Mar 31, 2023
Financial Review |
||||
Results |
(? in crores) |
|||
For the year ended |
For the year ended |
|||
31st March, 2023 |
31st March, 2022 |
|||
Turnover |
58,154 |
50,336 |
||
EBITDA |
13,632 |
12,503 |
||
Profit before exceptional items and tax |
13,141 |
11,773 |
||
Profit for the year |
9,962 |
8,818 |
||
Division Wise Turnover |
(? in crores) |
|||
For the year ended 31st March, 2023 |
For the year ended 31st March, 2022 |
|||
Sales |
Others* |
Sales |
Others* |
|
Home Care |
21,103 |
127 |
16,470 |
108 |
Beauty & Personal Care |
21,498 |
333 |
19,157 |
303 |
Foods and Refreshments |
14,744 |
132 |
14,020 |
85 |
Others (including Exports and consignment sales) |
810 |
397 |
689 |
361 |
Total |
58,154 |
990 |
50,336 |
857 |
* Others include service income from operations, relevant to the respective businesses. |
||||
Summarised Profit and Loss Account |
(? in crores) |
|||
For the year ended |
For the year ended |
|||
31st March, 2023 |
31st March, 2022 |
|||
Turnover |
58,154 |
50,336 |
||
Other operational income |
990 |
857 |
||
Total Revenue from operations |
59,144 |
51,193 |
||
Operating Costs |
45,512 |
38,690 |
||
Profit Before Depreciation, Interest, Tax (PBDIT) |
13,632 |
12,503 |
||
Depreciation |
1,030 |
1,025 |
||
Profit Before Interest & Tax (PBIT) |
12,602 |
11,478 |
||
Other Income (net) |
539 |
295 |
||
Profit before exceptional items |
13,141 |
11,773 |
||
Exceptional items |
(62) |
(34) |
||
Profit Before Tax (PBT) |
13,079 |
11,739 |
||
Taxation |
3,117 |
2,921 |
||
Profit for the year |
9,962 |
8,818 |
||
Basic EPS (?) |
42.40 |
37.53 |
||
Key Financial Ratios |
2022-23 |
2021-22 |
||
Return on Net Worth (%) |
20.1 |
18.6 |
||
Return on Capital Employed (%) |
101.9 |
107.8 |
||
Basic Earnings Per Share (EPS) (?) |
42.40 |
37.53 |
||
Debtors Turnover (no. of times) |
24.9 |
28.1 |
||
Inventory Turnover (no. of times) |
14.7 |
13.8 |
||
Interest Coverage Ratio |
143.9 |
129.2 |
||
Debt Service Coverage Ratio |
21.8 |
21.4 |
||
Current Ratio |
1.4 |
1.3 |
||
Debt Equity Ratio |
0.0 |
0.0 |
||
Operating Profit Margin (%) |
21.7 |
22.8 |
||
Net Profit Margin (%) |
17.1 |
17.5 |
||
Increase in Return on Net Worth is led by PAT growth |
||||
There is no significant change (i.e. change of 25% or more as compared to the FY 2021 -22) |
in the other key financial ratios. |
What does EVA show?
EVA is residual income after charging the company for the cost of capital provided by lenders and Shareholders. It represents the value added to the Shareholders by generating operating profits in excess of the cost of capital employed in the business.
When will EVA increase?
EVA will increase if:
a. Operating profits can be made to grow without employing more capital, i.e. greater efficiency.
b. Additional capital''s invested in projects that return more than the cost of obtaining new capital, i.e. profitable growth.
c. Capital is curtailed in activities that do not cover the cost of capital, i.e liquidate unproductive capital.
EVA in practice at Hindustan Unilever Limited (HUL)
In Hindustan Unilever Limited, the goal of sustainable long term value creation for our shareholders is well understood by all the business groups. Measures to evaluate business performance and to set targets take into account this concept of value creation.
Other Financial Disclosures
There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year (FY) to which this financial statement relates on the date of this Integrated Annual Report.
During the Financial Year, there was no amount proposed to be transferred to the Reserves.
Capital Expenditure (including Intangible Assets) during the financial year was at ?1,042 crores (?919 crores in the previous financial year).
Explanation to Key Financial Ratios
(i) Return on Net Worth (%)
Return on Net Worth is a measure of profitability of a company expressed in percentage. It is calculated by dividing total comprehensive income by average shareholder''s equity.
(ii) Return on Capital Employed (%)
Return on Capital Employed indicates the ability of a company''s management to generate returns for both the debt holders and the equity holders. It measures a Company''s profitability and the efficiency with which its capital is used. It is calculated by dividing profit before exceptional items, interest and tax by capital employed. Capital Employed = tangible net worth total debt deferred tax liability.
(iii) Basic EPS
EPS is the portion of a company''s profit allocated to each share. It serves as an indicator of a Company''s profitability. It is calculated by dividing profit for the year by weighted average number of shares outstanding during the year.
(iv) Debtors Turnover
Debtors Turnover measures the efficiency at which the firm is managing the receivables. The ratio shows how well a company uses and manages the credit it extends to customers and how quickly that short-term debt is collected or is paid. It is calculated by dividing turnover by average trade receivables.
(v) Inventory Turnover
Inventory Turnover measures the efficiency with which a company utilises or manages its inventory. It establishes the relationship between sales and average inventory held during the period. It is calculated by dividing turnover by average inventory.
(vi) Interest Coverage Ratio
Interest Coverage Ratio measures how many times a company can cover its current interest payment with its available earnings. It is calculated by dividing earnings available for debt service by interest payments.
(vii) Debt Service Coverage Ratio
Debt Service Coverage Ratio is used to analyse the firm''s ability to pay-off current interest and instalments. It is calculated by dividing earnings available for debt service by debt service.
(viii) Current Ratio
The Current Ratio indicates a company''s overall liquidity position. It measures a company''s ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.
(ix) Debt Equity Ratio
Debt Equity ratio is used to evaluate a company''s financial leverage. It is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. It is calculated by dividing total debt by shareholder''s equity.
(x) Operating Profit Margin (%)
Operating Profit Margin is used to calculate the percentage of profit a company produces from its operations. It is calculated by dividing earnings before interest and tax by turnover.
(xi) Net Profit Margin (%)
The Net Profit Margin is equal to how much net profit is generated as a percentage of revenue. It is calculated by dividing net profit by turnover.
What is EVA ?
Traditional approaches to measuring Shareholder''s Value Creation have used parameters such as earnings capitalisation, market capitalisation and present value of estimated future cash flows. Extensive equity research has established that it is not earnings per se, but VALUE that is important. A measure called ''Economic Value Added'' (EVA) is increasingly being applied to understand and evaluate financial performance.
EVA = Net Operating Profit after Taxes (NOPAT) - Cost of Capital Employed (COCE), where
NOPAT = Profits after depreciation and taxes but before interest costs. NOPAT thus represents the total pool of profits available on an ungeared basis to provide a return to lenders and shareholders
COCE = Weighted Average Cost of Capital (WACC) x Average Capital Employed.
Cost of Debt is taken at the effective rate of interest applicable to an ''AAA'' rated Company like HUL for a short-term debt, net of taxes. We have considered a pre tax rate of 7.85%.
Cost of Equity is the return expected by the investors to compensate them for the variability in returns caused by fluctuating earnings and share prices.
Cost of Equity = Risk free return equivalent to yield on long term Government Bonds Market risk premium (x) Beta variant for the Company, where Beta is a relative measure of risk associated with the Company''s shares as against the market as a whole. Thus HUL''s cost of equity = 10.90%.
IGAAP |
IND AS |
(? in crores) |
|||||||||
2013 14 |
2014 15 |
2015 16 |
2016 17 |
2017 18 |
2018 19 |
2019 20 |
2020 21 |
2021 22 |
2022-23 |
||
Cost of Capital Employed (COCE) |
|||||||||||
1. |
Average Debt |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
2. |
Average Equity |
3,715 |
4,338 |
5,664 |
5,831 |
6,181 |
6,668 |
7,227 |
46,890 |
47,156 |
48,486 |
3. |
Average Capital Employed : (1) (2) |
3,715 |
4,338 |
5,664 |
5,831 |
6,181 |
6,668 |
7,227 |
46,890 |
47,156 |
48,486 |
4. |
Cost of Debt, post-tax % |
6.36 |
5.56 |
5.43 |
4.90 |
5.21 |
5.77 |
5.25 |
4.70 |
4.81 |
5.87 |
5. |
Cost of Equity % |
11.62 |
10.91 |
11.98 |
12.25 |
14.19 |
11.84 |
9.11 |
8.86 |
9.09 |
10.90 |
6. |
Weighted Average Cost of Capital % (WACC) |
11.62 |
10.91 |
11.98 |
12.25 |
14.19 |
11.84 |
9.11 |
8.86 |
9.09 |
10.90 |
7. |
COCE : (3) x (6) |
432 |
474 |
679 |
714 |
877 |
789 |
658 |
4,153 |
4,289 |
5,285 |
Economic Value Added (EVA) |
|||||||||||
8. |
Profit after tax, before exceptional items |
3,555 |
3,843 |
4,116 |
4,247 |
5,135 |
6,080 |
6,743 |
7,963 |
8,724 |
9,720 |
9. |
Add : Interest, after taxes |
24 |
11 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
10. |
Net Operating Profits After Taxes (NOPAT) |
3,579 |
3,854 |
4,117 |
4,247 |
5,135 |
6,080 |
6,743 |
7,963 |
8,724 |
9,720 |
11. |
COCE, as per (7) above |
432 |
474 |
679 |
714 |
877 |
789 |
658 |
4,153 |
4,289 |
5,285 |
12. |
EVA : (10) - (11) |
3,147 |
3,380 |
3,438 |
3,533 |
4,258 |
5,291 |
6,085 |
3,810 |
4,435 |
4,435 |
During the Financial Year, the Company did not accept any public deposits as defined under Chapter V of the Companies Act, 2013 (the Act).
The Company manages cash and cash flow processes assiduously, involving all parts of the business. There was cash and bank balance of ?4,422 crores (FY 2021-22: ?3,618 crores), as on 31st March, 2023. The Company''s low debt equity ratio provides ample scope for gearing the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company''s imports and exports. The Company accounts for mark-to-market
gains or Losses every quarter end, are in Line with the requirements of Ind AS 21.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The details of Foreign Exchange Earnings and Outgo as required under Section 134 of the Act and Rule 8(3) of Companies (Accounts) Rules, 2014 are mentioned below:
Forthe |
in crores) For the |
|
year ended |
year ended |
|
31st March, 2023 |
31st March, 2022 |
|
Foreign Exchange Earnings |
1,574 |
1,527 |
Foreign Exchange Outgo |
3,695 |
3,131 |
Includes all Indian subsidiaries, excludes Unilever NepaL Limited.
The summary of performance of subsidiaries is provided beLow:
Unilever India Exports Limited
Unilever India Exports Limited is a wholly owned subsidiary of the Company and is engaged in Fast Moving Consumer Goods (FMCG) exports business. The focus of the FMCG exports operation is two-fold: to expand global presence of brands, such as Vaseline, Dove, Pears, Bru, Red Label, Lakme, HorLicks and Boost, and to effectively provide cross-border sourcing of FMCG products to other Unilever companies across the world.
The top Line growth of the company was driven by growth in Skin Care, Health Food Drinks, Instant Tea and Personal Wash Brands Like Dove, HorLicks, Vaseline, Pears, SunsiLk, Glow and LoveLy, Ponds, Lipton Hot Instant Tea, Lakme and Lifebuoy. These brands have registered heaLthy growth in the focused markets.
Lakme Lever Private Limited is a whoLLy owned subsidiary of the Company and is engaged in SaLon business and aLso operates a manufacturing unit at Gandhidham which carries out job work operations for the Company by manufacturing toiLet soaps, bathing bars and detergent bars.
The company deLivered robust top Line and bottom Line growth Led by recovery in the saLon business. With focus on safety, quaLity of operations, expert treatments and prudent cost optimisation, the saLon business continues to perform weLL in the beauty services category. Job work business continued to do weLL.
The company has over 450 owned / managed and franchisee saLons. At Lakme SaLon, safety and weLLbeing of our consumers and experts have aLways been the topmost priority. The company has emerged stronger post the pandemic by strengthening safety, quaLity and expertise across aLL touch points in our customer journey. The extended team comprising the housekeeping staff, experts,
saLon managers and business partners have been trained and audited continuousLy to ensure compLete adherence to protocoLs. The company aLso diaLed up expertise by continued investment in training. This has heLped maintain the company''s Net Promoter Score at 90% pLus by ensuring safety and keeping customer satisfaction as focus.
Innovations Like QuintessentiaL bridaL Looks, Luxury body treatments, Cappuccino pedicure/manicure spa and our signature Beautysutra range added excitement to our comprehensive Runway secrets portfoLio. Thematic campaigns - Good Hair Day, Happy New You and Skin Investment PLan heLped gain new cLients and sustain existing ones. Lakme SaLon continues to be a highLy preferred option for franchisees in the beauty and weLLness category attracting severaL professionaLs and entrepreneurs to own their Lakme SaLon.
Hindustan UniLever Foundation (HUF) is a not-for-profit company that anchors water management reLated community deveLopment and sustainabiLity initiatives of the Company.
The company operates the ''Water for PubLic Good'' programme, with a specific focus on water conservation, buiLding LocaL community institutions to govern water resources and enhancing farm-based LiveLihoods through adoption of judicious water practices. It aims to cataLyse effective soLutions to India''s water chaLLenges through a partnership approach invoLving the Government, communities, experts and mission-based organisations.
The company partners with non-profit organisations in water-stressed regions across the country to support ruraL communities with water conservation and regenerative agricuLturaL practices amongst farmers. The initiative has deLivered a cumuLative and coLLective water potentiaL of over 2.6 triLLion Litres through improved suppLy and demand water management, over 1.7 miLLion tonnes of additionaL agricuLturaL and biomass production, and over 110 miLLion person-days of empLoyment due to project interventions.â TiLL now, HUF''s programmes have reached more than 14,000 viLLages in 13 States and 2 Union Territories.
UniLever NepaL Limited is a subsidiary of the Company and is engaged in marketing and manufacturing detergents, toiLet soaps, personaL products and Laundry soaps in NepaL.
The company deLivered strong doubLe-digit growth with high singLe digit voLume growth. Growth was competitive, supported by LocaLisation and a step up in brand and marketing investments. Recovering from the impact caused by the pandemic, the NepaL economy condition remained chaLLenging with acute Liquidity, rising infLation and pressure on foreign reserves. Despite a chaLLenging environment, the company has demonstrated resiLience and agiLity to deLiver a strong aLL-round performance. The company continue to manage our business dynamicaLLy by driving savings harder across aLL Lines of P&L, ensuring right
price-vaLue equation and investing competitiveLy behind our brands Leading to a heaLthy growth in profit margins.
UniLever India Limited is a whoLLy owned subsidiary of the Company that was incorporated to Leverage the growth opportunities in a fast-changing business environment. In JuLy 2022, UniLever India Limited''s new Home Care factory was inaugurated in Sumerpur, Uttar Pradesh.
The new unit, a state-of-the-art spray dried detergent factory manufactures Home Care products for the Company. It is designed to make the best use of digitaL 4th industriaL revoLution has to offer, guaranteeing worLd cLass performance in peopLe safety, product quaLity, innovation Lead times and environmentaL performance. The site''s integrated design aLLows for an ecosystem of materiaL suppLiers, Logistic operators, and manufacturing partners to be Located at the site for optimaL integration of the suppLy chain.
This unit is firmLy on its path to be UniLever''s first gender-baLanced factory in South Asia and currentLy has 170 femaLe empLoyees. It is an inspiring exampLe of the path breaking work being done to increase femaLe representation in our shop fLoors through Project Samavesh.
Zywie Ventures Private Limited
Zywie Ventures Private Limited (ZVPL) is a subsidiary of the Company engaged in the business of HeaLth and WeLLbeing products under the brand name of ''OZiva''. The Company acquired 53.34% stake (51.00% on a fuLLy diLuted basis) in ZVPL on 10th January, 2023.
OZiva is a pLant-based and cLean LabeL consumer weLLness brand focused on the need spaces such as LifestyLe Protein, Hair & Beauty SuppLements and Women''s HeaLth. OZiva is a digitaL-first brand with an omnichanneL approach, avaiLabLe on its D2C website, digitaL marketpLaces and a growing offLine presence. The company has a strong inhouse R&D team comprising Ph.D.s, Phyto-chemists and BiotechnoLogists.
The investment is in Line with the Company''s strategy to enter fast evoLving growth space of HeaLth and WeLLbeing.
Pond''s Exports Limited is a subsidiary of the Company which was engaged in Leather business and has currentLy discontinued operations.
Bhavishya Alliance Child Nutrition Initiatives is a
not-for-profit subsidiary of the Company and is under voLuntary Liquidation.
Daverashola Estates Private Limited is a subsidiary of the Company which currentLy has no business activity. There is an ongoing Litigation on the property owned by the company in TamiL Nadu.
Jamnagar Properties Private Limited is a subsidiary of the Company and currentLy has no business activity.
Levers Associated Trust Limited, Levindra Trust Limited and Hindlever Trust Limited, subsidiaries of the Company, act as trustees of the empLoyee benefits trusts of the Company.
The Scheme for Merger of Pond''s Exports Limited and Jamnagar Properties Private Limited into UniLever India Exports Limited was fiLed with the Hon''bLe NationaL Company Law TribunaL, Mumbai on 1st JuLy, 2021. As on date, the finaL order on the company petition for merger is awaited.
During the year, the Company has obtained a certificate from the Statutory Auditors certifying that the Company is in compLiance with the FEMA ReguLations with respect to the downstream investment made in Zywie Ventures Private Limited and NutritionaLab Private Limited.
OTHER STATUTORY INFORMATION Audit & Auditors Statutory Auditors
In terms of provisions of Section 139 of the Act, M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No.: 101248W/W-100022) were re-appointed as Statutory Auditors of the Company at the 86th AnnuaL GeneraL Meeting (AGM) heLd on 29th June, 2019, to hoLd office tiLL the concLusion of 91st AGM of the Company.
The Report given by the Statutory Auditors on the financiaL statements of the Company is part of this Integrated AnnuaL Report. There has been no quaLification, reservation, adverse remark or discLaimer given by the Auditors in their Report. During the year under review, the Auditors have not reported any fraud under Section 143(12) of the Act.
Secretarial Auditors
In terms of provisions of Section 204 of the Act, read with the Companies (Appointment and Remuneration of ManageriaL PersonneL) RuLes, 2014, the Board, at its Meeting heLd on 27th ApriL, 2022 had appointed M/s. S. N. Ananthasubramanian & Co., Company Secretaries (COP No. 1774) to conduct SecretariaL Audit for the FY 2022-23.
The SecretariaL Audit Report forms part of this Integrated AnnuaL Report and does not contain any quaLification, reservation or adverse remark. During the year under review, the SecretariaL Auditor has not reported any fraud under Section 143(12) of the Act.
Cost Records and Cost Audit
In terms of provisions of Section 148 of the Act read with the Companies (Accounts) RuLes, 2014, Cost Audit is appLicabLe for foLLowing businesses such as Coffee, Drugs and PharmaceuticaLs, Insecticides, MiLk Powder, Organic ChemicaLs, Other Machinery, PetroLeum Products and Tea, etc. The accounts and records for the above appLicabLe businesses are made and maintained by the Company as specified by the CentraL Government under Section 148(1) of the Act.
and salt carried out under the brands of ''Annapurna'' and ''Captain Cook'' to Uma Global Foods Pte Limited and Uma Consumer Products Private Limited, affiliates/nominees of CSAW Aqbator Pte Limited.
Particulars of Loan, Guarantee or Investments
Details of loans, guarantee or investments made by the Company under Section 186 of the Companies Act, 2013, during FY 2022-23 are appended as an Annexure to this Integrated Annual Report.
GOVERNANCE, COMPLIANCE AND BUSINESS INTEGRITY
The Legal function of the Company continues to be a valued business partner that provides solutions to protect the Company and enable it to win in the brittle, anxious, non-linear and incomprehensible environment. Through its focus on creating ''value with values'', the function provides strategic business partnership in the areas including product claims, mergers and acquisitions, legislative changes, combatting unfair competition, business integrity and governance. The function works with the growth enabler mindset.
As the markets continue to be disrupted with newer technologies and ever-evolving consumer preferences, the need to have a framework around data security and privacy is paramount. The Company continues to ensure it has an appropriate framework and safeguards for data privacy of its stakeholders with enhanced legal and security standards. The legal function of the Company continues to embrace newer technologies to make the function future ready to support the growth agenda of the business.
We are of the view that the menace of counterfeits can be effectively addressed if enforcement actions are supplemented with building awareness amongst the consumers of tomorrow. The Company continued to engage with various stakeholders including e-Commerce Channel Partners, Industry Bodies and Regulators to curb the menace of counterfeiting across channels and markets, including through the import route to the country.
The Legal function of the Company works with leading industry associations, national and regional regulators and key opinion formers to develop a progressive regulatory environment in the best interest of all stakeholders.
Business Integrity
Our principles and values apply to all our employees through our Code of Business Principles (CoBP) and Code Policies. Our employees undertake mandatory annual training on these Policies via online learning modules and sign an annual Business Integrity Pledge. Our Business Integrity governance framework includes clear processes for dealing with CoBP breaches.
During the financial year, 79 incidents were reported across all areas of our CoBP and Code Policies, with 36 confirmed breaches. During the year, we terminated employment
M/s. RA & Co., Cost Accountants (Firm Registration No. 000242) have carried out the Cost Audit for applicable businesses during the year. During the year under review, the Cost Auditor has not reported any fraud under Section 143(12) of the Act.
The Board of Directors, based on the recommendation of the Audit Committee, have appointed M/s. RA & Co., Cost Accountants as Cost Auditors for the FY 2023-24. M/s. RA & Co., being eligible, have consented to act as the Cost Auditors of the Company for the FY 2023-24. The remuneration of ?14 lakhs (Rupees Fourteen lakhs only) exclusive of taxes and out-of-pocket expenses incurred in connection with the aforesaid audit, is proposed to be paid to the Cost Auditors, subject to ratification by the Members of the Company at the ensuing AGM.
The Company has a robust Internal Financial Control framework which is established in accordance with the Committee of Sponsoring Organisation (COSO) framework. The details of Internal Financial Control framework, form a part of the Corporate Governance Report of this Integrated Annual Report.
Employee Stock Option Plan (ESOP)
Pursuant to the approval of the Members at the AGM held on 23rd July, 2012, the Company adopted the ''2012 HUL Performance Share Scheme''. In accordance with the terms of the Performance Share Scheme, employees are eligible for award of conditional rights to receive equity shares of the Company at the face value of ?1/- each. These awards will vest only on the achievement of certain performance criteria measured over a period of three years. The Company confirms that the 2012 HUL Performance Share Scheme complies with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014.
No shares were awarded to employees under the ''2012 HUL Performance Share Scheme'' during the FY 2022-23.â
The employees of the Company are eligible for Unilever share award plans, namely Performance Share Plan (PSP) and the SHARES plan. Through PSP, all managers are eligible to receive a conditional grant of Unilever shares on an annual basis. The Target PSP share award is equivalent to 50% of the Target Bonus for Managers and 100% of the Target Bonus for Senior Leaders. The actual share grant is determined by the line manager basis the employees'' sustained impact, leadership and future-fit talent profile. These shares vest after a 3 year period with vesting being determined by Company performance against metrics.
Under the SHARES Plan, eligible employees can invest in the shares of Unilever PLC (Holding Company) up to a specified amount and after three years, one share is granted to the employees for every three shares invested, subject to the fulfilment of conditions of the plan. The Holding Company charges the Company for the grant of shares to the Company''s employees based on the market value of the shares on the exercise date.
Particulars of Employees and Related Disclosures
Disclosures with respect to the remuneration of Directors and employees as required under Section 197(12) of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Rules) have been appended as an Annexure to this Integrated Annual Report.
The statement containing particulars of employee remuneration as required under provisions of Section 197(12) of the Act and Rule 5(2) and 5(3) of the Rules are available on the Company''s website at https://www.hul. co.in/investor-relations/annual-reports/.
The Directors are pleased to recommend a Final Dividend of ?22/- per equity share of face value of ?1/- each for the FY ended 31st March, 2023. The Interim Dividend of ?17/- per equity share was paid on Thursday, 17th November, 2022.
The Final Dividend, subject to the approval of Members at the AGM on Monday, 26th June, 2023, will be paid on or after Thursday, 29th June, 2023, to the Members whose names appear in the Register of Members, as on the Book Closure date, i.e. from Tuesday, 20th June, 2023, to Monday, 26th June, 2023, (both days inclusive). The Total Dividend for the financial year, including the proposed Final Dividend, amounts to ?39/- per equity share and will absorb ?9,163 crores. In view of the changes made under the Income-tax Act, 1961, by the Finance Act, 2020, dividends paid or distributed by the Company shall be taxable in the hands of the Shareholders. The Company shall, accordingly, make the payment of the Final Dividend after deduction of tax at source.
Unpaid/Unclaimed Dividend
In terms of the provisions of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 and Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, ^13.64 crores of unpaid/unclaimed dividends were transferred during the year to the Investor Education and Protection Fund.
