# Nirmal Consumer Products (NSE: NIRMAL) — Equity Analysis

> **ILLUSTRATIVE EXAMPLE — FICTIONAL COMPANY, INVENTED FIGURES.** Nirmal Consumer
> Products Ltd does not exist. This file is a worked exemplar of the skill's
> Standard-mode output; every citation below is to a fictional document. Do not
> reuse any figure here for a real company.

**Analysis date:** 2026-08-02
**Basis:** Consolidated · Ind-AS · ₹ crore (1 crore = 10 million)
**Latest reported period:** FY26 (year ended 31-Mar-2026), audited.
**Price reference:** ₹1,150 [NSE close, 2026-07-31] · **Market cap:** ₹23,000 cr · **EV:** ₹22,300 cr

**Depth mode: Standard.** Sector playbook: FMCG / branded consumer.

---

## RECENCY STATEMENT

- **Most recent reported period incorporated:** FY26 (ended 31-Mar-2026), results filed 09-May-2026; FY26 concall (12-May-2026) incorporated.
- **Events checked through:** 2026-08-02. Q1 FY27 (Jun-2026) board meeting announced for 05-Aug-2026 — **not yet reported**; this analysis is pre-Q1-FY27.
- **Material events since year-end:** final dividend of ₹6.0/share declared [FY26 AR, p.14]; a new ₹450 cr capacity expansion announced 20-Jun-2026 [exchange filing, 2026-06-20]. No rating action, block deal or governance event found.
- **Invalidation trigger already tripped:** No.

## DATA QUALITY NOTE

| Item | Statement |
|---|---|
| **Primary sources (Tier 1)** | FY26 Annual Report (audited); FY22–FY25 Annual Reports; Q4 FY26 results filing (09-May-2026). |
| **Company secondary (Tier 2)** | FY26 earnings-call transcript (12-May-2026); FY26 investor presentation. |
| **Aggregators (Tier 4 — navigation/cross-check only)** | screener.in used only to locate filings and cross-check two figures; never cited as a source. |
| **As-of dates** | Financials to 31-Mar-2026. Price/market cap 31-Jul-2026. Shareholding 30-Jun-2026. |
| **Basis** | Consolidated throughout; standalone immaterial (subsidiaries <3% of revenue). |
| **Currency/units** | ₹ crore unless stated. |
| **Estimated** | `[E]`: maintenance capex split (~60% of gross capex); FY27 EPS in scenarios. All marked inline. |
| **Missing** | Channel-level (IQVIA/AWACS) secondary offtake not disclosed — primary-vs-secondary check could not be run; flagged in §5.2. |

---

## VERDICT AND KEY RISKS

**Verdict:** An excellent branded-consumer franchise — wide distribution moat, ~32% ROCE, clean cash conversion, net cash — but the price already embeds ~18% FCF growth for a decade [reverse-DCF, valuation.py], which the company has not sustained. Quality high; margin of safety thin. **Confidence: high on business quality, low on the entry price being attractive.**

**Composite score: 7.1 / 10** (sector-relative, weights in §4) · **Playbook:** FMCG / branded consumer · **Situation flags:** none.

**Disqualifying gates: checked, none tripped.** Clean audit opinion, no promoter pledge, no related-party leakage, no auditor/CFO churn [FY26 AR, Auditor's Report & Note 34]. The score's drag is valuation, not quality or integrity.

**The three things that matter most:**
1. **Distribution moat is widening.** Direct reach 1.35 m outlets, up from 0.9 m in FY22 [FY26 investor presentation, slide 9]; this is the durable asset, not any single brand.
2. **Returns are high and cash-backed.** ROCE 32% [computed: EBIT 820 / capital employed 2,550, FY26 AR] with CFO/EBITDA of 88% [computed: CFO 806 / EBITDA 916, FY26 AR] — profit converts to cash.
3. **The price is the risk.** P/E 41x / EV/EBITDA 24x [valuation.py] on a business growing revenue ~12%.

**Key risks:**
1. **Multiple de-rating.** A re-rating from 41x to 30x P/E is ~−27% with no change in the business.
2. **Volume slowdown.** FY26 volume growth was 7% [FY26 concall]; a slip to low-single-digits with input-cost inflation would compress the ~19% EBITDA margin.
3. **Input-cost / competition.** Palm oil and packaging are ~40% of COGS [FY26 AR, p.96]; a spike, or aggressive private-label entry, pressures gross margin (52% [FY26 AR, p.88]).

