Note 1 : COMPANY INFORMATION
Hindustan Unilever Limited (the ‘Company’) is a public limited company domiciled in India
with its registered office located at Unilever House, B.D. Sawant Marg, Chakala, Andheri (East), Mumbai 400
099. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The
Company is in the FMCG business comprising primarily of Home Care, Beauty & Personal Care and Foods &
Refreshment segments. The Company has manufacturing facilities across the country and sells primarily in
India.
Note 2 : BASIS OF PREPARATION, MEASUREMENT AND SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION AND MEASUREMENT
(a) Basis of preparation
These financial statements have been prepared in accordance with the Indian Accounting Standards
(hereinafter referred to as the ‘Ind AS’) as notified by Ministry of Corporate Affairs pursuant
to section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards)
Rules, 2015 as amended from time to time.
The financial statements have been prepared on accrual and going concern basis. The accounting policies
are applied consistently to all the periods presented in the financial statements. All assets and liabilities
have been classified as current or non-current as per the Company’s normal operating cycle and other
criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of
products and the time between acquisition of assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or
non-current classification of assets and liabilities.
The financial statements are presented in INR, the functional currency of the Company. Items included in
the financial statements of the Company are recorded using the currency of the primary economic environment
in which the Company operates (the ‘functional currency’).
Transactions and balances with values below the rounding off norm adopted by the Company have been
reflected as “0” in the relevant notes to these financial statements.
The financial statements of the Company for the year ended 31st March 2019 were approved for issue in
accordance with the resolution of the Board of Directors on 3rd May 2019.
(b) Basis of measurement
These financial statements are prepared under the historical cost convention unless otherwise
indicated.
2.2 KEY ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires management to make judgments, estimates and assumptions
in the application of accounting policies that affect the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates. Continuous evaluation is done on the estimation and
judgments based on historical experience and other factors, including expectations of future events that are
believed to be reasonable. Revisions to accounting estimates are recognised prospectively.
Information about critical judgments in applying accounting policies, as well as estimates and
assumptions that have the most significant effect to the carrying amounts of assets and liabilities within
the next financial year, are included in the following notes:
(a) Measurement of defined benefit obligations – Note 40
(b) Measurement and likelihood of occurrence of provisions and contingencies - Note 20 and 24
(c) Recognition of deferred tax assets - Note 9
(d) Key assumptions used in discounted cash flow projections - Note 42
(e) Impairment of Intangible assets - Note 4
2.3 RECENT ACCOUNTING DEVELOPMENTS
Standards issued but not yet effective:
In March 2019, the Ministry of Corporate Affairs (MCA) issued the Companies (Indian Accounting Standards)
Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, 2019, notifying Ind
AS 116 ‘Leases’ and amendments to certain IND AS. The Standard / amendments are applicable to the
Company with effect from 1st April 2019.
i. IND AS 116: Leases
The standard changes the recognition, measurement, presentation and disclosure of leases. It
requires:
- Lessees to record all leases on the balance sheet with exemptions available for low value and shortterm
leases.
- At the commencement of a lease, a lessee will recognise lease liability and an asset representing
the right to use the asset during the lease term (right-of-use asset).
- Lessees will subsequently reduce the lease liability when paid and recognise depreciation on the
right-of-use asset.
- A lease liability is remeasured upon the occurrence of certain events such as a change in the lease
term or a change in an index or rate used to determine lease payments. The remeasurement normally also
adjusts the right-of-use asset.
- The standard has no impact on the actual cash flows of a Company. However, operating lease payments
currently expensed as operating cash outflows will instead be capitalised and presented as financing cash
outflows in the statement of cash flows.
The Company has reviewed all relevant contracts to identify leases and preparations for this standard are
substantially complete. This review included:
- an assessment about whether the contract depends on a specific asset,
- whether the company obtains substantially all the economic benefits from the use of that asset;
and
- whether the Company has the right to direct the use of that asset.
From 1st April 2019 the Company will focus on ensuring that the revised process for identifying and
accounting for leases is followed.
The estimated impact of IND AS 116 on the Company’s financial statements at 31st March 2019 is as
follows:
Balance sheet:
The Company estimates that the adoption of IND AS 116 will result in an increase in total assets of
approximately Rs. 675 crores. Liabilities are expected to increase by approximately Rs. 725 crores.