Mergers, Acquisitions & Divestment Strategic investments in Zywie Ventures Private Limited and Nutritionalab Private Limited
During the year, the Company entered the ''Health & Wellbeing'' category with strategic investments completed in Zywie Ventures Private Limited and Nutritionalab Private Limited. These investments strongly align with our mission to improve the health and wellbeing of consumers and empower people to take charge of their health through solutions that they can trust.
Sale of atta and salt business carried out under the brands of ''Annapurna'' and ''Captain Cook''
Given the strategic priorities and portfolio choices, during the year, the Company sold the non-core businesses of atta of 16 employees and issued 16 warning letters as a consequence of such breaches.
The CoBP and Code Policies reflect our desire to fight corruption in all its forms. We are committed to eradicating any practices or behaviours though our zero-tolerance approach to such practices. The CoBP is periodically refreshed and updated so that it provides a current reflection of the way we do business at Unilever. Our CoBP and Code Policies have been reviewed to align them with the changes in the internal and the external environment.
Our Responsible Partner Policy help to give us visibility of our third parties to ensure their business principles are consistent with our own.
Maintaining high standards of Corporate Governance has been fundamental to the business of our Company since its inception. A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). A Certificate of the Chief Executive Officer and Chief Financial Officer of the Company in terms of Listing Regulations, inter-alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed to this Integrated Annual Report.
Prevention of Sexual Harassment at Workplace
As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (POSH Act) and Rules made thereunder, the Company has constituted Internal Committees (IC). Our POSH Policy is now inclusive and gender neutral, detailing the governance mechanisms for prevention of sexual harassment issues relating to employees across genders including employees who identify themselves with LGBTQI community.
While maintaining the highest governance norms, the Company has appointed external independent persons who have prior experience in the areas of women empowerment and prevention of sexual harassment, as Chairpersons of each of the Internal Committees. During the year, 7 complaints with allegations of sexual harassment were received by the Company and of which 5 complaints were investigated and resolved as per the provisions of the POSH Actâ. To build awareness in this area, the Company has been conducting induction/ refresher programmes in the organisation on a continuous basis. During the year, your Company organised offline training sessions on the topics of Gender Sensitisation and Code Policies including POSH for all office and factory-based employees.
In Line with the requirements of the Act and the Listing Regulations, the Company has formulated a Policy on Materiality of Related Party Transaction (RPT) & Dealing with RPT which is also available on the Company''s website at https://www.hul.co.in/investor-relations/corporate-governance/. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and its Related Parties.
All Related Party Transactions and subsequent material modifications are placed before the Audit Committee for its review and approval. Prior omnibus approval is obtained for RPTs on a quarterly basis for transactions which are of repetitive nature and/or entered in the ordinary course of business and are at arm''s length. All RPTs are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of RPTs under the Act, and Listing Regulations.
All RPTs entered during the year were in ordinary course of the business and at arm''s length basis. No Material RPTs, as per the materiality threshold adopted by the Board of Directors, were entered during the year by the Company. Accordingly, the disclosure of RPTs as required under Section 134(3)(h) of the Act, in Form AOC-2 is not applicable.
Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return of the Company in Form MGT-7 for FY 2022-23, is available on the Company''s website at https:// www.huL.co.in/investor-reLations/annuaL-reports/.
BOARD OF DIRECTORS AND KEY MANAGERIALPERSONNELChange in Directorate
During the year, Mr. Wilhelmus Uijen (DIN: 08614686) stepped down as the Whole-time Director and Member of Management Committee of the Company with effect from 31st August, 2022, consequent to his elevation as the Chief Procurement Officer for Unilever, globally.
The Board places on record its appreciation for the leadership and invaluable contribution made by Mr. Wilhelmus Uijen during his tenure as a Whole-time Director and Member of Management Committee of the Company.
Further, the Board of Directors at its meeting held on 10th March, 2023, based on the recommendation of the Nomination and Remuneration Committee of the Company, approved the following appointments to the Board:
(a) the appointment of Mr. Rohit Jawa (DIN: 10063590) as an Additional Director - Whole-time Director of the Company with effect from 1st April, 2023 upto 26th June, 2023 and as the Managing Director & Chief Executive Officer (CEO & MD) of the Company for a term of five consecutive years with effect from 27th June, 2023.
(b) the appointment of Mr. Ranjay Gulati (DIN: 10053369) as an Additional Director - Independent Director of the Company for a term of five consecutive years with effect from 1st April, 2023.
The above-mentioned appointments are subject to approval of the Members at the ensuing AGM of the Company.
Mr. Rohit Jawa will succeed Mr. Sanjiv Mehta (DIN: 06699923) as the CEO & MD and as the head of the Management Committee of the Company with effect from 27th June, 2023. Since, Mr. Rohit Jawa is a Singapore National and has a non-residential status, his appointment as the Wholetime Director and as a CEO & MD of the Company shall also be subject to Central Government approval.
Mr. Sanjiv Mehta will step down as the CEO & MD of the Company with effect from the close of business hours on 26th June, 2023 after a transformational tenure of 10 years at the helm of the Company. During his tenure, the business more than doubled its turnover, significantly improved its profitability and the market capitalisation of the Company increased more than four times from US$17 billion to US$75 billion.
The Board places on record its deep sense of appreciation and gratitude to Mr. Sanjiv Mehta for his immense and sustainable contribution to the business as the CEO & MD of the Company, that led in reinforcing HUL as one of India''s most valuable businesses.
Retirement by rotation and subsequent re-appointment
Mr. Nitin Paranjpe (DIN: 00045204), Mr. Ritesh Tiwari (DIN: 05349994) and Mr. Dev Bajpai (DIN: 00050516), are liable to retire by rotation at the ensuing AGM and being eligible have offered their candidature for re-appointment.
As per the provisions of the Act, the Independent Directors are not liable to retire by rotation.
Brief resume, nature of expertise, disclosure of relationship between directors inter-se, details of directorships and committee membership held in other companies of the Directors proposed to be appointed/re-appointed, along with their shareholding in the Company, as stipulated under Secretarial Standard-2 and Regulation 36 of the Listing Regulations, is appended as an Annexure to the Notice of the ensuing AGM.
Mr. Sanjiv Mehta, CEO & MD, Mr. Ritesh Tiwari, Chief Financial Officer and Mr. Dev Bajpai, Company Secretary are the Key Managerial Personnel of the Company as on 31st March, 2023. During the FY 2022-23, there were no changes to the Key Managerial Personnel of the Company.
The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by the CEO & MD and has Functional/Business Heads as its members.
During the year, the Board of Directors approved the appointment of Mr. Yogesh Mishra as Executive Director, Supply Chain and a Member of the Management Committee in succession to Mr. Wilhelmus Uijen.
Declaration from Independent Directors
The Company has, inter alia, received the following declarations from all the Independent Directors confirming that:
⢠they meet the criteria of independence as prescribed under the provisions of the Act, read with the Rules made thereunder and Listing Regulations. There has been no change in the circumstances affecting their status as Independent Directors of the Company;
⢠they have complied with the Code for Independent Directors prescribed under Schedule IV to the Act; and
⢠they have registered themselves with the Independent Director''s Database maintained by the Indian Institute of Corporate Affairs.
In the opinion of the Board, all Independent Directors possess requisite qualifications, experience, expertise and hold high standards of integrity required to discharge their duties with an objective independent judgment and without any external influence. List of key skills, expertise and core competencies of the Board, including the Independent Directors, forms a part of the Corporate Governance Report of this Integrated Annual Report.
Meetings of the Board, Board Evaluation, Training and Familiarisation Programme & Vigil Mechanism
During the year, eight meetings of the Board of Directors were held.
The details of meetings held and Director''s attendance, training and familiarisation programme and Annual Board Evaluation process for Directors, policy on Director''s appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director and also remuneration for Key Managerial Personnel and other employees, composition of Audit Committee, establishment of Vigil Mechanism for Directors and employees, form a part of the Corporate Governance Report of this Integrated Annual Report.
The Company continues to derive sustainable benefit from the strong foundation and long tradition of Research & Development (R&D) at Unilever. New products, technologies, and processes flow to the Company from R&D work done across Unilever''s 8 Global R&D Centres of excellence and 10 multi-market R&D hubs, including three in India located at Mumbai, Bengaluru (both Global R&D Centres), and Gurugram. The Unilever R&D labs in India work closely with the HUL business to create exciting innovations that help us win with our consumers every day. We have access to over 20,000 active patents that Unilever holds. With world-class facilities, and a superior science and technology culture, Unilever attracts the best of R&D talent globally to develop breakthrough
and proprietary technologies with innovative consumer propositions. The global R&D team comprises of more than 5,000 highly qualified scientists and technologists working in the areas of Home Care, Beauty & Personal Care, Foods & Refreshment, along with critical R&D functional capability teams in the areas of Regulatory, Clinicals & Digital R&D. We also directly benefit from the Unilever''s Safety and Environmental Assurance Centre (SEAC), which assess all our products from the lens of safety impact of our products on People and Environment. Our scientists at SEAC partnering with Unilever R&D Scientists and use internationally recognised safety approaches, and authoritative scientific evidence, to ensure that people are safe when using our products and environmental safety of the ingredients we use is assured. Further, we continue to develop new scientific methods and enhance our approaches, working closely with other external experts to ensure that our products are safe for people and environment. We also derive exceptional benefits and advantage of scale from Unilever R&D''s extensive global ecosystem of academia, technology experts and long-term collaborations with large suppliers for material and technologies.
We have a Technical Collaboration Agreement (TCA) and a Trademark License Agreement (TMLA) with Unilever since 2013. We are enjoying the benefits of an increasing stream of new products and innovations, backed by technology and know-how from Unilever. The pace of innovations and the scope of services have expanded over the years. Unilever''s global resources are providing greater expertise and superior innovations. This has helped in bringing to the Indian consumers, bigger, better, and faster innovations. The TCA provides for payment of royalty on net sales of specific products manufactured by the Company, with technical know-how provided by Unilever. The TMLA provides for the payment of trademark royalty as a percentage of net sales on specific brands where Unilever owns the trademark in India including use of ''Unilever Corporate logo''.
The Company maintains strong and healthy interactions with Unilever through a well-coordinated management exchange programme, which includes setting out governing guidelines pertaining to identifying areas of research, agreeing timelines, resource requirements, scientific research based on hypothesis testing and experimentation. This leads to new, improved, and alternative technologies, supporting the development of launch-ready product formulations based on research, and introducing them to markets. The Company continuously imports technology from Unilever under the TCA, which is fully absorbed. Some of the examples of cutting-edge science technologies that have been absorbed include Human Microbiome & Human Biology led technology platforms which cut across Beauty & Personal Care product ranges delivering multitude of consumer benefits, including hygiene, skin glow and protection against sun, pollution, odour among many others.
Similarly for Foods & Refreshment portfolio, set of technologies include fortification, novel processing routes, flavour modulation, plant-based protein delivery, sugar & salt reduction without compromise on taste etc. Lastly, in
the space of Homecare, Beauty & Personal care a suite of technologies including sustainable palm and Eco-Boost technologies help reduce our environmental footprint while delivering superior product experience at an affordable price for our consumers.
The Company has also benefited from continued global R&D capital investments into critical R&D capabilities and infrastructure in India, including setting up of Agile Innovation Hub and Advanced Manufacturing Centre, product testing & validation capabilities to help unlock speed in innovation by deploying cutting edge data science, technology & automation. These capabilities allow us to identify and lead consumer trends, rapidly design, prototype and test new ideas, products as well as digitally scale up new technologies and products leading to more impactful innovations, faster speed to market as well as significant cost savings for the Company.
The Company also receives continuous support and guidance from Unilever to drive functional excellence in marketing, supply management, media buying and IT, among others, which helps us build capabilities, remain competitive and further step-up its overall business performance. Unilever is committed to ensuring that the support in terms of new products, innovations, technologies, and services is commensurate with the needs of the Company and enables us to win in the marketplace.
CONSERVATION OF ENERGY
For details on the steps taken by the Company on conservation of energy, water and reduction of waste, please refer to the Business Responsibility and Sustainability Report, which forms part of this Integrated Annual Report.
COMPLIANCE WITH SECRETARIAL STANDARDS
The Company has generally complied with all the applicable provisions of Secretarial Standard on Meetings of Board of Directors (SS-1) and Secretarial Standard on General Meetings (SS-2), respectively issued by Institute of Company Secretaries of India.
STAKEHOLDER ENGAGEMENT
Our multi-stakeholder model aims to respect the interests of and be responsive towards all stakeholders. Stakeholder engagement and partnership are essential to grow our business and to reach the ambitious targets set out in the HUL Compass ESG goals. The Code of Business Principles (CoBP), which is the statement of values and represents the standard of conduct for everyone associated with the Company, and the Code Policies guide how we interact with our partners, suppliers, customers, employees, shareholders, Government, Non-Governmental Organisations (NGOs), trade associations and industry bodies. Through the underlying standards set in CoBP and Code Policies, we are committed to transparency, honesty, integrity and openness in all our engagements with the various stakeholders. Details on stakeholder engagement is provided in the Stakeholder engagement and review section on pages 53 to 77.
In the backdrop of a challenging operating environment, we delivered another strong all-round performance led by our focus on growing consumer franchise and protecting our business model.
In the near term, the operating environment is expected to remain volatile with global slowdown risks and weather-related uncertainty. While inflation has moderated, commodities remain elevated vis-a-vis longer-term averages. Looking forward, we expect that the price-volume growth will rebalance. Price growth will tail off due to lapping of higher prices in the base and sequential easing of inflation. Market volumes is expected to recover gradually as consumption habits readjust with a lag.
We remain focused on managing our business with agility and growing our consumer franchise whilst maintaining margins in a healthy range. We stay confident of the medium to long term potential of Indian FMCG sector and HUL''s ability to deliver a Consistent, Competitive, Profitable and Responsible growth.
Pursuant to Section 134 of the Act, the Board of Directors confirm that:
⢠In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and there are no material departures from the same;
⢠They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs and of the profits of the Company for that period;
⢠They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act and for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
⢠They have prepared the Annual Accounts on a going concern basis;
⢠They have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
⢠They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
During the year under review:
⢠no significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status of the Company and or it''s operations in future;
⢠no proceedings are made or pending under the Insolvency and Bankruptcy Code, 2016 and there is no instance of one-time settlement with any Bank or Financial Institution;
⢠no shares with differential voting rights and sweat equity shares have been issued;
⢠no public deposits as defined under Chapter V of the Act have been accepted by the Company;
⢠there has been no change in the nature of business of the Company.
APPRECIATIONS AND ACKNOWLEDGMENTS
The Board places on record its deep appreciation to all employees for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain an industry leader.
The Board would also like to acknowledge the excellent contribution by Unilever to the Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products and introduction of new products.
The Board places on record its appreciation for the support and co-operation the Company has been receiving from its suppliers, distributors, retailers, business partners and others associated with it as its trading partners. The Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be our endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co-operation with each other, consistent with consumer interests.
The Board also take this opportunity to thank all Shareholders, Business Partners, Government and Regulatory Authorities and Stock Exchanges, for their continued support.
On behalf of the Board
Nitin Paranjpe
Chairman
Mumbai, 27th April, 2023 (DIN: 00045204)
Mar 31, 2022
We operate in a complex and volatile world. Our strategy is constantly evolving to adapt to the trends and forces shaping our markets and impacting our stakeholders.
Hindustan Unilever Limited is part of the Fast-Moving Consumer Goods (FMCG) industry which continues to be one of the biggest long-term sustainable business opportunities that our country offers. Despite being one of the fastest growing markets globally for FMCG products, India''s per capita FMCG consumption is still amongst the lowest in the world. Rural markets account for more than 60% of our country''s population and contribute to just about 30% of FMCG consumption; thus, offering significant headroom for growth. Rising affluence, large working population, nuclear family structures, urbanisation and rapidly increasing adoption of technology will positively impact the growth of FMCG industry in the country.
The operating environment this year continued to remain volatile and challenging. India witnessed a devastating second wave of Covid-19 during the June quarter with a significant humanitarian and economic impact. Due to the disruption in global supply chains, inflation in many key commodities like crude oil derivatives, palm oil and packaging rose to historic highs. The latter half of the year witnessed a marked moderation in the FMCG market growth with volumes being impacted due to high inflation. This was more pronounced in rural markets.
As we gradually emerged from the challenging phase of the pandemic, the consumption of hygiene products moderated. With mobility going up, there was an increase in demand for discretionary and out of home products. Consumers are also increasingly choosing brands which they see as making a positive impact on the world.
India is undergoing rapid digital transformation, new-age technologies are transforming the landscape of consumer goods market, bringing opportunities for brands, consumers, and customers alike. E-Commerce continues to gain traction as more consumers shop online and with more digital-first brands entering the market. With a technology-focused approach, retailers are reinventing their business models to stay more connected in the digital world.
Consumers
Our brands are evolving to meet the changing needs of consumers.
The two years of pandemic has made us a stronger, better business which is much more resilient and responsive. As the economy, consumer and channel landscapes rapidly evolve, we continue to be agile to leverage our strengths, capture opportunities and navigate through the challenges. Our strategy is constantly evolving in line with the trends and forces shaping our markets and impacting our multi-stakeholders. We remain committed to delivering 4G growth - growth that is consistent, competitive, profitable, and responsible.
Our Compass and our business model are designed to create value for our stakeholders. Understanding their changing needs helps us make informed strategic decisions.
We have identified six stakeholder groups that are critical to our future success: consumers, our people, customers, suppliers & business partners, planet & society, and shareholders. The stakeholder review on pages 29 to 41 explains how we have worked to create value for each of our stakeholders in the financial year 2021-22 as well as how our business benefits from these vital relationships.
In light of our purpose and strategy to create long-term value as set out on page no. 20, we take steps to understand the needs and priorities of each stakeholder group through a number of mediums, including by direct engagement or via their delegated committees and forums. We have provided a high-level summary of how we engaged with stakeholders and had regard to their interests, when setting our strategy and taking decisions concerning the business in the last year. This has been provided in the Business Responsibility Report on pages 72 to 85.
Value and values
As we gradually emerged from the challenging phase of the pandemic and Covid-related restrictions, the consumer uncertainty and anxiety started receding. Driven by high inflation and choices fuelled by digitalisation, consumers have become more conscious and selective.
The varying impact of the pandemic has also led to some shoppers treating themselves to more premium products while others are increasingly cost-conscious, looking for the best-performing products they can afford. Despite the gradual easing of restrictions and people spending more time out of their homes, online shopping and the demand for convenience stayed strong; e-everything is here to stay.
Consumers continue to be increasingly discerning - looking for highly effective and quality products, with ingredients that are good for them and good for the environment. There is compelling evidence that brands with purpose grow. Our own research shows a strong correlation between brand purpose and brand attractiveness (referred to as brand power), which, in turn, drives market share and growth.
Our three Divisions anticipated and met consumers'' needs through innovative products, strong marketing capabilities including digital and performance marketing, and purpose-driven brands. We are harnessing new Artificial Intelligence (AI) powered innovation tools to spot trends early and test new product concepts. Our nano-factories provide us the flexibility to manufacture on-trend products in small batches, reducing the time from idea to shelf.
We believe in beauty that not only does less harm, but also does more good - beauty that''s both inclusive and sustainable. To achieve our new Positive Beauty vision, we are using our scale to create positive change and drive growth through our big brands, impactful innovation and portfolio transformation.
In the Beauty & Personal Care (BPC) division, we operate in categories that play a significant role in consumers'' lives and touch a vast majority of Indian households. The current nascent stage of evolution of many of our BPC categories presents an excellent opportunity to boost penetration,
consumption, and premiumisation, presenting a healthy long-term potential. With a portfolio of iconic, wellloved and purposeful brands that span the price-benefit pyramid, we ensure that our brands are accessible and aspirational for all consumers across the country.
We are growing our core business by investing in our purposeful brands and delivering superior products. India is a diverse country - with different climatic conditions, varied skin and hair types and even differing quality of water. We are bringing to life our product philosophy of designing for India and Winning in Many Indias (WiMI).
In our Skin Cleansing portfolio, our brands Lifebuoy and Lux have introduced winning products by regions with consumer centricity at the heart of the product design philosophy. We are also bringing this thinking of ''Design for Many Indias'' into Skin Care & Hair Care with products like Pond''s Light Moisturiser that is specifically designed to perform in hot and humid weather. In addition, we are leveraging our WiMI philosophy to market our products across different regions.
We continue to strengthen brand equity through consistent, purposeful communication on our iconic brands. Clinic Plus, Dove and Sunsilk were rated as the top 3 Hair Care brands in the country as per ''Kantar Brand Health Check Report''. Lifebuoy continues to build the habit of handwashing, through the ''H for Handwashing'' campaign. The brand is also scaling up its telemedicine initiative through the ''Mobile Doctorni''. Similarly, Clinic Plus, launched a film under its inspiring #MeriBetiStrong campaign to educate mothers on the issue of domestic violence. We have committed to extend our reach to over one lakh women across our ecosystem and educate them on their rights as well as provide them with appropriate resources to address this issue.
We are energised by the huge opportunity to accelerate Premium Beauty and lead Market Development in categories like hair conditioners, serums, body lotions, body wash and sunscreen to name a few. Our priority is to drive growth in our five big beauty master-brands, Dove,
Pond''s, TRESemme, Lakme and indulekha, which span across categories. We are doing this through on-trend and relevant innovations, solutions that are designed for consumers and channels of the future, and by driving adoption of key future formats. Through compelling communication, we are addressing key category triggers and barriers, as well as scaling up education-led sampling. This year, TRESemme launched the Thick and Full Shampoo and Conditioner with Biotin and Wheat Protein and expanded its hair care range. in Skin Care, Dove launched Love & Care, a new range of hand and body moisturisers while Pond''s introduced its gold beauty range including Facewash, Serum, Day Creme, Peel off Mask and a Night Creme. Lakme expanded its cosmetics range with volume mascara, highlighter and liquid concealer. The female intimate hygiene brand VWash, which was acquired by us in the previous year, continued to gain traction with consumers. We are also creating new capabilities for driving ''beauty'' market development through salons, medical marketing and online marketing, which serves as a distinct competitive advantage.
We continue to strengthen our ''naturals'' strategy by building specialist brands like indulekha and Hamam. This year, we expanded the indulekha franchise into relevant benefit segments like anti-dandruff, as well as e-Commerce relevant formats like masks and serums. Another pillar of our naturals strategy involves natural variants of our existing brands like Clinic Plus Egg Protein shampoo, TRESemme Botanique, Glow & Lovely Ayurvedic Care, Lifebuoy Neem and Turmeric, Pears Naturale etc.
Since the consumers'' shopping journey is increasingly moving online, e-Commerce continues to gain relevance. Last year, we had set up the Premium Beauty Business Unit (PBBU) within the Beauty & Personal Care organisation to strengthen our play in ''Masstige'' beauty segment. This unit is now fully operational with three digital-first brands Simple, Love Beauty & Planet and Baby Dove. PBBU is not just about building brands but also about incubating organisation-wide capabilities fit for the fast-changing digital world. We have created an agile innovation model that enables us to pick up trends and launch the product in minimal time, scaling it up as it succeeds. We are building nano factory setups and a flexible supply chain that allow us to produce quickly and in small batch sizes. We have also developed Performance Marketing, D2C and e-Commerce capabilities required to target the digital native consumers.
Technology-driven commerce will continue to grow disproportionately, and we are investing in it ahead of the curve. Lakme''s leading Beauty Tech Solutions like virtual
try-on and Artificial intelligence (Ai) Skin Analyser on its D2C platform allow consumers to replicate their offline journeys online. Lakme is the most followed indian beauty brand on instagram with around 30% of its sales now through digital channels. We continue to strengthen our content platform ''Be Beautiful'' which educates consumers on their Beauty & Personal Care needs, and are also creating new ecosystems that can help us scale influencer Marketing and lead the curve on upcoming opportunities like Social Commerce.
As we work to make the lives of our consumers easier, cleaner and safer, we are also leading our industry towards a cleaner future through the power of science and innovation. Last year, ''Get-Set-Clean'', our online platform for housekeeping and cleaning tips, stepped up to create meaningful content to ease consumers'' worries around the pandemic. Our relentless focus on serving consumer preferences and needs through our strong purposeful brands continue to fuel strong competitive growth thereby extending our market leadership.
Putting purpose at the heart of every action and communication, our brands continue to drive salience with consumers. Through its purposeful activations, our biggest brand Surf excel is spreading its philosophy of ''Daag Acche Hain'' or ''Dirt is Good''. Our latest Surf excel Holi campaign encourages people to celebrate joyous moments like a child would, with family and friends, and lead fulfilling lives. Wheel continued to uphold the concept of equal partnership between husband and wife through its campaign that depicted men actively participating in household chores challenging social stereotypes. This year Rin celebrated india''s Olympic fencer Bhavani Devi''s story of grit, determination, and hard work, inspiring millions to keep persevering in pursuit of their dreams. Sunlight''s Pujo campaign ''Tantir Rong'' this year supported the handloom weavers of Bengal and decided to add back colours to their lives by generating demand and awareness for their art.
Our dishwash portfolio continued its resilient performance. Vim with its well-defined purpose of ''change your outlook, move beyond dishes'' focussed on breaking the societal stereotype that dishwashing is solely a woman''s responsibility. Based on a clear consumer need, our home hygiene brand Domex launched a superior product backed by a breakthrough patented Fresh Guard technology which fights malodour in toilets for 100 flushes.
