Detergents India Limited 201Chapter 10
10. A Case Study: Detergents India Limited
OBJECTIVES
Introduce the student to the FMCG and Detergents industry.
Introduction to manufacturing practices in the detergents industry.
Evaluating a standard capital budgeting decision.
Introduction to make or buy decision.In 1995–96, Detergents India Limited (DIL) was evaluating the feasibility of putting up a 1,500 mt detergent
cake plant and a 500 mt detergent powder plant, and an indent from Hindustan Lever Limited (HLL) to
manufacture its product called 501 Bar. DIL, a company belonging to the Shaw Wallace Group, was set up
in 1974 and commenced operations in 1977. The company manufactures synthetic detergents (cake and
powder). The company has a principal-to-principal agreement with Shaw Wallace and HLL to cater to their
needs. DIL has a capacity of 3,800 metric tonnes of which 1,400 mt is in Kodur (Andhra Pradesh), 750 mt in
Coimbatore (Tamil Nadu) and 550 mt in Gulbarga (Karnataka). The company also has processing agreements
for 700 tonnes with Jayanthi Detergents Limited and the Calcutta Chemicals Company. Apart from these,
DIL uses third party operations as and when required. Exhibit 10.1 presents an executive summary of DIL’s
financial performance in the last four years.
Exhibit 10.1 Executive summary of financial performance of DIL
(Rs crore)
1998 1999 2000 2001
Net Sales 43.01 39.05 49.11 45.08
EBDIT 0.9 0.55 0.36 –0.54
PAT 0.35 0.15 0.03 –0.74
Gross fixed assets 6.97 7.37 7.83 8.34
Current Assets 5.9 6.45 9.52 6.19
Long term borrowings 0.27 0.0 0.03 0.02
Capital Employed 1.6 1.42 1.48 –0.53
PAT/Net worth 27.03 10.91 2.09 N.A.
Current Ratio 1.06 1.06 1.06 0.81
Net working capital 2 0 4 1
Cycle (days)
Source: Prowess, Centre for Monitoring Indian Economy (CMIE) database.