1. CORPORATE INFORMATION
Gillette India Limited (''the Company'') is a public company
incorporated under the provisions of the Companies Act, 1956. The
Company is engaged in the manufacturing and selling of branded packaged
fast moving consumer goods in the grooming, portable power and oral
care businesses. The Company''s products are sold through retail
operations including mass merchandisers, grocery stores, membership
club stores, drug stores, department stores and high frequency stores.
The Company has its manufacturing locations at Bhiwadi in Rajasthan and
Baddi in Himachal Pradesh, apart from third party manufacturing
locations spread across India.
Rights attached to equity shares
The Company has only one class of equity shares having a par value ofRs.
10 per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividends in Indian rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the company, the holders of equity
shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will
be in the proportion to the number of equity shares held by the
2. (a) Contingent Liabilities:
(i) In respect of Income Tax demands for which the company has
preferred appeals with appropriate authorities - Rs. 54 27 91 889
(Previous year :Rs. 13 42 95 184). The contingent liability is in respect
of matters related to: Income tax dispute on inventory write-off,
allowability of losses carried forward from merged entities and others.
(ii) In respect of Sales Tax matters for which the company has
preferred appeals with appropriate authorities - Rs. 22 37 29 095
(Previous year : Rs. 22 16 36 473). The contingent liability is in
respect of matters related to: non submission of C Forms/ F
Forms Rs. 16 08 55 701 (Previous year : Rs. 19 37 99 184) and Interest
demand on VAT rate difference Rs. Nil (Previous year : Rs. 8 831) and
others Rs. 6 28 73 394 (Previous year : Rs. 2 78 28 458).
(iii) In respect of Excise, Service Tax and Customs matters for which
the company has preferred appeals with appropriate authorities
- Rs. 1 33 02 69 529 (Previous year :Rs. 1 04 98 83 545). The contingent
liabilities are in respect of denial of excise duty benefits at excise
exempt location Rs. 82 65 03 316 (Previous year : Rs. 65 70 84 390) out of
which the Company has a right to claim Cenvat credit ofRs. 49 92 93 751
(Previous year : Rs. 39 38 12 373); denial of Cenvat credit Rs. 31 61 43
634 (Previous year :
Rs. 32 39 26 267); sendee tax matters Rs. 49 54 606 (Previous year : Rs. 49
54 606); Customs valuation disputes Rs. 15 28 06 226 (Previous year :Rs. 16
18 04 057) and others Rs. 2 98 61 747 (Previous year : Rs. 2 72 81 963).
(iv) In respect of counter guarantees given to bank against guarantees
given by bank Rs. 16 51 57 448 (Previous year : Rs. 11 99 29 266).
At the request of the Company, its bankers have issued guarantees to
government bodies and third parties for performance obligation under
various commercial agreements. The Company has issued counter
guarantees to the banks in respect of these guarantees.
(v) In respect of other claims Rs. 3 82 00 000 (Previous year : Rs. 2 00 31
519). The Company is a party to various legal proceedings in the normal
course of business.
(vi) In respect of Demand raised by Delhi Development Authority towards
interest on belated payment of Unearned Increase in respect of
leasehold land charges Rs. 3 94 57 027 (Previous year : Rs. 3 94 57 027).
(vii) Other commitments of Rs. 4 50 22 577 (Previous year : Rs. Nil)
(Payable to a Contract Manufacturer towards commitment charges).
Future Cash Flow in respect of the above, if any, is determinable only
on receipt of judgements/decisions pending with the relevant
authorities. The Company does not expect the outcome of matters stated
in (i) to (vi) above to have a material adverse effect on the
Company''s financial condition, results of operations or cash flows.
(b) Estimated amount of contracts remaining to be executed on capital
account (net of advances) Rs. 1 03 74 366 (Previous year : Rs. 61 02 977)
3. As informed in the previous Financial Statements, the Company had
filed a writ petition in the High Court of Himachal Pradesh at Shimla
challenging the premature withdrawal of Excise duty exemption for
packing/repacking activities at its Baddi Manufacturing Facility.
The High Court has since passed an order in favour of your company and
has struck down the notification withdrawing the excise exemption.
