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Marico
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Download Annual Report PDF Format 2013 | 2012 | 2011 | 2010
Directors Report Year End : Mar '13    Mar 12
To the Members
 
 The Board of Directors (''Board'') is pleased to present the Twenty Fifth
 Annual Report of your Company, Marico Limited, for the year ended March
 31, 2013 (''the year under review'', ''the year'' or ''FY13'').
 
 In line with the requirements of the Listing Agreement with the BSE
 Limited and National Stock Exchange of India Limited, your Company has
 been reporting consolidated results - taking into account the results
 of its subsidiaries. This discussion therefore covers the financial
 results and other developments during April 2012 - March 2013 in
 respect of Marico Consolidated comprising Domestic Consumer Products
 Business under Marico Limited (Marico) in India, International Consumer
 Products Business comprising exports from Marico and operations of its
 overseas subsidiaries and the Skin Solutions Business of Kaya in India
 and overseas. The consolidated entity has been referred to as ''Marico''
 or ''Group'' or ''Your Group'' in this discussion.
 
 FINANCIAL RESULTS - AN OVERVIEW
 
                                                      Rs. Crore 
                                                Year ended March 31,
                                                2013          2012
 
 Consolidated Summary Financials for 
 the Group
 
 Revenue from Operations                      4596.2        3979.7
 
 Profit before Tax                             551.9         400.3
 
 Profit after Tax                              395.9         317.1 
 
 Marico Limited - financials
 
 Revenue from Operations                      3407.1        2965.3
 
 Profit before Tax                             542.0         399.3
 
 Less: Provision for Tax for the current year  112.9          62.7
 
 Profit after Tax for the current year         429.1         336.6
 
 Add : Surplus brought forward                 835.4         602.5
 
 Profit available for Appropriation           1264.5         939.1 
 
 Appropriations:
 
 Distribution to shareholders                   32.2          43.0
  
 Tax on dividend                                 5.2           7.0
 
                                                37.4          50.0
 
 Transfer to General Reserve                    42.9          33.7
 
 Debenture Redemption Reserve                   21.3          20.0
 
 Surplus carried forward                      1162.8         835.4
 
 Total                                        1264.5         939.1
 
 DISTRIBUTION TO EQUITY SHAREHOLDERS
 
 Your Company''s distribution policy has aimed at sharing your Company''s
 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 favourably
 during the year to 100% as compared to 70% during FY12. Your Company''s
 distribution to equity shareholders during FY13 comprised the
 following:
 
 First interim dividend of 50% on the equity base of Rs 64.46 Crore
 
 Second interim dividend of 50% on the equity base of Rs. 64.48 Crore
 
 The total equity dividend for FY13 was at 100% amounting to (including
 dividend tax) Rs. 74.93 Crore. The overall dividend payout ratio hence
 is 19.3% as compared to 15.8% during FY12.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 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.
 
 REVIEW OF OPERATIONS
 
 During FY13 Marico registered revenue from operations of INR 4,596
 Crore, a growth of 15% over the previous year.  This was contributed by
 12% expansion in volumes (includes 4% inorganic growth) accompanied by
 3% through price increases and sales mix. The top line increase was
 accompanied by a bottom-line growth of 25%. Profit After Tax (PAT)
 including exceptional items during the year was at INR 396 Crore as
 against INR 317 Crore in FY12. The financial statements of FY13 and
 FY12 include certain exceptional items. The growth in PAT after
 excluding the impact of such items is healthy 18%. The details about
 the exceptional items is provided under section Results of
 Operations.
 
 The Company has demonstrated steady growth on both the top line and the
 bottom line. Over the last 5 years, they have grown at a Compounded
 Annual Growth Rate of 19% each.
 
 Consumer Products Business: India
 
 The Consumer Products Business in India (CPB) achieved a turnover of
 INR 3,253 Crore during FY13, a growth of about 18% over FY12. The
 organic domestic volume growth was about 11% in an environment of
 subdued demand. The healthy volume growth reflects strong equity of the
 Company''s brands in consumers'' minds.
 