Statement of Profit and Loss:
The Company estimates that the adoption of IND AS 116 will result in increased depreciation of
approximately Rs. 345 crores from the right-of-use assets. This will offset the reduction in operating lease
expenses of around Rs. 400 crores per year, resulting in an overall increase in Earnings Before Interest and
Tax (EBIT) of Rs. 55 crores. Finance costs are expected to increase by approximately Rs. 60 crores per year
due to the interest recognised on lease liabilities.
Statement of Cash Flows:
The Company estimates that the adoption of IND AS 116 will increase cash flows from operating activities
by approximately Rs. 400 crores with a related decrease in cash flows used in financing activities of Rs. 400
crores which relates to lease payments.
ii. Other Amendments
The MCA has notified below amendments which are effective 1st April 2019:
- Appendix C to Ind AS 12, Income taxes
- Amendments to Ind AS 103, Business Combinations
- Amendments to Ind AS 109, Financial Instruments
- Amendments to Ind AS 111, Joint Arrangements
- Amendments to Ind AS 19, Employee Benefits
- Amendments to Ind AS 23, Borrowing Costs
- Amendments to Ind AS 28, Investments to Associates and Joint Ventures
Based on Preliminary work, the Company does not expect these amendments to have any significant impact on
its Financial statements.
NOTES :
(a) Buildings include Rs. 0 crore (March 31, 2018: Rs. 0 crore) being the value of shares in
co-operative housing societies.
(b) The title deeds of Freehold Land aggregating Rs. 0 crore (31st March, 2018: Rs. 0 crores),
Leasehold Land, net block aggregating Rs. 1 crore, (31st March, 2018: Rs. 1 crore) are in the process of
perfection of title.
(c) Additions in capital expenditure of Rs. 2 crores (2017-18: Rs. 5 crores) and Rs. 0 crores
(2017-18: Rs. 0 crores) incurred at Company’s inhouse R&D facilities at Mumbai and Bengaluru
respectively are eligible for weighted deduction under section 35(2AB) of the Income Tax Act, 1961.
(d) The Property, Plant and Equipment in 3A includes assets given on lease given in the below
table:
IMPAIRMENT CHARGES
The goodwill and indefinite life intangible assets are tested for impairment and accordingly no
impairment charges were recognised for FY 2018-19 (FY 2017-18: Nil).
SIGNIFICANT CASH GENERATING UNITS (CGUs)
The Company has identified its reportable segments, i.e. Home Care, Beauty & Personal Care, Foods &
Refreshment and Others as the CGUs. The goodwill and brand (with indefinite life) acquired through business
combination has been allocated to CGU ‘Beauty & Personal Care’ and “Foods &
Refreshment” segment of the Company. The carrying amount of goodwill and brand (with indefinite life)
as at March 31, 2019 is Rs. 36 crores and Rs. 311 crores respectively.
The projections cover a period of five years, as the Company believes this to be the most appropriate
time scale over which to review and consider annual performances before applying a fixed terminal value
multiple to the final year cash flows. The growth rates used to estimate future performance are based on the
estimates from past performance. Segmental margins are based on FY 2018-19 performance. Weighted Average Cost
of Capital % (WACC) = Risk free return ( Market risk premium x Beta for the Company).
The Company has performed sensitivity analysis around the base assumptions and has concluded that no
reasonable change in key assumptions would result in the recoverable amount of the CGU to be less than the
carrying value.
INVESTMENT IN ASSOCIATE
The Company holds 24% of equity in Comfund Consulting Limited and 26% equity and preference capital in
Aquagel Chemicals (Bhavnagar) Private Limited. The Company does not exercise significant influence or control
on decisions of the investee. Hence, they are not being construed as associate companies.
(a) Finished goods includes good purchased for re-sale, as both are stocked together.
(b) During FY 2018-19 an amount of Rs. 132 crores (31st March, 2018: Rs. 165 crores) was charged to
the Statement of Profit and Loss on account of damaged and slow moving inventory. The reversal on account of
above during the year amounted to Nil (31st March, 2018: Nil).
b) Rights, preferences and restrictions attached to shares
Equity shares: The Company has one class of equity shares having a par value of Rs. 1 per share. Each
shareholder is eligible for one vote per share held. In the event of liquidation, the equity shareholders are
eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in
proportion to their shareholding. The dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.
B. Nature and purpose of reserves
(a) Capital Reserve: During amalgamation, the excess of net assets acquired, over the cost of
consideration paid is treated as capital reserve.