**What would change the verdict:** see §10 — chiefly the price, and whether volume growth holds ≥6%.

---

## 1. The Business

Nirmal sells branded packaged foods (biscuits, snacks, spreads) to Indian consumers through ~1.35 m directly-served retail outlets [FY26 investor presentation, slide 9]. What the customer buys is a trusted, consistent, affordable brand available everywhere; the moat is **distribution density plus brand recall**, which compounds with scale.

- **Revenue build:** volume × price/mix. FY26 revenue ₹4,820 cr [FY26 AR, p.88], +12.3% YoY, decomposed as ~7% volume + ~5% price/mix [FY26 concall]. 5-year revenue CAGR 11.7% (FY22 ₹3,100 cr → FY26 ₹4,820 cr) [FY22 & FY26 AR].
- **Mix:** biscuits 54%, snacks 31%, spreads 15% of revenue [FY26 AR, segment note p.104]; premium/"better-for-you" lines now 22% of sales, up from 14% in FY23 — the margin-mix driver.
- **Cost structure:** gross margin 52.0% [FY26 AR, p.88]; commodity inputs (edible oil, wheat, sugar, packaging) ~40% of COGS [FY26 AR, p.96]; A&P spend 8.1% of sales.
- **Cash-conversion path:** negative-to-neutral working capital — a structural FMCG strength; suppliers and the trade partly finance the business (§5.3).

---

## 2. Sector Classification and Playbook

**Sub-sector:** Branded packaged foods (FMCG). **Playbook:** `references/sectors/fmcg-consumer.md`.

**Why:** an annuity-like, brand-and-distribution business; the right lens is volume growth, gross/EBITDA margin, ROCE, working-capital cycle and reinvestment — not the metrics that suit asset-heavy or financial businesses.

**Metrics used with care / suppressed:**

| Standard metric | Status | Why |
|---|---|---|
| Net debt / EBITDA | n/a — net cash | Nirmal holds net cash of ₹700 cr [valuation.py EV bridge]; leverage ratios are not the constraint. |
| EV/Sales in isolation | Use with care | 4.6x looks high cross-sector but is normal for a high-margin FMCG; read with EV/EBITDA. |
| P/B | Low information | Brand and distribution value is off-balance-sheet; P/B 9.8x reflects that, not overvaluation per se. |

---

## 3. Situation Classification

No special situation — analysed as a going-concern operating business. No cyclicality overlay (FMCG demand is inelastic), no recent IPO, no holdco structure.

---

## 4. Scorecard

Sector-relative (FMCG) and vs Nirmal's own history. Anchor: 6 = peer-typical, 8 = clearly above, 3 = materially below.

| Category | Score /10 | Weight | Weighted | One-line rationale |
|---|---:|---:|---:|---|
| Business quality & moat | 8 | 18% | 1.44 | Widening distribution reach + premiumising mix; durable. |
| Earnings quality | 8 | 12% | 0.96 | CFO/EBITDA 88%; no exceptionals; clean tax rate. |
| Balance sheet | 8 | 8% | 0.64 | Net cash ₹700 cr; no pledge; low contingent liabilities. |
| Cash flow | 7 | 12% | 0.84 | Strong CFO; FCF held back by growth capex (new plant). |
| Returns on capital | 9 | 15% | 1.35 | ROCE 32%, ROE 24%; high incremental returns. |
| Growth | 7 | 12% | 0.84 | ~12% revenue, 7% volume — good, not spectacular. |
| Management & governance | 7 | 8% | 0.56 | Clean, professional; promoter 48%, no pledge; pay reasonable. |
| Valuation | 3 | 15% | 0.45 | 41x P/E / 24x EV/EBITDA prices in ~18% growth for a decade. |
| **Composite** | | **100%** | **7.1** | Excellent business, demanding price. |

**Weighting rationale:** FMCG default — moat and returns carry the most weight (an FMCG thesis is a compounding-quality thesis), with valuation held high (15%) because entry price is the main open question here.

---

## 5. Core Analysis by Dimension

### 5.1 Business Quality and Moat
Evidence *for*: direct reach up 50% in four years (0.9 m → 1.35 m outlets) [FY26 presentation, slide 9]; premium mix 14%→22% of sales [FY23 & FY26 AR]; ROCE sustained ≥27% every year FY22–FY26 [computed from each AR] — high returns *held while competitors tried*, the real moat test. Evidence *against*: category is contestable at the value end; private label is a slow structural threat. Net: a widening, durable moat.

