A Study on Performance of Selected FMCG Companies through Economic Value Added (EVA)

Author

Epuri Kranthi Kireeti , Dr Meda Srinivasa Rao


Abstract

 This study evaluates the value-creating performance of five leading Fast-Moving Consumer Goods (FMCG) companies – Hindustan Unilever, Nestlé India, Britannia Industries, Dabur India and Marico – by using Economic Value Added (EVA) for 2020-21 to 2024-25. Profit after tax, return on equity and earnings per share fail to capture the cost of capital, which is crucial in determining shareholder wealth. EVA overcomes this limitation by adjusting Net Operating Profit After Tax (NOPAT) for a charge that reflects the opportunity cost of capital. This is an analytical and descriptive study based on secondary data retrieved from the companies’ annual reports. Cost of equity was estimated by the Capital Asset Pricing Model and applied to capital employed at the year-end to arrive at the weighted average cost of capital. The data was subjected to mean, standard deviation and coefficient of variation, one-way Analysis of Variance (ANOVA) with Tukey’s Honestly Significant Difference (HSD), Kruskal-Wallis test, paired t-test, Pearson and Spearman’srank correlation as well as simple linear regression analysis. The results show that all the 25 observations registered positive EVAs, and the aggregated EVA increased from about Rs. 9,476 crore in 2020-21 to about Rs. 12,882 crore in 2024-25. There were significant differences in the mean EVA of the companies, F(4, 20) = 61.68, p < 0.001, η² = 0.93). Hindustan Unilever recorded the highest absolute value while Nestlé India had the highest spread between the returns and the cost of capital. Dabur India was the only company that recorded no-growth EVA. Taken together, the study concludes that the selected FMCG companies are consistently creating value but the magnitude varies with their size and capital employed rather than profitability.


Keywords

Economic Value Added (EVA), FMCG Industry, NOPAT, Weighted Average Cost of Capital (WACC), Capital Employed, Shareholder Value, Return on Invested Capital, Value-Based Management, India.



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References


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