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Colgate Palmolive (India) Directors Report, Colgate Reports by Directors
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Colgate Palmolive (India)

BSE: 500830|NSE: COLPAL|ISIN: INE259A01022|SECTOR: Personal Care
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Directors Report Year End : Mar '17    Mar 16

The Directors have pleasure in presenting their Report and Audited Accounts of the Company for the year ended March 31, 2017.

1. Financial Results

(Rs. Crore)

F.Y. 2016-17

F.Y. 2015-16

Total Revenue (a b c)

4,560.01

4,388.62

Sales (Including Excise Duty) (a)

4,489.85

4,318.98

Other Operating Revenue (b)

30.35

30.13

Other Income (c)

39.81

39.51

Profit before Tax from ordinary activities

851.43

866.63

Profit before Taxation

851.43

835.28

Tax Expense

274.00

254.11

Profit for the year

577.43

581.17

Other Comprehensive Income (net of Tax)

5.17

1.19

Total Comprehensive Income

572.26

579.98

Balance brought forward

595.27

340.21

Adjustment of Depreciation as per Schedule-ll of the Companies Act, 2013

Profit available for appropriation

572.26

579.98

Balance transferred to Retained Earnings from

3.65

2.43

Share Options Outstanding Account

Appropriation :

Dividend

(271.99)

(271.99)

Dividend Distribution Tax

(55.37)

(55.37)

General Reserve

-

-

Balance carried forward

843.82

595.27

2. Business Performance

India continued to consolidate its position as the fastest growing major economy in the world with all leading indicators including GDP growth, inflation, deficits, foreign currency reserves, etc. trending in the right direction. Normal monsoons helped stimulate rural demand as well as ensured inflation was benign paving the way for interest rate cuts by the Central Bank. The recovery in demand was temporarily halted by the demonetization exercise that temporarily sucked liquidity from the system putting short term pressure on businesses due to softer demand as well as a reduction in trade pipeline. The much awaited landmark tax reform in the form of GST bill was passed by parliament paving the way for a unified market in India and it is expected to go a long way to help businesses conduct their affairs in a more efficient manner.

During the year, your Company continued its focus on innovation built on consumer insights while leveraging its strong heritage in the oral care category. Despite intense competition in the FMCG space, your Company maintained its leadership position in oral care and continued to offer customized products for each market segment. While the operations in the first half of the year saw healthy growth in sales and profitability, the second half of the year was more challenging for your Company. Demonetization affected sales adversely during the third quarter with some spillover into the fourth quarter. Your Company responded by selectively extending credit terms, advancing processing of claims and invoices as well as running additional schemes to maintain robust distribution.

In the above context, reported Net Sales for the Financial Year stood at Rs.4,489.8 crore, an increase of 4% over last year. Reported Net Profit after tax for the year was Rs.577.4 crore, a decline of 0.6% over the previous year. Reported Net Profit after tax in the previous year included net tax reversals of Rs.14.9 crore relating to favourable tax assessments. Excluding the impact of these reversals, Net Profit after tax for F.Y. 2016-17 increased by 2% over the previous year.

3. Dividend

Your Company’s Board declared three interim dividends, aggregating to Rs.10/- per share, for the financial year 2016-17. These dividends were paid on November 23, 2016, December 27, 2016 and April 21, 2017. Having declared three interim dividends, your Company’s Board has not recommended a final dividend for the financial year 2016-17.

4. Colgate is the #1 Most Trusted Brand in India

Colgate was once again voted as the #1 ‘Most Trusted Brand’ in India across categories in The Economic Times’ Brand Equity 2016 annual survey. This is the sixth consecutive year that Colgate has been voted as the #1 ‘Most Trusted Brand’. Colgate is the only brand to feature in the top three from 2001-2016 since inception of the survey.

5. Focus on Innovation and New Launches

In a highly competitive market environment, it is essential for fast moving consumer goods companies to offer quality products that delight consumers. Your Company therefore strongly believes that developing new innovative products by leveraging technology from the Parent Company is a key driver of profitable growth. Your Company is focused on developing insight-driven innovation that provides value-added new products across all price points. Beyond new products, innovation is embedded into your Company’s culture to encourage new ideas and process improvements in every aspect of the organization.