(b) Capital Redemption Reserve: The Company has recognised Capital Redemption Reserve on buyback of
equity shares from its retained earnings. The amount in Capital Redemption Reserve is equal to nominal amount
of the equity shares bought back.
(c) Securities Premium : The amount received in excess of face value of the equity shares is
recognised in Securities Premium. In case of equity-settled share based payment transactions, the difference
between fair value on grant date and nominal value of share is accounted as securities premium
(d) Employee Stock Options Outstanding Account: The fair value of the equity-settled share based
payment transactions is recognised in Statement of Profit and Loss with corresponding credit to Employee
Stock Options Outstanding Account.
(e) General Reserve: The Company had transferred a portion of the net profit of the Company before
declaring dividend to general reserve pursuant to the earlier provisions of Companies Act, 1956. Mandatory
transfer to general reserve is not required under the Companies Act, 2013. During the year the Company has
reclassified the amount standing to the credit of the General Reserves to the Retained Earnings subsequent to
approval by Hon’ble National Company Law Tribunal on Scheme of arrangement.
(f) Retained Earnings: Retained earnings are the profits that the Company has earned till date, less
any transfers to general reserve, dividends or other distributions paid to shareholders.
(g) Other Reserves: The Company has recognised Other Reserves on amalgamation of Brooke Bond Lipton
India Limited as per statutory requirements. This reserve is not available for capitalisation/declaration of
dividend/ share buy-back. Further it also includes capital subsidy and revaluation reserve.
(h) Items of Other Comprehensive Income
i) Remeasurements of Net Defined Benefit Plans: Differences between the interest income on plan assets
and the return actually achieved, and any changes in the liabilities over the year due to changes in actuarial
assumptions or experience adjustments within the plans, are recognised in ‘Other comprehensive
income’ and subsequently not reclassified to the Statement of Profit and Loss.
ii) Debt Instruments through Other Comprehensive Income: The fair value change of the debt instruments
measured at fair value through other comprehensive income is recognised in Debt instruments through Other
Comprehensive Income. Upon derecognition, the cumulative fair value changes on the said instruments are
reclassified to the Statement of Profit and Loss.
C. Other Comprehensive Income accumulated in Other Equity, net of tax
The disaggregation of changes in other comprehensive income by each type of reserve in equity is shown
below:
D Capital Management
Equity share capital and other equity are considered for the purpose of Company’s capital
management.
The Company manages its capital so as to safeguard its ability to continue as a going concern and to
optimise returns to shareholders. The capital structure of the Company is based on management’s
judgement of its strategic and day-to-day needs with a focus on total equity so as to maintain investor,
creditors and market confidence.
The management and the Board of Directors monitor the return on capital as well as the level of dividends
to shareholders. The Company may take appropriate steps in order to maintain, or if necessary adjust, its
capital structure.
(i) It is not practicable for the Company to estimate the timings of cash outflows, if any, in respect
of the above pending resolution of the respective proceedings as it is determinable only on receipt of
judgements/decisions pending with various forums/ authorities.
(ii) The Company does not expect any reimbursements in respect of the above contingent
liabilities.
(iii) The Company’s pending litigations comprise of claims against the Company by employees and
pertaining to proceedings pending with various direct tax, indirect tax and other authorities. The Company
has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are
required and disclosed as contingent liabilities where applicable, in its financial statements. The Company
does not expect the outcome of these proceedings to have a materially adverse effect on its financial
statements.
(iv) The Company has given Bank Guarantees in respect of certain contingent liabilities included
above.
(v) There has been a Supreme Court (SC) judgement dated 28th February 2019, relating to components of
salary structure that need to be taken into account while computing the contribution to provident fund under
the EPF Act. There are interpretative aspects related to the Judgement including the effective date of
application. The Company will continue to assess any further developments in this matter for the implications
on financial statements, if any.
B COMMITMENTS
i) Operating lease commitments
The Company’s significant leasing arrangements are in respect of operating leases for premises
(residential, office, stores, godown etc.) and computers. These leasing arrangements which are cancellable
(other than those specified below), range between 11 months and 10 years generally, or longer, and are
usually renewable by mutual consent on mutually agreeable terms. The aggregate lease rentals payable are
charged as rent in the Statement of Profit and Loss.
The Company has entered into agreement to take certain land and building on operating lease for
warehousing activities from a third party. The lease arrangement is for 10 years, including a non-cancellable
term of 9 years. The lease rent of Rs. 13 crores (201718: Rs. 13 crores) on such lease is included in Other
expenses.
