Marico Directors Report, Marico Reports by Directors
BSE: 531642|NSE: MARICO|ISIN: INE196A01026|SECTOR: Personal Care
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Directors Report Year End : Mar '14    « Mar 13
To the Shareholders
 The Board of Directors (''Board'') is pleased to present the Twenty
 Sixth Annual Report of your Company, Marico Limited, for the year ended
 March 31, 2014 (''the year under review'', ''the year'' or ''FY14'').
 In line with the requirements of the Listing Agreement with BSE Limited
 and the National Stock Exchange of India Limited, your Company has been
 reporting consolidated results – taking into account the results of its
 subsidiaries. This report, therefore, covers the financial results and
 other developments during April 2013 – March 2014 in respect of Marico
 Consolidated comprising the unified FMCG business under Marico Limited
 (''Marico'') in India and overseas. The consolidated entity has been
 referred to as ''Marico'' or ''Group'' or ''Your Group'' in this report.
                                       Rs. Crore Year ended March 31,
                                        2014          2013
 Consolidated Summary 
 Financials for the Group
 Revenue from Operations               4686.52       4596.18
 Profit before Tax                      694.58        551.88
 Profit after Tax                       485.38        395.86
 Marico Limited – financials
 Revenue from Operations               3682.58      3407.10
 Profit before Tax                      717.27       541.99
 Less: Provision for Tax for
 the current year                       140.05       112.90
 Profit after Tax for the current year  577.22       429.09
 Add : Surplus brought forward         1162.84       835.43
 Profit available for Appropriation    1740.06      1264.52
 Distribution to shareholders           257.95        32.24
 Tax on dividend                          9.37         5.23
                                        267.31        37.47
 Transfer to General Reserve             57.72        42.91
 Debenture Redemption Reserve            20.86        21.30
 Surplus carried forward               1394.18      1162.84
 Total                                 1740.07      1264.52
 Your Company''s distribution policy has aimed at sharing its prosperity
 with its shareholders, through a formal earmarking / disbursement of
 profits to shareholders.
 Keeping in mind the increase in the profits made by the Company over
 the last five years and in an endeavor to maximize the returns to its
 shareholders, the Company increased its dividend payout during the year
 to 350% as compared to 100% during FY13. Your Company''s distribution to
 equity shareholders during FY14 comprised the following:
 First interim dividend of 75% on the equity base of Rs 64.48 Crore.
 Second interim dividend of 100% on the equity base of Rs. 64.48 Crore.
 Third interim dividend (A special onetime Silver Jubilee Dividend to
 commemorate 25 years since incorporation) of 175% on the equity base of
 Rs.64.48 Crore.
 The total equity dividend for FY14 (including dividend tax) aggregated
 to Rs. 229.6 Crore. The overall dividend payout ratio hence is 47.3% as
 compared to 19.3% during FY13. Excluding the one-time dividend, the
 payout ratio for the year is 24.1%.
 An Annexure to this Report contains a detailed Management Discussion
 and Analysis, which, inter alia, covers the following:
 - Industry structure and development
 - Opportunities and Threats
 - Risks and Concerns
 - Internal control systems and their adequacy
 - Discussion on financial and operational performance
 - Segment-wise performance
 - Outlook
 In addition, a Review of Operations of your Company has been given in
 this report.
 During FY14 Marico posted revenue from operations of INR 4,687 Crore, a
 growth of 10% over the previous year. This was contributed by 6%
 expansion in volumes accompanied by 4% price increases and improvement
 in sales mix. The business reported bottom line of INR 485 Crore,
 growth of 12% over last year. The growth in PAT after excluding the
 impact of certain one-time accounting adjustments made in FY13 is 19%.
 During FY14, the Company has received 900% dividend from Marico
 Bangladesh Limited on which income tax charge of INR 34.5 Crore has
 been accounted in the books. This has increased the effective tax rate
 (ETR) for the year. Profit growth excluding this tax impact is 26% for
 The company has demonstrated steady growth on both the top line and the
 bottom line. Over the last 5 years, the topline has grown by 16% and
 bottom line by 21% at a Compounded Annual Growth Rate.
 Domestic FMCG Business: Marico India
 The Domestic FMCG Business achieved a turnover of INR 3,519 Crore
 during FY14, a growth of about 8% over FY13. This was mainly led by
 volume growth of 6% in an environment of subdued demand. The Company''s
 brands have continued to improve their market shares.