Your Company’s continued commitment to grow its business by creating new and technologically advanced products through innovation are demonstrated by launching the following products :

In the toothpaste category, your Company introduced innovative products like:

Colgate Cibaca Vedshakti : An excellent natural solution to take care of all your oral care needs. The new natural toothpaste has the power of six natural ingredients. Developed using Colgate’s expertise in oral care, Colgate Cibaca Vedshakti is enriched with the power of nature that helps in keeping your family’s teeth healthy and problem-free for long.

Colgate Sensitive Clove : Our first sensitivity toothpaste with natural ingredient. Colgate Sensitive Clove, a natural product based toothpaste, provides protection against sensitivity. Formulated with Potassium Nitrate and Clove Oil, it penetrates deep into open dentin tubules to soothe sensitive areas of teeth.

Colgate Kids Toothpaste : A new range of toothpastes for kids aged 2 to 5 years, which has two delightful flavours and exciting animal cartoons.

Colgate MaxFresh Power Freeze : A new invigorating gel toothpaste infused with cooling crystals, which dissolve as you brush for a new dimension of freshness.

In the toothbrush category, your Company introduced innovative products like:

Colgate A1 Toothbrush : A new product that has been launched to address the consumer needs for dense and long lasting bristles.

Colgate Star Toothbrush : An entry toothbrush product that has been launched in select markets to drive penetration at the bottom of the pyramid, this toothbrush also comes with a tongue cleaner.

Colgate Slim Soft Advanced Toothbrush : It has dual core bristles that gently reach 7X deeper below the gum line and makes gums 300% healthier.

In the Personal Care category, your Company introduced innovative products like :

Plax Spicy Fresh : This spicy fresh mouthwash variant has an intense Spicy Fresh sensation of Eucalyptus & Clove, for lasting fresh breath without the burning feeling. This alcohol free mouthwash removes 99% of germs & helps control bad breath 24/7.

Palmolive Body Wash Men’s Range : Imported from Europe, Palmolive Men body washes are available in three exciting variants: Palmolive Men Energising-enriched with Magnesium & Citrus Oil, Palmolive Men Refreshing-enriched with Sea Minerals & Eucalyptus Oil and Palmolive Men Sensitive-enriched with Aloe Vera extract & Vitamin E, this variant nurtures your sensitive skin.

Palmolive Men Shaving Foams : The product helps soften your beard as you shave, allowing your razor to get close to your skin without causing skin irritation. Imported from Europe, and available in two exciting variants: Palmolive Men Classic and Palmolive Men Cool.

Innovations like these help your Company to maintain the position as India’s Most Trusted Brand today and hopefully will for many more years.

6. Sustainability

Your Company is committed to sustainability with focused and measureable goals. Your Company values sustainability through a commitment to the quality of the environment and extends it to the long term well-being of the people and communities it serves. Through our sustainability efforts, we are helping to ensure that the business grows responsibly, while promoting the well-being of future generations.

Considering this, your Company developed a plan that guides its sustainability initiatives with key goals in the following three areas viz. People, Performance and Planet.

The broad aspects covered in these goals are as under:

I. People

Promoting healthier lives, Contributing to the Communities where we live and work.

II. Performance

Delivering Products that delight consumers and respect our Planet.

III. Planet

Making every drop of water count, reducing our impact on the climate and the environment.

Your Company believes that integrating sustainability into its everyday operations will help in making better business decisions and improve peoples’ lives. The sustainability strategy will also continue to increase consumer loyalty, provide a competitive advantage and help to ensure long-term shareholder value. Amongst the sustainability initiatives in the area of People,

Performance and Planet, listed below are a few initiatives undertaken during the year:

Free Health check-up for all the employees;

Initiatives on clean technology, energy efficiency, renewable energy etc.

Sourcing of packaging material locally to reduce the fuel emission;

Usage of reused and recycled materials for packaging;

LEED certification for our new facilities;

Reducing consumption of water and energy per ton of product produced;

Nil material to landfill; and

Reusage of waste water from the factories.

More details on energy conservation measures undertaken by your Company are mentioned in Annexure - 3 to this report.