(c) The Company has spent Rs. 126 crores (2017-18: Rs. 116 crores) towards various schemes of Corporate
Social Responsibility as prescribed under section 135 of the Companies Act, 2013. The details are:
I. Gross amount required to be spent by the Company during the year: Rs. 124 crores (2017-18: Rs. 112
crores)
II. Amount spent during the year on:
III. Above includes a contribution of Rs. 8 crores (2017-18: Rs. 32 crores) to Hindustan Unilever
Foundation, a subsidiary registered under Section 8 of the Companies Act, 2013, with the main objectives of
working in the areas of social, economic and environmental issues such as water harvesting, health and
hygiene awareness, women empowerment and enable the less privileged segments of the society to improve their
livelihood by enhancing their means and capabilities to meet the emerging opportunities.
IV. The Company does not carry any provisions for Corporate social responsibility expenses for current
year and previous year.
Proposed dividend on equity shares is subject to the approval of the shareholders of the Company at the
Annual General Meeting and not recognised as liability as at the Balance Sheet date.
“Dividend Distribution Tax (DDT)-net, pertaining to the current year comprises credit in respect of
tax paid under section 115 O of the Income-tax Act, 1961 by the Company on dividend received from its
subsidiaries.
NOTE 3 : FINANCIAL INSTRUMENTS
Refer Note 2.4 (g) for accounting policy on Financial Instruments.
A ACCOUNTING CLASSIFICATIONS AND FAIR VALUES
The carrying amounts and fair values of financial instruments by class are as follows:
The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances,
trade receivables, receivables from group companies, trade payables and unpaid dividends at carrying value
because their carrying amounts are a reasonable approximation of the fair values due to their short term
nature.
B INCOME, EXPENSES, GAINS OR LOSSES ON FINANCIAL INSTRUMENTS
Interest income and expenses, gains or losses recognised on financial assets and liabilities in the
Statement of Profit and Loss are as follows:
C FAIR VALUE HIERARCHY
The fair value of financial instruments as referred to in note (A) above have been classified into three
categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority
to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest
priority to unobservable inputs (Level 3 measurements).
The categories used are as follows:
- Level 1: Quoted prices for identical instruments in an active market;
- Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs; and
CALCULATION OF FAIR VALUES
The fair values of the financial assets and liabilities are defined as the price that would be received
on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used
for the year ended 31st March, 2018.
Financial assets and liabilities measured at fair value as at Balance Sheet date:
1. The fair values of investment in treasury bills and quoted investment in equity shares is based on
the current bid price of respective investment as at the Balance Sheet date.
2. The fair values of investments in mutual fund units is based on the net asset value
(‘NAV’) as stated by the issuers of these mutual fund units in the published statements as at
Balance Sheet date. NAV represents the price at which the issuer will issue further units of mutual fund and
the price at which issuers will redeem such units from the investors.
3. The fair values of the derivative financial instruments has been determined using valuation
techniques with market observable inputs. The models incorporate various inputs including the credit quality
of counter-parties and foreign exchange forward rates.
Other financial assets and liabilities
- Cash and cash equivalents, trade receivables, investments in term deposits, other financial assets
(except derivative financial instruments), trade payables, and other financial liabilities (except derivative
financial instruments) have fair values that approximate to their carrying amounts due to their short-term
nature.
- Loans have fair values that approximate to their carrying amounts as it is based on the net present
value of the anticipated future cash flows using rates currently available for debt on similar terms, credit
risk and remaining maturities.
NOTE 4 : FINANCIAL RISK MANAGEMENT
The Company’s business activities are exposed to a variety of financial risks, namely liquidity
risk, market risks and credit risk. The Company’s senior management has the overall responsibility for
establishing and governing the Company’s risk management framework. The Company has constituted a Risk
Management Committee, which is responsible for developing and monitoring the Company’s risk management
policies. The Company’s risk management policies are established to identify and analyse the risks
faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the
changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating
actions are also placed before the Audit Committee of the Company.
A MANAGEMENT OF LIQUIDITY RISK
Liquidity risk is the risk that the Company will face in meeting its obligations associated with its
financial liabilities. The Company’s approach in managing liquidity is to ensure that it will have
sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this,
management considers both normal and stressed conditions.