Over the years, we have witnessed great success in upgrading consumers and premiumising our portfolio, and we continued this strategy during the year, where our premium products outperformed the rest of the portfolio. Through our portfolio which straddles the price-benefit pyramid, we continue to actively engage with consumers in their upgradation journey. For instance, Surf excel has been driving upgradation in detergent powders, led by Surf excel Easy Wash and Surf excel Matic. Premiumisation continues to be an important agenda for the dishwash business and with a strong and scalable consumer contact programme, Vim liquid continues to pioneer premiumisation in the country.
With the changing demographics in our country, urbanisation and nuclear families, the need for more convenient ways for cleaning and laundry continue to develop. Over the years, our Fabric Care business has developed strong expertise in seeding and scaling new categories. Led by effective market development actions we have been able to drive relevance for our liquid detergents, matic liquids and fabric conditioners portfolio. We continue to invest in newer formats like Surf excel Smart shots and Smart sprays for effective fabric care and Vim Matic range for dishwashers.
We know that consumers want sustainable products that perform just as well as conventional ones. in 2021, we embarked on our clean future journey with Rin and Surf excel. Rin has launched an environment-friendly and superior product. Surf excel''s product and packaging has become environment-friendly with biodegradable actives, 100% recyclable plastic bottles, made with 50% recycled plastic and a portfolio-wide pipeline of water-saving products. Another example is the new ''Smart Fill'' machine, an in-store vending model which offers consumers option to reuse plastic bottles by refilling our home care products through this machine.
We are committed to transition from fossil fuel-derived chemicals in our cleaning and laundry products by 2030. During the year, we took a step forward in this journey by partnering with ''Tuticorin Alkali Chemicals and Fertilizers Limited'' and ''Carbon Clean Solutions'' for Soda Ash, one of the key raw materials for our laundry products, using carbon capture technology.
Our brands continue to provide great-tasting, nutritious and sustainable foods for consumers - using our world-class innovation and brand purpose to inspire change.
Through a combination of superior products, impactful innovations and purposeful activations, our brands continue to attract new consumers. Our market leadership position in tea was further strengthened during the year, enabled by a very strong portfolio that straddles the price-benefit segment serving the different needs of consumers. Leveraging our Winning in Many indias (WiMi) strategy, we continue to build tea blends which are suited to the tastes and preferences of consumers. Our iconic brand Red Label is bringing to life the taste of togetherness through its ''Swad Apnepan Ka'' campaign.
During the year, the ice Cream and Frozen Desserts business recovered strongly and was significantly ahead of pre-pandemic levels. We scaled up our in-home consumption portfolio through innovative, delicious products like the Kwality Wall''s Cadbury Crackle tub and the Trixy cup. Offering sweet delicacies to consumers during festive season, Kwality Wall''s activated integrated campaigns to reach consumers offline as well as online. iCNOW, our digital initiative for home delivery of ice Creams is receiving a good response from consumers.
Kissan strengthened its market leadership in ketchups and introduced new pack sizes offering more convenience and value for consumers. Building on its credentials of ''restaurant-like-food'' at home, Knorr activated its campaigns on soups and Chinese gravy mixes.
Our strong brands and capabilities in the Health Food Drinks (HFD) space continue to serve the nutritional needs of our consumers. During the year, we expanded the reach of our Nutrition business by integrating it with HUL''s sales systems and processes. We are now focussing on building category relevance and driving penetration through market development. Our persuasive media campaigns and extensive sampling programmes are reaching out to millions of consumers. To address nutrition needs at various stages of life we have expanded the Horlicks portfolio with the high sciences range such as Diabetes Plus, Mother''s Plus, etc. All these actions are enabling us to gain market share and penetration in HFD.
Our new product offerings in Foods portfolio viz. Hellmann''s Mayonnaise, Kissan Peanut Butter are gaining traction with consumers and building scale. Strengthening our coffee portfolio we recently launched BRU Beaten Coffee, a product that is specifically designed for taste preferences of coffee lovers in North and West of India. Our functional tea portfolio which includes brands like Lipton Green Tea and Red Label Natural Care continues to do well. During the year, we expanded Lipton Darjeeling tea nationally.
As one of India''s largest F&R businesses, HUL is using its scale and reach in its efforts to encourage the wider food ecosystem to become healthier and more sustainable.
Over the last two years, we have launched several products that offer positive nutrition - foods that are rich in protein, fibre, fruits and vegetables, Omega-3, vitamins and minerals. Our HFD portfolio is designed
for macro and micro nutrition supplementation to help alleviate childhood malnutrition. The Horlicks Plus range addresses specific adult health issues such as protein supplementation, loss of calcium in women, and sugar and cholesterol management for diabetics.
HUL is amongst the largest buyers of agri-commodities like tomatoes, cereals, tea, coffee and dairy. We have partnered with ''Sahyadri Farms'', a farmers'' co-operative based in Maharashtra, for sustainable sourcing of tomatoes, helping consumers experience products made from great quality tomatoes, at affordable prices, while providing better livelihood to farmers. We are now extending this sourcing model to other agri-commodities.
We are also one of the co-founders and co-funders of Trustea - The India Sustainable Tea Programme. Trustea has played a pivotal role in achieving sustainable sourcing and zero deforestation commitments in tea.
This year reinforced the importance of being a safe, inclusive and supportive place to work for all our employees. Health and safety of our employees, their families and the people in our extended value chain remained our #1 priority. We continued to nurture a culture in which our people can thrive, become future-fit and bring their best selves to work.
We have continued to help our people protect themselves from Covid-19 with enhanced timely testing and vaccinations to keep our workplaces as safe and productive as possible. We ensured that our people and their families received medical care through our facilities and healthcare resources, telehealth options and connections with community resources. We increased our medical staff and infrastructure, and leveraged our strong affiliations with 200 hospitals to provide prompt medical support to our people.
Our team of 130 employee volunteers went above and beyond to support our Covid-19 impacted employees and their families with timely medical assistance. We created a dedicated HUL Healthcare Helpline for anytime Covid-19 assistance and also facilitated vaccination for our employees and people in our extended value chain.
Safety of our employees and people in our extended value chain is at the core of everything that we do. We launched a safety awareness programme "BeSafe" in 2021 and trained over 12,000 employees to further strengthen our safety culture. We have rolled out a new incident management tool to enhance faster and easier reporting.
Our Total Recordable Frequency Rate* (TRFR) was 0.31 accidents per million hours worked (1st October 2020 to 30th September 2021) as compared to 0.34 in the same period last year.
Sadly, two of our employees were involved in a fatal car accident. When fatalities occur, our first priority is to support the needs of the families of the individuals involved. Road safety is one of the focus areas for us and we have been taking several preventive measures to reduce road incidents. We have strengthened our
Safe Travel Policy and have been training our employees as well as our extended driver network about safe on-road behaviours.
Alongside safety at work, supporting our people''s physical, mental and emotional wellbeing has never been more important. We dialled up our systematic approach on wellbeing with customised interventions for various employee segments. We provided our people a range of tools to help them to focus on their wellbeing.
In a wider focus on mental health across the business, we took this conversation to our frontline teams, training 45 blue-collar Mental Health Champions (MHCs) across 10 factory locations and we have over 850 trained MHCs. As a result of our sustained efforts, we saw the reflections in our annual employee survey, UniVoice, with 85% office based employees and 96% factory employees sharing their belief that the Company cares for their wellbeing.
In an highly competitive talent market, we made concerted efforts to attract and retain talent. We continued to build meaningful and deep engagements with students, digitally as well as on campus, to strengthen our employer brand and attract the best talent for the Company. Our purpose-led and future-fit vision and culture ensured that we cemented our position as the ''No. 1 Employer of Choice'' across industries in 2021. In a resurgent talent market, our voluntary attrition continued to be well below the FMCG industry benchmarks.
The world of work is changing. Our 2021 employee survey showed that 91% of our people believe we have become simpler, faster and more agile in the last 12 months. Covid-19 has been a catalyst to expand flexible and more inclusive ways of working. We also continue to build organisational capabilities with a clear focus on functional learning to enable our people to upskill and reskill for their roles and help them prepare for the changing landscape of work. In our latest employee survey, 87% of our people in offices and 94% of our people in factories believe that the Company provides opportunities for skill development to advance them towards a successful future.
Customers
We work with our many retail partners to help them grow sustainably alongside the Company.
We are transforming how we work at HUL by introducing more flexible and agile ways of working that unlock capacity and help individuals find a meaningful and balanced way of working. Our AI-powered internal talent marketplace allows us to match people with specific skills to projects that require them. This helped us assign resources to over 500 business critical projects when teams faced capacity constraints.
Our endeavour is to shape a Growth Culture based on three tenets: Human, Purposeful and Accountable. Using our future-fit plans, our people are shaping development and career plans based on their purpose. We sustained very high engagement levels -85% in offices and 95% in factories - which places us in the top quartile for employee engagement compared to industry benchmark.
We implemented a best-in-class Return to Workplace programme and co-created our hybrid ways of working, keeping employee context and flexibility at the heart. We continue to create flexible working options for our people and have launched new employment models, U-Work and Open2U, built on the premise of providing flexibility combined with security.
We also want to be a workplace where everyone feels they belong and are able to thrive. This means creating an inclusive culture free from the barriers that limit people in reaching their true potential. We have identified our equity, diversity and inclusion priorities - gender, people with disabilities and LGBTQI communities. We are building the capabilities of our business leaders and HR practitioners to support equity advocacy, diversity awareness and psychological safety in their teams.
We continue to make progress in our commitment to be gender balanced across our managerial levels within the next few years. In calendar year 2021, we improved our gender balance from 42% to 44%*at managerial levels. Another step in our diversity journey has been the introduction of 250 women in our extended sales ecosystem and the addition of 186 women on our shopfloor. In 2021, we also launched the HUL ProUd network as an employee resource group for LGBTQI employees and allies.
To support the agenda of ending the silence on domestic violence, in March 2021, we launched the #UnMute campaign. We aim to address the issues related to women safety by enabling our employees and extended value chain, to become the voice of allyship on women''s safety and domestic violence. As part of this campaign, we have raised awareness among employees and over 100,000 women in our extended value chain on safety at work, safety in public spaces and safety at home. We aim to continue this journey and reach 500,000 women by the end of 2022.
We have a long-standing relationship with our customers that is based on trust and mutuality of interest. We continue to work with all our partners including small family-owned stores to large organised retail and e-Commerce to serve the evolving needs of our shoppers. Our endeavour is and has always been to ensure that our brands are easily available wherever shoppers choose to shop.
Our brands are present in over 9 million retail outlets spread across the country through a network of 3500 distributors, who are the backbone of our retail reach. We also reach our consumers through large, organised retailers, e-Commerce and omnichannel customers as well as our own D2C platforms. As a gateway to the people who buy and use our products, these customer partners are critical to our success.
Protecting lives and livelihoods of our people and of those in our extended value chain became even more important during the pandemic. During the second wave of Covid-19, we extended medical assistance via our Medical and Occupational health team as well as through Covid-19 warriors working on ground across the country. We continued to follow appropriate safety protocols while also using our learning from the previous year to ensure the smooth running of operations.
Through our Shakti initiative, which helps enhance livelihoods and financially empower rural Indian women, we have now reached over 1.6 lakh Shakti entrepreneurs. We are now working to create a larger social impact by making these Shakti entrepreneurs future-fit through sessions on nutrition awareness, waste recycling, women empowerment etc. With these inputs, they could truly become vehicles of social change and impact in their villages.
India''s retail landscape is rapidly evolving as technology continues to influence consumer behaviour, with shoppers'' path to purchase now spanning various channels and devices. The fast-evolving shoppers of today move seamlessly between online and offline channels, seeking convenience, value and premiumisation across categories. To service the needs of these discerning digital shoppers, we have adapted a D4C (Design for Channel) approach in launching brands and SKUs. At the same time, we also have a few premium brands going D2C through digital means.
Traditional Kirana stores, which continue to be the largest ecosystem for consumers to access their favourite brands, is witnessing the evolution of e-B2B and eB2C offerings. At the same time, organised retail is undergoing consolidation and customers are expanding with omnichannel offerings. We are seeing the rise of new models like social commerce, where people shop through social media platforms, and quick commerce, where people expect to receive their orders in less than an hour, often, within 15 minutes of the orders being placed.
As the customer landscape continues to evolve, we have been taking several steps to ensure that our partners and distributors remain future-fit. We are supporting traditional trade in their efforts to embrace technology. Shikhar - our e-B2B solution for online ordering - to give our retailers a safe, non-contact way of interacting with us at convenient times to place orders, track stock and shipments, and see prices and promotions. With a large number of our traditional trade business having access to Shikhar app, our ability to accept their orders allowed us to service the needs even during Covid-led lockdowns. This solves two main challenges that a retailer faces: capital and space, by empowering them to order online at their convenience, getting fast and reliable service and improving assortment. Not only does this create a better experience for our customers, but it also helps them increase sales. We have scaled up Shikhar by onboarding over 8 lakhs stores.
We are increasingly designing products and organising our business to suit the requirements of our Modern Trade and e-Commerce channel partners. We are collaboratively working with them to create growth plans based on shopper centric innovations and activations. We continue to enhance our capabilities such as performance marketing, deploying advanced analytical tools and executing Market Development initiatives at scale to engage shoppers both online and in-stores.
The Pharma channel offers a strategic growth opportunity and an essential platform for operating in the more premium and specialised Health & Beauty segment. This year, we piloted various initiatives to understand the product portfolio, content and in-store execution, and the route-to-market interventions needed to win in this channel. We are also engaging with medical professionals and pharmacists to educate them on products and their benefits, through our ''Expert'' channel.
Planet & society
Our Business will not prosper without a healthy planet and society.
Our supplier ecosystem is an integral part of our business delivery helping us to innovate our products and drive mutual and sustainable growth. Involving lakhs of people in India as well as around the world - from small local producers to large multinationals, we partner with around 1,300 suppliers who provide us with goods and services such as raw materials, logistics, advertising, professional services and much more.
The pandemic-induced restrictions continued to challenge supply chains, with lockdowns affecting our suppliers'' businesses in many parts of the world. Commodities, packaging and transport, all experienced significantly high levels of inflation. We also experienced a marked increase in supply volatilities from the pandemic as well as by supply-demand imbalances, energy crisis, production curbs, cross border restrictions and geopolitical challenges.
To ensure business continuity, our teams acted fast by securing material supplies, onboarding many new suppliers, making strategic interventions and designing to value. We operated in a dynamic manner, shortened our planning cycles to ensure we responded quickly to the changing environment. Our R&D and Supply Chain teams worked closely with local suppliers for capability development to improve supply reliability, while also increasing value chain transparency and cost competitiveness. We localised sourcing of many of our chemicals by developing alternative supplier capacity in India and leveraged the growing domestic chemicals industry, to reduce our import dependency. We have developed manufacturing capabilities for small quantities, making the production process more agile and responsive.
We worked closely with our supply partners and made strategic interventions to manage prices and demand spikes/supply shocks, utilising multi-modal logistics. We looked at all cost lines of our P&L with a sharp focus to cut costs and minimise the impact of inflation. Further, we extended our efficiency improvement programme to our suppliers to reduce inefficiencies and wastage from their processes, thereby reducing cost and enabling growth.
We worked alongside our suppliers to respond to the demand variations across product categories during the current volatile environment. The value of data insights, smarter sourcing and more real-time visibility of goods and logistics became clearer. This is a key focus for us -we are using increasingly sophisticated digital tools to identify new potential innovation partners, onboarding new suppliers by conducting virtual audits, monitoring and reviewing quality performance online, and tracking logistics and supply risks in real time.
The support of our suppliers, who are the gateway to the lakhs of people in our wider supply chain, is critical to our progress towards key aims such as reducing carbon emissions, protecting nature, and improving diversity and inclusion. We can only achieve our ambitious goals by bringing our supply partners with us - in doing so, we believe we are positioning both our business and theirs for growth. Our ''Partner with Purpose'' programme aims at building an open, inclusive supplier ecosystem to deliver growth, while doing good for the people and planet.
We worked extensively with our supply partners on integrating better with our supply chain. For instance, producing packaging materials closer to our factories helps us improve material availability while reducing carbon footprint. For agricultural commodities like Tea, Coffee, Tomato, Dairy and Cereals, we are developing integrated local partnerships across the value chain to help drive transparency, sustainability, competitiveness and resilience, while creating a positive social impact on smallholder farmers. Partnerships based on clear standards of responsible sourcing strengthen our supply chain and the businesses within it. Our Responsible Sourcing & Business Partner Policy (RSBPP) sets out our commitment to conduct business with integrity, and with respect for universal human and labour rights as well as environmental sustainability. It''s a crucial part of the due diligence we undertake to identify and encourage remediation of issues by suppliers. We are launching a refreshed RSBPP in 2022 with an expanded focus on climate and nature - and a new requirement for suppliers to pay a living wage instead of a minimum wage, which will be introduced progressively covering all by 2030.
Our approach to sustainability continues to recognise the interconnection of the planet and society - and that sustainability can be a driver of business performance.
India has seen several incidents linked to global warming in 2021 alone, from a glacier collapse in the Himalayas, to a sweltering heat wave and three cyclones that occurred within a few days of each other causing considerable damage to lives and livelihoods. The urgency to tackle climate change, reduce plastic waste and protect nature has never been greater.
Climate Action is at the heart of our business strategy. We are committed to the Unilever Climate Transition Action Plan that sets out the steps that will be taken to reduce emissions and achieve net zero in our operations by 2030.
Your Company has achieved plastic neutrality by collecting and responsibly processing over 1.16 lakh tonnes plastic in 2021. We have a framework called ''Less Plastic, Better Plastic, No Plastic'' with which we evaluate our plastic footprint. For instance, we have reduced virgin plastic usage by replacing them with Post-Consumer Recycled (PCR) plastic for Vim Dishwash, Surf excel Matic, Surf excel Easy Wash, Rin Matic and Comfort etc.
We are working with leading organisations such as UNDP and Xynteo to change consumer behaviour of plastic segregation at source to build a better ecosystem for post consumer recycle uses and it''s circularity. So far, the project has reached out to more than 75,000 households.
We continue to work towards a deforestation-free supply chain. Unilever''s People & Nature Policy enhances supplier requirements around no deforestation and human rights for our key commodities. Our Regenerative Agriculture Principles guides our suppliers and farmers, including smallholders, on how to nourish soil and water, capture carbon and restore land. We are sourcing nearly 95% of tomatoes used in Kissan ketchup sustainably. We have sourced and procured over 68% of tea from sustainable
sources and by the end of 2021, 100% of the chicory was sourced sustainably.
Through the Hindustan Unilever Foundation (HUF), a not-for-profit company that works in the area of water management, we reached over 10,000 villages. Along with its partners, the foundation has delivered a cumulative and collective water potential of over 1.9 trillion litres through improved supply and demand water management, over 1.3 million tonnes of agricultural and biomass production, and over 60 million person-days of employment in financial year 2020-21.
We are helping to build more resilient and equitable communities by raising living standards, advancing equity, diversity and inclusion.
Growing inequality in society has direct impact on consumption and India has one of the highest gap. We have taken an ambitious target to ensure everyone in our value chain who directly provide goods/services to us shall earn a living wage by 2030. Through Prabhat, our community development initiative around HUL''s sites, we have trained women and youth in employable and future-fit skills such as IT, electrical, plumbing, solar technician, tailoring, beauty and more. In our journey to build a fairer and more inclusive future, we have been training people with disabilities, transgenders, sex workers, widows and other vulnerable communities, through Project Prabhat''s 18 livelihood centres.
We believe that until social justice and fairness become commonplace, it is our responsibility to drive equity and create a fairer, more socially inclusive society. We have achieved 44%* gender diversity in 2021 across our managerial base and have a strong roadmap to be gender balanced by 2025. Through several programmes we are striving to enhance women representation on the shop floor. Samavesh is our project to improve women participation in our factory shop floors. With our Ahilya initiative, we are empowering women to become sales professionals. Our ambition is to achieve 5% of our workforce to be made up of people with disabilities by 2025.
Shareholders
We are focusing on our strategic choices to deliver 4G growth i.e. consistent, competitive, profitable and responsible growth
This financial year was unpredictable and challenging with continued pressure from Covid-19 and unprecedented cost inflation. As global supply chains were disrupted, firstly, due to the pandemic and then later due to the geopolitical crisis, inflation in many commodities like crude oil derivatives, vegetable oils, packaging, etc. rose to historic highs resulting in significant input cost pressures. High inflation also resulted in a marked moderation in FMCG market growth with volumes declining in second half of the year.
Our performance
In a challenging environment, we have shown resilience and agility to deliver strong all-round performance. Our reported turnover and net profit grew 11% and 11% respectively in financial year 2021-22. We further cemented our leadership position with highest YoY market share gains* in more than a decade. More than 75% of our business is winning market share, both value and volume. We have gained market shares in all our divisions, across price segments and across regions.
In our divisions, Home Care delivered a strong performance, growing 19% led by double-digit growth in both Fabric Care and Household Care. Beauty & Personal Care grew 8% with Skin Cleansing and Hair Care performing well on a strong base comparator. Skin Care and Colour Cosmetics portfolio which was impacted due to Covid-19 led mobility restrictions recovered during second half of the year and was ahead of pre-pandemic levels in the latter half of the year. Foods & Refreshment continued to perform well and grew 7% on an exceptionally high base. Ice Cream made a strong comeback and was significantly ahead of pre-pandemic levels. Tea delivered another year of strong performance, strengthening value and volume market leadership.
Our dynamic financial management, a strong savings programme and calibrated pricing actions helped protect our business model against rising input costs as we kept our EBITDA margins at a healthy 25%. Our cash from operations (after taxes) was at ''11,684 crores.
Through our brands and our operations, we continue to promote health and wellbeing, inclusive beauty and positive nutrition - finding ways to power growth through purpose.
Lifebuoy''s purpose is preventing illness and saving lives through handwashing with soap. Its ''H for Handwashing'' education campaign has been teaching children the importance of handwashing since its inception. To drive awareness on Covid Prevention in communities, Lifebuoy and the Federation of Indian Chambers of Commerce and Industry (FICCI) partnered for a new public service campaign called ''It''s In Your Hands''. The campaign made a humble appeal to the people of the country, asking them to play their part in fighting the virus by practising proper hygiene, wearing a mask in the right way, maintaining social distancing, getting vaccinated and washing hands with soap.
Based on our learning from 2020, we took steps to augment health infrastructure in Covid-19 hotspots during the second Covid-19 wave. In response to the severe shortage of medical oxygen and to reduce the pressure on healthcare infrastructure, we airlifted over 5,500 oxygen concentrators from across the world. Under Mission HO2PE, these were made available in the most impacted areas in the country. We initiated a partnership through which we executed a model that delivers oxygen concentrators to Covid-19 patients at home through a borrow-use-return model.
During the year, we launched three more Suvidha centres with the centre in Dharavi, Mumbai being one of the largest community toilets in India. ''Suvidha'' is a first-of-its-kind urban water, hygiene and sanitation community centre,
that was first set up at Ghatkopar, one of the largest slums in Mumbai. Inspired by the success of the first seven Suvidha centres, along with Municipal Corporation of Greater Mumbai & HSBC. We have announced the plan for establishment of 10 more Suvidha centres across the city.
Your Company''s ''Future Foods'' ambition demonstrates our commitment to being a force for good. Your Company is continuously working to improve its products to help people transition towards healthier diets. Your Company''s aim is to help people make the transition to healthier eating by providing positive nutrition. Foods that deliver positive nutrition are defined as products containing impactful amounts of vegetables, fruits, proteins, fibre, unsaturated fatty acids or micronutrients such as vitamins, zinc, iron and iodine. Your Company has committed to double the number of products sold that deliver positive nutrition by 2025.
We aim to advance and promote respect for human rights in everything we do - within our workplaces, through our supply and distribution chains and through our brands. With our suppliers, peers, industry bodies, trade unions and civil society we are working to address human rights impact and ensure that all those connected to our value chain are treated with respect, dignity and fairness.
In addition to this, our Code of Business Principles (''the Code'') upholds the principles of human rights and fair treatment. The Code also conforms to the International Labour Organisation (ILO) principles. The principles of human rights are followed in the same spirit within and outside the organisation when engaging with business partners.
Your Directors are pleased to recommend a final dividend of ''19/- per equity share of face value of ''1/- for the year ended 31st March, 2022. The interim dividend of ''15/- per share was paid on 12th November, 2021. The total dividend for the financial year ended 31st March, 2022 amounts to ''34/- per share of face value of ''1/- each.
Last year we set out in detail the Compass strategy to deliver our vision. The five clear choices we have made in our strategy - portfolio, brands, channels, structure & capabilities, and culture - the continued delivery of our five Growth Fundamentals, have been playing an important role in building momentum across the business.
We continue to invest in building a future-fit portfolio and create long-term value. We are strengthening our core, creating categories of the future through market development, and driving premiumisation by upgrading consumers to higher order benefits.
We are driving growth in our core portfolio by focusing on product superiority and building purposeful brands. Our biggest brand Surf excel, for instance continued to build its relevance through the iconic campaign ''Dirt is Good'' and has been delivering strong results for us.