The Excise department has preferred an appeal with the Hon''ble Supreme
Court of India against the said order of the High Court. The Company
has as a matter of prudence, created a Contingency Reserve of Rs. 41 50
00 000 (Previous year : Rs. 30 00 00 000) by way of appropriation of
profits to the extent of excise duty payable (net of Cenvat credit) on
dispatches made from the Baddi plant. Accordingly during the current
year profit of Rs. 11 50 00 000 (Previous year : Rs. 9 00 00 000) have been
appropriated. These Reserves will be reviewed < as and when this
litigation is finally decided.
II. Defined Benefit Plans
a. Gratuity Fund (Funded Scheme): Gratuity is payable to all eligible
employees of the Company on Superannuation, death, permanent
disablement or resignation in terms of the provisions of the Payment of
Gratuity Act or Company''s scheme whichever is more beneficial.
Benefits would be paid at the time of separation based on the last
drawn base salary.
b. Provident Fund (Funded Scheme): Provident Fund for all permanent
employees is administered through a trust. The Provident Fund is
administered by trustees of an independently constituted common trust
recognised by the Income Tax authorities where two other group
Companies are also participants. Periodic contributions to the Fund are
charged to revenue. The Company has an obligation to make good the
shortfall, if any, between the return from the investment of the trust
and notified interest rate by the Government. The contribution by
employer and employee together with interest are payable at the time of
separation from service or retirement whichever is earlier. The benefit
under this plan vests immediately on rendering of service.
c. Post Retirement Medical Benefit (PRMB) (Non-funded Scheme): Under
this scheme, employees get medical benefits subject to certain limits
of amount, periods after retirement and types of benefits, depending on
their grade at the time of retirement. Employees separated from the
Company as part of early separation scheme are also covered under the
scheme. The liability for post retirement medical scheme is based on an
independent actuarial valuation.
(E) Category of Plan Assets
The Company''s Plan Assets in respect of Gratuity, alongwith two other
group companies, are funded through the group scheme of the Life
Insurance Corporation of India.
The Company''s Provident Fund is administered by Company''s own Trust
Fund. The Company has an obligation to service the shortfall on account
of interest generated by the Fund and on maturity of Fund investments
and hence the same has been classified as Defined Benefit Obligation.
4. (a) Global Employee Stock Ownership Plan (Stocks of the Parent
The Gillette Company, USA (TGC) had a Global Employee Stock
Ownership Plan (employee share purchase plan) whereby specified
employees of its subsidiaries have been given a right to purchase
shares of TGC.
Every employee who opted for the scheme contributed by way of payroll
deduction up to a specified percentage (upto 15%) of his gross salary
towards purchase of shares on a monthly basis. The Company contributes
50% of employee''s contribution (restricted to 2.5% of gross salary).
Such contribution is charged to staff cost.
Subsequent to the worldwide merger of Aquarium Acquisition Corporation
(wholly owned subsidiary of the Procter & Gamble Company, USA) with TGC
on October 1, 2005, the shares of TGC got delisted from the New York
Stock Exchange and the share purchase plan has been adopted by the
Procter & Gamble Company, USA.
The shares of TGC (till 30 September 2005)/The Procter & Gamble
Company, USA are listed with New York Stock Exchange of USA and are
purchased on behalf of the employees at market price on the date of
During the year 2 478.13 shares (Previous year : 2 457.29 shares) were
purchased by employees at weighted average fair value ofRs. 3 220.89
(Previous year : Rs. 2 841.87) per share. The Company''s contribution
during the year on such purchase of shares amounting to Rs. 24 80 581
(Previous year : f 21 22 809) has been charged under Employee Benefit
Expenses under Note 21.
(b) Employees Stock Options Plan (Stocks of the Parent Company)
The Gillette Company, USA (TGC) had an Employees Stock Options Scheme
whereby specified employees of its subsidiaries covered by the plan
were granted an option to purchase shares of the Parent Company i.e.