The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year
ended 31st March, 2019 and 31st March, 2018. Cash flow from operating activities provides the funds to
service the financial liabilities on a day-to-day basis.
The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going
basis to meet operational needs. Any short term surplus cash generated , over and above the amount required
for working capital management and other operational requirements, is retained as cash and cash equivalents
(to the extent required) and any excess is invested in interest bearing term deposits and other highly
marketable debt investments with appropriate maturities to optimise the cash returns on investments while
ensuring sufficient liquidity to meet its liabilities.
The following table shows the maturity analysis of the Company’s financial liabilities based on
contractually agreed undiscounted cash flows along with its carrying value as at the Balance Sheet date.
B MANAGEMENT OF MARKET RISK
The Company’s size and operations result in it being exposed to the following market risks that
arise from its use of financial instruments::
- current risk;
- price risk; and
- interest rate risk
The above risks may affect the Company’s income and expenses, or the value of its financial
instruments. The Company’s exposure to and management of these risks are explained below.
C MANAGEMENT OF CREDIT RISK
Credit risk is the risk of financial loss to the Company if a customer or counter-party fails to meet its
contractual obligations.
Trade receivables
Concentration of credit risk with respect to trade receivables are limited, due to the Company’s
customer base being large and diverse. All trade receivables are reviewed and assessed for default on a
quarterly basis.
Our historical experience of collecting receivables indicate a low credit risk. Hence, trade receivables
are considered to be a single class of financial assets.
Refer note 2.4(g) for accounting policy on Financial Instruments.
Other financial assets
The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments in
treasury bills, government securities, money market liquid mutual funds and derivative instrument with
financial institutions. The Company has set counter-party limits based on multiple factors including
financial position, credit rating, etc. The Company has given intercorporate deposits (ICD) only to its
subsidiaries amounting Rs. 191 crores (31st March, 2018: Rs. 226 crores).
The Company’s maximum exposure to credit risk as at 31st March, 2019 and 31st March, 2018 is the
carrying value of each class of financial assets.
NOTE 5 : DEFINED BENEFIT PLANS
Refer note 2.4(l) for accounting policy on Employee Benefits.
Description of Plans
Retirement Benefit Plans of the Company include Gratuity, Management Pension, Officer’s Pension and
Provident Fund. Other post-employment benefit plans includes post retirement medical benefits.
Gratuity is funded through investments mostly with an insurance service provider and partly through
direct investment under Hind Lever Gratuity Fund. Pension (Management Pension and Officer’s Pension)
for most employees is managed through a trust, investments with an insurance service provider and for some
employees investments are managed through Company managed trust. Provident Fund for most of the employees are
managed through trust investments and for some employees through government administered fund. Post-retirement
medical benefits are managed through investment made under Company managed trust.
Governance
The trustees of the trust fund are responsible for the overall governance of the plan and to act in
accordance with the provisions of the trust deed and rules in the best interests of the plan participants.
They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term
investment, risk management and funding strategy.
Investment Strategy
The Company’s investment strategy in respect of its funded plans is implemented within the
framework of the applicable statutory requirements. The plans expose the Company to a number of actuarial
risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has
developed policy guidelines for the allocation of assets to different classes with the objective of
controlling risk and maintaining the right balance between risk and long-term returns in order to limit the
cost to the Company of the benefits provided. To achieve this, investments are well diversified, such that
the failure of any single investment would not have a material impact on the overall level of assets.
A. Balance Sheet
The assets, liabilities and surplus/(deficit) position of the defined benefit plans at the Balance Sheet
date were:
None of the plans invest directly in any property occupied by the Company or any financial securities
issued by the Company.
E. Assumptions
With the objective of presenting the plan assets and plan obligations of the defined benefits plans at
their fair value on the Balance Sheet, assumptions under Ind AS 19 are set by reference to market conditions
at the valuation date.
The estimates of future salary increases, considered in actuarial valuation, takes into account of
inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment
market.
Demographic Assumptions
Mortality in Service: Indian Assured Lives Mortality (2012-14) Ultimate table
Mortality in Retirement: LIC Buy-out Annuity Rates & UK published S1PA mortality table adjusted for
Indian lives.
F. Sensitivity Analysis
The sensitivity of the overall plan obligations to changes in the weighted key assumptions are:
The above sensitivity analysis have been determined based on reasonable possible changes of the
respective assumptions occurring at the end of the year and may not be representative of the actual change.
