INTERNATIONAL JOURNAL OF ENGINEERING MANAGEMENT AND
SOCIAL SCIENCES

A Study on Inflation and Its Impact on the Financial Performance of Hindustan Unilever Limited

Inflation is one of the most pervasive macroeconomic forces shaping corporate financial performance, eroding purchasing power, distorting price signals, and compressing real returns. This study empirically examines the impact of inflation on the financial performance of Hindustan Unilever Limited (HUL), India's largest FMCG company, over the five financial years FY2020-21 to FY2024-25 - a period spanning both peak-inflation and disinflation phases. Adopting a descriptive and analytical, single-company case study design based entirely on secondary data from HUL's annual reports and government inflation statistics (MoSPI CPI and WPI series), the study applies trend analysis, ratio analysis, percentage analysis, price-volume mix decomposition, and correlation analysis to assess inflation's transmission into HUL's revenue, margins, working capital, and profitability. The analysis finds that India's WPI inflation peaked at 12.9 per cent in FY2021-22 while CPI peaked at 6.7 per cent in FY2022-23, and that HUL's gross margin compressed by 340 basis points to a study-period low of 51.2 per cent in FY2021-22 before recovering to 57.0 per cent by FY2024-25 as commodity prices eased. A strong negative correlation was computed between WPI inflation and HUL's gross margin (r = -0.87), confirming wholesale price inflation as the dominant driver of margin movements, while price-led revenue growth of 8.5-10.2 per cent during peak-inflation years came at the cost of volume growth compressed to 2.8-3.4 per cent. The study concludes that HUL's brand equity, pricing power, and cost discipline enabled it to sustain nominal earnings growth through the inflationary cycle even as real, inflation-adjusted revenue growth turned negative in FY2023-24, and it recommends that HUL institutionalise commodity hedging, real-time inflation monitoring, tiered pricing, and portfolio diversification to build structural resilience against future inflationary shocks.