7. Responsibility Statement

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Company’s Directors, based on the representations received from the Management, confirm :

a) that in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

b) that they have, in selection of the accounting policies, consulted the statutory auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

c) that to the best of their knowledge and information, they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) that they have prepared the annual accounts on a going concern basis;

e) that they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) that they have had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

8. Corporate Governance

A separate report on Corporate Governance along with the Auditors’ Certificate on its compliance is attached as Annexure - 1 to this Report.

9. Corporate Social Responsibility

Your Company’s success is linked to the Company’s values of Caring, Global Teamwork and Continuous Improvement. Your Company cares about people: Colgate people, customers, shareholders, business partners and the community at large. Your Company works towards protecting the environment, improving and enhancing the quality of life of individuals and communities through several partnerships and associations.

Your Company and its employees are committed to bring in a positive change in the lives of many underserved communities. Your Company undertakes its Corporate Social Responsibility (CSR) activities through a variety of effective programs. Some of the key CSR activities which your Company has undertaken during the year are in the areas of Promoting preventive health care, Promoting education, Addressing inequalities and Conservation of natural resources. These activities are broadly in accordance with the Schedule VII of the Companies Act, 2013.

The Board of Directors and the CSR Committee review and monitor from time to time all the CSR activities being undertaken by the Company.

The following are the key CSR programs undertaken by your Company during the Financial Year 2016-17 :

i) Bright Smiles, Bright Futures™

ii) Oral Health Month

iii) A Positive Step

iv) Supporting Pratham

v) Supporting Seva Mandir

vi) Skill development program for rural youth

vii) Water for People

The details of the above programs/activities are elaborated in the Annual CSR Report attached as Annexure - 2 to this Report.

The contents of the CSR Policy as well as the CSR programs undertaken by the Company are available on the Company’s website.

10. Employee Relations

The employee relations in the Company continued to be healthy, cordial and progressive.

Your Company’s culture is one that reflects our values of caring, global teamwork and continuous improvement, as well as our unwavering commitment to integrity in everything we do. Our employees are our greatest asset, and we’re committed to maintaining an environment that celebrates their differences, values their contributions and provides opportunities for personal and professional growth. The diversity of our employees gives us an advantage over our competitors and continues to drive our success.

Your Company recognizes its responsibility and continues to strive to provide a safe working environment for its employees, free from sexual harassment and discrimination. Your Company also has a Policy on Prevention of Sexual Harassment which is reviewed by the Internal Complaints Committee (ICC) at regular intervals.

“Managing With Respect” is the way Colgate people put your Company Values (Caring, Global Teamwork and Continuous Improvement) into action. Each and every employee is expected to work with all stakeholders (other employees, customers, consumers, suppliers, etc.) in a respectful manner. Each employee is also expected to strictly follow your Company’s Code of Conduct and any violation is appropriately addressed. By fully including ethics and integrity in the ongoing business relationships and decision-making, your Company demonstrates a commitment to a culture that promotes the highest ethical standards. During the financial year 2016-17, four complaints were received, investigated and resolved by the ICC. There are no pending complaints at the end of the year.

11. Trade Relations

Your Directors wish to record their appreciation of the continued, unstinted support and co-operation from its retailers, stockists, suppliers of goods/ services, clearing and forwarding agents and all others associated with it. Your Company will continue to build and maintain a strong association with its business partners.

12. Particulars of Employees

Information as per Section 197 of the Companies Act, 2013 (the ‘Act’) read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure - 6.

Details of employee remuneration in accordance with the Act and Rules mentioned above are available at the Registered Office of the Company during business hours on any working day of the Company up to the date of 76thAnnual General Meeting. Any shareholder interested in obtaining a copy of the said statement may write to the Secretarial Department at the Registered Office of the Company. Such details are also available on your Company’s website.

13. Energy Conservation, Technology Absorption and Foreign Exchange

The information required under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is appended hereto as Annexure - 3 and it forms part of this Report.

14. Directors and Key Managerial Personnel

During the year, following changes took place in the Board of Directors and the Key Managerial Personnel :

i) Resignation of Mr. Niket Ghate as the Wholetime Director & Company Secretary effective December 31, 2016 as he decided to pursue his career outside Colgate;

ii) Cessation of Mr. Godfrey Nthunzi as the CFO and Whole-time Director effective October 6, 2016 and October 28, 2016 respectively consequent upon his promotion and movement to another Colgate division;

iii) Appointment of Mr. M. S. Jacob as the CFO and Whole-time Director effective October 7, 2016 and October 28, 2016 respectively;

iv) Appointment of Mr. M. Chandrasekar as a Whole-time Director effective January 2, 2017; and

v) Appointment of Mr. Makarand Karnataki as the Company Secretary & Compliance Officer effective January 2, 2017.

