single Index Model, while simplifying
complexity, serves as a powerful reminder that portfolio construction is as much about choosing
the right securities as it is about calculating the right statistics.

39
References

 Sun Pharmaceutical Industries Ltd. (2024). Annual Report 2023–24.

[Link]
 Reuters. (2025, July 14). India’s Sun Pharma launches anti-baldness drug Leqselvi in
U.S. [Link]
launches-anti-baldness-drug-leqselvi-us-2025-07-14
 The Economic Times. (2024, March 3). JM Financial retains ‘Buy’ on Sun Pharma,
lowers target price to Rs 2025.
[Link]
sun-pharma-lowers-target-price-to-rs-2025/articleshow/[Link]
 The Economic Times. (2024, May 27). Sun Pharma shares in focus after $200 million
settlement in U.S. drug pricing case.
[Link]
after-200-million-settlement-in-us-drug-pricing-case/articleshow/[Link]

 Grasim Industries Limited. Official website. Retrieved July 29, 2025, from
[Link]
 The Economic Times. Grasim Industries Ltd. - Director’s Report. Retrieved July 29,
2025, from [Link]
 Capital Market. Company Information: Directors' Reports. Retrieved July 29, 2025, from
[Link]
 National Stock Exchange of India. (n.d.). Grasim Industries: Historical Stock Data.
Retrieved July 29, 2025, from [Link]
symbol=GRASIM#info-historicaldata
 Moneycontrol. (n.d.). Grasim Industries Ltd. Stock Price and Financials. Retrieved July
29, 2025, from [Link]

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 Moneycontrol. (n.d.). Grasim Industries Balance Sheet. Retrieved July 29, 2025, from
[Link]
 Hindustan Unilever Limited | Unilever
 Hindustan Unilever Ltd (HINDUNILVR) Stock, Price, News, Quotes, Forecast and
Insights | MSN Money
 HUL Share Price Today, HUL Stock Price Live NSE/BSE

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