 Parachute coconut oil in rigid packs, the focus part of its portfolio,
 grew by 4% in volume as compared to FY13. During the 12 month period
 ended March 2014 Parachute along with Nihar improved its market share
 marginally over the same period last year to 56%.
 Marico''s value added hair oil brands (Parachute Advansed, Nihar
 Naturals and Hair & Care) grew by 11% in volumes during the year.
 Marico continues to gain market share and has emerged as a clear market
 leader with 28% share (for 12 months ended March 2014) in the INR 4500
 Crore (USD 834 million) market. Nihar Shanti Amla continues to gain
 market share and achieved a volume market share of about 30% for the 12
 months ended March 2014 in the Amla hair oils category (FY13: 25%).
 The Saffola refined edible oils franchise grew by about 9% in volume
 terms during FY14 compared to FY13 reporting an improvement in
 performance albeit on a lower base. During the year, the Company
 revamped one of its existing variants i.e., New Saffola with an
 improved and top of the line offering for modern day needs Saffola
 Total. The brand maintained its leadership position in the super
 premium refined edible oils segment with a market share of about 55%
 during the 12 months ended March 2014.
 Saffola plain and savory oats represents Marico''s healthy foods
 franchise. Saffola has a market share of over 14% by volume in the oats
 category and has emerged as the number two player in the category.
 Saffola Oats has increased its market share by about 24 bps as compared
 to last year. Saffola Oats crossed Rs. 50 Crore landmark in top line
 during the year under review.  The Company expects to continue the
 robust growth in Oats.
 Parachute Advansed Body Lotion has achieved a market share of over 6%
 (moving 12 months basis) and is the number 3 participant in the market.
 The Company launched India''s first unique multi-dimensional ''spray-on''
 body lotion. The new launch
 DIRECTORS'' REPORT will be extensively supported with heavy media and
 visibility support.
 The acquired portfolio of the youth brands grew by 16% in value terms
 during the year over FY13. The Company has established a leadership
 position in the Hair Gels and Post Wash Leave-on conditioner market
 with about 33% and 82% share respectively.  Set Wet and Zatak increased
 its market share marginally in the deodorants segment to 5% for 12
 months ended March 2014, in this crowded category. In February, Set Wet
 launched a new variant Set Wet Infinity, a non-aerosol perfume spray
 with ''no-gas'' formulation.
 The Company has entered into the fastest growing creams segment of Hair
 Colour category by introducing Livon Conditioning Cream Colour in
 January 2014. Entry into the hair colour category not only strengthens
 the Company''s hair care portfolio in India but also establishes our
 presence in categories which are replicable in other geographies.
 In partnership with Union Swiss, the Company has introduced Bio-Oil in
 India. Union Swiss is a privately owned MNC based in South Africa.
 Marico will be marketing and distributing its flagship brand, Bio-Oil,
 in India. With presence in 76 countries, Bio-Oil is the No.1 selling
 product to improve appearance of scars and stretch marks. Having
 Bio-Oil in the portfolio will further strengthen Marico''s presence in
 channels such as chemists and modern trade.
 International FMCG Business: Marico International
 The international business reported a topline growth of 16% during FY14
 albeit 10% of it came from favorable foreign exchange movement. The
 overall volume growth in international business was 5%. It was a mixed
 bag for the international business.  Business in Vietnam and Egypt grew
 in double digits while growth in Bangladesh was in single digit due to
 political instability in the country. Your Group has managed to cut
 back its losses in the Middle East region substantially and the
 geography is showing early signs of revival.
 Organizational Changes
 Marico''s Board of Directors, on March 25, 2014, approved the
 appointment of Mr. Saugata Gupta, CEO Marico Limited as Managing
 Director and CEO. Mr. Saugata Gupta has been inducted into the
 Company''s Board of Directors effective April 1, 2014. Mr. Harsh
 Mariwala, previously Chairman & Managing Director, has been
 re-designated as Non-Executive Director. He will continue to act as
 Chairman of the Board and will guide the MD & CEO on long term strategy
 and direction.
 The Board, at its meeting held on April 30, 2014, approved appointment
 of Mr. Vivek Karve, previously EVP and Head Corporate Finance, as the
 Chief Finance Officer of the Company effective April 1, 2014, in place
 of Mr. Milind Sarwate who moved on.
 Demerger of Kaya Business
 The Kaya Business, earlier a part of Marico, has been demerged
 effective October 17, 2013, with April 1, 2013 as the Appointed Date.