 Marico participates in the INR 2800 crore (USD 518 million) branded
 coconut oil market through Parachute, Nihar and Oil of Malabar.
 Parachute coconut oil in rigid packs, the focus part of its portfolio,
 grew by 10% in volume as compared to FY12. During the 12 month period
 ended March 2013 Parachute along with Nihar improved its market share
 by about 240 basis points (bps) over the same period last year to 57.6%
 
 Marico''s hair oil brands (Parachute Advansed, Nihar and Hair & Care)
 have performed well over the past few years.  These brands continued to
 record very healthy growths and market share gains during FY13. The
 volume growth rate was 24% for FY13. Marico''s basket of hair oil brands
 achieved market leadership position in the Value Added Hair Oils space
 and now have about 27% share (for 12 months ended March 31, 2013) in
 the INR 4500 crore (USD 834 million) market. This compares to a share
 of about 17%-18% about 5-6 years ago.
 
 The Saffola refined edible oils franchise grew by about 7% in volume
 terms during FY13 compared to FY12. The deceleration in the growth can
 be attributed to two reasons: a softer demand environment in premium
 packaged foods that are discretionary in nature and inflation in the
 safflower oil and rice bran oil being at significantly higher levels
 compared to inflation in sunflower oil. This had led to expansion in
 premium of Saffola vis-a-vis the other refined edible oils. Though the
 Company doesn''t believe that Saffola''s existing consumers are down
 trading there is a deceleration in the rate at which new consumers are
 upgrading into the Saffola brand, leading to a lower growth rate. The
 Company has initiated some price reduction in select packs in order to
 bring the premium back to sustainable levels.
 
 Saffola oats, including its savory variants, are now available on a
 national basis. Saffola has an exit market share of about 13% by volume
 in the Oats category and has emerged as the number two player in the
 category showing a fast paced growth of 30% per annum. Besides offering
 oats Saffola strengthened its position in the breakfast category by
 introducing Muesli on a national basis. The market size of Muesli is
 estimated to be around INR 80 crore to INR 100 crore (USD 14.8 million
 to USD 18.5 million) growing rapidly at rates in excess of 40%. Saffola
 Muesli has already become a number 3 player with an exit market share
 of about 9%.
 
 Parachute Advansed Body Lotion has achieved a market share of over 7%
 (moving 12 months basis) within a short period of time and has become
 the number 3 participant in the market. The brand gained about 320 bps
 in market share during the current season as compared to the last
 season.
 
 The acquired portfolio of the youth brands has completed its first
 financial year in Marico''s hands (even though this year was of 9 months
 as the transaction was completed in end of May 2012). The overall
 performance thus far is tracking better than the company''s acquisition
 assumptions. The turnover achieved from the youth brands during the
 year was INR 139 crore (USD 25.7 million), a growth of 18% over the
 corresponding period in FY12.
 
 International FMCG Business
 
 The year FY13 has been a mixed year for the international FMCG
 business. The overall business environment in international business
 remained challenging throughout the year. There were some pockets of
 the business that performed well whereas at the same time some faced
 challenges. The overall performance was subdued during the year mainly
 on account of de-growth in Middle East region.
 
 During FY13, the Company''s international business recorded a turnover
 growth of 8% over FY12. Without considering the impact of adverse
 performance in GCC region, the international business grew by 17%.
 
 Kaya
 
 Kaya offers skin care solutions - its technology led cosmetic
 dermatological services and products through 105 clinics: 83 in India
 across 26 cities and 18 in the Middle East in addition to the 4 DRx
 clinics and medispas in Singapore and Malaysia.
 
 During the year FY13, Kaya achieved a turnover of INR 336 crore (USD
 62.2 million) registering a growth of about 21% over FY12. The Kaya
 business in India and in the Middle East achieved same store sales
 growth of about 12% during FY13 as compared to FY12. Amidst an
 environment where the discretionary spends are witnessing a
 deceleration in growth rates Kaya business has continued to report
 growth.
 
 During FY13, Kaya recorded a loss of about INR 18.5 crore (USD 3.4
 million) at the PBIT level. This compares with a loss of INR 30.8 crore
 (USD 5.7 million) at PBIT level for FY12 (this includes a financial hit
 of INR 13 crores of one-time adjustment in Kaya Middle East). The
 losses for the year FY13 also include a financial hit amounting to INR
 15 crore (USD 2.8 million) on account of impairment of certain clinics
 in India and Middle East which are not performing as per expectation.
 
 Taking the objective of increasing the product sales further, Kaya has
 introduced a new concept in the month of December 2012 called Kaya
 Skin Bar. The Company now has three such stores opened in Delhi and
 Bangalore. The Company plans to prototype this concept with 4 or 5
 stores and depending upon the response it will decide the future course
 of action.
 