With a wide and resilient portfolio that straddles the price-benefit pyramid our consumers are able to choose their trusted brands at various price points. Even our highly penetrated categories like Fabric Wash and Tea offer opportunities to grow through premiumisation. Our brands like Surf excel, Dove, TRESemme, Brooke Bond are responding to the needs of the consumers and leading premiumisation in their respective categories. In early 2021, we also setup the Premium Beauty Business unit (PBBU) to strengthen our play in the fast growing ''Masstige'' beauty segment. Overall, these actions have yielded good results as our premium portfolio grew ahead of the rest of the portfolio during the financial year 2021-22.
We have a strong track record of seeding and building scale in new categories through market development activities.
For instance, our Liquid detergents and fabric conditioners grew 4 times in Last 5 years to become a ?1,700 crores business. We are also covering portfolio white spaces through Mergers & Acquisitions. InduLekha, a specialist natural hair care brand with strong Ayurveda credentials has grown 6x since its acquisition in 2016. VWash, a female intimate hygiene brand acquired in 2020 is gaining good traction with consumers. With the merger of GSK CH, we acquired strong brands and capabilities in the functional nutrition space. Overall, our market development portfolio performed well in the financial year 2021 -22.
We see an increasing number of consumers preferring trusted brands that not only deliver great products, but also positively impact people and planet. With more than 100 PhD scientists working across three R&D centres in India and access to the work done by 5,000 people in Global R&D function of Unilever, we have the largest R&D function across FMCG companies in India. Using world-class technology, we continuously strive to bring superior products which are aLso good for the pLanet. For instance, our brand Surf excel has launched a new formulation for its liquid detergent with biodegradable actives, packed in 100% recyclable plastic bottles made with 50% recycled materials. HorLicks has launched Diabetes Plus which is scientificaLLy made to support dietary management of at-risk and diabetic individuals. By harnessing digital, artificial intelligence (AI) capabilities, as well as the latest IT solutions, our newly set up Agile Innovation Hub is transforming HUL''s speed of innovation using a unique digital inn ovati o n workflow.
Advancement in technology is increasingly influencing consumer behaviour. While traditional Kirana stores continue to be the Largest ecosystem for consumers to access their favourite brands, e-Commerce is growing at a fast pace. There is aLso consoLidation amongst customers, evoLution of the e-B2B firms and omnichanneL ecosystems. With quick commerce, shoppers now have a choice of express/instant deLiveries in many pLaces. As the distribution Landscape is rapidLy transforming, we are cLearLy focussed in ensuring that our brands are avaiLabLe wherever shopper wants to shop.
Design for ChanneL has been one of the strategic thrusts for us and we are designing products and organising our business for organised retaiL by coLLaborating with our customers and partners. Shikhar, our e-B2B online ordering solution is a real gamechanger for us. We believe that by
helping smaller retailers engage with the digital economy through Shikhar, we can help them build more resilient and profitable businesses that also grow our sales. We have now scaled Shikhar to cover more than 8 lakhs stores.
We are aLso expanding our digitaL presence through D2C platforms - we now have D2C websites for our premium brands Like Lakme, InduLekha, Simple and a multi-brand platform UShop. This allows consumers access to their favourite brands directly from our platforms and get it home delivered giving them a unique shopping experience. ALL these initiatives have now enabled us to capture more than 20% of our demand digitaLLy and gives us a unique abiLity to run our demand generation and demand fuLfiLment activities in a disruptive way.
Rapid digitaLisation in our country has transformed the market dynamics across sectors. This has Led to fragmentation of consumer choice, new channeL shifts and the creation of service ecosystems. Our Reimagine HUL journey continues to heLp us acceLerate our shift towards becoming an "InteLLigent Enterprise". Subsequent to the digitaLisation of our process, we are now focussing on creating connected ecosystem across consumer, customer and operation, supported by data, technoLogy and anaLytics at its core.
As part of the consumer ecosystem, we are focused on faster-better innovation, Leveraging next generation media tooLs to reach consumers effectiveLy and efficientLy, and buiLding consumer engagement pLatforms. In the customer ecosystem, we are buiLding competitive moats across demand capture, demand fuLfiLment and demand generation by digitaLising our operations and Leveraging data-driven anaLytics. To drive agiLity and resiLience for our business, optimise costs with a focus on sustainabLe growth, our suppLy chain is undergoing a transformation. We continue to treat data as an enterprise asset and are enabLing data-Led decision making in aLL parts of our business. We are integrating data from disparate internaL and externaL data sources and are anaLysing them to enabLe better and faster data-Led decision making across the business.
Winning in Many Indias (WiMI) has been a cornerstone of our strategy. Looking at the diverse nature of our country we have de-averaged India into 15 consumer cLusters. This brings us cLose to the consumers and aLLows us to capture consumer trends at a granuLar LeveL. With the heLp of these rich granuLar insights, we are abLe to depLoy customised strategies to drive growth. As consumers increasingLy become more discerning our WiMI strategy wiLL continue to keep us future-fit.
We beLieve that when empLoyees are cLear on their purpose in Life and how this connects to the work they do, they are more engaged and wiLLing to go the extra miLe. Working with purpose is at the heart of our cuLture. This aLso heLps us attract the best taLent, as evidenced by our status as number one empLoyer of choice across industries in the country. We are transforming how we work at HUL by introducing more fLexibLe and agiLe ways of working. We continue on our journey to buiLd a diverse and incLusive organisation through our progressive poLicies. We are reskiLLing and upskiLLing our peopLe, and embracing hybrid ways of work to prepare for the future of work. We continue to buiLd organisationaL capabiLities with cLear focus on functionaL Learning priorities and embedding digitaL-first mindset to make our peopLe future-fit.
The Company continues to derive sustainabLe benefit from the strong foundation and Long tradition of R&D at UniLever, which differentiates it from others. New products, processes and benefits fLow from work done in various UniLever R&D centres across the gLobe, incLuding in India. The UniLever R&D Labs in Mumbai, BengaLuru and Gurgaon work cLoseLy with the business to create exciting innovations that heLp us win with our consumers. With worLd-cLass faciLities, and a superior science and technoLogy cuLture, UniLever attracts the best taLent to provide a significant technoLogy differentiation to its products and processes.
The R&D programmes, undertaken by UniLever gLobaLLy, are focused on the deveLopment of breakthrough and proprietary technoLogies with innovative consumer propositions. The gLobaL R&D team comprises highLy quaLified scientists and technoLogists working in the areas of Home Care, Beauty & PersonaL Care, Foods & Refreshment and Water Purification and criticaL functionaL capabiLity teams in the areas of ReguLatory, CLinicaLs, DigitaL R&D, Product & Environment Safety and Open Innovation.
We have an existing TechnicaL CoLLaboration Agreement (TCA) and a Trademark License Agreement (TMLA) with UniLever since 2013. Your Company is enjoying the benefits of an increasing stream of new products and innovations, backed by technoLogy and know-how from UniLever. The pace of innovations and the scope of services have expanded over the years. UniLever''s gLobaL resources are providing greater expertise and superior innovations. This has heLped in bringing to the Indian consumers bigger, better and faster innovations.
The TCA provides for payment of royaLty on net saLes of specific products manufactured by your Company, with technicaL know-how provided by UniLever. The TMLA provides for the payment of trademark royaLty as a percentage of net saLes on specific brands where UniLever owns the trademark in India incLuding use of ''UniLever Corporate Logo''.
Your Company maintains strong and heaLthy interactions with UniLever through a weLL-coordinated management exchange programme, which incLudes setting out governing guideLines pertaining to identifying areas of research, agreeing timeLines, resource requirements, scientific research based on hypothesis testing and experimentation. This Leads to new, improved and aLternative technoLogies, supporting the deveLopment of Launch-ready product formuLations based on research, and introducing them to markets. Your Company continuousLy imports technoLogy from UniLever under the TCA, which is fuLLy absorbed.
Your Company aLso receives continuous support and guidance from UniLever to drive functionaL exceLLence in marketing, suppLy management, media buying and IT, among others, which heLp your Company buiLd capabiLities, remain competitive and further step-up its overaLL business performance. UniLever is committed to ensuring that the support in terms of new products, innovations, technoLogies and services is commensurate with the needs of your Company and enabLes it to win in the marketpLace.
B. Our risks and opportunities
Our risk appetite and approach to risk management
Risk management is integral to your Company''s strategy and to the achievement of HUL''s long-term goals. Our success as an organisation depends on our ability to identify and leverage the opportunities generated by our business and the markets we operate in. In doing this we take an embedded approach to risk management which puts risk and opportunity assessment at the core of the Board''s agenda, which is where we believe it should be.
HUL''s appetite for risk is driven by the following:
⢠Our growth should be consistent, competitive, profitable, and responsible;
⢠Our actions on issues such as plastic and climate change must reflect their urgency, and not be constrained by the uncertainty of potential impacts;
⢠Our behaviours must be in line with our Code of Business Principles (Code) and Code Policies;
⢠Our ambition to continuously improve our operational efficiency and effectiveness.
Our approach to risk management is designed to provide reasonable, but not absolute, assurance that our assets are safeguarded, the risks facing the business are being assessed and mitigated and all information that may be required to be disclosed is reported to HUL''s Senior Management and Board & Board Committees including, where appropriate, the Chief Executive Officer and Managing Director, Chief Financial Officer, Audit Committee, Risk Management Committee.
For each of our principal risks we have a risk management framework detailing the internal controls we have in place and who is responsible for managing both the overall risk and the individual controls mitigating that risk. Our assessment of risk considers short and long term as well as internal and external risks including financial, operational, sectoral, sustainability (particularly Environment, Social and Governance related risks), information, cyber security, legal & compliance and any other risks as may be determined by the Company Leadership teams. How the identified risks are changing as well as emerging risk areas are reviewed on an ongoing basis, and formally by Risk Management Committee and the Board at least twice a year.
Processes
HUL engages in a wide range of processes and activities across all its operations covering strategy, planning, execution and performance management. Risk management is integrated into every stage of this business
3. Rapidly changing Business Models
Rapidly evolving consumer behaviour, new-demand spaces and changing shopping habits; Transforming retail channel landscape; Pandemic accelerated reconfiguration of work protocols-hybrid models; Heightened ESG focus.
The potential impact and likelihood of certain principal risks remain heightened due to the Covid-19 pandemic. These risks are the safety and wellbeing of our employees and the extended value chain, continuity of operations, and IT availability.
cycle. These procedures are formalised and documented and are increasingly being centralised and automated into transactional and other information technology systems.
The Board advised by the Risk Management Committee, where appropriate, regularly reviews the significant risks and decisions that could have a material impact on HUL. These reviews consider the level of risk that HUL is prepared to take in pursuit of the business strategy and the effectiveness of the management controls in place to mitigate the risk exposure.
The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company''s internal controls environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company''s risk management policies and systems.
In the following pages we have identified the risks that we regard as the most relevant to our business. These are the risks that we see as most material to HUL''s business and performance at this time. There may be other risks that could emerge in the future.
Our principal risks have not changed this year. However the Macro economic and Geopolitical movements, rapidly evolving business transformation, heightened ESG focus and increasing vulnerability of systems and information have accentuated the risks in these areas. Much of our risk mitigation focus during the year has been on managing these risks.
1. Macro-economic and geopolitical volatility
Heightened risk due to inflationary and supply chain pressures, geopolitical and Covid-19 uncertainties.
2. Systems & Information
Greater exposure to Cyber risks with increased digitisation of business and the cyber attacks being increasingly active and sophisticated.
We regularly review our risk areas and the Company leadership retains the responsibility for determining the nature and extent of significant risks and drawing out commensurate mitigation plans. We identify the most relevant risks for our business and reflect on whether the level of risk associated with each of our principal risks is increasing or decreasing.
We set out below our principal risks, certain mitigating actions that we believe help us to manage our risks and the increase/decrease corresponding to each of the these.
Detailed explanation of ratios
(i) Return on Net Worth
Return on Net Worth (RONW) is a measure of profitability of a Company expressed in percentage. It is calculated by dividing total comprehensive income by average shareholder''s equity.
(ii) Return on Capital Employed
Return on Capital Employed (ROCE) indicates the ability of a Company''s management to generate returns for both the debt holders and the equity holders. It measures a Company''s profitability and the efficiency with which its capital is used. It is calculated by dividing profit before exceptional items, interest and tax by capital employed. Capital Employed = tangible net worth total debt deferred tax liability.
(iii) Basic EPS
Earnings Per Share (EPS) is the portion of a Company''s profit allocated to each share. It serves as an indicator of a Company''s profitability. It is calculated by dividing Profit for the year by Weighted average number of shares outstanding during the year.
(iv) Debtors Turnover
Debtors Turnover measures the efficiency at which the firm is managing the receivables. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short-term debt is collected or is paid. It is calculated by dividing turnover by average trade receivables.
(v) Inventory Turnover
Inventory Turnover measures the efficiency with which a Company utilises or manages its inventory. It establishes the relationship between sales and average inventory held during the period. It is calculated by dividing turnover by average inventory.
(vi) Interest Coverage Ratio
The Interest Coverage Ratio measures how many times a Company can cover its current interest payment with its available earnings. It is calculated by dividing earnings available for debt service by interest payments.
(vii) Debt Service Coverage Ratio
Debt Service coverage ratio is used to analyse the firm''s ability to pay-off current interest and instalments. It is calculated by dividing earnings available for debt service by debt service.
(viii) Current Ratio
The Current Ratio indicates a Company''s overall liquidity position. It measures a Company''s ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.
(ix) Debt Equity Ratio
Debt Equity ratio is used to evaluate a Company''s financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly owned funds. It is calculated by dividing total debt by shareholder''s equity.
(x) Operating Profit Margin (%)
Operating Profit Margin is used to calculate the percentage of profit a Company produces from its operations. It is calculated by dividing EBIT by turnover.
(xi) Net Profit Margin (%)
The net profit margin is equal to how much net profit is generated as a percentage of revenue. It is calculated by dividing net profit by turnover.
Innovations like Free Spirits - vibrant colours, Beautysutra facials and manicure/pedicure treatments and Tresplex hair treatments added excitement to our comprehensive Runway Secrets portfolio. Thematic campaigns - Good Hair Day, Happy New You and Hair Tech helped gain new clients and sustain existing ones. Lakme Salon was awarded several awards notable amongst which are Best Franchisor - Beauty and Wellness at the Franchise India Summit and Best National Salon Chain at the Salon Congress.
Hindustan Unilever Foundation
Hindustan Unilever Foundation (HUF) is a not-for-profit company that anchors water management related community development and sustainability initiatives of Hindustan Unilever Limited. The company operates the ''Water for Public Good'' programme, with a specific focus on water conservation, building local community institutions to govern water resources and enhancing farm-based livelihoods through adoption of judicious water practices. HUF''s programmes currently reach over 10,000 villages* in 46 Districts in 8 States and 2 Union Territories across India in partnership through 15 NGO partners and multiple co-funders. The Company also supports several knowledge initiatives in water conservation, governance and behaviour change.
By the end of financial year 2020-21, the cumulative and collective achievements through partnered programmes of the Company (independently assured) include:
⢠Water Conservation: Over 1.9 trillion litres of water potential created;
⢠Crop Yield: Additional agriculture production of over 1.3 million tonnes has been generated;
⢠Livelihoods: Over 60 million person-days of employment have been created though water conservation and increased agriculture production*.
Unilever Nepal Limited
Unilever Nepal Limited (UNL), a subsidiary of your Company and is engaged in manufacturing, marketing and sale of detergents, foods and refreshment products, toilet soaps, personal products and laundry soaps in Nepal.
During the year, UNL enhanced its growth trajectory which was broad based across all categories. UNL has maintained its bottom-line performance, driven by mix, judicious price management and by leveraging the current manufacturing capability. Transformation programmes such as Distributor Management System and SAP migration
*The significant reach and livelihood impact are on account of HUF''s support to MGNREGS programme partnership in West Bengal with PRADAN, a reputed non-profit organisation. This programme reaches out to over 7,000 villages across 54 blocks in 6 districts.
There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which this financial statement relates on the date of this Integrated Annual Report.
During the financial year, there was no amount proposed to be transferred to the Reserves.
Capital Expenditure (including Intangible Assets)during the financial year was at ''919 crores (''4,051 crores in the previous financial year).
During the financial year, your Company did not accept any public deposits as defined under Chapter V of the Companies Act, 2013.
Your Company manages cash and cash flow processes assiduously, involving all parts of the business. There was cash and bank balance of ''3,618 crores (financial year 2020-21: ''4,321 crores), as on
31st March, 2022. The Company''s low debt equity ratio provides ample scope for gearing the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company''s imports and exports. The Company accounts for mark-to-market gains or losses every quarter end, are in line with the requirements of Ind AS 21. The details of foreign exchange earnings and outgo as required under Section 134 of the Companies Act, 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014 are mentioned below:
('' in crores) |
||
For the year ended 31st March, 2022 |
For the year ended 31st March, 2021 |
|
Foreign Exchange earnings |
1,527 |
1,407 |
Foreign Exchange outgo |
3,131 |
2,698 |
Includes all Indian subsidiaries, excludes Unilever |
Nepal Limited |
The summary of performance of the subsidiaries is provided as below:
Unilever India Exports Limited is a wholly owned subsidiary of the Company and is engaged in FMCG exports business. The focus of the FMCG exports operation is two-fold: to develop overseas markets by driving distribution of brands, such as Vaseline, Dove, Pears, BRU, Red Label, Lakme, Horlicks, Boost and to effectively provide cross-border sourcing of FMCG products to other Unilever companies across the world.
The topline growth of the Company was driven by robust growth in Personal Wash, Personal care, and Culinary products portfolio. Brands like Dove, Vaseline, Lakme, Glow & Lovely, Horlicks, Lifebuoy, Knorr and Kissan have registered healthy growth in the focused markets.
Lakme Lever Private Limited is a wholly owned subsidiary of the Company. The Company is engaged in Salons business and also operates a manufacturing unit at Gandhidham which carries out job work operations for your Company by manufacturing toilet soaps, bathing bars and detergent bars.
The company delivered robust topline and bottom line growth led by recovery in the salon business which was impacted by Covid-19 during the previous financial year. With focus on safety, quality of operations, expert treatments and prudent cost optimisation, the salon business continues to perform well in the beauty services category. Job work business continues its strong top line and bottom line growth momentum.
It has over 400 owned/managed and franchisee salons. At Lakme Salon, safety and wellbeing of our experts and consumers have always been the topmost priority. This is assured by detailed Lakme SOPs, rigorous training and high-quality products. The stringent safety and hygiene protocols rolled out after the first wave were strengthened when salons reopened post wave 2. The extended team comprising the housekeeping staff, experts, salon managers and business partners have been trained and audited continuously to ensure complete adherence to protocols. The safety standards were communicated in an authentic and credible manner leveraging walk throughs and client testimonials with the Safer than Home campaign. This has improved company''s ''Net Promoter Score'' which is in the healthy range of 85 to 90%.
are helping in faster decision-making, localised and swifter innovation delivery and increased speed-to market.
Unilever India Limited is a wholly owned subsidiary of your Company that had been incorporated to leverage the growth opportunities in a fast-changing business environment. Presently, it is in the process of setting up its manufacturing facility at Sumerpur, Uttar Pradesh. It is proposed to manufacture detergent powder at this facility.
This company is on-track to commission its factory and start commercial production in the financial year 2022-23.
Pond''s Exports Limited is a subsidiary of your Company which was engaged in leather business and has currently discontinued operations.
Bhavishya Alliance Child Nutrition Initiatives is a not-for-profit subsidiary of your Company and has discontinued operations.
Daverashola Estates Private Limited is a subsidiary of your Company which currently has no business activity. There is an ongoing litigation on the property owned by the company in Tamil Nadu.
Jamnagar Properties Private Limited is a subsidiary of your Company and has currently discontinued operations.
Levers Associated Trust Limited, Levindra Trust Limited and Hindlever Trust Limited, subsidiaries of your Company, act as trustees of the employee benefits trusts of your Company.
The Scheme for merger of Ponds Exports Limited and Jamnagar Properties Private Limited into Unilever India Exports Limited was filed with the Hon''ble National Company Law Tribunal, Mumbai on 1st July, 2021. As on date, the final order on the company petition for merger is awaited.
During the year, your Company has obtained a certificate from the Statutory Auditors certifying that the Company is in compliance with the Foreign Exchange Management Act with respect to the downstream investment made in its subsidiary company i.e. Unilever India Limited.
In terms of the Section 148 of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, the cost audit is applicable for following businesses such
as Coffee, Drugs and Pharmaceuticals, Insecticides, Milk Powder, Organic Chemicals, Other Machinery, Petroleum Products and Tea. The accounts and records for the above applicable businesses are made and maintained by the Company as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.
Details of the shares issued under Employee Stock Option Plan (ESOP), as also the disclosures in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014, are uploaded on the website of the Company https://www. hul.co.in/investor-relations/annual-reports/hul-annual-report-related-documents/. No employee has been issued share options during the year equal to or exceeding one percent of the issued capital of the Company at the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting held on 23rd July, 2012, the Company adopted the ''2012 HUL Performance Share Scheme''. In accordance with the terms of the Performance Share Scheme, employees are eligible for award of conditional rights to receive equity shares of the Company at the face value of ''1/- each. These awards will vest only on the achievement of certain performance criteria measured over a period of three years. The Company confirms that the 2012 HUL Performance Share Scheme complies with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014.
No shares were awarded to employees under the ''2012 HUL Performance Share Scheme'' in the financial year 2021 -22.
The employees of the Company are eligible for Unilever share award plans, namely Performance Share Plan (PSP) and the SHARES plan. Through PSP, all managers are eligible to receive a conditional grant of Unilever shares on an annual basis. The Target PSP share award is equivalent to 50% of the Target Bonus for Managers and 100% of the Target Bonus for Senior Leaders. The actual share grant is determined by the line manager basis the employees'' sustained impact, leadership and future-fit talent profile. These shares vest after a 3 year period with vesting being determined by Company performance against metrics.
Under the SHARES Plan, eligible employees can invest in the shares of Unilever PLC (Holding Company) up to a specified amount and after three years, one share is granted to the employees for every three shares invested, subject to the fulfilment of conditions of the plan. The Holding Company charges the Company for the grant of shares to the Company''s employees based on the market value of the shares on the exercise date.
Disclosures with respect to the remuneration of Directors and employees as required under Section 197(12) of the Companies Act, 2013 and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (''Rules'') have been appended as an Annexure to this Integrated Annual Report. Details of employee remuneration as required under provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) and 5(3) of the Rules are available on the Company''s website at https://www.hul.co.in/investor-relations/annual-reports/ hul-annual-report- related-documents/.
Your Directors are pleased to recommend a final dividend of ''19/- per equity share of face value of ''1/- each for the year ended 31st March, 2022. The interim dividend of ''15/-per equity share was paid on Friday, 12th November, 2021.
The final dividend, subject to the approval of Members at the Annual General Meeting on Thursday, 23rd June, 2022, will be paid on or after Monday, 27th June, 2022 to the Members whose names appear in the Register of Members, as on the Book Closure date, i.e. from Friday, 17th June, 2022 to Thursday, 23rd June, 2022 (both days inclusive). The total dividend for the financial year, including the proposed final dividend, amounts to ''34/- per equity share and will absorb ''7,989 crores. In view of the changes made under the Income-tax Act, 1961, by the Finance Act, 2020, dividends paid or distributed by the Company shall be taxable in the hands of the Shareholders. Your Company shall, accordingly, make the payment of the final dividend after deduction of tax at source.
In terms of the provisions of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016/Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, ''12.11 crores of unpaid/unclaimed dividends were transferred during the financial year to the Investor Education and Protection Fund.
There were no mergers/acquisitions during the year.
Details of loans, guarantee or investments made by your Company under Section 186 of the Companies Act, 2013, during financial year 2021-22 are appended as an Annexure to this Integrated Annual Report.
The Legal function of the Company continues to be a valued business partner that provides solutions to protect your Company and enable it to win in the volatile, uncertain, complex and ambiguous environment. Through its focus on creating ''value with values'', the function provides strategic business partnership in the areas including product claims, mergers and acquisitions, legislative changes, combatting unfair competition, business integrity and governance.
As the markets continue to be disrupted with newer technologies and ever-evolving consumer preferences, the need to have a framework around data security and privacy is paramount. Your Company continues to ensure it has an appropriate framework and safeguards for data privacy of its stakeholders with enhanced legal and security standards. The legal function of your Company continues to embrace newer technologies to make the function future ready to support the growth agenda of the business.
Your Company is of the view that the menace of counterfeits can be effectively addressed if enforcement actions are supplemented with building awareness amongst the consumers of tomorrow. Your Company continued to engage with various stakeholders including e-Commerce Channel Partners, Industry Bodies and Regulators to curb the menace of counterfeiting on the e-Commerce platforms.
One of the key activities undertaken by your Company in this direction is propagating intellectual property awareness, particularly among school students. Your Company believes it is important to educate students on intellectual property and build awareness and understanding of the subject so that students start respecting intellectual property rights from a young age.
The Legal function of your Company works with leading industry associations, national and regional regulators and key opinion formers to develop a progressive regulatory environment in the best interest of all stakeholders.
Our principles and values apply to all our employees through our Code of Business Principles (Code) and Code Policies. Our employees undertake mandatory annual training on these Policies via online learning modules and sign an annual Business Integrity Pledge. Our Business Integrity governance framework includes clear processes for dealing with Code breaches.