 Pursuant to the De-merger Scheme, the transfer of Kaya Business to
 Marico Kaya Enterprises Limited (MaKE) has been accounted by the
 Company by recording the transfer of the relevant assets and
 liabilities of the Kaya Business at their book values as of the
 appointed date. In accordance with the scheme approved by the Hon''ble
 High Court of Bombay, the excess of book value of assets over
 liabilities has been adjusted against Securities Premium Reserve.
 Further, pursuant to the scheme, as on the Record Date i.e. November 5,
 2013, every shareholder holding 50 fully paid equity shares with a face
 value of Re. 1 each in Marico Limited has been allotted 1 fully paid
 equity share of MaKE with a face value of Rs. 10 and a premium of Rs.
 200 each . MaKE submitted the Listing application along with the
 Information Memorandum to the Stock Exchanges on March 14, 2014 for
 seeking relaxation from SEBI. In April 2014, MaKE has received the
 necessary relaxations from SEBI and will now proceed with completing
 other listing formalities.
 Accordingly, the financial results of the Kaya Business do not form
 part of the audited consolidated financial results for the year ended
 March 31, 2014. However, the audited consolidated financial results of
 previous year include the results of Kaya Business and accordingly, to
 that extent, are not comparable with the results for the year ended
 March 31, 2014.
 Final Distribution of Halite Assets to MCCL
 The shareholders of Halite Personal Care Private Limited (Halite), a
 wholly owned step-down subsidiary of your Company, vide a special
 resolution at their extra ordinary general meeting held on January 18,
 2013, resolved that the company be voluntarily liquidated. The
 shareholders also appointed a liquidator. In view of the liquidation,
 the liquidator, on March 25, 2013, distributed the assets of Halite to
 MCCL, being the sole shareholder of Halite. MCCL took over assets of
 Halite at fair values, determined by an independent valuer, where
 applicable. On distribution, MCCL received assets in excess of its
 Equity investment in Halite, resulting in profit of Rs. 5.91 Crore as
 mentioned below, which was shown as an exceptional item in the
 Statement of Profit and Loss for the year ended March 31, 2013.
 During the year under review, a final meeting of the shareholders of
 Halite was held on January 15, 2014 to approve the Statement of
 Accounts (stating the manner in which liquidation was conducted)
 prepared by the Liquidator. Further assets were distributed on the said
 date as below. The liquidation proceedings are now pending before the
 Official Liquidator.
                                            (Rs. Crore)
 Particulars                           As at March 
                                       31, 2014         As at March
                                                        31, 2013
 Tangible assets (net)                                    0.73
 Intangible assets                                      729.80
 Distribution of other 
 assets and liabilities (net)             0.03 
 Cash and bank balance                    0.45           20.98
 Total                                    0.48          751.51
 Less: Value of equity investments in 
 Halite in books of MCCL                               (745.60)
 Excess of assets taken over 
 on investment                            0.48            5.91
 Classified as exceptional item 
 (Refer Note 39)                                          5.91
 Classified as Miscellaneous income       0.48 
 MCCL Capital Reduction Scheme
 During the year under review, the Honourable Bombay High Court vide its
 order dated June 21, 2013 approved the Scheme of Capital Reduction
 pertaining to Marico Consumer Care Limited (MCCL) (a wholly owned
 subsidiary of your Company).  Accordingly intangible assets aggregating
 Rs. 723.72 Crore were adjusted against the Share Capital and Securities
 Premium Reserves in accordance with the provisions of Section 78 (read
 with sections 100 to 103) of the Companies Act, 1956.
 Marico Employee Stock Option Scheme 2007
 In pursuance of shareholders'' approval obtained on November 24, 2006,
 your Company had formulated and implemented an Employee Stock Options
 Scheme (the Scheme) for grant of Employee Stock Options (ESOS) to
 certain employees of the Company and its subsidiaries. The Corporate
 Governance Committee (''Committee'') of the Board of Directors of your
 Company is entrusted with the responsibility of administering the
 Scheme and in pursuance thereof, the Committee has granted 1,13,76,300
 stock options (as at March 31, 2014) comprising about 1.76% of the
 current paid up equity capital of the Company as at March 31, 2014. An
 aggregate of 212,600 options were outstanding as on March 31, 2014.