The Gillette Company, USA at a fixed price (grant price) for a fixed
period of time. Subsequent to the worldwide merger of Aquarium
Acquisition Corporation (wholly owned subsidiary of the Procter &
Gamble Company, USA) with The Gillette Company, USA on October 1, 2005,
the shares of The Gillette Company got delisted from the New York Stock
Exchange. Upon this change in control the 2005 Gillette Option award
got automatically converted into P&G options at the established
conversion ratio of 0.975 shares in the Procter and Gamble Company, USA
for every share held in the Gillette Company. The shares of the
Gillette Company (till September 30, 2005)/ The Procter & Gamble
Company, USA were/are listed with New York Stock Exchange of USA. The
options were issued to Key Employees of the Company with Exercise price
equal to the market price of the underlying shares on the date of the
grant. The Grants issued are vested after 3 years/5 years and have a 5
years/10 years life cycle.
5. Disclosures under the Micro. Small and Medium Enterprises
Development Act, 2006:
(i) No payments were due and outstanding to suppliers covered under the
Micro Small and Medium Enterprises Development Act, 2006 as at the end
of the current and previous accounting year on account of Principal and
(ii) No interest was paid in the current and the previous accounting
(iii) No interest was payable at the end of the current and previous
accounting year other than interest under Micro, Small and Medium
Enterprises Development Act, 2006.
( iv) No amount of interest was accrued and unpaid at the end of the
current and previous accounting year.
The above information regarding Micro, Small and Medium Enterprises has
been determined to the extent such parties have been identified on the
basis of information available with the Company. This has been relied
upon by the auditors.
6. The Company has taken on lease guesthouses for accommodation of
employees and godowns for storage of inventories, with an option of
renewal at the end of the lease term and escalation clause in some of
the cases. These leases can be terminated with a prior notice as per
terms and conditions of the respective lease agreements. Lease payments
amounting to Rs. 2 18 34 969 (Previous Year: Rs. I 48 96 204) have been
charged to the Statement of Profit and Loss for the year. There are no
''Non cancellable'' leases.
7. Common service expenses paid/recovered include payment/recoveries
on account of finance, personnel, secretarial, administration and
planning services rendered under common services agreement of the
Company with Procter and Gamble Hygiene and Health Care Limited and
Procter and Gamble Home Products Limited.
8. (a) Re-appointment of Managing Director
The Managing Director of the Company Mr. Shantanu Khosla, has been
re-appointed as the Managing Director of the Company on completion of
his five year term for a period of five years with effect from January
29, 2012 by the Board of Directors at their meeting held on May 4,
2012. The said re-appointment is subject to the approval of the Members
at the ensuing 28th Annual General Meeting of the Company and the
Central Government. The said approval for re-appointment shall also
include either payment of remuneration to Mr. Khosla directly and/or
the same may be reimbursed/cross charged to/from any other Company of
which Mr. Khosla is also the Managing Director, as enumerated in the
Explanatory Statement annexed pursuant to Section 173 of the Act,
provided however that the remuneration payable to Mr. Khosla or the
reimbursement as aforesaid shall not exceed the maximum limits for
payment of managerial remuneration specified in Schedule XIII to the
Companies Act, 1956 or any amendments thereto as may be made from time
to time. The Board of Directors of the Company has at the said meeting
approved/ratified the payment towards the remuneration of Mr. Khosla
either being made directly to Mr. Khosla or by way of re-imbursement to
any other Company of which Mr. Khosla is also the Managing Director
from January 29, 2012 till the date of the Annual General Meeting.
Where in any Financial Year during the tenure of office of Mr. Khosla,
the Company has no profits or its profits are inadequate, the Company
shall pay remuneration, benefits and amenities to Mr. Khosla as
specified in the said explanatory statement, subject to the approval of
the Central Government, if and to the extent necessary. Mr. Shantanu
Khosla is not liable to retire by rotation.
The re-appointment of Mr. Khosla as the Managing Director of the
Company is notwithstanding the fact that he has been appointed as the
Managing Director of Procter & Gamble Home Products Limited and Procter
and Gamble Hygiene & Health Care Limited for a period of five years.
An application has been made by the Company to the Central Government
seeking approval for the said re-appointment of Mr. Shantanu Khosla as
the Managing Director of three legal entities as is stated above. The
said application is as yet pending for approval.