During the financial year, we closed 52 incidents across all areas of our Code and Code Policies, with 21 confirmed breaches. During the year, we terminated the employment
of 7 employees as a consequence of such breaches. The Code and Code Policies reflect our desire to fight corruption in all its forms. We are committed to eradicating any practices or behaviours though our zero-tolerance approach to such practices. The Code of Business Principles is periodically refreshed and updated so that it provides a current reflection of the way we do business at Unilever. Our Code and Code Policies have been reviewed to align them with the changes in the internal and the external environment.
Our Responsible Sourcing Business Partner Policy help to give us visibility of our third parties to ensure their business principles are consistent with our own.
Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter-alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.
Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as on 31st March, 2022 is available on the Company''s website on https://www.hul.co.in/ investor-relations/annual-reports/.
As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (''POSH Act'') and Rules made thereunder, your Company has constituted Internal Committees (IC). Your Company''s POSH Policy is now inclusive and gender neutral, detailing the governance mechanisms for prevention of sexual harassment issues relating to employees across genders including employees who identify themselves with LGBTQI community.
While maintaining the highest governance norms, the Company has appointed external independent persons who have prior experience in the areas of women empowerment and prevention of sexual harassment, as Chairpersons of each of the Internal Committees. During the year, 2 complaints with allegations of sexual harassment were received by the Company and they were investigated and resolved as per the provisions of the
POSH Act. To build awareness in this area, the Company has been conducting induction/refresher programmes in the organisation on a continuous basis. During the year, your Company organised offline training sessions on the topics of Gender Sensitisation and Code Policies including POSH for all office and factory based employees.
In line with the requirements of the Companies Act, 2013 and amendment to the Listing Regulations, your Company has formulated a revised ''Policy on Related Party Transactions'', which is also available on the Company''s website at https://www.hul.co.in/investor-relations/ corporate-governance/. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.
All Related Party Transactions and subsequent material modifications are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and/ or entered in the Ordinary Course of Business and are at Arm''s Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013, and Listing Regulations.
All Related Party Transactions entered during the year were in Ordinary Course of the Business and at Arm''s Length basis. No Material Related Party Transactions, as per the materiality threshold adopted by the Board of Directors, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013, in Form AOC-2 is not applicable.
During the year, based on the recommendation of Nomination and Remuneration Committee, the Board of the Directors approved the appointment of Ms. Ashu Suyash (DIN: 00494515) as an Additional Director - Independent Director, of the Company, with effect from 12th November, 2021, which was subject to shareholders approval.
Securities Exchange Board of India vide Third Amendment Regulations, 2021 read with the corrigendum to Listing Regulations has stipulated the requirement of attaining approval of shareholders by means of a special resolution, for appointment of an Independent Director on the Board of Directors either at the next general meeting or within a
time period of three months from the date of appointment, whichever is earlier, effective from 1st January, 2022. Even though the requirement of obtaining shareholder approval was effective only from 1st January, 2022, as part of good Corporate Governance practice, the Company has received approval of the Members of the Company by means of Special Resolution through Postal Ballot for appointment of Ms. Ashu Suyash as an Independent Director of the Company for a period of 5 (five) years with effect from 12th November, 2021 to 11th November, 2026.
The Board of Directors based on the recommendation of the Nomination and Remuneration Committee appointed Mr. Nitin Paranjpe (DIN: 00045204) as an Additional Director - Non-Executive Director designated as Chairman of the Company with effect from 31st March, 2022, subject to approval of shareholders. Mr. Sanjiv Mehta will continue as the Chief Executive Officer and Managing Director of the Company with effect from 31st March, 2022. The Board of Directors had expressed their deep sense of appreciation and gratitude to Mr. Sanjiv Mehta for the immense contribution made by him as Chairman of the Board and the Company and the manner in which he had led the Board and the Company.
Members at the 83rd Annual General Meeting of the Company held on 30th June, 2017 had approved the appointment of Mr. Dev Bajpai (DIN: 00050516), as the Whole-time Director of the Company for a period of five years with effect from 23rd January, 2017 till 22nd January, 2022. The Board of Directors had based on the recommendation of Nomination and Remuneration Committee and subject to approval of the Members, approved the re-appointment of Mr. Dev Bajpai, as a Whole-time Director and Company Secretary of the Company for a further period of 5 years, with effect from 23rd January, 2022 to 22nd January, 2027.
The Company has received approval of the Members of the Company on 16th April, 2022 through Postal Ballot for appointment of Mr. Nitin Paranjpe as Non-Executive Director and re-appointment of Mr. Dev Bajpai as a Whole-time Director.
As per the provisions of the Act, the Independent Directors are not liable to retire by rotation. The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013 and the Listing Regulations. All other Directors, except the Managing Director, will retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-election.
The details of training and familiarisation programme and Annual Board Evaluation process for Directors have been provided in the Corporate Governance Report. The policy on Director''s appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for key managerial personnel and other employees, forms part of the Corporate Governance Report of this Annual Report.
During the year, five meetings of the Board of Directors were held. The details of meetings held and Director''s attendance are provided in the Corporate Governance Report, which forms part of this Integrated Annual Report.
The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall supervision and control of the Board. The Management Committee is headed by the Chief Executive Officer and Managing Director, and has Functional/ Business Heads as its members.
During the year, the Board of Directors approved the appointment of Mr. Srinandan Sundaram, Executive Director, Customer Development as Executive Director, Foods and Refreshment in succession of Mr. Sudhir Sitapati, who had decided to pursue an external opportunity.
Further, the Board of Directors approved the appointment of Mr. Kedar Lele as Executive Director, Customer Development and a Member of Management Committee replacing Mr. Srinandan Sundaram. Ms. Priya Nair, currently, Executive Director Beauty & Personal Care has been appointed Chief Marketing Officer, Beauty & Wellbeing at Unilever. Accordingly, the Board of Directors approved the appointment of Mr. Madhusudhan Rao as Executive Director, Beauty & Personal Care and a Member of Management Committee of the Company in succession to Ms. Priya Nair.
Ms. Prabha Narasimhan, Executive Director, Home Care decided to leave the Company to pursue an external opportunity. The Board of Directors of the Company approved the appointment of Mr. Deepak Subramanian as Executive Director, Home Care and a Member of Management Committee of the Company, in succession to Ms. Prabha Narasimhan.
The Board places on record its appreciation for the leadership and invaluable contribution made by Mr. Sudhir Sitapati, Ms. Priya Nair and Ms. Prabha Narasimhan during their tenure as Members of Management Committee of the Company.
M/s. B S R & Co. LLP, Chartered Accountants were re-appointed as Statutory Auditors of your Company at the Annual General Meeting held on 29th June, 2019, for the second term of five consecutive years. The Auditors have confirmed that they are not disqualified from being re-appointed as Auditors of the Company.
The Report given by the Auditors on the financial statement of the Company is part of this Integrated Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Companies Act, 2013.
M/s. R A & Co., Cost Accountants carried out the cost audit for applicable businesses during the year. The Board of Directors has appointed M/s. R A & Co., Cost Accountants as Cost Auditors for the financial year 2022-23.
The Board of Directors had appointed M/s. S. N. Ananthasubramanian & Co., Company Secretaries to conduct Secretarial Audit for the financial year 2021-22.
The Secretarial Audit Report forms part of this Integrated Annual Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.
The details in relation to Internal Financial Controls, Director''s Remuneration Policy and the composition of Audit Committee, establishment of Vigil Mechanism for raising concerns by Directors, employees, any other persons including vendors, contractors, sub-contractors, consultants, trainees, shareholders, former employees or any other third parties, is provided in the Corporate Governance Report forming part of this Integrated Annual Report.
No significant or material orders were passed by the Regulators or Courts or Tribunals which impacts the Company''s going concern status and operations in future.
The Company has complied with all the applicable provisions of Secretarial Standard on Meetings of Board of Directors (SS-1), Revised Secretarial Standard on General Meetings (SS-2), Secretarial Standard on Dividend (SS-3) Secretarial Standard on Report of the Board of Directors (SS-4) respectively issued by Institute of Company Secretaries of India.
Our multi-stakeholder model aims to respect the interests of and be responsive towards all stakeholders. Stakeholder engagement and partnership are essential to grow your Company''s business and to reach the ambitious targets set out in the Compass sustainability commitments. The Code of Business Principles, which is the statement of values and represents the standard of conduct for everyone associated with your Company, and the Code Policies guide how we interact with our partners, suppliers, customers, employees, shareholders, Government, Non-Governmental Organisations (NGOs), trade associations and industry bodies. Through the underlying standards set in Code and Code Policies, your Company is committed to transparency, honesty, integrity and openness in all its engagements with the various stakeholders. Details on stakeholder engagement is provided in the Business Responsibility Report on pages 72 to 85.
Our overarching goal remains the delivery of 4G growth -that is, growth which is consistent, competitive, profitable and responsible. In the backdrop of a challenging operating environment in this fiscal, we dynamically managed our business to deliver strong bottomline performance whilst growing our consumer franchise and made significant progress on our strategic priorities.
We will continue to take this approach in financial year 2022-23 where operating environment is expected to remain challenging with further input cost inflation and soft FMCG market growth. Our strategic clarity, the strength of our brands, our execution prowess, agility and adaptability will continue to hold us in good stead. We remain confident of outpacing FMCG market growth and maintaining margins at healthy levels.
Notwithstanding these near-term challenges, Indian FMCG sector offers significant potential for growth. In the mid-long term, we will continue to create value for all our stakeholders by growing ahead of the market, delivering modest margin expansion and through disciplined use of capital.
⢠In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
⢠They have selected such accounting policies and applied them consistently and made judgements and
estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;
⢠They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
⢠They have prepared the annual accounts on a going concern basis;
⢠They have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
⢠They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively
Your Directors place on record their deep appreciation to all employees for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain an industry leader.
Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories in which
it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products, and introduction of new products.
The Board places on record its appreciation for the support and co-operation your Company has been receiving from its suppliers, distributors, retailers, business partners and others associated with it as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be your Company''s endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co-operation with each other, consistent with consumer interests.
The Directors regret the loss of lives and are deeply grateful,share their immense respect for every person who risked their life and safety to fight this pandemic.
Your Directors also take this opportunity to thank all Shareholders, Business Partners, Government and Regulatory Authorities and Stock Exchanges, for their continued support.
On behalf of the Board
Chairman
Mumbai, 27th April, 2022 (DIN: 00045204)
Mar 31, 2021
We operate in a complex and volatile world. Our strategy is constantly evolving to adapt to the trends and forces shaping our markets and impacting our stakeholders.
Hindustan Unilever Limited is part of the Fast-Moving Consumer Goods (FMCG) industry which continues to be one of the biggest long-term sustainable business opportunities that our country offers. Despite being one of the fastest growing markets globally for FMCG products, India''s per capita FMCG consumption is still amongst the lowest in the world, giving the industry a long runway for growth.
2020 was a highly volatile and challenging year. Covid-19 changed almost every aspect of human lives in ways never imagined. The economic toll from the pandemic was unprecedented. Operational challenges mounted due to restricted movement and disrupted supply lines. As the Covid-19 cases continued to rise exponentially, the economy declined sharply. Our focus was on our people''s health & safety, ensuring uninterrupted supplies of Covid-19 relevant portfolio, meeting the demand of consumers arising out of changed behaviour and needs, caring for the communities in which we operate, preserving cash and protecting our business model.
As the country navigated through the crisis, the Government and the Reserve Bank of India took effective measures to support a robust economic recovery. The Union Budget
2021 focused on regaining the growth momentum in the economy through several measures including keeping tax rates stable and enhancing investments in infrastructure.
The agriculture sector performed well, leading to a strong performance by rural markets. The impact of Covid-19 was more pronounced in metros and bigger towns, resulting in a slower recovery in urban markets.
Global trade dynamics, volatile commodity cycles and climate concerns continue to create challenges and uncertainties for companies and categories across the spectrum. New technologies are changing the landscape of the consumer goods market, bringing opportunities for brands and consumers alike. Consumers are shopping
Stakeholder |
Interests and concerns |
How we engaged in FY 2020-21 |
Considerations and outcomes |
The pandemic has impacted |
We have many direct and indirect |
Our Board and Management |
|
consumer spending habits, |
touchpoints with our consumers. Our |
Committee members regularly |
|
mil |
particularly for discretionary |
People Data Centre combines social |
review consumer trends, their |
Consumers |
purchases. Consumers have |
listening with traditional consumer |
concerns and consider these when |
Changes in |
become more conscious about |
research while our Consumer Carelines |
making decisions. Basis insights |
consumer |
their health and hygiene as |
give us rich insights into the experiences |
on new trends, shaping consumer |
behaviour have |
well as being value seeking as |
of consumers when using our products. |
choices and behaviours during |
accelerated, |
they look to protect themselves |
We continue to collaborate with |
the pandemic, the Management |
leading to new |
from the consequences of the |
research agencies and household |
Committee made changes to |
insights about |
pandemic. Digital engagement |
panels to conduct consumer surveys |
strategic directions and investments. |
the way people |
and online shopping gained |
and understand on-ground consumer |
We focused our innovations to serve |
shop and buy our |
prominence as people |
behaviour patterns, their interests |
health and hygiene needs of our |
products |
pivoted to E-everything and a |
and concerns. We also engaged with |
consumers and launched more than |
contactless culture. |
consumers through our digital platforms |
150 Stock Keeping Units (SKU). We |
|
^ For more on consumers see pages 22 to 25 |
such as Cleanipedia and BeBeautiful. |
also repurposed our brands to make |
|
These insights help us in building our understanding of consumer trends, including those that are likely to continue in a post-Covid world. |
them contextually relevant and drive salience. |
||
Covid-19 has been the |
Our leadership team members directly |
Safety and wellbeing of our |
|
¦¦ |
overriding concern for our |
engaged with our employees throughout |
employees is paramount to us. |
people during the year as the |
the year on issues of concern. Through |
We operated with stringent safety |
|
Our People |
pandemic impacted virtually |
empathetic leadership and always |
protocols to protect our people in |
We stepped up |
every part of their lives, |
on two-way communication, our line- |
factories and frontline sales. We |
engagement |
especially work arrangements. |
managers across all levels could provide |
transitioned to 100% remote working |
with employees |
Through our engagement, |
clarity in the time of crisis and strengthen |
for all our office-based employees |
significantly to help |
we also consistently see that |
connectedness. With our ''Care to |
and as the country opened up we |
our people through |
career opportunities, wellbeing, |
Connect'' programme, factory leadership |
resumed our office operations |
the pandemic |
purpose, sustainability and |
teams connected individually with all |
in a calibrated and safe manner |
being a more simple and agile |
our factory employees and their families. |
wherever possible. Through the |
|
^ For more on people see pages 26 to 27 |
business remain important for |
We conducted frequent pulse-check |
year, we built a systemic approach |
our people. |
surveys throughout the year for instant |
on wellbeing with customised |
|
feedback. Our annual UniVoice survey garnered a participation from 84% of our |
interventions for various employee segments. Our UniVoice survey |
||
office-based employees. |
showed improvements across all dimensions, especially remarkable was that 88% employees felt positive and optimistic, 90% believe that their line manager had supported them to be effective during Covid-19 crisis. |
People''s concerns arou nd health & hygiene, as well as the planet, continued to g row this year
As the pandemic unfolded, it reshaped how people lived, worked and shopped. Almost overnight, people''s immediate concerns - health, hygiene and immunity became a priority as people sought to protect themselves and their near-ones from Covid-19. With the country going into a lockdown, daily habits changed dramatically: from eating out to eating at home, from shopping in stores to shopping online and from working in offices to working from home. While the immediate focus for many people was to deal with the crisis, however, concerns around waste, water, climate change, social inequality remained relevant for people. People continued to look for convenient, eco-friendly, natural and chemical free products.
Our three Divisions worked to meet these changing consumer needs in a variety of ways viz. serving through product innovations, creating awareness through contextual communication, shifting to new distribution models and connecting with consumers through their brand''s purpose-led initiatives.
Beauty & Personal Care
We believe in beauty that cares for people, society, and our planet
In the Beauty & Personal Care (BPC) division, we operate in categories that play a significant role in consumers'' lives and touch a vast majority of Indian households. The categories manifest an excellent opportunity to boost penetration, consumption, and premiumisation, presenting a healthy long-term potential. Leveraging our Winning in Many Indias strategy we offer an extensive portfolio with many products tailored to specific regional preferences. With a product portfolio straddling the price-benefit pyramid, we ensure that our brands are accessible and aspirational for all consumers across the country.
Exhibiting resilience and portfolio strength during Covid-19
Covid-19 has had a varied impact on our categories. The humble bar of soap became people''s first line of defence against the risk of catching the infection resulting in an unprecedented demand for Skin Cleansing, especially hand hygiene products. In contrast, categories like
Mar 31, 2019
REPORT OF BOARD OF DIRECTORS
UNILEVER SUSTAINABLE LIVING PLAN (USLP)
The Companyâs vision is to accelerate growth in the business, while reducing environmental footprint and increasing positive social impact. This vision has been codified in the USLP launched in 2010, which is your Companyâs blueprint for achieving sustainable growth. By spurring innovation, strengthening the supply chain, lowering costs, reducing risks and building trust, sustainability is creating value for your Company as well as the society.
Your Company has made good progress on the three USLP big goals to be achieved globally: to help more than a billion people improve their health and well-being, to halve the environmental footprint of our products and to source 100% of our agricultural raw materials sustainably and enhance the livelihoods of people across our value chain.
Detailed information on the progress of your Companyâs USLP initiatives and CSR activities are available in the Annual Report on CSR and Business Responsibility Report which is appended as an Annexure to this Report.
FINANCIAL REVIEW (STANDALONE)
Results (Rs. crores)
For the year ended 31st March, 2019 |
For the year ended 31st March, 2018 |
|
Sales |
37,660 |
34,619 |
EBITDA |
8,637 |
7,276 |
Profit before exceptional items and tax |
8,749 |
7,347 |
Profit for the year |
6,036 |
5,237 |
Division Wise Turnover (Rs. crores)
For the year ended 31st March, 2019 |
For the year ended 31st March, 2018 |
|||
Sales |
Others |
Sales |
Others |
|
Home Care |
12,763 |
113 |
11,464 |
165 |
Beauty and Personal Care |
17,323 |
332 |
16,132 |
332 |
Foods and Refreshment |
7,068 |
65 |
6,425 |
62 |
Others (including Exports, Infant and Feminine Care) |
506 |
54 |
598 |
26 |
TOTAL |
37,660 |
564 |
34,619 |
585 |
*Others include service income from operations, relevant to the respective businesses.
Summarised Profit and Loss Account (Rs. crores)
For the year ended 31st March, 2019 |
For the year ended 31st March, 2018 |
|
Sale of products (including excise duty) |
37,660 |
34,619 |
Other operational Income |
564 |
599 |
REVENUE FROM OPERATIONS |
38,224 |
35,218 |
Operating Costs |
29,587 |
27,942 |
Profit Before Depreciation, Interest, Tax (PBDIT) |
8,637 |
7,276 |
Depreciation |
524 |
4^8 |
Profit Before Interest & Tax (PBIT) |
8,113 |
6,798 |
Other Income (net of finance cost) |
636 |
549 |
Profit before exceptional items |
8,749 |
7,347 |
Exceptional Items |
(227) |
(62) |
Profit Before Tax (PBT) |
8,522 |
7,285 |
Taxation |
2,486 |
2,048 |
Profit for the year |
6,036 |
5,237 |
Basic EPS (Rs.) |
27.89 |
24.20 |
Key Financial Ratios
Particulars |
2018-19 |
2017-18 |
2016-17 |
Return on Net Worth (%) |
90.5 |
84.5 |
76.7 |
Return on Capital Employed (%) |
131.2 |
118.9 |
105.9 |
Basic EPS (after exceptional items) (?) |
27.9 |
24.2 |
20.8 |
Debtors Turnover |
26.7 |
33.4 |
34.0 |
Inventory Turnover |
15.8 |
14.7 |
13.9 |
Interest coverage ratio |
289.8 |
340.9 |
256.9 |
Current ratio |
1.4 |
1.3 |
1.3 |
Debt Equity ratio |
1.3 |
1.4 |
1.3 |
Operating profit margin (%) |
21.5 |
19.6 |
16.7 |
Net profit margin (%) |
16.0 |
15.1 |
13.3 |
There is no significant change (i.e. change of 25% or more as compared to the immediately previous financial year) in the key financial ratios.
Detailed explanation of ratios
(i) Return on Net Worth
Return on Net Worth (RONW) is a measure of profitability of a Company expressed in percentage. It is calculated by dividing total comprehensive income for the year by average capital employed during the year.
(ii) Return on Capital Employed
Return on Capital Employed (ROCE) is a financial ratio that measures a Companyâs profitability and the efficiency with which its capital is used. In other words, the ratio measures how well a Company is generating profits from its capital. It is calculated by dividing profit before exceptional items and tax by average capital employed during the year.
(iii) Basic EPS
Earnings Per Share (EPS) is the portion of a Companyâs profit allocated to each share. It serves as an indicator of a Companyâs profitability. It is calculated by dividing Profit for the year by Weighted average number of shares outstanding during the year.
(iv) Debtors Turnover
The above ratio is used to quantify a Companyâs effectiveness in collecting its receivables or money owed by customers. The ratio shows how well a Company uses and manages the credit it extends to customers and how quickly that short-term debt is collected or is paid. It is calculated by dividing turnover by average trade receivables.
(v) Inventory Turnover
Inventory Turnover is the number of times a Company sells and replaces its inventory during a period. It is calculated by dividing turnover by average inventory.
(vi) Interest Coverage Ratio
The Interest Coverage Ratio measures how many times a Company can cover its current interest payment with its available earnings. It is calculated by dividing PBIT by finance cost.
(vii) Current Ratio
The Current Ratio is a liquidity ratio that measures a Companyâs ability to pay short-term obligations or those due within one year. It is calculated by dividing the current assets by current liabilities.
(viii) Debt Equity Ratio
The ratio is used to evaluate a Companyâs financial leverage. It is a measure of the degree to which a Company is financing its operations through debt versus wholly owned funds. It is calculated by dividing a Companyâs total liabilities by its shareholderâs equity.
(ix) Operating Profit Margin (%)
Operating Profit Margin is a profitability or performance ratio used to calculate the percentage of profit a Company produces from its operations. It is calculated by dividing the EBIT by turnover.
(x) Net Profit Margin (%)
The net profit margin is equal to how much net income or profit is generated as a percentage of revenue. It is calculated by dividing the profit for the year by turnover.
Other Financial Disclosures
There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which this financial statement relates on the date of this report.
Capital Expenditure during the year was at Rs. 728 crores (Rs. 853 crores in the previous year).
During the year, your Company did not accept any public deposits under Chapter V of Companies Act, 2013.
Your Company manages cash and cash flow processes assiduously, involving all parts of the business. There was a net cash surplus of Rs. 3,688 crores (2017-18: Rs. 3,373 crores), as on 31st March, 2019. The Companyâs low debt equity ratio provides ample scope for gearing the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Companyâs imports and exports. The Company accounts for mark-to-market gains or losses every quarter end, are in line with the requirements of Ind AS 21. The details of foreign exchange earnings and outgo as required under Section 134 of the Companies Act, 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014 are monllonod belo w:
Cost Audit
In terms of the Section 148 of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, the cost audit is applicable for following businesses such as Liquid Detergents and Powders, Petroleum Jelly Products, Tea, Milk Powder, Insecticides, Machinery and Mechanical Appliances Drugs and Pharmaceuticals. The accounts and records for the above applicable businesses are made and maintained by the Company as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.
Dividend
Your Directors are pleased to recommend a Final Dividend of Rs. 13/- per equity share of face value of Rs. 1/- each for the year ended 31st March, 2019. The Interim Dividend of Rs. 9/- per equity share was paid on 1st November, 2018.
The Final Dividend, subject to the approval of Members at the Annual General Meeting on Saturday, 29th June, 2019 will be paid on or after 4th July, 2019 to the Members whose names appear in the Register of Members, as on the Book Closure dates, i.e. from Saturday, 22nd June, 2019, to Saturday, 29th June, 2019 (both days inclusive). The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs. 22/- per equity share and will absorb Rs. 5,719 crores, including Dividend Distribution Tax of Rs. 957 crores.
Unpaid / Unclaimed Dividend
In terms of the provisions of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 / Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, Rs. 5.95 crores of unpaid / unclaimed dividends were transferred during the year to the Investor Education and Protection Fund.
Mergers and Acquisitions
During the year, your Company entered into an agreement with Vijaykant Dairy and Food Products Limited (VDFPL) and its group companies, acquiring its Ice cream and frozen desserts business consisting of its flagship brand âAdityaa Milkâ and front-end distribution network across geographies. The proposed acquisition was in line with the Companyâs strategic intent to strengthen its position in the rapidly growing Ice cream and frozen desserts market in India.
During the year, the Board of Directors of your Company approved a Scheme of Amalgamation between the Company and GlaxoSmithKline Consumer Healthcare Limited (GSK CH India) to acquire the business of GSK CH India, subject to obtaining requisite approvals from statutory authorities and shareholders. The proposed transaction is an all equity merger, under which on the Scheme becoming effective, 4.39 shares of the Company will be allotted for every share of GSK CH India.