 OTHER CORPORATE DEVELOPMENTS 
 
 Completion of acquisition of Personal Care brands of Paras
 Pharmaceuticals from Reckitt Benckiser
 
 Marico completed the acquisition of Halite Personal Care India Private
 Limited (the Company that owned personal care brands of Paras
 Pharmaceuticals Limited) from Reckitt Benckiser on May 29, 2012. This
 acquisition gave Marico an access to the male grooming brands Set Wet
 and Zatak and the post wash hair serum brand Livon. This acquisition is
 in line with the strategy to strengthen our participation in categories
 of hair care, skin care and male grooming. The acquired business
 operates in categories such as Hair creams/gels, Leave-on conditioner
 and Deodorants. While this acquisition gives your Company a leadership
 position in the categories of hair creams and gels and Leave-on
 conditioners, it also provides an entry into the fast growing deodorant
 category. The Company also expects to leverage synergies in the areas
 of buying (input materials and media) and distribution. There are also
 reverse distribution synergies of the acquired portfolio with Marico''s
 existing portfolio as the acquired portfolio gives Marico an access to
 the chemist and cosmetic channel of distribution in a much larger way.
 This year, the Company focused on integrating the operations into its
 own manufacturing, sales and distribution network. The integration
 process was successful and now complete.
 
 Preferential Allotment of Equity Shares to part fund the acquisition of
 Personal care business of Paras Pharmaceuticals
 
 The shareholders of the Company, at their meeting held on May 2, 2012,
 approved issue of equity shares on preferential allotment basis
 aggregating Rs. 50,000 lacs at a price of Rs. 170 per equity share to
 two overseas investors for funding a part of the Halite acquisition.
 Subsequently, the Company allotted 29,411,764 equity shares of face
 value of Re. 1 each at a share premium of Rs. 169 each to these
 investors on May 16, 2012. This resulted in increase of equity share
 capital by Rs. 294.12 lacs and securities premium reserve by Rs.
 49,705.88 lacs. The proceeds of the issue together with internal
 accruals were infused by Marico as equity investment in MCCL. MCCL
 utilized the equity proceeds for acquiring 100% equity stake in Halite
 on May 29, 2012.
 
 Restructuring of businesses, corporate entities and organization
 
 The Board of Directors of Marico Limited, at its meeting held on 7th
 January 2013, passed a resolution approving restructuring of Marico''s
 businesses, corporate entities and organization, effective April 1,
 2013.
 
 This restructuring is a proactive step to build on Marico''s sustained
 value creation, taking into account
 
 - the increasing convergence of businesses in Consumer Products in
 India (Current CPB) and the International Business Group (Current IBG)
 and
 
 - Kaya''s distinct potential to create value as an independent
 business.
 
 Marico Limited is currently the apex corporate entity, which
 effectively owns all businesses in the group. The objective is to
 create two separate companies through partitioning of the current
 Marico Limited, into an FMCG Business Company which is Marico Limited
 and Marico Kaya Enterprises Limited (MaKE), a newly formed Skin Care
 Solutions Business Company for this purpose.
 
 As a consideration, the shareholders of Marico Limited as on the record
 date shall be issued 1 share of MaKE with a face value of Rs. 10 each
 for every 50 shares of Marico with a face value of Re. 1 each.
 Consequently, the shareholding structure of MaKE will mirror the
 shareholding structure of Marico Limited.
 
 The Corporate Entity restructuring is subject to shareholders,
 creditors, lenders and other contractual, statutory and regulatory
 approvals as may be required.
 
 Subsidiaries of the Company
 
 With effect from March 15, 2013, Marico Innovation Foundation (MIF), a
 company registered under Section 25 of the Companies Act, 1956, as a
 company limited by guarantee not having share capital, became a wholly
 owned subsidiary of the Company. MIF was set up with an objective to
 fuel innovation and promote application of qualified innovation in all
 forms of businesses, educational, social, cultural, and creative and
 sports related enterprises. Your Company would continue to make
 contributions towards CSR through the activities of MIF.
 
 Halite Personal Care India Private Limited (Halite), a step down
 subsidiary of the Company, is under voluntary liquidation.  On January
 18, 2013, the shareholders of Halite passed a special resolution for
 voluntarily liquidation and appointment of a liquidator. The liquidator
 distributed the assets of Halite in species to its only shareholder
 Marico Consumer Care Limited, a wholly owned subsidiary of your
 Company.
 
