Marico

1) The Company and nature of its operations:
 
 Marico Limited (Marico or the Company), headquartered in Mumbai,
 Maharashtra, India, carries on business in Consumer Products. Marico
 manufactures and markets products under brands such as Parachute,
 Nihar, Saffola, Sweekar, Hair & Care, Revive, Shanti, Oil of Malabar,
 Mediker and Manjal. Maricos products reach its consumers through
 retail outlets serviced by Maricos distribution network comprising
 regional offices, carrying & forwarding agents, consignment agent,
 redistribution centers and distributors spread all over India.
 
 2) a) Contingent liabilities not provided tor in respect of:
 
 (i) Disputed tax demands / claims:
 
                    March 31, 2009            March 31, 2008
                      Rs. Crore                  Rs. Crore
 
 Sales tax               4.88                         3.52
 Income tax                                           3.71
 Customs duty            2.86                         3.48
 Agricultural Produce
 Marketing
 Committee cess          7.81                         7.18
 Employees State
 Insurance Corporation   0.18                         0.04
 
 (ii) Claims against the Company not acknowledged as debts. Rs. 0.21
 Crore (Rs. 0.31 Crore)
 
 b) (i) Counter guarantees given to banks on behalf of subsidiaries
 Rs.46.05 Crore (Rs. 32.86 Crore)
 
 (ii) Stand by Letter of Credit given to banks on behalf of subsidiaries
 Rs. 80.15 Crore (Rs. 65.01 Crore)
 
 c) Amount outstanding towards Letters of Credit Rs.18.07 Crore (Rs.
 Nil)
 
 3) Estimated amount of contracts remaining to be executed on capital
 account and not provided for Rs.10.38 Crore (Rs. 2.80 Crore) net of
 advances.
 
 4) Borrowing costs capitalised during the year amount to Rs.3.55 Crore
 (Rs.Nil).
 
 5) Miscellaneous income includes lease income Rs.0.41 Crore (Rs. 0.41
 Crore), insurance claims Rs.0.07 Crore (Rs. 0.07 Crore), profit on sale
 / disposal of assets (net) Rs.Nil (Rs.0.40 Crore), royalty from
 subsidiaries Rs.4.39 Crore (Rs. 7.20 Crore).
 
 6) Miscellaneous expenses include labour charges Rs.1.91 Crore (Rs.1.83
 Crore), training & seminar expenses Rs.2.42 Crore (Rs.2.63 Crore),
 outside services Rs.2.37 Crore (Rs.3.60 Crore), professional charges
 Rs.9.61 Crore (Rs. 9.92 Crore), donations Rs. 1.19 Crore (Rs. 0.68
 Crore), loss on sale / disposal of assets (net) Rs.0.14Crore(Rs. Nil)
 and are net of excess provisions no longer required written back
 Rs.5.14 Crore (Rs. 1.42 Crore) [including Impairment provision of Rs.
 0.86 Crore (Rs. Nil)].
 
 7) Research and Development expenses aggregating Rs.5.73 Crore (Rs.
 5.24 Crore) have been included under the relevant heads in the Profit
 and Loss account.
 
 8) The Exceptional items stated in the Profit and Loss account are as
 under:
 
 - Profit on Slump Sale of Sil business, including manufacturing unit at
 Saswad Rs.Nil (Rs.10.61 Crore)
 
 - Provision for diminution in the value of investment/advances in
 Sundari LLC, Rs. Nil (R. 9.37 Crore) (Refer Note 24 below).
 
 - Advances to subsidiary written off Rs. 47.86 Crore (Rs. Nil) (Net
 off. Rs. 3.33 Crore withdrawn from provisions made in earlier year
 (Refer note 24, below)
 
 9) Segment Information:
 
 The Company has only one reportable segment in terms of Accounting
 Standard 17 (AS 17) Segment Reporting mandated by Rule 3 of the
 Companies (Accounting Standard) Rules 2006, which is manufacturing and
 sale of consumer products.
 
 Notes:
 
 1.  The above remuneration to Chairman and Managing Director does not
 include contribution to Gratuity Fund and provision for Leave
 encashment, as these are lump sum amounts for all relevant employees
 based on actuarial valuation.
 
 2.  Since no commission is payable during the year, computation of net
 profits for the year under section 198 of the Companies Act, 1956 has
 not been given.
 
 10) The Guidance Note on Implementing Accounting Standard 15 (AS 15),
 Employee benefits (revised 2005) issued by Accounting Standards Board.
 (AS8) states that benefits involving employer-established provident
 funds, which require interest shortfalls to be recompensed, are to be
 considered as defined benefit plans. Pending the issuance of the
 guidance note from the Actuarial Society of India, the Companys
 actuary has expressed an inability to reliably measure provident fund
 liabilities. Accordingly, the Company has accounted for the same as a
 defined contribution plan.
 