Your Board places on record its appreciation for the valuable contributions made by Mr. Niket Ghate and Mr. Godfrey Nthunzi during their tenure on the Board of the Company.

All the Independent Directors (except Ms. Shyamala Gopinath) were appointed by the shareholders for a term of five consecutive years effective July 25, 2014.

Ms. Shyamala Gopinath was appointed by the shareholders for a term of five consecutive years effective July 30, 2015.

None of the Independent Directors are liable to retire by rotation.

The Independent Directors of your Company have given a declaration that they meet the criteria of independence as prescribed under the Companies Act, 2013 and SEBI Listing Regulations.

Mr. Issam Bachaalani, Managing Director, Mr. M. S. Jacob, Whole-time Director & CFO and Mr. Makarand Karnataki, Company Secretary & Compliance Officer are the Key Managerial Personnel of the Company.

A detailed profile of all the directors of your Company is available on the website www.colgatepalmolive.co.in

15. Familiarization Program

Your Company, for many years now, has been familiarizing the Independent Directors on its Board with detailed presentations by its business functional heads on the Company operations, strategic business plans, new products and technologies, including significant aspects of the Industry and its future outlook. Details of familiarization programs extended to the Non-Executive & Independent Directors during the year are also disclosed on the Company website from time to time at http://www.colgate.co.in/Colgate/ IN/Corp_v2/Relatedlnformation/Familarization-Programme.pdf

16. Policies

The Board of Directors of your Company from time to time has approved and framed various Policies under The Companies Act, 2013 and its applicable Rules & Regulations for better governance and administration of your Company. Some of the important Policies that were framed by your Board include the following :

i) Nomination & Remuneration Policy :

This policy sets out the objective, terms of reference, functions and scope of the Nomination & Remuneration Committee for determining qualifications, experience, independence etc. relating to the appointment and remuneration for the directors, key managerial personnel and other employees of the Company.

ii) Corporate Social Responsibility Policy : This policy sets the scope for identification of the areas where the CSR activities will performed, evaluation of CSR activities, review the CSR spending vis-a-vis the activities implemented and monitoring the process of CSR projects / programs of the Company.

iii) Risk Management Policy : This policy provides the framework for identification of risks of the Company, risk assessment and prioritization, loss prevention measures and other risk management measures for the Company.

iv) Policy on Related Party Transactions : This policy intends to regulate the transactions between the Company and its related parties based on the laws and regulations applicable to the Company from time to time.

v) Policy on determination of Materiality of Event or information : The objective of the Policy is to determine the materiality of event or information of the Company which requires disclosure to the stock exchanges pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

vi) Record Management Policy : This policy establishes general guidelines for retaining, preserving and, when appropriate, disposing of Records.

vii) Code of Conduct for dealing in Company’s Securities : Pursuant to the SEBI (Prohibition of Insider Trading) Regulations, 2015, your Company has framed a Code of Conduct for the designated persons for dealing in the securities of the Company.

viii) Dividend Distribution Policy : This policy provides the circumstances under which a shareholder may or may not expect the dividend. Also, details of the financial parameters and internal and external factors which shall be considered for declaration of dividend.

17. Committees

The Board of Directors of your Company has established various committees of the Board to assist in discharging its duties. These include an Audit Committee, Nomination & Remuneration Committee, Risk Management Committee, Stakeholder Relationship Committee and Corporate Social Responsibility Committee. The Board has approved the terms of reference for each of these committees. All the Committees of the Board hold their meetings at regular intervals and make their recommendations to the Board from time to time.

The broad terms of reference of the said Committees are stated in the Corporate Governance Report.