It is based on a change in the key assumption while holding all other assumptions constant. When calculating
the sensitivity to the assumption, the same method is used to calculate the liability recognised in the
Balance Sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change
compared to the previous year.
NOTE 6 : SHARE BASED PAYMENTS
Refer note 2.4(l) for accounting policy on Share Based Payments.
EQUITY SETTLED SHARE BASED PAYMENTS
The members of the Company had approved Rs. 2001 HLL Stock Option Plan’ at the Annual General
Meeting held on 22nd June, 2001. The plan envisaged grant of share options to eligible employees at market
price as defined in Securities and Exchange Board of India (Share Based Employee Benefits) Regulations,
2014.
This plan was amended and revised vide Rs. 2006 HLL Performance Share Scheme’ at the Annual General
Meeting held on 29th May, 2006. This scheme provided for conditional grant of Performance Shares at nominal
value to eligible management employees as determined by the Compensation Committee of the Board of Directors
from time to time, at the end of 3-year performance period. The performance measures under this scheme
include group underlying sales growth and free cash flow. The scheme also provided for ‘Par’
Awards for the managers at different work levels.
The 2006 scheme was further amended and revised vide Rs. 2012 HUL Performance Share Scheme’ at the
Annual General Meeting held on 23rd July, 2012. This scheme provided for conditional grant of Performance
Shares at nominal value to eligible management employees as determined by the Nomination and Remuneration
Committee of the Board of Directors from time to time, at the end of 3-year performance period. The
performance measures under this scheme include group underlying sales growth, core operating margin
improvement and operating cash flow.
The number of shares allocated for allotment under the 2006 and 2012 Performance Share Schemes is
2,00,00,000 (two crores) equity shares of Rs. 1/- each. The schemes are monitored and supervised by the
Nomination and Remuneration Committee of the Board of Directors in compliance with the provisions of
Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and amendments
thereof from time to time.
The Employee Stock Option Plan includes employees of Hindustan Unilever Limited, its subsidiaries and a
subsidiary of parent company.
The risk free interest rates are determined based on the zero-coupon sovereign bond yields with maturity
equal to the expected term of the option. Volatility calculation is based on historical stock prices using
standard deviation of daily change in stock price. The historical period is taken into account to match the
expected life of the option. Dividend yield has been calculated taking into account expected rate of dividend
on equity share price as on grant date.
CASH SETTLED SHARE BASED PAYMENTS
The employees of the Company are eligible for Unilever PLC (the ‘Holding Company’) share
awards namely, the Management CoInvestment Plan (MCIP), the Global Performance Share Plan (GPSP) and the
SHARES Plan. The MCIP allows eligible employees to invest up to 100% of their annual bonus in the shares of
the Holding Company and to receive a corresponding award of performance-related shares. Under GPSP, eligible
employees receive annual awards of the holding company’s shares. The awards under MCIP and GPSP plans
will vest after 3-4 years between 0% and 150% of grant level, depending on the acheivement of the performance
metrics. The performance metrics of GPSP are underlying sales growth, operating cash flow and core operating
margin improvement. The performance metrics of MCIP are underlying sales growth, underlying EPS growth and
sustainability progress index. Under the SHARES Plan, eligible employees can invest upto Rs. 16,897 per month
in the shares of the Holding Company and after three years one share is granted free of cost to the employees
for every three shares invested, provided they hold the shares bought for three years. The Holding Company
charges the Company for the grant of shares to the Company’s employees at the end of the 3/4 years
based on the market value of the shares on the exercise date. The Company recognises the fair value of the
liability and expense for these plans over the vesting period based on the management’s estimate of the
vesting and forfeiture conditions.
The Company grants share appreciation rights (SARs) to eligible employees for all cash settled share
based plans mentioned above that entitles them to a cash/shares after three years of service. The amount of
payment is also determined basis increase in the share price of the Holding Company between grant date and
the time of exercise.
NOTE 7 : BUSINESS COMBINATION
Refer note 2.4(r) for accounting policy on Business Combination.
Acquisition of Indulekha Brand
On April 07, 2016, the Company completed the acquisition of the flagship brand ‘Indulekha’
from Mosons Extractions Private Limited (‘MEPL’) and Mosons Enterprises (collectively referred to
as ‘Mosons’ and acquisition of the specified intangible assets referred to as the ‘Business
acquisition’). The deal envisaged the acquisition of the trademarks ‘Indulekha’ and
‘Vayodha’, intellectual property, design and knowhow for a total cash consideration of Rs. 330
crores and a deferred consideration of 10% of the domestic turnover of the brands each year, payable annually
for a 5 year period commencing financial year 2018-19.