 11) There are no Micro and Small Enterprises to whom the Company owes
 dues, which are outstanding for more than 45 days as at March 31, 2009.
 This information as required to be disclosed under the Micro, Small and
 Medium Enterprises Development Act, 2006 has been determined to the
 extent such parties have been identified on the basis of information
 available with the company.
 
 12) As at March 31, 2009, the Company holds 100 % of the Equity Capital
 of Kaya Limited (erstwhile Kaya Skin Care Limited) (Kaya) at a cost of
 Rs.73.00 Crore (Rs.73.00 Crore). The Company has also advanced loans to
 Kaya of Rs.54.71 Crore (Rs.35.90 Crore). Based on the audited
 financials of Kaya, there has been erosion in the value of investments
 in Kaya.
 
 Since the incorporation of Kaya during 2002-03, its business has been
 in a development and later in an expansion phase.  Encouraged by the
 consumer response to Kayas pioneering offerings in products and
 services in the skin care category, it has focused on building the
 brand Kaya through setting up of a large number of Clinics at several
 locations. In the process, Kaya has incurred significant set up costs
 including advertisement and sales promotion, leading to losses. There
 were significant improvements in operations during the year. Kaya will
 continue with its growth phase with focus on profitability through
 consumer acquisition.
 
 Based on the fundamentals of Kaya and its future business plans, the
 management is of the opinion that it is strategically desirable for
 Marico to continue to support Kaya through funding (including equity /
 debt infusion), through either fresh funds or conversion of existing
 loans into equity. Having regard to this, the management perceives the
 erosion in the value of investment in Kaya as only a temporary
 diminution in value. Hence, no provision for diminution in value is
 considered necessary in respect of the Companys investment in Kaya or
 of the loans and advances given to Kaya.
 
 13) The Company had, in February 2003, acquired the spa products
 business under the brand Sundari through the acquisition of the
 controlling interest in Sundari LLC (Sundari), a company domiciled in
 the United States. Over the years the Company increased its
 shareholding and in October 2007 made Sundari a wholly owned
 subsidiary. The Company had been working upon making improvements in
 the business model and the business had shown some positive signs of
 recovery.
 
 However, during the year under review, the economic ambience turned for
 the worse across the globe creating uncertainties, more so in the USA.
 The Company therefore decided to focus on its prioritized geographies
 of Asia and Africa and consequently decided to divest its stake in
 Sundari. It entered into documentation with a US based company that
 envisaged sale of Maricos interests in Sundari LLC at a consideration
 which is based on a valuation report from an independent agency and
 rendering Sundari free of all liabilities (including the amounts
 advanced by Marico) on or before the date of the actual sale of its
 interests in Sundari LLC.
 
 Accordingly, Marico initiated necessary steps in March 2009 to comply
 with applicable FEMA regulations for divestment of its stake in Sundari
 LLC and write off of Loans and advances (including interest accured
 thereon). Upon completion of necessary compliances under FEMA
 regulations on June 8, 2009 the Company divested its stake in Sundari
 LLC, which ceased to be subsidiary of the Company from the said date.
 
 Consequent to the completion of compliance formalities under FEMA, the
 Company has during the year written off Loans and advances (including
 interest accrued thereon) of Rs. 47.86 Crore (net of amount of Rs. 3.33
 Crore withdrawn from provision made in earlier year) which is reflected
 as Exceptional items in the Profit and Loss account. Provision made in
 the earlier year is retained to the extend of Rs.6.04 Crore towards
 diminution in the value of investments. (Refer Note 13, above)
 
 Based on legal advice received, the loss on account of write off of the
 non-recoverable advances and interest accrued thereon has been treated
 as business loss for the purposes of computation of income tax
 provision for year ended March 31, 2009.
 
 14) The Company had advanced long tern loan of Rs.33.80 Crore to its
 wholly owned subsidiary Marico South Africa Consumer Care (pty) Limited
 which was denominated in Indian rupees. With effect from October 1,
 2008, terms of loan had been modified and loan is denominated in South
 African Rand (ZAR). The operations of the said subsidiary are
 classified as Non - integral foreign operations. Accordingly, as per
 the requirements of Accounting Standard 11 (AS 11) The effect of
 changes in Foreign Exchange Rates, exchange loss of Rs.1.72 Crore
 arising on revaluation of the said loan is accumulated in Foreign
 Currency Translation Reserve, to be recognized as income or expenses
 in the Profit and Loss Account upon disposal of the net investment in
 said subsidiary.
 
 15) There are no dues payable to the Investor Education and Protection
 Fund as at March 31, 2009.
 
 16) (a) The figures in brackets represent those of the previous year.
 
 (b) The figures for the previous year have been regrouped where
 necessary to conform to current periods classification.