18. Annual Performance Evaluation by the Board

Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board has carried out an Annual Performance Evaluation of its own performance, the Directors individually as well as the evaluation of the working of the Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

19. Vigil Mechanism

Your Company has an effective Vigil Mechanism system which is embedded in its Code of Conduct. The Code of Conduct of your Company serves as a guide for daily business interactions, reflecting your Company’s standard for appropriate behaviour and living corporate values. The Code of Conduct applies to all Colgate people, including Directors, Officers, and all employees of the Company. Even your Company vendors and suppliers are also subject to these requirements as adherence to the Code is a prerequisite for conducting business with your Company.

The Code of Conduct Hotline is available on the Company website to report any genuine concerns about unethical behaviour, any actual or suspected fraud or violation of Company’s Code of Conduct.

20. Loan, Guarantees and Investment

Particulars of loans, guarantees and investment made by the Company pursuant to Section 186 of the Companies Act, 2013 are given in the Notes to the Financial Accounts.

21. Related Party Contracts & Arrangements

All related party transactions done by the Company during the financial year were at arm’s length and in ordinary course of business. All related party transactions were placed in the meetings of Audit Committee and the Board of Directors for their necessary review and approval. During the financial year, your Company has not entered into any material transaction as per the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 with any of its related parties which may have potential conflict with the interest of the Company at large. Disclosures pursuant to Accounting Standards on related party transactions have been made in the notes to the Financial Statements. To identify and monitor significant related party transactions, the Company has also framed a Policy on the Related Party Transactions and the same is available on the Company’s website.

All the related party transactions entered during the year were in Ordinary Course of the Business and on Arm’s Length business and hence disclosure unde section 134(3)(h) in Form AOC-2 of the Companies Act, 2013 is not applicable.

22. Auditors

M/s. Price Waterhouse (Firm Registration No. 301112E), Chartered Accountants has been the Auditors of the Company for a period more than ten years. Pursuant to Section 139 of the Companies Act, 2013, an audit firm which has completed two terms of five consecutive years cannot be re-appointed as the Auditor of the Company. Accordingly, the two terms of five consecutive years and the transitional period of three years of the present auditors expires at the conclusion of the forthcoming 76th Annual General Meeting. The Board of Directors of the Company based on the recommendation of the Audit Committee, propose the appointment of M/s. S R B C & CO LLP, Chartered Accountants, (Registration No. 324982E/E300003) as the Statutory Auditors of the Company.

The Company has received a written consent, eligibility letter and other necessary declarations and confirmations from M/s. S R B C & CO LLP. stating that they satisfy the criteria provided under Section 141 of the Companies Act, and that the appointment, if made, shall be in accordance with the applicable provisions of the Act and rules framed thereunder.

If approved by the Members, the appointment of M/s. S R B C & CO LLP, Chartered Accountants as the Statutory Auditors will be for a period of five consecutive years commencing from the conclusion of 76th Annual General Meeting till the conclusion of the 81st Annual General Meeting subject to ratification of the appointment by Members at every Annual General Meeting held after this Annual General Meeting.

The Audit report for the financial year 2016-17 does not contain any qualification, reservation or adverse remarks.

23. Secretarial Auditor & Secretarial Audit Report

The Board had appointed M/s. S.N. Ananthasubramanian & Co., Company Secretaries in Whole-time Practice, to carry out Secretarial Audit under the provisions of Section 204 of the Companies Act, 2013. The report of the Secretarial Auditor in Form MR-3 is annexed to this report as Annexure - 4. The Secretarial Auditors’ Report for the financial year 2016-17 does not contain any qualification, reservation or adverse remarks.

24. Extract of Annual Return

Pursuant to the Section 92(3) of the Companies Act, 2013 extract of the annual return in Form MGT-9 is annexed to this report as Annexure - 5.

25. Business Responsibility Report

The Business Responsibility Report for the Financial Year 2016-17, as stipulated under Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to this report as Annexure - 7.

26. Significant and Material Orders passed by the Regulators or Courts

There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and operations of the Company in future.

27. Acknowledgements

Your Directors sincerely appreciate the high degree of professionalism, commitment and dedication displayed by employees at all levels. Your Directors also wish to place on record their gratitude towards the shareholders for their continued support and confidence.

On behalf of the Board

Issam Bachaalani R.A. Shah

Managing Director Vice-Chairman

(DIN : 06975320) (DIN : 00009851)

M.S. Jacob M. Chandrasekar

Whole-time Director & CFO Whole-time Director

(DIN :07645510) (DIN :07667965)

May 15, 2017

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