The acquisition is in line with your Companyâs strategy to build a sustainable and profitable Foods & Refreshment business in India by leveraging the mega trend of health and wellness. GSK CH India is the market leader in the Health Food Drinks (HFD) category, with iconic brands such as Horlicks and Boost, and a product portfolio supported by strong nutritional claims.
The Competition Commission of India has vide its order dated 18th February, 2019, accorded its approval for the amalgamation of GSK CH India with the Company. The Company has obtained No Objection Letters dated 15th February, 2019 from BSE Limited and National Stock Exchange of India Limited for the proposed Scheme of Amalgamation. The Company had filed the Scheme with the National Company Law Tribunal (NCLT) for its sanction and the same is pending. The Mumbai Bench of National Company Law Tribunal vide its order dated 2nd May, 2019, has directed the Company to convene meeting of Equity Shareholders and Unsecured creditors on 29th June, 2019.
Scheme of Arrangement
The Members of the Company, had, at the Court Convened Meeting held on 30th June, 2016, approved the Scheme of Arrangement for transfer of the balance of Rs. 2,187 crores standing to the credit of the General Reserves to the Profit and Loss Account. The Company had accordingly filed the petition for sanction of the Scheme of Arrangement with the Honâble High Court of Mumbai [jurisdiction later changed to National Company Law Tribunal (NCLT)]. The Honâble National Company Law Tribunal, Mumbai Bench, vide its order dated 30th August, 2018, has sanctioned the aforesaid Scheme of Arrangement. With Scheme becoming effective, the balance of Rs. 2,187 crores standing to the credit of the General Reserves has been transferred to the Profit and Loss Account.
Particulars of Loan, Guarantee or Investments
Details of loans, guarantee or investments made by your Company under Section 186 of the Companies Act, 2013, during the financial year 2018-19 are appended as an Annexure to this report.
GOVERNANCE, COMPLIANCE AND BUSINESS INTEGRITY
The Legal function of the Company continues to be a valued business partner that provides solutions to protect your Company and enable it to win in the volatile, uncertain, complex and ambiguous environment. Through its focus on creating âvalue with valuesâ, the function provides strategic business partnership in the areas including product claims, mergers and acquisitions, legislative changes, combating unfair competition, business integrity and governance.
As the markets continue to be disrupted with newer technologies and ever-evolving consumer preferences, the need to have a framework around data security and privacy is paramount. Your Company continues to ensure it has an appropriate framework and safeguards for data privacy of its stakeholders with enhanced legal and security standards. The legal function of your Company continues to embrace newer technologies to make the function future ready to support the growth agenda of the business.
Your Company is of the view that the menace of counterfeits can be effectively addressed if enforcement actions are supplemented with building awareness amongst the consumers of tomorrow. The menace of counterfeiting is also seen in the channels of the future like e-commerce. Your Company continued to engage with various stakeholders including e-commerce Channel Partners, Industry Bodies and Regulators to curb the menace of counterfeiting on the e-commerce platforms.
One of the key activities undertaken by your Company in this direction is propagating intellectual property awareness, particularly among school students. Your Company believes it is important to educate students on intellectual property and build awareness and understanding of the subject so that students start respecting intellectual property rights from a young age.
The Legal function of your Company works with leading industry associations, national and regional regulators and key opinion formers to develop a progressive regulatory environment in the best interest of all stakeholders.
Business Integrity
Our principles and values apply to all our employees through our Code and Code Policies. Our employees undertake mandatory annual training on these Policies via online training modules and an annual business integrity pledge. Our Business Integrity guidelines include clear processes for managing Code breaches.
During the year, we closed 147 incidents across all areas of our Code and Code Policies, with 97 confirmed breaches. During the year, we terminated the employment of 11 employees on account of such breaches. The Code and Code Policies reflect our commitment to fight corruption in all its forms. We are committed to eradicating any practices or behaviours through our zero-toleravce policy.
Our Responsible Sourcing Policy and Responsible Business Partner Policy help to give us visibility of our third parties to ensure their business principles are consistent with our own.
Corporate Governance
Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.
The extract of annual return in Form MGT-9 as required under Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to this Annual Report and also available on the website of the Company at https://www.hul. co.in/investor-relations/annual-reports/hul-annual-report-related-documents.ytml.
Prevention of Sexual Harassment at Workplace
As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (âPOSH Actâ) and Rules made thereunder, your Company has constituted Internal Committees (IC). While maintaining the highest governance norms, the Company has appointed external independent persons who worked in this area and have the requisite experience in handling such matters, as Chairpersons of each of the Committees. During the year, four complaints with allegations of sexual harassment were received by the Company and they were investigated and resolved as per the provisions of the POSH Act. To build awareness in this area, the Company has been conducting induction / refresher programmes in the organisation on a continuous basis. Your Company has also engaged with Government Authority and made suggestions to make POSH Act more enabling and easier to administer so that matters under this Act can be dealt with more efficiently.
Update on Kodaikanal Soil Remediation
Your Company had informed the Members that soil remediation trials had been concluded. Pursuant to which the authorities permitted the Company to commence full scale soil remediation work on the premises of the former factory of your Company as per the approved up-scaling plan. In the meantime, the soil remediation up-scaling plan and the Site-Specific Target Level specified by the authorities was challenged before the National Green Tribunal. The National Green Tribunal dismissed the petition that was filed and ordered that the remediation be carried out as per the approved upscaling plan. The decision of the National Green Tribunal was challenged before the Supreme Court of India; the Supreme Court of India dismissed the petition and has allowed the soil remediation to go ahead. The Company is taking steps to commence full-scale soil remediation at the factory site at the earliest after obtaining the requisite local approvals.
Related Party Transactions
In line with the requirements of the Companies Act, 2013 and amendment to the Listing Regulations, your Company has formulated a revised Policy on Related Party Transactions which is also available on the Companyâs website at https://www.hul. co.in/Images/policy-on-materiality-of-rpt-and-dealing-with-rpt tcm1255-537139 1 en.pdf. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.
All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Armâs Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013, and Listing Regulations.
All Related Party Transactions entered during the year were in Ordinary Course of the Business and at Armâs Length basis. No Material Related Party Transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statement, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013, in Form AOC-2 is not applicable.
BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year, the Board of Directors appointed Mr. Leo Puri as an Additional Director with effect from 12th October, 2018, to hold office up to the date of the forthcoming Annual General Meeting. Being eligible, Mr. Leo Puri has offered himself to be appointed as the Independent Director of your Company.
During the year, Mr. Sanjiv Mehta, Chairman and Managing Director of the Company was elevated as President, South Asia and Member of Unilever Leadership Executive effective from 1st May, 2019.
In terms of the requirements of the Companies Act, 2013, the Independent Directors of the Company were appointed for a period of five years on 30th June, 2014. Such term of appointment of the Independent Directors shall come to an end on 29th June, 2019. In view of the same, the Board of Directors have basis the recommendation of the Nomination and Remuneration Committee proposed to re-appoint Mr. Aditya Narayan, Mr. O. P. Bhatt, Dr. Sanjiv Misra and Ms. Kalpana Morparia as the Independent Directors of the Company for a second term. A resolution proposing re-appointment of Independent Directors of the Company for the second term pursuant to Section 149(6) of the Companies Act, 2013 forms part of the Notice of Annual General Meeting. Dr. Sanjiv Misra and Ms. Kalpana Morparia shall attain age of 75 years during the proposed second term. A resolution proposing their continuation of term on attaining age of 75 years during their second term pursuant to Section 149(6) of the Companies Act, 2013 forms part of the Notice of Annual General Meeting.
Mr. S. Ramadorai, Independent Director of the Company, did not offer his candidature for re-appointment by shareholders in the forthcoming Annual General Meeting. Consequently, he will resign from the position of an Independent Director with effect from 30th June, 2019 after serving of about 17 years in the Company. The Board places on record its deep sense of gratitude and appreciation for Mr. Ramadoraiâs immense contribution, strategic guidance provided during his tenure as an Independent Director and as the Chairperson of the Nomination and Remuneration Committee of the Company.
The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013. Mr. Sanjiv Mehta, Chairman and Managing Director have been appointed for a term of five years in accordance with the relevant provisions of Companies Act, 2013, and is not eligible to retire by rotation.
The details of training and familiarisation programme and Annual Board Evaluation process for Directors have been provided under the Corporate Governance Report. The policy on Directorâs appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for key managerial personnel and other employees, forms part of the Corporate Governance Report of this Annual Report.
MANAGEMENT COMMITTEE
The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by the Managing Director and has Functional / Business Heads as its members. During the year, Ms. Geetu Verma, Executive Director, Foods and a Member of Management Committee was appointed as Global Vice President-Nutrition & Natural Platforms, Unilever. In view of the integration of the Foods and Refreshments categories Mr. Sudhir Sitapati, Executive Director, Refreshments was re-designated as an Executive Director, Foods & Refreshment.
The Board of Directors based on the recommendation of the Nomination and Remuneration Committee held on 3rd May, 2019 appointed Ms. Anuradha Razdan as Executive Director, Human Resource in place of Mr. B. P. Biddappa and Dr. Vibhav Sanzgiri was appointed as Executive Director, Research and Development effective 1st June, 2019.
AUDITORS
M/s. BSR & Co. LLP, Chartered Accountants were appointed as Statutory Auditors of your Company at the Annual General Meeting held on 30th June, 2014, for a term of five consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the firm of Statutory Auditors can be re-appointed for a further period of five years.
A resolution proposing re-appointment of M/s. BSR & Co. LLP as the Statutory Auditors of the Company pursuant to Section 139 of the Companies Act, 2013 forms part of the Notice of Annual General Meeting.
The Report given by the Auditors on the financial statement of the Company is part of this Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.
M/s. RA & Co., Cost Accountants carried out the cost audit for applicable businesses during the year. The Board of Directors have appointed M/s. RA & Co., Cost Accountants as Cost Auditors for the financial year 2019-20.
STAKEHOLDER ENGAGEMENT
Our multi-stakeholder model aims to respect the interests of and be responsive towards all stakeholders.
Stakeholder engagement and partnership is essential to grow your Companyâs business and to reach the ambitious targets set out in the USLP. The CoBP, which is the statement of values and represents the standard of conduct for everyone associated with your Company, and the Code Policies guide how we interact with the partners, suppliers, customers, employees, shareholders, government, Non-Governmental Organisations (NGOs), trade associations and industry bodies. Through the underlined standards set in CoBP and Code policies, your Company is committed to transparency, honesty, integrity and openness in all its engagements with the various stakeholders.
OUTLOOK
From a medium to long-term perspective, FMCG markets continue to offer sizeable headroom for growth by increasing consumption and penetration. Secular trends of young population, growing affluence, rising urbanisation and burgeoning digital connectivity will increase awareness, drive premiumisation and enhance spending patterns of consumers.
India continues to be one of the fastest growing economies in the world and this is expected to continue in the financial year 2019-20. The demand trends in the markets is stable and the government initiatives such as increases to Minimum Support Price (MSP), provision of health insurance, direct income distribution etc. will lend further impetus to the rural economy. Inclusive GDP growth will augur well for the overall economy. Commodity inflation, potential disruptions due to global events and a below normal monsoon this year are possible headwinds which the business will need to navigate with caution.
Your Company, with its brands, talent and investment in digital capabilities, is well placed to leverage the FMCG opportunity. Your Companyâs strategy to lead premiumisation, market development, build channels of the future whilst keeping the sustainable living plan at its core, will enable it to create long-term value for all stakeholders.
Your Company will continue to focus on being Purpose-led and Future fit.
RESPONSIBILITY STATEMENT
The Directors confirm that:
- In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
- They have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for lhal period;
- They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
- They have prepared the annual accounts on ongoing concern basis;
- They have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
- They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
APPRECIATIONS AND ACKNOWLEDGMENTS
Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain an industry leader.
Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products, and introduction of new products.
The Board places on record its appreciation for the support and co-operation your Company has been receiving from its suppliers, distributors, retailers, business partners and others associated with it as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be your Companyâs endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co-operation with each other, consistent with consumer interests.
Your Directors also take this opportunity to thank all Shareholders, Clients, Vendors, Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued support.
On behalf of the Board
Sanjiv Mehta
Chairman and
Managing Director
Mumbai, 3rd May, 2019 (DIN: 06699923)
Mar 31, 2018
REPORT OF BOARD OF DIRECTORS
Against the backdrop of the external environment discussed earlier, our value . creation model and our strategy, your Board of Directors ii: pleased to share with you the Business Performance under each of its strategic pillars along with the Audited Financial Statements for the financial year ended 31st March, 2018.
WINNING WITH BRANDS AND INNOVATION
Our consumers are at the heart of our value creation model and strategy. We meet the needs of our consumers through our four categories spanning 40 brands, most of which are household names.
The key thrust areas for your Company under this strategic pillar of Winning with Brands and Innovation are building brands with purpose, innovating across the portfolio and market development.
To make the business future ready, we have implemented the Winning In Many Indias (WiMi) strategy that resulted in creating 14 Consumer Clusters and the Country Category Business Teams (CCBTs), which are multi-functional business units consisting of marketing, R&D, customer development, finance and supply chain resources. Through WiMi and CCBTsjjyour Company is crafting sharper strategies and rolling out innovations at a much faster pace.
Personal Care
Your Company is focusing on key strategic thrusts to further strengthen its leadership in the Indian Personal Care market, by strengthening the core brands, accelerating premiumisation of the portfolio, market development and scaling up play in ânaturals'.
The penetration and consumption of most of the categories in which your Company operates have a healthy headroom to grow, indicating the potential in the Personal Care market in India.
Skin Care saw healthy growth across segments including face care, face cleansing, hand and body. Growth of core brands in Skin Care was driven by a successful re-launch of Fair &Â Lovely. The talcum powder business grew ahead of the market with refreshed communication and focused relevance building.
Skin Cleansing had a good year, With Lifebuoy, Lux,j Pears and Dove growing strongly. Lifebuoy continued its mission of changing hand washing habits across the nation and Lux held its second edition of the âLux-Golden Rose Awards', the only award to celebrate and recognise best women actors. Dove and Pears led the growth at the premium end of the market.
In Haircare,j your Company launched various new products in the core portfolio of every brand to meet its growth ambition. Several innovations were delivered in the ânaturals' space. Two new variants of TRESemme, namely, âTRESemme Botanique Detox and Restore' and âTRESemme Botanique Nourish and Replenish' were also launched. A new variant for Dove called âEnvironmental Defence' was launched to protect hair damage caused due to pollution.
The re-shaping of the Oral Care market resulted in headwinds to your Company's Oral Care business. Close-up was re-launched in 2017 with a refreshed proposition and communication as well as high scale media deployment. Peps dent had a refreshed communication to build relevance of the germ protection proposition, with focus on âsweet loving' eating habits. Your ''Company, through LEVER ayush, has forayed into the ânaturals' segment in Oral Care.
Lakme had a milestone year and entered the list of your Company's Rs, 1,000 crores brands. Growth was broad-based, :%ith all sub-ranges (Core, 9to5, Absolute) delivering strong growth. Lakme continued to lead trends in the market with new ranges like Lakme Absolute Argan Oil range. The brand also hosted the marquee Lakme Fashion Week.
In Deodorants, the Axe brand performed well, and a new mini format of Axe Ticket was launched. Rexona, our leading anti-perspirant brand, has shown encouraging results during initial launch.
Your Company has a comprehensive ânaturals' strategy to ensure it is able to leverage this growing trend. The Company is building a master brand LEVER ayush across multiple categories like oral care, haircare, skin care and more. The brand strives to make ancient ayurvedic wisdom accessible to solve modern day beauty problems. LEVER ayush consists of a wide range of products across toothpaste, soaps, hand washes, shampoos and face wash, with each segment offering varied solutions. LEVER ayush works with one of the premier Ayurvedic Institutes, Arya Vaidya Pharmacy, to make products that use the right ingredients to make the product effective.
Your Company is also building specialist 'naturals' brands like Indulekha and Citra. Indulekha has delivered impressive performance in the oil format and has now been extended into shampoos, with a unique product formulation and distinctive packaging.
The third leg of the ânaturals' strategy involves launching various natural variants within its existing portfolio of products like TRESemme Botanique, Clinic Plus Ayurveda, FAL Ayurvedic care, Close-up Nature Boost and Nature Rush.
Home Care
Your Company's Home Care business sustained its competitive, profitable growth agenda during the year. Your Company's fabric wash business has delivered strong and comprehensive performance on the back of continuing the premiumisation thrust with Surf excel and regaining growth in the mass segment led by Wheel. In the emerging segments of machines and fabric conditioning, Surf excel matic liquid and Comfort fabric conditioner built momentum and reached more consumer homes. Surf excel hand wash and matic powders were re-engineered for optimized delivery of fabric whiteness. Sunlight powder was re-launched with improved performance on cleaning. Wheel powder was re-launched with malodour masking benefits on fabrics delivered through fragrance technology. Rin bar was re-launched with improved performance on cleaning and fragrance attributes. Rin Matic liquid for Top Load washing machines was launched.
In Household Care, Vim led the market development for dish wash through category adoption of Vim bar in rural India and by upgrading existing bar consumers to the liquid format. During the year, Vim bar also launched its value-added variant Vim Anti-Smell (with Pudina) to start upgrading existing bar users to a higher value benefit of removal of strong leftover smells from clean vessels. Vim liquid was re-engineered to deliver better value to our consumers. Domex launched India's first low-cost toilet cleaning powder. Domex toilet rim blocks too were re-launched via e-commerce.
Pureit continued to strengthen its presence in the fast-growing Reverse Osmosis (RO) business. Launch of the low-priced mineral RO range complemented the existing range well and has further opened the segment by providing consumers a quality range of RO water purifiers at an affordable price. Your Company also launched the new Pureit air purifier range to provide effective solutions to the growing concern around air pollution.
Foods
Your Company's Foods business presents sustainable opportunities for future growth given low household penetration. Consumers are looking for taste, freshness and differentiated offerings that satiate their need for experimentation and time saving. The preference for international cuisines is rising and higher disposable incomes squarely translate to higher share of wallet for packaged foods, leading to a virtuous cycle of growth.
The Foods business will continue to focus on volume growth in core categories, while successfully landing innovations which will be critical to tap into a fast re-shaping landscape of packaged foods.
During the year, the Foods business embarked on several new initiatives and launches, notably the launch of new Knorr Italian Margherita and Cheese &Â Herbs variant of noodles. This launch in select geographies adds to the noodles portfolio and comes as an addition to Knorr's flagship Soupy noodles which has a loyal consumer base. Your Company also launched two new variants of Premium International soups - Italian Mushroom and Mexican Tomato Corn. Under the food solutions channel, the Company introduced seven different Masala variants. Knorr noodles tied up with Carnival cinemas to provide a great snacking experience for moviegoers.
Kissan re-launched its Sweet &Â Spicy range of ketchups to cater to the evolving palate of new-age consumers. Kissan entered into a partnership with INOX to provide consumers with the experience of a new Sweet &Â Spicy range at every INOX movie hall in the country, a unique tie-up to distribute samples at the âmoment of consumption'. The year also saw the launch of one new variant of premium jam, Kissan Tropical blast and new packs of Kissan Mixed Fruit jams. Kissan Ketchup and sauces were re-launched during the year.
Kissan also launched its first ever engagement platform in 2017. In an endeavour to help make the sometimes-daunting task of packing tiffin easier, Kissan, true to its ethos, is on a journey via its âKissan Tiffin Timetable' channel to create 200 recipes for 200 schooldays. The recipes are co-created with India's leading recipe platform, India Food Network, and presented by an assortment of renowned trained chefs, home chefs and food bloggers. The initiative was recognized by the Indian Food Forum with a âGolden Spoon Award' as the best marketing activation for 2017.
Refreshments
The Refreshments business of your Company, comprising iconic brands like Taj Mahal, Red Label, Lipton, BRU and Kwality Wall's, had a good year. It delivered strong and broad-based volume-led growth across Tea, Coffee and Ice Cream. The business continued to drive the reach through increase in direct distribution. Tea continued to deliver robust, volume-led growth as all the key brands continued to grow and delight millions of consumers with their superior taste. Your Company initiated the launch of 13 new premium variants of Taj Mahal for gifting on the e-commerce channel.
Brooke Bond Red Label and 3 Roses Natural Care Tea, with its differentiated immunity benefit from goodness of ayurvedic ingredients, continued to delight consumers. In Taaza, small packs and low unit packs were re-launched.
Brooke Bond Taj Mahal was re-launched with superior product and packaging. Your Company continues to promote healthy lifestyle through green tea.
During the year, your Company launched a new variant of BRU Coffee in select geographies. It continues to leverage state-of-the-art roasting and extraction technologies to deliver superior instant coffee products. For the first time, your Company launched beaten coffee and new masala tea premix in the Out of Home vending channel.
The Ice Cream and Frozen Dessert business saw competitive growth during the year. New innovations in Cornet to and sticks range have done well and received good consumer feedback. Your Company launched the Cornet to Red Velvet variant, Oreo variant, Kwality Wall's Sandwich and Cloud Bite. In Paddle Pop, your Company launched two new exciting variants, namely, dragon popper and mango and strawberry zaps. To cater to the health conscious consumers, your Company introduced Cornet to Mini in reduced portion size and in multipack.
Brands with Purpose
Our sustainable living brands are those that take action to make sustainable living commonplace in a way that is relevant to the product, good for society and motivating to consumers.
We are constantly endeavoring to build brands with purpose. By December 2017, Lifebuoy reached over 67 million people through Lifebuoy Handwashing Programme in India. Dove worked with partners such as Fountainhead and World Association of Girl Guides and Girl Scouts to build the self-esteem of thousands of young girls in India.
The Fair &Â Lovely Foundation, through relevant online courses, continued its journey of empowering women to become self-reliant. The programme has seen high degree of participation with nearly two lakhs women.
Rin introduced the new Rin detergent bar with patented âsmart-foam' technology that saves up to two buckets of water in every washing cycle. Surf excel launched its #HaarKoHarao campaign to make children future-ready by helping them 'Learn from Failure'.
Domex launched India's first toilet cleaning powder in a test market. The innovation caters to the bottom of the pyramid consumers for whom the powder provides an effective and affordable solution for cleaning the toilet and removing malodour. Given the initial success, the brand is extending this innovation to new markets in 2018. Domex also continued with its purpose by adopting 400 villages in Andhra Pradesh to make them Open Defecation Free through behavior change with on-ground interventions.
Till 2017, Pureit provided over 83 billion litres of safe drinking water to consumers across India and continues to make progress towards its ambition of providing safe drinking water to millions. The brand is leveraging its partnership with Micro-Finance Institutions to reach the poorest of the poor.
Sustainable sourcing protects the planet while increasing farmer incomes. Each tomato that goes into the making of Kissan ketchup is grown by a farmer in the most sustainable way.
Staying steady on the progress as part of the âReducing salt' commitment under the USLP, three key variants of Kissan ketchup now meet sodium benchmarks of 5g salt intake per day. The launch of these variants with reduced sodium in a competitive market serves as a testimony that we are progressing steadfastly towards our USLP commitments by providing consumers a variety of options from our portfolio that not only appeal to their taste buds but also contribute positively towards their health and well-being.
As per the latest statistics by World Food Programme (WFP), 815 million people, or one in nine of the global population still goes to bed hungry. India is home to a quarter of undernourished people worldwide, making the country a key focus for tackling hunger on a global scale. In 2017, to mark the occasion of World Food Day, Knorr gave food lovers the opportunity to turn a virtual food post into a real meal for someone in need. On 16th October, 2017, each time our #Share The Meal post was shared or re-tweeted on Face book and Twitter, Knorr Global donated the equivalent of one meal via the WFP, up to a total of 1.5 million meals, and Knorr India donated 50,000 meals via Akshaya Patra.
Your Company follows global principles of responsible food and beverage marketing and is also a signatory of the India Policy on Marketing Communications to Children. In accordance, HUL pledges to advertise products to children under the age of 12 that meet common âFood &Â Beverage Alliance of India' nutrition criteria.
Your Company continues to collaborate with Confederation of Indian Industry (CII) and Food Safety Authority of India to run âCII-HUL Initiative on Food Safety Sciences', to propagate science based culture in food safety. This initiative aims to accomplish a food operations regime in India that embodies the principles of food safety sciences and is positioned on risk based food safety approaches.
WINNING IN THE MARKETPLACE
The Customer Development ecosystem of your Company encompasses capturing the demand, fulfillment of demand and generation of demand. Your Company leads market development by growing new channels with a focus on execution through its Perfect Stores programme. Your Company works with customers, such as large retail chains, to generate insights about those who visit their stores through technology that creates detailed shopper profiles.
Key thrust areas under this strategic pillar are WiMi, increasing your Company's effective coverage and becoming the partner of choice across channels. WiMi is an agenda that allows your Company to get closer to customers and consumers by providing tailor-made products across categories and geographies.
It has been a year of strengthening the WiMi thinking across markets, embedding it into your Company's ways of working. This has helped the Company move the needle on quality of servicing and in-market execution by getting closer to the customers and consumers. Our supply chain's capability to offer cluster-specific promotion and formulation is helping the Company get closer to a diverse set of consumers and address their needs and aspirations. This approach has strengthened your Company's connect with them across geographical clusters and will be a source of competitive advantage for years to come.