### 5.2 Earnings Quality

| Metric | FY26 | Own 3–5y | Read |
|---|---|---|---|
| CFO / EBITDA | 88% [computed 806/916] | 82–90% | Profit is cash. |
| Effective tax rate | 25.1% [FY26 AR, p.92] | 25% band | Normal; no tax-driven flatter. |
| Other income / PBT | 4% [FY26 AR, p.90] | <5% | Operating, not treasury-driven. |
| Exceptionals | none [FY26 AR] | none | No add-back games. |

Caveat: channel secondary-offtake (IQVIA/AWACS) is not disclosed, so the primary-billing-vs-secondary check could not be run — a genuine gap, flagged in the Data Quality Note.

### 5.3 Balance Sheet
Net cash ₹700 cr [valuation.py]; total borrowings ₹200 cr against ₹900 cr cash [FY26 AR, p.86]. No promoter pledge [shareholding pattern, Jun-2026]. Contingent liabilities ₹95 cr (~4% of net worth) — immaterial [FY26 AR, Note 39]. A fortress balance sheet; the ₹450 cr new-plant spend is comfortably self-funded.

### 5.4 Cash Flow
CFO ₹806 cr [FY26 AR, cash flow statement]; gross capex ₹336 cr, of which ~₹135 cr [E] maintenance and the rest the new-plant growth spend → FCF (CFO − capex) ~₹470 cr [E]. Cumulative FCF FY22–FY26 ≈ ₹1,850 cr vs cumulative PAT ₹2,180 cr — ~85% conversion over five years, strong for a company also building capacity.

### 5.5 Returns on Capital
ROCE 32% [computed: EBIT 820 / (equity 2,350 + debt 200), FY26 AR]; ROE 23.8% [560/2,350]. **DuPont:** net margin 11.6% × asset turnover 1.38x × leverage 1.49x = 23.8% [computed, FY26 AR]. Incremental ROCE on FY22→FY26 capital deployed ≈ 34% [E] — reinvestment is value-accretive, the core of the compounding case.

### 5.6 Growth
Revenue CAGR 11.7% (5y); EBITDA CAGR 14% (margin expanded 17.2%→19.0% on premium mix) [FY22 & FY26 AR]; EPS ₹18.4 → ₹28.0. Growth is ~60% volume, ~40% price/mix — high quality. Share count flat (no dilution) [FY26 AR].

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## 6. Peer Comparison

**Peer set (illustrative, fictional):** Anand Foods, Prakash Snacks, Vedic Consumer — branded-foods peers of similar scale and channel model. (In a real analysis these would be named listed comparables with sourced figures.)

Peer medians below are illustrative, FY26 basis [see note; real analysis would cite each peer's FY26 filing]:

| Metric | Nirmal | Peer median (illus.) | Read |
|---|---|---|---|
| Revenue CAGR 5y | 11.7% | 10% | Slightly ahead. |
| Gross margin | 52% | 48% | Premium mix shows. |
| EBITDA margin | 19% | 17% | Above median. |
| ROCE | 32% | 26% | Above median — efficiency, not just margin. |
| CFO/EBITDA | 88% | 82% | Cleaner cash. |
| P/E | 41x | 44x | In line-to-slightly-cheaper vs a rich peer set. |

Nirmal sits modestly above the peer set on quality and roughly in line on multiple — a good business at a category-typical (rich) price, not a mispricing.

---

## 7. Valuation

**Method:** trailing multiples + reverse-DCF (implied-expectations) + scenario table, per `references/06-valuation.md`. The figures below are `scripts/valuation.py` output on the FY26 sourced inputs (price as of 2026-07-31).