Basis the projection of the domestic turnover of the brand, the contingent consideration is subject to
revision on a yearly basis. As at 31st March 2018, the fair value of the contingent consideration was Rs. 104
crores which was classified as other financial liability.
Deferred contingent consideration
Based on actual performance in financial year 2018-19 and current view of future projections for the
brand, the Company has reviewed and fair valued the deferred contingent consideration so payable. As at 31st
March 2019, the fair value of the contingent consideration is Rs. 157 crores which is classified as other
financial liability.
The determination of the fair value as at Balance Sheet date is based on discounted cash flow method. The
key inputs used in determining the fair value of deferred contingent consideration were domestic turnover
projections of the brand and weighted average cost of capital.
Acquistion of Adityaa Milk Brand
On September 26, 2018, the Company completed the acquisition of the brand ‘ Adityaa Milk’ and
its front-end distribution network from Vijaykant Dairy and Food Products Limited [VDFPL]. The deal comprised
the acquisiton of the brand ‘ Adityaa Milk’, customer relationship, technical know-how, Property,
Plant and Equipment, working capital and other intangible assets for a total consideration of Rs. 65 crores
and a deferred consideration of Rs. 18 crores. The transaction is accounted as business combination under Ind
AS 103
The acquisition is in line with the Company’s strategic intent to strengthen its leadership
position in the rapidly growing Ice Cream and Frozen Dessert market in India. ‘Adityaa Milk’
brings to the Company, a premium brand with strong credentials around dairy and dairy-based product that will
complement its existing portfolio.
Deferred contingent consideration
The Contingent consideration is payable after 3 year from acquisition date and accrodignly recognised at
fair value of Rs. 18 crores. Determination of the fair value as at balance sheet date is based on discounted
cash flow method. Contingent consideration is arrived basis weighted average probability approach of
achieving various financial and non financial performance targets
Assets acquired and liabilities assumed:
The fair values of identifiable assets acquired and liabilities assumed as at the date of acquisition
were:
Acquisition-related costs
In addition to cash consideration mentioned above, acquisition- related costs of Rs. 0 crore paid towards
transfer of assets are included in ‘Exceptional items’ in the Statement of Profit and Loss.
Impact of acquisition on the results
The acquired business contributed revenue of Rs. 31 crores and loss (before tax) of Rs. 12 crores for the
year ended 31st March, 2019 including one time integration costs.
NOTE 8 : RELATED PARTY DISCLOSURES
A. Enterprises exercising control
(i) Holding Company : Unileer P!c
B. Enterprises where control exists
(i) Subsidiaries : Unilever India Exports Limited (100%)
(Extent of holding) Lakme Lever Private Limited (100%)
Unilever Nepal Limited (80%)
Pond’s Exports Limited (90%)
Daverashola Estates Private Limited (100%)
Jamnagar Properties Private Limited (100%)
Bhavishya Alliance Child Nutrition Initiatives (100%) (Section 8 Company) Hindustan Unilever Foundation
(76%) (Section 8 Company)
Hindlever Trust Limited (100%)
Levers Associated Trust Limited (100%)
Levindra Trust Limited (100%)
(ii) Trust : Hindustan Unilever Limited Securitisation of Retirement Benefit Trust (100%
control)
(iii) Joint Ventures : Kimberly Clark Lever Private Limited (50% control, ceases to be Joint
venture after 29th September, 2017)
Terms and conditions of transactions with related parties
All Related Party Transactions entered during the year were in ordinary course of the business and are on
arm’s length basis.
For the year ended 31st March, 2019, the Company has not recorded any impairment of receivables relating
to amounts owed by related parties (2017-18: Nil). This assessment is undertaken each financial year through
examining the financial position of the related party and the market in which the related party operates.
NOTE 9:
The Company has a process whereby periodically all long-term contracts (including derivative contracts)
are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that
adequate provision as required under any law/ accounting standards for material foreseeable losses on such
long-term contracts (including derivative contracts) has been made in the books of accounts.
NOTE 10 :
The Company has disclosed segment information in the consolidated financial statements which are
presented in the same financial report. Accordingly, in terms of Paragraph 3 of Ind AS 108 ‘Operating
Segments’, no disclosures related to segments are presented in this standalone financial
statements.
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