 MCCL Capital Reduction Scheme
 
 The shareholders of MCCL, at their meeting held on April 1, 2013
 decided to adjust the carrying costs of acquired intellectual property
 right upon voluntary liquidation of Halite, directly against net worth
 of the company, in accordance with the provisions of Section 78 (read
 with Sections 100 to 103) of the Companies Act, 1956. The said capital
 reduction is subject to the approval of the Hon''ble High Court of
 Judicature at Bombay. MCCL has filed a petition in this regard with the
 High Court.
 
 Transfer of KME ownership from MME to DIAL
 
 To align the shareholding in Kaya''s skin care business so as to
 integrate the ownership under Kaya Limited in view of the proposed
 de-merger in Kaya''s skin care business from the Company, the
 shareholders of Marico Middle East FZE at their meeting held on March
 18, 2013 approved disinvestment of 100% stake in Kaya Middle East FZE
 to Derma Rx International Aesthetics Pte. Ltd (DIAL) for a
 consideration of 55,050,000 UAE Dirhams. The disinvestment was effected
 through a share purchase agreement between MME and DIAL dated February
 7, 2013 subject to approval from Hamriyah Free Zone Authority (HFZA).
 Post approval it will become a subsidiary of DIAL.
 
 Marico Employee Stock Option Scheme 2007
 
 In pursuance of shareholders'' approval obtained on November 24, 2006,
 your Company 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, 2013) comprising about 1.76% of the
 current paid up equity capital of the Company as at March 31, 2013. An
 aggregate of 3,52,665 options were outstanding as on March 31, 2013.
 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
 Report.
 
 None of the Non-executive Directors (including Independent Directors)
 have received 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 members at the Extra-Ordinary General
 Meeting held on November 24, 2006.
 
 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 year 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. During the financial year
 under review the Corporate Governance Committee notified Scheme III on
 December 7, 2012 under the STAR Plan granting additional STARs to
 certain eligible employees. The vesting date of the STARs granted under
 Scheme III is November 30, 2015. As on March 31, 2013, an aggregate of
 58,79,800 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 8th February, 2011, granted a general exemption under
 Section 212(8) of the Companies Act from attaching copies of the
 Balance Sheet, Statement of Profit and Loss, 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, Statement
 of Profit and Loss, 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 Member 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.
 
 PUBLIC DEPOSITS
 
 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.
 
 DIRECTORS'' RESPONSIBILITY STATEMENT
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956 (the Act)
 amended by the Companies (Amendment) Act, 2000, the Directors confirm
 that:
 
 - 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, 2013 and the
 profits of your Company for the year ended March 31, 2013;
 
 - 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;
 
 - The observation(s) and qualification(s) of the Auditors in their
 report to the Members have been adequately dealt with in the relevant
 notes to the accounts. Hence no additional explanation is considered
 necessary.
 
 CORPORATE GOVERNANCE
 
 A report on Corporate Governance has been provided as a separate part
 of this Report.
 
 DIRECTORS
 
 Directors retiring by rotation
 
 Mr. Rajen Mariwala and Mr. Atul Choksey, Directors of the Company, are
 liable to retire pursuant to the provisions of Section 256 of the
 Companies Act, 1956 respectively and being eligible offer themselves
 for re-appointment.
 
 ADDITIONAL STATUTORY INFORMATION
 
 Information under Section 217(1)(e) of the 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 Members, any member desirous of obtaining this
 information may write to the Company Secretary at the Registered Office
 of the Company.
 
 STATUTORY AUDITORS
 
 M/s. Price Waterhouse, Chartered Accountants and Statutory Auditors of
 the Company retire at the ensuing Annual General Meeting and have
 confirmed their eligibility for re-appointment.
 
 COST AUDITORS
 
 Your Company appointed M/s. Ashwin Solanki & Associates, Cost
 Accountants, Mumbai, to conduct the cost audit for the Financial Year
 ended March 31, 2013 with respect to the products falling under
 Pharmaceutical, Edible Oil seeds and Oils (including Vanaspati) and
 packaged foods category. The Company has received necessary approval
 from Central Government for appointment of the Cost Auditor. The Cost
 Audit Report for the year ended March 31, 2013, will be submitted to
 the Central Government in due course.
 
 INTERNAL AUDITORS
 
 Ernst & Young LLP, a Chartered Accountant Firm, has been associated
 with your Company from the financial year 2012-13 as its internal
 auditor partnering your Company in the area of risk management and
 internal control systems.
 
 ACKNOWLEDGEMENT
 
 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, 2013                Chairman and Managing Director
Source : Dion Global Solutions Limited
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