As far as demand capturing is concerned, the focus of your Company has been on driving quality of coverage and increasing the assortment using data-centric and analytical approach. With respect to demand fulfillment, process and technology interventions have been used for improving service and efficiencies. For demand generation, the strategy of your Company encompasses winning in traditional trade in both open and closed formats, winning in âroute-to-market' as well as winning in emerging channels like modern trade and e-commerce.
In a rapidly changing world, leveraging technology and data-led decision-making continue to be a big thrust for your Company. HUL has been a thought leader in the area of big data and analytics as a tool to drive sustainable growth. The Company uses intelligent analytics at the backend to deliver better on-shelf availability in stores. Your Company continues to invest and experiment in this dynamic space to ensure it retains the edge in the marketplace.
In traditional trade, the focus has been on optimal servicing with appropriate beat lengths and in improving in-store visibility. In âroute-to-market', your Company has been driving the distribution of the market development portfolio through differentiated investment patterns. The call centres set up for retailers have helped many of your Company's traditional trade customers reach out directly to us. The calls received from retail outlets provide useful insights and help the Company understand issues and opportunities in the marketplace better and address them effectively.
In Modern Trade, the foundation of your Company's success is based on collaborative planning with key customers. Your Company has also significantly improved investments in âassisted selling'. Building âbrands in store' remains a key thrust in this channel and has yielded good results. This has translated into healthy growth during the year on the back of growing brand penetration.
The e-commerce space is growing exponentially in India. Your Company has made significant investments in capability building, and is committed to being the best FMCG player in this channel. A specialized team is working closely with all key e-commerce partners to create competitive advantage for the business and is scaling up at a rapid pace.
Your Company continues to focus on and drive âProject Shakti', the initiative aimed at empowering women, enhancing livelihoods and building opportunities for small-scale entrepreneurs in rural India. Your Company now has nearly 80,000 Shakti Entrepreneurs (Shakti Ammas) across India who make a respectable living by distributing HUL products.
WINNING THROUGH CONTINUOUS IMPROVEMENT
Your Company is constantly aligning its products, processes and strategies to the changing market conditions to stay ahead of competition. The key thrust areas under the strategic pillar of continuous improvement are achieving profitable growth, improving customer service and quality, and building back-end capabilities to improve our processes.
Your Company's Supply Chain agenda focuses on building business competitiveness through consumer and customer-centricity, creating value through cost saving, customer service excellence ensuring availability of product, âpartner to win' programme with suppliers and driving the sustainability agenda in manufacturing.
Your Company continued to improve on-shelf consumer relevant quality standards, thereby enhancing overall consumer experience. âDelighting consumers everyday' is core to how we drive quality in our products. During the year, on-shelf quality was improved by 20% over the previous year.
With a robust funnel of savings programme, your Company continued on its path of delivering consistent end-to-end cost savings. Cash delivery was achieved with the help of IT tools resulting in optimizing and maximizing of cash flows. Your Company has brought down inventory holding by two days. It continues to progress on the world-class manufacturing journey and this covers 25% of production cost perimeter. Factories started delivering >10% cost savings on perimeter by eliminating non- value-added activities.
The service delivery standards improved steadily with Customer-Case Fill-On-Time (CCFOT) upwards of 95%. This was achieved by developing a segmented approach and having a clear roadmap developed for category, geography and channels. IT has continued to play a pivotal role in driving both growth and efficiency for the business. IT solutions for transport management have helped optimize logistics costs and improved demand planning, while forecasting solutions have enabled a leaner supply chain.
Your Company has increased its renewable energy share to 36%, in line with the USLP commitments. This was achieved by converting agricultural process waste from our operations into fuel, besides increasing utilization of traditional befouls like agriwaste. Your Company expanded installation of specialized burners to utilize heavy vegetable oil residue from operations as fuel, substituting furnace oil. This increase in renewable energy usage and reduction in specific energy consumption has also contributed to CO2 reduction in your Company's manufacturing operations by 54% compared to 2008 baseline. All factories and warehouses continue to maintain âzero non-hazardous waste to landfill sites' status. Waste segregation and pre-processing facilities have been provided at all locations to improve recyclability and reduce total waste quantities. Increase in harvested rainwater utilization in processes, reuse of treated effluent water, reduction of water losses from boilers and cooling tower blow-down, process water requirement optimizations, etc. have all contributed to reduction of water usage in manufacturing by 55% compared to 2008 baseline.
For further details on the steps taken by the Company on conservation of energy, water and reduction of waste, please refer to the Business Responsibility Report which forms part of this Annual Report.
Technology Absorption
Your Company continues to derive sustainable benefit from the strong foundation and long tradition of R&D at Unilever, which differentiates it from others. New products, processes and benefits flow from work done in various Unilever R&D centres across the globe, including India. The Unilever R&D labs in Mumbai and Bengaluru work closely with the business to create exciting innovations that help us win with our consumers. With world-class facilities, and a superior science and technology culture, Unilever attracts the best talent to provide a significant technology differentiation to its products and processes.
The R&D programmes, undertaken by Unilever globally, are focused on the development of breakthrough and proprietary technologies with innovative consumer propositions. The global R&D team comprises highly qualified scientists and technologists working in the areas of Home Care, Personal Care, Foods, Refreshments and Water Purification and critical functional capability teams in the areas of Regulatory, Clinicals, Digital R&D, Product &Â Environment Safety and Open Innovation.
Your Company has an existing Technical Collaboration Agreement (TCA) and a Trade Mark License Agreement (TMLA) with Unilever which was entered into in 2012. The TCA provides for payment of royalty on net sales of specific products manufactured by your Company, with technical know-how provided by Unilever. The TMLA provides for the payment of trademark royalty as a percentage of net sales on specific brands where Unilever owns the trademark in India. The pace of innovations and the scope of services have expanded over the years. Unilever's global resources are providing greater expertise and superior innovations. Your Company is enjoying the benefits of an increasing stream of new products and innovations, backed by technology and know-how from Unilever. This has helped in bringing to the Indian consumers bigger, better and faster innovations.
Your Company maintains strong and healthy interactions with Unilever through a well-coordinated management exchange programme, which includes setting out governing guidelines pertaining to identifying areas of research, agreeing timelines, resource requirements, scientific research based on hypothesis testing and experimentation. This leads to new, improved and alternative technologies, supporting the development of launch-ready product formulations based on research, and introducing them to markets. Your Company continuously imports technology from Unilever under the TCA, which is fully absorbed. The benefits derived by your Company through technology absorption and R&D have been detailed in the section Winning with Brands and Innovation earlier in this report.
Your Company also receives continuous support and guidance from Unilever to drive functional excellence in marketing, supply management, media buying and IT, among others, which help your Company build capabilities, remain competitive and further step-up its overall business performance. Unilever is committed to ensuring that the support in terms of new products, innovations, technologies and services is commensurate with the needs of your Company and enables it to win in the marketplace.
The details of expenditure on R&D at the Company's in-house facilities, eligible for a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961, for the year ended 31st March, 2018, are as follows:
Capital Expenditure : Rs, 5 crores Revenue Expenditure : Rs, 23 crores
Finance &Â IT
The Goods and Services Tax (GST) was one of the biggest indirect tax reforms in the history of independent India. Your Company, along with 10,000+ vendors and 3,500+ distributors, transitioned swiftly and smoothly to the GST regime on 1st July, 2017. The transition began within a few minutes post-midnight across several locations and your Company was servicing distributors from Day One. This was made possible by meticulous planning and flawless execution by a cross-functional team. The impact of GST was outlined on various processes in the areas of customer development, supply chain, procurement, payment processing and accounting. Almost all the IT systems needed to be rewired and were tracked rigorously to ensure they landed on time in full. Securing >95% registrations of our ecosystem and conducting extensive training across multiple locations were key to a smooth transition.
Price change actions across categories were landed to ensure the benefits were passed on to consumers from the first day, well ahead of competition.
Effective 15th November, 2017, GST rates were reduced for some of our categories from 28% to 18%. While the implementation of this was done, due to paucity of time, it was not possible to immediately pass on the benefit of these rate reductions on some of the pipeline stocks to the end consumers. An estimated value of Rs, 124 crores has been proactively disclosed to the authorities on this count and we have offered to pay this amount suo motu to the Government. This amount is not recognized as revenue and is accounted as a liability as on 31st March, 2018.
In addition to the above, we have also offered Rs, 36 crores towards additional realization which would have been made by Company's distributors on the closing stocks at point of transition. This is only a pass through and has no impact on Company's financials.
The finance function of your Company continues to assist in driving superior performance of the business, pioneer thought leadership and stewardship.
During the year, your Company's finance team completed a big transformational project that enabled centralization and simplification of the accounting and control processes. Future Finance is a transformative programme that has been initiated this year that will change the way the finance team functions and partners business in your Company. A core component of this change is the Finance Excellence Team (FET) which has been organized around core performance management processes such as forecasting, budgeting and planning, as well as providing decision support in key areas. FET will focus on specific core business processes and decision support topics, enabling the team to develop deeper expertise and greater subject matter knowledge.
During the year, your Company started monitoring and reporting controls through Livewire, a comprehensive analytics tool that tracks compliance with internal controls framework established by the management. The controls dashboard allows the management to perform thematic analysis of its control health across different processes and activities, time periods and responsibility centres. This will enable the management to proactively protect value through implementation of a robust control environment.
WINNING WITH PEOPLE
Great Brands and Great People are our biggest assets. Sustainable, profitable growth can only be achieved in an organization which focuses on a performance culture and where employees are engaged and empowered to be the best they can be.
To compete in a fast-changing world that is impacted by digitization and increased competition, we have created an organization that's faster, simpler, more consumer and customer-centric and future-proofed through our business transformation programme Connected 4 Growth (C4G). In order to propel the C4G transformation, your Company identified new behaviors as a key to winning in the market - Empowerment, Collaboration &Â Experimentation. We are creating an organization and culture where our employees are empowered to act like entrepreneurs and business owners.
HUL retained the 'No. 1 Employer of Choice' amongst key business schools for the seventh year in a row. HUL continues to be the âDream Employer' and is also the top company considered for application by B-School students. The Face book âUnilever Diaries' page has over 5 lakhs fans and helps us deepen our engagement with students, as well strengthens our brand image among them.
Driven by the âleaders build leaders' philosophy, we have sustained an environment where people get big responsibility early in their career and are also able to constantly experiment. Our flagship management trainee programme, the Unilever Future Leaders Programme (UFLP), has been the training ground for many inspiring leaders across HUL and Unilever, and provides extensive cross-functional experience through live projects and assignments.
Our thrust is on building an agile and inclusive organization that celebrates differences and leverages diversity. Apart from enabling infrastructure and work practices such as maternity and paternity support programme, flexible work arrangements towards creating an inclusive culture, we are constantly evaluating various employee support requirements.
Employee well-being is of utmost importance to us. We focus on four aspects of well-being - Physical, Mental, Emotional and Purposeful. An Employee Assistance Programme called âReach Out', a telephonic counseling programme which has round-the-clock access, has provided timely help to some employees.
At HUL, we believe that purpose is at the heart of what energises people. In line with this thinking, we kick started the Discover Your Purpose (DYP) journey with the intent to ignite passion and purpose in our employees.
Our mission is to protect and enhance the well-being of our employees, visitors and partners. A safe work environment is non-negotiable, for which we follow global safety standards in all our units. Our safety practices ensure all possible safety hazards are identified and eliminated, not only at the workplace but also during employee travel. We promote âBeyond Work Safety' as part of our holistic safety culture to improve safety beyond work.
Employee Stock Option Plan (ESOP)
Details of the shares issued under Employee Stock Option Plan (ESOP), as also the disclosures in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014, are uploaded on the website of the Companyhttps://www.hul.co.in/investor-relations/annual-reports/hul-annual-report-related-documents. html. No employee has been issued share options during the year, equal to or exceeding one per cent of the issued capital of the Company at the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting held on 23rd July, 2012, the Company adopted the â2012 HUL Performance Share Scheme'. In accordance with the terms of the Performance Share Plan, employees are eligible for award of conditional rights to receive equity shares of the Company at the face value of ' 1/- each. These awards will vest only on the achievement of certain performance criteria measured over a period of three years. The Company confirms that the 2012 HUL Performance Share Scheme complies with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014.
Under this plan, eligible Managers were given Conditional Performance Grant of shares of Unilever and the Company in the ratio of 67:33, to mirror your Company's shareholding, where Unilever held 67% shareholding. During the year, 160 employees were awarded conditional rights to receive 70,267 equity shares at the face value of ' 1/- each. It comprises conditional grants made to eligible managers covering performance period from 2017 to 2018 and from 2018 to 2020.
The employees of the Company are eligible for Unilever PLC (the âholding Company') share awards namely, the Management Co-Investment Plan (MCIP), the Global Performance Share Plan (GPSP) and the SHARES Plan. The MCIP scheme has two sets of eligibilities - for Managers, it allows eligible employees to invest up to 20% of their annual bonus and for eligible senior leaders 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 GPSP and MCIP plans vest after 3-4 years up to 200% of grant level, depending on the satisfaction of the performance metrics. Under the SHARES Plan, eligible employees can invest in the shares of the holding Company for specified amount and after three years, one share is granted to the employees for every three shares invested, subject to the fulfillment of conditions of the scheme. The holding Company charges the Company for the grant of shares to the Company's employees based on the market value of the shares on the exercise date.
Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Act and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Rules) have been appended as Annexure to this report. Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of the Rules are available at the Registered Office of the Company during working hours, 21 days before the Annual General Meeting and shall be made available to any shareholder on request. Such details are also available on your Company's website https://www.hul.co.in/investor-relations/annual-reports/hul-annual-report-related-documents.html.
PERFORMANCE OF SUBSIDIARIES AND JOINT VENTURE
The summary of performance of the subsidiary and joint venture companies is provided below:
Unilever India Exports Limited
Unilever India Exports Limited (UIEL) is a 100% subsidiary of your Company and is engaged in FMCG exports business. The focus of the FMCG exports operation is two-fold: to develop overseas markets by driving distribution of brands, such as Kissan, BRU, Brooke Bond, Lakme, Pears and to effectively provide cross-border sourcing of FMCG products to other Unilever companies across the world. This year was a challenging one for the Company in view of disruption in its key export markets. However, key brands continued to perform well in focus markets.
Lakme Lever Private Limited
Lakme Lever Private Limited (LLPL), is a 100% subsidiary of the Company and has over 350 owned / managed and franchisee salons.
In a market witnessing lower discretionary spends, LLPL continued to expand its salons business in key markets. The 'Runway Rewards' programme continued its successful journey into the second year and combined with attractive thematic promotion campaigns like Good Hair Day, Happy New You and Fall Collection helped drive footfall growth. Effective use of digital media and strong advocacy amongst customers has helped increased customer loyalty. The boost in confidence is clearly evidenced in the increasing average bill value. Your Company will continue to support LLPL to drive growth in this attractive market opportunity.
LLPL also operates a manufacturing unit at Gandhidham which carries out job work operations for your Company manufacturing toilet soaps, bathing bars and detergent bars.
Unilever Nepal Limited
Unilever Nepal Limited (UNL), a subsidiary of your Company, is engaged in manufacturing, marketing and sale of detergents, toilet soaps, personal products and laundry soaps in Nepal. In 2017, UNL completed 25 glorious years in the country.
During the year, UNL continued robust growth in sales which was broad based across all categories. UNL has maintained its bottom-line performance, driven by mix, judicious price management and by leveraging on the current manufacturing capability. UNL brands continue to be market leaders in all the categories they operate in.
Hindustan Unilever Foundation
Hindustan Unilever Foundation (HUF) is a not-for-profit Company that anchors water management related community development and sustainability initiatives of HUL.
HUF operates the âWater for Public Good' programme, with a specific focus on water conservation, building local community institutions to govern water resources and enhancing farm based livelihoods through adoption of judicious water practices. The Foundation's programmes reach out to 2,400 villages in 57 districts across India in partnership with 20 NGOs and multiple co-founders. HUF also supports several knowledge initiatives in water conservation and governance.
By the end of year, the cumulative and collective achievements through partnered programme of HUF include:
- Â Â Â Water Conservation: More than 450 billion litres of water conservation potential created.
- Â Â Â Crop Yield: Additional agriculture production of over 6.5 lakhs tonnes has been generated.
- Livelihoods: More than 50 lakhs person days of employment have been created though water conservation and increased agriculture production.
The cumulative impact of HUF supported projects has been independently assured.
Other Subsidiaries
Pond's Exports Limited is a subsidiary of the Company which was engaged in leather business and has since discontinued operations.
Bhavishya Alliance Child Nutrition Initiatives is a subsidiary of the Company which is not-for-profit subsidiary of the Company and had launched a hand washing behavior change programme in the state of Bihar that aims to reduce diarrhoea and pneumonia in children under the age of five years. Similar hand washing programme is now being driven by your Company directly.
Daverashola Estates Private Limited is a subsidiary of the Company which has been exploring opportunities to enter into appropriate business activities.
Jamnagar Properties Private Limited is a subsidiary of the Company. The litigation over the land of the Company is now over and accordingly, the Company has initiated the process of surrendering the land.
Levers Associated Trust Limited, Levindra Trust Limited and Hindlever Trust Limited, subsidiaries of the Company, act as trustees of the employee benefits trusts of the Company.
Joint Venture
Kimberly-Clark Lever Private Limited
Kimberly-Clark Lever Private Limited (KCLL) was a joint venture between your Company and Kimberly-Clark Corporation (KCC), USA, with infant care diapers as its primary product category sold under the brand Huggies and feminine care products sold under the brand Kotex.
In line with your Company's decision to focus on its core business, the Company has divested its stake in KCLL during the year and accordingly the joint venture has ceased to exist.
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statements of subsidiaries, associates and joint venture companies in Form AOC 1 is attached herewith. The separate audited financial statements in respect of each of the subsidiary companies shall be kept open for inspection at the Registered Office of the Company during working hours for a period of 21 days before the date of the Annual General Meeting. Your Company will also make available these documents upon request by any member of the Company interested in obtaining the same. The separate audited financial statements in respect of each of the subsidiary companies are also available on the website of your Company at https://www.hul.co.in/investor-relations/annual-reports/hul-annual-report-related-documents.html.
Your Company has not made any downstream investments in subsidiaries or joint venture during the year.
OPPORTUNITIES &Â RISKS
Our success as an organization depends on our ability to identify opportunities and leverage them while mitigating the risks that arise while conducting our business.
Your Company has an elaborate risk management procedure, which is based on three pillars: Business Risk Assessment, Operational Controls Assessment and Policy Compliance Processes. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Company has set up a Risk Management Committee to monitor the risks and their mitigating actions and the key risks are also discussed at the Audit Committee.
Some of the opportunities for the business of your Company and key identified risks along with the steps taken by your Company to mitigate them are presented below.
Strategy |
Opportunity |
Details |
Winning with Brands and Innovation |
Premiumisation and Market Development |
With changing population demographics, higher spending capacity of consumers and wider reach of products, there is increasing scope of premiumisation of our products. We constantly innovate to meet needs of all our consumers. Most of the categories in which your Company operates in are under-penetrated and therefore your Company continuously invests in market development. |
Winning in the Marketplace |
Winning in Channels of future |
Winning in traditional trade and âroute-to-market' continues to be important for your Company. However, winning in emerging channels like e-commerce and modern trade will be the differentiator for your Company. Investments in strengthening our capabilities in the channels of the future while digitalizing our distribution in the traditional trade would be the key thrusts. |
Winning in the Marketplace and Winning through Continuous Improvement |
Leveraging Big Data |
Your Company has been a thought leader in using big data and analytics as a tool to drive sustainable growth. The Company uses intelligent analytics at the backend to deliver better on-shelf availability in stores. Services like order management, shipment planning, tendering, tracking and monitoring can be improved with building backend capabilities. |
Winning in the Marketplace and Winning through Continuous Improvement |
Sharper and Richer Execution |
Our continued and relentless focus on flawless execution across the value chain is a key differentiator and a growth driver for the Company. We will continue to leverage this opportunity by making appropriate investments. |
Â
Strategy |
Description of Risk |
Details |
 |
 |
Brand Preference |
 | |
Winning with Brands and Innovation |
Your Company's success depends on the value and relevance of its brands and products to consumers and on our ability to innovate and remain competitive. Consumer tastes, preferences and behaviors are changing more rapidly than ever. Your Company's ability to identify and respond to these changes is vital to business success. We are dependent on creating innovative products that continue to meet the needs of consumers and getting these new products to market with speed. If we are unable to innovate effectively, sales or margins could be materially adversely affected. |
Your Company monitors external market trends and collates consumer, customer and shopper insights to develop category and brand strategies. Our R&D function actively searches for ways to translate the trends in consumer preference and taste into new technologies for incorporation into future products. Our innovation management process converts category strategies into projects which deliver new products to market. We develop product ideas both in-house and with selected partners to enable us to respond to rapidly changing consumer trends with speed. Your Company has access to Unilever's global resources that provide greater expertise and superior innovations, backed by technology and know-how from Unilever. This helps your Company bring bigger, better and faster innovations to its consumers. |
 |
 |  |
Â
Strategy Description of Risk |
Details |
 |
Technological change is disrupting our traditional brand communication models. Our ability to develop and deploy the right communication, both in terms of messaging content and medium is critical to the continued strength of our brands. |
Our brand communication strategies are designed to optimise digital communication opportunities. We develop and customise brand messaging content specifically for each of our chosen communication channels (both traditional and digital) to ensure that our brand messages reach our target consumers. |
|
Legal and Regulatory |
||
Winning in the Compliance with laws and regulations Marketplace is an essential part of your Company's business operations. We are subject to laws and regulations in diverse areas as product safety, product claims, trademarks, copyright, patents, competition, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes. Frequent changes in legal and regulatory regime and introduction of newer regulations with multiple authorities regulating same areas lead to complexity in compliance. |
We are committed to complying with all applicable laws and regulations. The relevant teams are responsible for setting detailed standards and ensuring that all employees are aware of and comply with regulations and laws specific and relevant to their roles. Our legal and regulatory specialists are closely engaged in monitoring and reviewing our practices to provide reasonable assurance that we remain aware of and in line with all relevant laws and legal obligations. Your Company has institutionalised the mechanism to monitor changes in legislation, both existing and proposed. The Company proactively engages with the Government and regulators to develop a regulatory framework which is in the best interest of the consumers and other stakeholders including Industry. |
 |
Systems and Information |
||
Winning through Your Company's operations are increasingly Continuous dependent on IT systems and the Improvement management of information. Increasing digital interactions with customers, suppliers and consumers place even greater emphasis on the need for secure and reliable IT systems and infrastructure, and careful management of the information that is in our possession. The cyber-attack threat of unauthorized access and misuse of sensitive information or disruption to operations continues to increase. |
To reduce the impact of external cyber-attacks impacting our business, we have firewalls and threat monitoring systems in place, complete with immediate response capabilities to mitigate identified threats. We also maintain a global system for the control and reporting of access to our critical IT systems. This is supported by an annual programme of testing of access controls. We have policies covering the protection of both business and personal information, as well as the use of IT systems and applications by our employees. Our employees are trained to understand these requirements. We also have a set of IT security standards and closely monitor their operation to protect our systems and information. We have standardized ways of hosting information on our public websites and have systems to monitor compliance with appropriate privacy laws and regulations, and with our own policies. |
 |
UNILEVER SUSTAINABLE LIVING PLAN (USLP)
Your Company's vision is to accelerate growth in the business, while reducing environmental footprint and increasing positive social impact. This vision has been codified in the USLP launched in 2010, which is your Company's blueprint for achieving sustainable growth. By spurring innovation, strengthening the supply chain, lowering costs, reducing risks and building trust, sustainability is creating value for your Company as well as the society.
Your Company has made good progress on the three USLP big goals to be achieved globally: to help more than a billion people take action to improve their health and well-being, to halve the environmental footprint of the making and use of the products and to enhance the livelihoods of millions of people, while growing the business. Detailed information on the progress of your Company's USLP initiatives and CSR activities are available in the Annual Report on CSR and Business Responsibility Report which is appended as an Annexure to this Annual Report.
FINANCIAL REVIEW (STANDALONE) Results
 |
For the Year ended |
For the Year ended |
 |
31st March, 2018 |
31st March, 2017 |
Sales (including excise duty) |
34,619 |
33,895 |
EBITDA |
7,276 |
6,047 |
Profit before exceptional items and tax |
7,347 |
6,155 |
Profit for the year |
5,237 |
4,490 |
a) Â Â Â According to the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, revenue for the year ended 31st March, 2017 was reported inclusive of excise duty. Goods and Services Tax ("GST") has been implemented with effect from 1st July, 2017 which replaces Excise Duty and other input taxes. As per Ind AS 18, the revenue for the year ended 31st March, 2018 is reported net of GST.
b) Â Â Â In compliance with IND AS 20 on Government Grants, the amount of budgetary support under Goods and Services Tax, GST Refunds, to be received from the Government of India in relation to the existing eligible units under the different Industrial Promotion Schemes have been recognized as "Other Operating Income". In past periods these credits were netted off from the excise cost reported in the Statement of Profit and Loss.
c) Â Â Â Comparable sales growth and comparable EBITDA margin improvement for FY 2017-18 has been arrived at by adjusting:
i. Â Â Â Excise Duty, other net input taxes from reported sales of FY 2016-17, and
ii. Â Â Â GST Refunds to the reported sales of FY 2017-18.
d) Â Â Â In view of the accounting impact as shared in note (a) to (c) above, while the reported Net Sales grew by 2% during the year, comparable Domestic Consumer Sales grew by 12% during the year. The reported EBITDA margin expansion was 320 bps for the year while comparable EBITDA margin expansion was at 155 bps.