 Additional information on ESOS as required by Securities and Exchange
 Board of India (Employees Stock Option Scheme and Employees Stock
 Purchase Scheme) Guidelines, 1999 is annexed and forms part of this
 None of the Non-executive Directors (including Independent Directors)
 have received any stock options in pursuance of the above Scheme.
 Likewise, no employee has been granted stock options, during the year
 equal to or exceeding 0.5% of the issued capital (excluding outstanding
 warrants and conversions) of the Company at the time of grant.
 The Company''s Auditors, M/s. Price Waterhouse, have certified that the
 Scheme has been implemented in accordance with the SEBI Guidelines and
 the resolution passed by the shareholders at the Extra-Ordinary General
 Meeting held on November 24, 2006.
 During the year the Company approved Marico Employee Stock Option
 Scheme 2014 (Marico ESOS 2014) for grant of 300,000 employee stock
 options to the Chief Executive Officer of the Company at an exercise
 price of Re. 1 per option. This does not have any impact on current
 financial statement as the grant date is April 1, 2014.
 On April 30, 2014, the Corporate Governance Committee and the Board of
 Directors approved formulation of a new ESOP Plan for further grant of
 ESOPs to the Managing Director & CEO on an annual basis as a part of a
 long term incentive plan of the MD & CEO on a similar basis as Marico
 ESOS 2014, for which approval of the shareholders is being sought in
 the accompanying Notice of the 26th Annual General Meeting.
 Marico Employees Stock Appreciation Rights Plan, 2011
 Your Company had implemented a long term incentive plan namely, Marico
 Stock Appreciation Rights Plan, 2011 (''STAR Plan'') in the previous
 financial years for the welfare of its employees and those of its
 subsidiaries. Pursuant to the STAR Plan the Corporate Governance
 Committee of the Board of Directors notifies various Schemes granting
 Stock Appreciation Rights (STARs) to certain eligible employees. Each
 STAR is represented by one equity share of the Company. The eligible
 employees are entitled to receive excess of the maturity price over the
 grant price in respect of such STARs subject to fulfillment of certain
 conditions and subject to deduction of tax. The Corporate Governance
 Committee notified Scheme IV on December 2, 2013 and 1,079,000 STARs
 were granted under the Scheme. The vesting date of STARs granted under
 Scheme IV is November 30, 2016. The Company also granted 202,300
 additional STARs under Scheme III on the same date. As on March 31,
 2014, an aggregate of 31,05,900 STARs were outstanding.
 Exemption from attaching the Balance Sheets, etc. of the Subsidiary
 Companies with the Balance Sheet of the Company
 The Ministry of Corporate Affairs (MCA) has vide its circular no.
 02/2011 dated February 8, 2011, granted a general exemption under
 Section 212(8) of the Companies Act from attaching copies of the
 Balance Sheet, Profit and Loss Accounts, Directors'' Report and
 Auditors'' Report of its subsidiary companies with the Balance Sheet of
 the Company, subject to fulfillment of certain conditions.
 In terms of the said circular, copies of the Balance Sheet, Profit and
 Loss Account, Report of the Board of Directors and the Report of the
 Auditors of the Subsidiary Companies have not been attached to the
 Balance Sheet of the Company. The Company has presented Consolidated
 Financial Statements comprising Marico Limited and its subsidiaries
 duly audited by the Statutory Auditors of the Company. The Consolidated
 Financial Statements prepared by the Company are in compliance with the
 Accounting Standard AS-21 as prescribed by the Companies (Accounting
 Standards) Rules, 2006 and the Listing Agreement with the Stock
 Exchanges. The statement required under Section 212 of the Companies
 Act, 1956 is attached to the annual accounts of the Company. The Annual
 Accounts and related documents of all the Subsidiary Companies shall be
 made available for inspection to the shareholders of the Company and
 its subsidiaries at the Registered Office of the Company from Monday to
 Friday during the hours between 11.00 a.m. and 1.00 p.m. The Company
 will also make available physical copies of such documents upon request
 by any shareholder of the Company or its subsidiaries interested in
 obtaining the same and the same would also be made available on the
 website of the Company.
 There were no outstanding Public deposits at the end of this or the
 previous year. The Company did not accept any public deposits during
 the year.