(b) Commission to Non-Executive Directors
During the previous year, commission of Rs. 1 60 00 000 was paid to the
Non-Executive Directors, which exceeded the maximum limit of 1% of the
net profits by an amount of Rs. 21 40 965. The said excess amount of Rs. 21
40 965 was considered as an advance held under trust for the Company by
the Non-Executive Directors. In order to enable the Non-Executive
Directors to retain the excess amounts of commission then paid, the
following approvals were obtained:
- Approval from the Members of the Company at their 27th Annual
General Meeting held on 31st October 2011 by a Special Resolution; and
- Approval from the Central Govt vide their Letter No B
25883299/2/2011-CL.VII dated 1st May, 2012.
Pursuant to the above mentioned approvals, the said amount of Rs. 21 40
965 has been expensed during the current year.
In respect of the current year, an aggregate amount of Rs. 80 00 000 has
been paid as commission to the Non-Executive Directors which is within
the overall limits of commission payable to such directors under
schedule XIII to the Companies Act, 1956. The said payment constitutes
50% of the aggregate amount of Rs. 1 60 00 000 (excluding service tax of
Rs. 9 88 800) which is payable to the Non-Executive Directors and is
provided for in the financial statements.
The aggregate amount of Commission of Rs. 1 69 88 800 (including service
tax of Rs. 9 88 800) payable and charged for the year in the financial
statements as is stated above, exceeds the maximum amount payable based
on 1% of the net profits of the Company amounting to Rs. 1 21 63 895 (as
per the computation below) for the year ended 30th June 2012, by an
amount of Rs. 48 24 905 (including service tax of Rs. 9 88 800). The said
excess amount of Rs. 48 24 905 which is provided but not paid, is subject
to by approval of the Members of the Company by way of a special
resolution at the ensuing 28th Annual General Meeting of the Company,
and the Central Government.
9. Related Party Disclosures:
The Group Companies of The Procter & Gamble Company, USA include, among
others, Gillette Worldwide Holding LLC; Procter & Gamble India Holding
BV; Procter & Gamble Iron Horse Holding BV; Procter & Gamble Eastern
Europe LLC; Procter & Gamble Nordic LLC; Procter & Gamble Global
Holding Limited; Procter & Gamble Luxembourg Global SARL; Procter &
Gamble International SARL; Procter & Gamble India Holdings Inc.;
Procter & Gamble International Operations, SA; Gillette Group (Europe)
Holdings, BV; Procter & Gamble Canada Holding BV; Procter & Gamble
Overseas Canada, BV.
Details of Related parties:
(a) Parties where control exists:
- The Procter and Gamble Company, USA - Ultimate Holding Company
The Procter & Gamble India Holdings B.V. - Holding Company
Notes on Segment Information:
(1) Segments have been identified in line with the Accounting Standard
on Segment Reporting (AS-17), taking into account the organisation
structure as well as the differential risks and returns of these
segments. Business segments have been considered as primary segments.
(2) Segment Revenue, Results and Capital Employed figures include the
respective amounts identifiable to each of the segments. Unallocable
income/expenses include income/expenses incurred at a corporate level
which relate to the company as a whole. Unallocable income/expenses
mainly includes income from investment of surplus funds and exchange
(3) Details of type of products included in each segment:
Grooming: Blades, Razors and Toiletries
Portable Power: Batteries
Oral Care: Tooth brushes and oral care products
(4) Unallocable Corporate Assets mainly include Trade Receivables, Cash
and Cash Equivalents, Loans and Advances and Other Current Assets.
(5) Unallocable Corporate Liabilities mainly include Trade Payables,
Other Liabilities and Provisions.
10. Excise duty deducted from turnover represents amount of excise duty
collected by the company on sale of goods. Excise duty shown under Note
23 - Other Expenses represents difference in amount of excise duty on
closing stock and opening stock of finished goods.
11. Salaries and Wages includes Rs. 44 51 709 (Previous year : Rs. Nil)
for expenditure on Voluntary Retirement Scheme.
12. No borrowing costs have been capitalised during the year.
13. Legal and Professional Services in Note 23 — Other Expenses
includes an amount off 5 61 800 (Previous year : Rs. 1 10 300) on account
of fees to cost auditors.
14. The Revised Schedule VI has become effective for periods
commencing on or after 1 April, 2011 for the preparation of financial
statements. This has significantly impacted the disclosure and
presentation made in the financial statements. Previous year''s
figures have been regrouped''reclassified wherever necessary to
correspond with the current year''s classification/disclosure.