Marico - Working Capital Improvement May Accelerate Value Creation: ICICI Securities
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ICICI Securities Report
While Indian fast moving consumer goods' value-creation story over 2010-2020 has been primarily driven by good earnings growth, we note instances (Emami Ltd. and GlaxoSmithKline Consumer Healthcare Ltd.) where accelerated value-creation was driven by working capital improvement (and hence higher operating cash flow/free cash flow).
In this report, we highlight the Marico Ltd. story – it improved working capital by 30 days to 17 days in FY21 driven by:
- stock keeping unit rationalisation,
- new manufacturing footprint and automated systems,
- lower receivables and
- stricter credit control in general trade.
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