 Pursuant to Section 217(2AA) of the Companies Act, 1956 (the Act)
 amended by the Companies (Amendment) Act, 2000, the Directors confirm
 - In preparation of the Annual Accounts of your Company, the Accounting
 Standards, laid down by the Institute of Chartered Accountants of India
 from time to time, have been followed and that no material departures
 have been made from the same;
 - Appropriate accounting policies have been selected and applied
 consistently, and reasonable and prudent judgment and estimates have
 been made so as to ensure that the accounts give a true and fair view
 of the state of affairs of your Company as at March 31, 2014 and the
 profits of your Company for the year ended March 31, 2014;
 - Proper and sufficient care has been taken for maintenance of
 appropriate accounting records in accordance with the provisions of the
 Act for safeguarding the assets of your Company and for preventing and
 detecting fraud and other irregularities;
 - The annual accounts have been prepared on a going concern basis;
 A report on Corporate Governance has been provided as a separate part
 of this Report.
 Directors retiring by rotation
 The relevant provisions of the Companies Act, 2013 were notified and
 made effective from April 1, 2014. In terms of Section 149(14) of the
 Companies Act, 2013, Independent Directors are not liable to retire by
 rotation. Accordingly, Mr. Rajen Mariwala, Non-Executive Director of
 the Company is liable to retire by rotation at this 26th Annual General
 Meeting and being eligible offers himself for re-appointment.
 Appointment of Independent Directors
 With the notification of the Companies Act, 2013 and the amended Clause
 49 of the Listing Agreement with the Stock Exchanges, Independent
 Directors who have served as such for 5 years or more with the Company
 can be re-appointed for another term of maximum 5 years only. All
 Independent Directors on your Company''s Board, except Mr. B S Nagesh,
 have already served a term of 5 years or more. Accordingly, your Board
 proposes re-appointment of all Independent Directors for a term of 5
 years at the ensuing Annual General Meeting subject to your approval.
 Information under Section 217(1)(e) of the Companies (''the Act'') 1956
 Act read with the Companies (Disclosure of Particulars in the Report of
 the Board of Directors) Rules, 1988 is annexed and forms part of this
 Report. Information pursuant to Section 217(2A) of the Act read with
 the Companies (Particulars of Employees) Rules, 1975, as amended by the
 Companies (Particulars of Employees) Amendment Rules, 1999 forms part
 of this Report. Although in accordance with the provisions of Section
 219(1) (b)(iv) of the Act such information has been excluded from the
 Report and Accounts sent to the shareholders, any shareholder desirous
 of obtaining this information may write to the Company Secretary at the
 Registered Office of the Company.
 M/s. Price Waterhouse, Chartered Accountants and Statutory Auditors of
 the Company retire at the ensuing Annual General Meeting. In terms of
 Section 139 of the Companies Act, 2013, M/s. Price Waterhouse who have
 been the Statutory Auditors of the Company over the last seven years,
 are eligible for a further term of maximum three years from the date of
 this Annual General Meeting. Such appointment shall be subject to
 ratification by the shareholders at each of the subsequent Annual
 General Meetings held during their tenure as Auditors. Accordingly,
 your Directors recommend appointment of M/s. Price Waterhouse as the
 Statutory Auditors of the Company to hold office from the conclusion of
 this 26th Annual General Meeting until the conclusion of 29th Annual
 General Meetting. M/s. Price Waterhouse have confirmed their
 willingness and eligibility for such re-appointment.
 Your Company appointed M/s. Ashwin Solanki & Associates, Cost
 Accountants, Mumbai, to conduct the cost audit for the Financial Year
 ended March 31, 2014 with respect to the products falling under
 vegetable fats and oils, pharmaceutical products, cereals, flour and
 product of cereals, prepared food products, food residues or prepared
 animal feed, personal care products, soaps and cleansing agents and
 albuminoidal substances, starches, glues, enzymes category. The Company
 had received necessary approval from Central Government for appointment
 of the Cost Auditor. The Cost Audit Report for the year ended March 31,
 2014 will be submitted to the Central Government in due course.
 Ernst & Young LLP, a Chartered Accountant Firm, has been associated
 with your Company from the financial year 2012-13 as Internal Auditor
 partnering your Company in the area of risk management and internal
 control systems.
 The Board takes this opportunity to thank all its employees for their
 dedicated service and firm commitment to the goals of the Company. The
 Board also wishes to place on record its sincere appreciation for the
 wholehearted support received from shareholders, distributors, bankers
 and all other business associates, and from the neighbourhood
 communities of the various Marico locations. We look forward to
 continued support of all these partners in progress.
                                On behalf of the Board of Directors
 Place : Mumbai                 Harsh Mariwala
 Date : April 30, 2014          Chairman
Source : Dion Global Solutions Limited
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