EV bridge and trailing multiples [valuation.py on FY26 AR figures, price 2026-07-31]:

| Line | Value | | Multiple | Value |
|---|---:|---|---|---:|
| Market cap | ₹23,000 cr | | P/E | 41.1x |
| + Total debt | ₹200 cr | | EV/EBITDA | 24.3x |
| − Cash | ₹900 cr | | EV/EBIT | 27.2x |
| = Enterprise value | ₹22,300 cr | | EV/Sales | 4.6x |
| Net cash | ₹700 cr | | P/B | 9.8x |
| | | | FCF yield | 2.0% |

Reverse-DCF and forward DCF [valuation.py, as of 2026-07-31]:

| Output | Assumptions | Value |
|---|---|---:|
| Reverse-DCF implied FCF growth | WACC 11%, 10y, terminal 5% | ~18.3%/yr |
| Forward DCF value/share | 13% 10y, fade 5y, terminal 5%, WACC 11% | ₹861 |
| Terminal share of EV | — | 52% |
| Forward DCF vs price | vs ₹1,150 | −25% |

**Reverse-DCF read (the testable claim):** at ₹1,150 the market embeds **~18% FCF growth for a decade** [valuation.py]. Nirmal has grown FCF ~14% over five years and revenue ~12% — so the price requires an *acceleration* the record does not evidence. That is the crux of the "quality high, price demanding" verdict.

**Scenario table** [valuation.py, EPS × exit P/E, as of 2026-07-31; probabilities are judgements]:

| Scenario | Prob | Assumptions | Value/share | vs ₹1,150 |
|---|---:|---|---:|---:|
| Bear | 30% | volume fades to 3–4%, de-rate to 28x on ₹24 EPS [E] | ₹672 | −42% |
| Base | 50% | ~11% growth holds, 38x on ₹31 EPS [E] | ₹1,178 | +2% |
| Bull | 20% | premiumisation accelerates, 46x on ₹35 EPS [E] | ₹1,610 | +40% |
| **Prob-weighted** | 100% | | **₹1,113** | **−3%** |

The probability-weighted value sits ~3% below the current price: a wonderful business priced for its own success, with a roughly symmetric-to-slightly-negative one-year skew.

---

## 8. Red Flags and Governance

**No material red flags identified.** Checked and clear: clean unqualified audit opinion [FY26 AR, Auditor's Report]; no CARO qualifications [FY26 AR, CARO annexure]; no promoter pledge, promoter holding stable at 48% [shareholding pattern, Jun-2026]; related-party transactions immaterial and arm's-length [FY26 AR, Note 34]; promoter remuneration ~2% of PAT; no auditor or CFO change in five years; contingent liabilities ~4% of net worth.

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## 9. The Bear Case

Nirmal is a very good business trading at a price that assumes it stays very good *and* gets faster. At 41x earnings and 24x EV/EBITDA, the reverse-DCF says the market is paying today for ~18% FCF growth for ten years — yet the company has compounded revenue at ~12% and FCF at ~14%, with FY26 volume growth of just 7% in a category where the value end is contestable and private label is advancing. FMCG multiples have de-rated before when volume growth stalled; a slip to mid-single-digit volumes with any input-cost inflation would compress the ~19% margin *and* the multiple simultaneously — the two forces that make the bear scenario −42%. Nothing needs to go wrong with the franchise for the *stock* to disappoint; the price has borrowed years of future growth into the present.

**Strongest counter (kept honest):** the distribution moat is genuinely widening (reach +50% in four years), returns are ~32% and cash-backed, premiumisation is a real and continuing margin lever, and the balance sheet is net cash — so a long runway of low-teens compounding is plausible, and for a patient owner the *business* will likely be worth materially more in a decade even if the *entry multiple* is unrewarding for a year or two.

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## 10. Thesis-Invalidation Triggers

| # | Trigger | Where to observe | By when | Action if hit |
|---|---|---|---|---|
| 1 | Volume growth falls below 5% for two consecutive quarters | Quarterly results / concall | By Q3 FY27 | Growth-durability leg weakens — revisit. |
| 2 | Gross margin falls below 49% for two quarters | Quarterly results | FY27 | Input-cost/competition pressure confirmed. |
| 3 | CFO/EBITDA falls below 75% | FY27 annual cash flow | FY27 AR | Earnings-quality leg breaks. |
| 4 | Promoter pledge appears, or holding falls materially | Shareholding pattern | Any quarter | Governance re-review. |
| 5 | Any acquisition paid at >5x EV/Sales outside core categories | Exchange filing / AR | Any time | Capital-allocation discipline in question. |

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## Disclaimer

This document is research and analysis for informational purposes only. It is **not** investment advice, not a recommendation to buy, sell or hold any security, and not a personalised financial recommendation. The author is not a licensed or registered investment adviser. **This is a fictional worked example: the company and all figures are invented.** Any real investment decision is the reader's own responsibility and should be made in consultation with a licensed financial adviser.