Category-Wise Turnover
 |
For the Year ended 31st March, 2018 III |
For the Year ended 31st March, 2017 |
||
 |
Sales |
Others* |
Sales |
"Hi-!' |
Home Care |
11,464 |
165 |
11,123 |
223 |
Personal Care |
16,132 |
332 |
16,078 |
226 |
Foods |
1,147 |
18 1 |
1,102 |
22 |
Refreshments |
5,181 |
44 |
4,795 |
53 |
Others (including Exports, Infant and Feminine Care) |
695 |
26 |
797 |
22 |
TOTAL |
34,619 |
585 |
33,895 |
546 |
*Others include service income from operations, relevant to the respective businesses.
Summarized Profit and Loss Account
___(Rs, crores)
 |
For the Year ended |
For the Year ended |
 |
31st March, 2018 |
31st March, 2017 |
Sale of products (including excise duty) |
34,619 |
33,895 |
Other operating income |
599 |
592 |
REVENUE FROM OPERATIONS |
35,218 |
34,487 |
Operating Costs |
27,942 |
28,440 |
Profit Before Depreciation, Interest, Tax (PBDIT) |
7,276 |
6,047 |
Depreciation |
478 |
396 |
Profit Before Interest &Â Tax (PBIT) |
6,798 |
5,651 |
Other Income (net of finance costs) |
549 |
504 |
Profit before exceptional items |
7,347 |
6,155 |
Exceptional items |
(62) |
241 |
Profit Before Tax (PBT) |
7,285 |
6,396 |
Taxation |
2,048 |
1,906 |
Profit for the year |
5,237 |
4,490 |
Basic EPS (?) |
24.20 |
20.75 |
Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for the last four years and for the year ended 31st March, 2018, are given below:
Particulars |
2013-14 |
2014-15 |
2015-16 |
2016-17 |
2017-18 |
Return on Net Worth (%) |
104.10 |
99.50 |
72.80 |
76.70 |
84.50 |
Return on Capital Employed (%) |
130.20 |
127.70 |
105.80 |
105.90 |
118.90 |
Basic EPS (after exceptional items) (?) |
17.88 |
19.95 |
19.12 |
20.75 |
24.20 |
There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which this financial statement relate on the date of this report.
Capital Expenditure during the year was at Rs, 853 crores (Rs, 1,372 crores in the previous year).
During the year, your Company did not accept any public deposits under Chapter V of Companies Act, 2013.
Your Company manages cash and cash flow processes assiduously, involving all parts of the business. There was a net cash surplus of Rs, 3,373 crores (2016-17: Rs, 1,671 crores), as on 31st March, 2018. The Company's low debt equity ratio provides ample scope for gearing the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company's imports and exports. The Company accounts for mark-to-market gains or losses every quarter end, are in line with the requirements of Ind AS 21. The details of foreign exchange earnings and outgo as required under Section 134 of the Companies Act. 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014 are mentioned below:
 |
For the |
For the |
 |
Year ended |
Year ended |
 |
31st March, |
31st March, |
 |
2018 |
2017 |
Foreign Exchange earnings |
387 |
541 |
Foreign Exchange outgo |
1,285 |
1,214 |
Dividend
Your Directors are pleased to recommend a Final Dividend of Rs, 12/- per equity share of face value of Rs, 1/- each for the year ended 31st March, 2018. The Interim Dividend of Rs, 8/- per equity share was paid on 14th November, 2017.
The Final Dividend, subject to the approval of Members at the Annual General Meeting on Friday, 29th June, 2018, will be paid on or after Wednesday, 4th July, 2018, to the Members whose names appear in the Register of Members, as on the Book Closure dates, i.e. from Saturday, 23rd June, 2018, to Friday, 29th June, 2018 (both days inclusive). The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs, 20/- per equity share and will absorb Rs, 5,177 crores, including Dividend Distribution Tax of Rs, 848 crore.
Unpaid / Unclaimed Dividend
In terms of the provisions of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 / Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, Rs, 4.01 crores of unpaid / unclaimed dividends were transferred during the year to the Investor Education and Protection Fund.
Scheme of Arrangement
Subsequent to the approval of the Members at the Court Convened Meeting held on 30th June, 2016, to the Scheme of Arrangement for transfer of the balance of Rs, 2,187 crores standing to the credit of the General Reserves to the Profit and Loss Account, your Company had filed the petition for sanction of the Scheme of Arrangement with the Hon'ble High Court of Mumbai. Upon the Scheme becoming effective, the amount so transferred is proposed to be distributed to the Members from time to time, by the Board of Directors, at its sole discretion, in such manner, quantum and at such time, as the Board of Directors may decide. The Scheme is currently pending with National Company Law Tribunal (NCLT) for sanction.
Particulars of Loan, Guarantee or Investments
Details of loans, guarantee or investments made by your Company under Section 186 of the Companies Act, 2013, during the financial year 2017-18 are appended as an Annexure to this report.
Risk and Internal Adequacy
The Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company's internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company's risk management policies and systems.
GOVERNANCE, COMPLIANCE AND BUSINESS INTEGRITY
The Legal function of the Company continues to be a valued business partner that provides solutions to protect your Company and enable it to win in the volatile, uncertain, complex and ambiguous environment. Through its focus on creating âvalue with values', the function provides strategic business partnership in the areas including product claims, legislative changes, combating unfair competition, business integrity and governance.
As the markets continue to be disrupted with newer technologies and ever-evolving consumer preferences, the need to have a framework around data security and privacy is paramount. Your Company continues to ensure it has an appropriate framework and safeguards for data privacy of its stakeholders with enhanced legal and security standards.
Your Company is of the view that the menace of counterfeits can be effectively addressed if enforcement actions are supplemented with building awareness amongst the consumers of tomorrow. One of the key activities undertaken by your Company in this direction is propagating intellectual property awareness, particularly among school students. Your Company believes it is important to educate students on intellectual property, and build awareness and understanding of the subject so that students start respecting intellectual property rights from a young age.
The Legal and Communications functions of your Company work with leading industry associations, national and regional regulators and key opinion formers to develop a progressive regulatory environment in the best interest of all stakeholders.
Business Integrity
Under its pillar of Business Integrity, your Company communicates its Code of Business Principles (Code) and Code Policies internally and externally. All Company employees are required to undertake mandatory annual training on our Code and Code Policies via online training modules as well as take an annual business integrity pledge. Our Code and Code Policies extend through our entire value chain including our employees, contractors and third parties. During the year, we closed 101 incidents across all areas of our Code and Code Policies, with 70 confirmed breaches. During the year, we terminated the employment of 18 employees as a consequence of such breaches. The Company also requires its third-party business partners to adhere to business principles consistent with its own. These expectations are set out in our Responsible Sourcing Policy (RSP) and Responsible Business Partner Policy (RBPP), which underpin our third-party compliance programme.
Corporate Governance
Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.
The extract of annual return in Form MGT-9 as required under Section 92(3) of the Companies Act and Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to this Annual Report.
Prevention of Sexual Harassment at Workplace
As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition &Â Redressal) Act, 2013 (âPOSH Act') and Rules made there under, your Company has constituted Internal Committees (IC). While maintaining the highest governance norms, the Company has appointed external independent persons who worked in this area and have the requisite experience in handling such matters, as Chairpersons of each of the Committees. During the year, four complaints with allegations of sexual harassment were received by the Company and they were investigated and resolved as per the provisions of the POSH Act. To build awareness in this area, the Company has been conducting induction / refresher programmes in the organization on a continuous basis.
Update on Kodaikanal Soil Remediation
Your Company had informed the Members about the long-standing dispute with the former workers association of the former factory in Kodaikanal wherein a Memorandum of Settlement was signed with the association, bringing this long-standing matter to an end. On the other issue pertaining to soil remediation on the premises of the former factory of your Company, the soil remediation trials have been concluded. The Company is committed to commence full-scale soil remediation at the factory site at the earliest.
Related Party Transactions
In line with the requirements of the Companies Act, 2013 and Listing Regulations, your Company has formulated a Policy on Related Party Transactions which is also available on the Company's website at https://www.hul.co.in/investor-relations/corporate-governance/. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.
All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Arm's Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013, and Listing Regulations.
All Related Party Transactions entered during the year were in Ordinary Course of the Business and at Arm's Length basis. No Material Related Party Transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statement, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013, in Form AOC-2 is not applicable.
BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. Harish Manwani, Non-Executive Chairman of the Company, has decided to retire and will not seek re-appointment at the forthcoming Annual General Meeting (AGM). The Board places on record its deep sense of gratitude and appreciation for the leadership and direction provided by Mr. Manwani, first as the Executive Director and thereafter, as the Non-Executive Chairman for the past 13 years. The Board has decided to appoint Mr. Sanjiv Mehta, presently the Managing Director and CEO of the Company, as the Chairman of the Board of Directors in succession to Mr. Manwani from the conclusion of the forthcoming AGM. The Board, while taking the above decision, took note of SEBI's amendments to the Listing Regulations, announced on 28th March, 2018, to accept the recommendation of the Kotak Committee on Corporate Governance to separate the positions of the Chairman and the Managing Director, effective April 2020, for top 500 Companies by market capitalization. Considering this, the Board decided that the current tenure of Mr. Mehta as the Chairman shall be till March 2020. The Company shall ensure compliance with the new requirement of separation of the positions of Chairman and the Managing Director by April 2020.
The present term of appointment of Mr. Mehta as the Managing Director and Chief Executive Officer is valid up to 9th October, 2018. The Board has, subject to the approval of the Members in the forthcoming AGM, approved the re-appointment of Mr. Mehta as Managing Director and Chief Executive Officer for another period of five years, post completion of his present term.
During the year, Mr. P. B. Balaji resigned as Executive Director (Finance &Â IT) and Chief Financial Officer with effect from 13th November, 2017, for pursuing external opportunities. The Board places on record its deep appreciation for the outstanding contribution made by Mr. Balaji. Mr. Srinivas Phatak was appointed as an Additional Director on the Company's Board and the Executive Director (Finance &Â IT) and Chief Financial Officer with effect from 1st December, 2017, succeeding Mr. Balaji, after obtaining requisite approvals of the Members, through Postal Ballot and the Central Government.
As per the provisions of the Companies Act, 2013, Independent Directors have been appointed for a period of five years and shall not be liable to retire by rotation. The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013. All other Directors, except the Managing Director, will retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-election.
The details of training and familiarization programme and Annual Board Evaluation process for Directors have been provided under the Corporate Governance Report. The policy on Director's appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for key managerial personnel and other employees, forms part of the Corporate Governance Report of this Annual Report.
MANAGEMENT COMMITTEE
The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by the Chief Executive Officer and has Functional / Business Heads as its members. During the year, Mr. Srinivas Phatak was appointed as Executive Director, (Finance &Â IT) and CFO and member of Management Committee of the Company in succession to Mr. P. B. Balaji.
AUDITORS
M/s. BSR &Â Co. LLP, Chartered Accountants were appointed as Statutory Auditors of your Company at the Annual General Meeting held on 30th June, 2014, for a term of five consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors is required to be ratified by Members at every Annual General Meeting.
In accordance with the Companies Amendment Act, 2017, enforced on 7th May, 2018 by the Ministry of Corporate Affairs, the appointment of Statutory Auditors is not required to be ratified at every Annual General Meeting.
The Report given by the Auditors on the financial statement of the Company is part of this Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.
M/s. RA &Â Co., Cost Accountants carried out the cost audit for applicable businesses during the year. The Board of Directors have appointed M/s. RA &Â Co., Cost Accountants as Cost Auditors for the financial year 2018-19.
OUTLOOK
From a fundamental and medium-term perspective, FMCG markets continue to offer sizeable headroom for growth by increasing penetration as well as consumption. Secular trends of young population, growing affluence, rising urbanization and burgeoning digital connectivity will increase awareness and drive premiumisation.
India continues to be one of the fastest growing economies in the world and this is expected to continue in financial year 2018-19, as per the latest economic survey. With GST having been successfully implemented, trade conditions have stabilized and we are witnessing a gradual improvement in demand. We expect government spending plans such as increases to Minimum Support Price (MSP), provision of health insurance, etc. to bolster rural development and drive consumption. Normal monsoon, as forecasted, will help the overall economy.
Crude oil led inflation, emerging global events and disruptions, if any, from state elections are potential headwinds which need to be managed carefully.
Your Company, with its brands, talent and investment in capabilities, is well placed to leverage the FMCG opportunity. Your Company's strategy to lead market development while keeping the sustainable living plan its core, will enable it to create long-term value for all stakeholders.
RESPONSIBILITY STATEMENT
The Directors confirm that:
- Â Â Â In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
- Â Â Â They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;
- Â Â Â They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
- Â Â Â They have prepared the annual accounts on a going concern basis;
- Â Â Â They have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
- Â Â Â They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively
APPRECIATIONS AND ACKNOWLEDGMENTS
Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain an industry leader.
Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products, and introduction of new products.
The Board places on record its appreciation for the support and co-operation your Company has been receiving from its suppliers, distributors, retailers, business partners and others associated with it as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be your Company's Endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co-operation with each other, consistent with consumer interests.
Your Directors also take this opportunity to thank all Shareholders, Clients, Vendors, Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued support.
                                                      On behalf of the Board
                                                       Harish Manwani
                                                      Chairman
Mumbai, 14th May, 2018 Â Â Â Â Â Â Â Â Â Â Â Â (DIN: 00045160)
Â
Mar 31, 2017
DIRECTORS'' REPORT
and Management Discussion and Analysis
To the Members,
Your Company''s Directors are pleased to present the 84th Annual Report of the Company, along with Audited Accounts, for the financial year ended 31st March, 2017.
1. FINANCIAL PERFORMANCE (STANDALONE)
1.1 Results
(Rs, crores)
For the year ended 31st March, 2017 |
For the year ended 31st March, 2016 |
|
Revenue from operations (including excise duty) |
34,487 |
33,491 |
Profit before exceptional items and tax |
6,155 |
5,977 |
Profit for the year |
4,490 |
4,137 |
1.2 Category Wise Turnover
(Rs, crores)
For the year ended 31st March, 2017 |
For the year ended 31st March, 2016 |
|||
Sales |
Others* |
Sales |
Others* |
|
Home Care |
11,123 |
223 |
10,585 |
228 |
Personal Care |
16,078 |
226 |
15,791 |
220 |
Refreshments |
1,102 |
22 |
1,078 |
18 |
Foods |
4,795 |
53 |
4,434 |
48 |
Others (including Exports, Infant and Feminine Care) |
797 |
22 |
1,043 |
9 |
TOTAL |
33,895 |
546 |
32930 |
524 |
*Others include service income from operations, relevant to the respective businesses.
1.3 Summarised Profit and Loss Account
(Rs, crores)
For the year ended 31st March, 2017 |
For the year ended 31st March, 2016 |
|
Sale of products (including excise duty) |
33,895 |
32,929 |
Other operational income |
592 |
562 |
Total Revenue |
33,491 |
|
Operating Costs |
28,440 |
27,742 |
Profit Before Depreciation, Interest, Tax (PBDIT) |
6,047 |
5,749 |
Depreciation |
396 |
321 |
Profit Before Interest & Tax (PBIT) |
5,651 |
5,428 |
Other Income (net) |
504 |
549 |
Profit before exceptional items |
6,155 |
5,977 |
Exceptional items |
241 |
(31) |
Profit Before Tax (PBT) |
6,396 |
5,946 |
Taxation |
1,906 |
1,809 |
Profit for the year |
4,490 |
4,137 |
Basic EPS (?) |
20.75 |
19.12 |
The financial statements for the year ended 31st March, 2017 are the first the Company has prepared under IND AS (Indian Accounting Standards). The financial statements for the year ended 31st March, 2016 have been restated in accordance with IND AS for comparative information.
2. DIVIDEND
Your Directors are pleased to recommend a Final Dividend of Rs, 10/per equity share of face value of Rs, 1/- each for the year ended 31st March, 2017. The Interim Dividend of Rs, 7/- per equity share was paid on 15th november, 2016.
The Final Dividend, subject to the approval of Members at the Annual General Meeting on 30th June, 2017, will be paid on or after Wednesday, 5th July, 2017 to the Members whose names appear in the Register of Members, as on the date of Book Closure, i.e. from Saturday, 24th June, 2017 to Friday, 30th June, 2017 (both days inclusive). The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs, 17/- per equity share and will absorb Rs, 4,394 crores, including Dividend Distribution Tax of Rs, 715 crores.
3. RESPONSIBILITY STATEMENT
The Directors confirm that:
- in the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;
- they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;
- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
- they have prepared the annual accounts on a going concern basis;
- they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and
- they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.
7. SUPPLY CHAIN
Your Company''s Supply Chain agenda was centered on five core areas - Customer Service Excellence, Creating Consumer Delight by dedicated end-to-end Quality Focus, Creating Value through cost savings programme, Sustainability and Supplier Partner to Win Programme.
The service levels improved steadily with Customer-Case Fill-On-Time (CCFOT) increasing to more than 95%. This was achieved by developing a segmented approach and having a clear roadmap developed for Category, Geography and Channels. Your Company continues to focus on last-mile delivery improvement programme and on strengthening the Sales and Operation Planning (S&OP) process to facilitate shorter planning cycles and response to market demands. This capability helps to align goals across Finance, Customer Development, Marketing, Research & Development and Supply Chain.
During the year, your Company set up a new state-of-the-art manufacturing facility in Doom Dooma Industrial Estate, Assam in record time and has already commenced commercial production. The first despatch was completed on 15th March, 2017. This unit will augment the production capacity of Personal Care products and make it a strategic sourcing site for the Company. The unit reinforces the Company''s long-term commitment to the state of Assam and to âMake in India''. Your Company acknowledges the excellent support it received in this regard from the Government and the local community.
Your Company continued its focus on quality by linking and improving on-shelf consumer relevant quality standards, thereby bringing together every part of the business to work on improving overall consumer experience. âDelighting consumers everyday'' is core to how your Company drives quality in its products and has been able to substantially improve the on-shelf quality by 37% over 2015.
With a robust funnel of savings programme, your Company continued on its path of delivering consistent end-to-end cost savings and achieved savings of six per cent of the total cost. Your Company brought down its inventory holding by 2.7 days.
Your Company has increased its renewable energy share to 28% in line with the Unilever Sustainable Living Plan commitments. This was achieved by converting agricultural process waste from its operations into fuel, besides increasing the utilization of traditional befouls like agri-waste. Your Company installed equipment to convert process wastes such as spent coffee and tea from beverages factories into fuel for boilers and air-heaters. Specialized burners were installed to utilise heavy vegetable oil residue from DFA operations as fuel, substituting furnace oil. Factory teams also worked to reduce specific energy consumption by eliminating idle operation of equipment, rightsizing of drives and installation of digital controllers. This has also contributed to reduction in your Company''s CO2 footprint by 13% over the previous year.
All factories and warehouses continue to maintain âzero non-hazardous waste to landfill site'' status. Year-on-year reduction of water usage continues to be a key priority for your Company. Increase in harvested rain water utilization in processes, reuse of treated effluent water, reduction of water losses from boiler and cooling tower blow down, process water requirement optimizations, etc. have all contributed to reduction of fresh water abstraction and lowering of water consumption across factories by nine per cent over previous year.
Your Company continues to progress on world-class manufacturing journey and covers 25% of production cost perimeter. Factories started delivering more than 10% cost savings on perimeter by eliminating non-value added activities.
Your Company''s âPartner to Win'' programme, aims at developing Joint Business Plans with suppliers and business partners. It has resulted in reduced lead-time and costs, improved reliability and new innovation- delivery.
8. RESEARCH & DEVELOPMENT
Your Company continues to derive sustainable benefit from the strong foundation and long tradition of Research & Development (R&D) at Unilever, which differentiates it from many others. New products, processes and benefits flow from work done in various Unilever R&D centres across the globe, including India. The Unilever R&D labs in Mumbai and Bengaluru work closely with the business to create exciting innovations to help us win with our consumers. With world-class facilities and a superior science and technology culture, your Company is able to attract the best talent to provide a significant technology differentiation to its products and processes.
The R&D programmes, undertaken by Unilever globally, are focused on the development of breakthrough and proprietary technologies with innovative consumer propositions. The R&D team comprises highly qualified scientists and technologists working in the areas of Home Care, Personal Care, Foods, Refreshments and Water Purification and critical functional capability teams in the areas of Regulatory, Clinicals, Digital R&D, Product & Environment Safety and Open Innovation.
Your Company has an existing Technical Collaboration Agreement (TCA) and a Trade Mark License Agreement (TMLA) with Unilever which was entered in the year 2012. The TCA provides for payment of royalty on net sales of specific products manufactured by your Company, with technical know-how provided by Unilever. The TMLA provides for the payment of trade-mark royalty, as a percentage of net sales on specific brands, where Unilever owns the trademark in India. The pace of innovations and the scope of services have expanded over the years. Unilever''s global resources are providing greater expertise and superior innovations. Your Company is enjoying the benefits of an increasing stream of new products and innovations, backed by technology and know-how from Unilever, such as those mentioned below. This has helped in bringing to the Indian consumers bigger, better and faster innovations.
During the year, your Company introduced several innovations across categories. Dove, a beauty brand trusted by women and mothers around the world, recently marked its entry into the Baby Care category in India with the launch of Baby Dove during the year. Developed for babies with normal to dry skin, the range includes the Baby Dove Rich Moisture Baby Bar, Baby Lotion, Diaper Rash Cream, Baby Wipes and a Sensitive Moisture Baby Bar to take special care of babies with sensitive skin. The range is built on its heritage of moisture, mildness and care to develop cleansers enriched with Dove''s iconic % moisturizing cream - a technology to protect the skin''s natural barrier. Dermatologist-tested and pediatrician-approved, Baby Dove range is formulated uniquely to replenish essential nutrients and is hypoallergenic and pH-neutral for skin types of all babies.
Lifebuoy continued to delight consumers by creating winning mixes and raising the bar on its germ protection technologies through Active Silver Formula to give strongest protection against both ordinary and stronger infection-causing germs.
In the Fabric Wash business, Surf excel Hand wash and Matic powders were relaunched with increased stain-removal efficacy, thereby driving better in-wash, tough and oily stain removal. Fabric conditioner was also relaunched with improved performance and fragrance delivery.
In the Water business, your Company launched âClassic RO'' - a range of five product variants in the âaffordable reverse osmosis (RO) devices'' segment of the market. The R&D team developed a novel manufacturing process for making carbon filters, which resulted in a 60% reduction in CO2 emissions with a significant reduction in electricity consumption, manpower and water-use compared to the earlier process.
In the Skin Care business, Pond''s, for the first time, launched pimple-clear face wash based on thymol-terpineol technology to visibly clear pimples, such that the difference could be seen in just three days.
Next generation skin-lightening molecule âHexyl Resorcinol'' and âdiamond'' powder was introduced in Lakme Perfect Radiance Serum portfolio to claim âHi-Res Crystal Radiance''. Lakme also, for the first time, introduced a transformation technology in the form of Lakme â9 to 5'' CC transform cream with key claim of âFairness cream that changes color to give a make-up finis''.
In Hair Care, TRESemme offered âBeauty-full Volume'' where unique Reverse Wash System was developed for consumers seeking voluminous hair. TRESemme was awarded âProduct of the Year'' for its range of shampoo and conditioners.
LEVER Ayush introduced 16 products and 23 SKUs as part of the launch across Skin Care and Cleansing, Body, Oral and Hair Care. LEVER Ayush products, formulated with ayurvedic ingredients written in the 5000-years-old âgranthas'', use ingredients that are highly beneficial to the skin, hair and teeth. The goodness of ingredients like turmeric, saffron, cow''s ghee, cardamom, rock salt, etc. are authentic solutions to modern day beauty problems.
In Foods, the year saw the launch of new variants of premium jams of Kissan. These have met with strong initial success and we continue to expand their availability footprint.
In Beverages, your Company launched for the first time, boilable tea bags in 3 Roses called âtasty tea buds'' in Tamil Nadu as a value-added tea proposition. As part of your Company''s commitment to sustainable sourcing, your Company contributes towards defining Maximum Residue Limits (MRLs) for pesticides in tea through the Plant Production Code Committee, an initiative of the Tea Board of India. Unilever has commissioned a research project with Centre for Agriculture and Biosciences International (CABI) and Tea Research Institutes in India to evaluate ecological approaches for pest management in tea.
R&D has further contributed to the Company''s sustainability agenda. Your Company was ranked 2nd in the first-ever India Access to Nutrition Index (ATNI). Your Company continues to work on improving the taste and nutritional quality of its products using globally recognized standards. 100% of the children''s Frozen Desserts and edible ice products have 110 kilocalories or fewer per portion.
With access to strong scientific expertise and the capability to deliver high value technologies developed globally by Unilever, your Company is well-placed to leverage the opportunities to drive faster growth on the back of strong support from R&D as well as brand development capabilities. At the same time, your Company is equipped to meet the challenges of increased competition.
8.1 Technology Absorption
Your Company maintains strong and healthy interactions with Unilever through a well-coordinated management exchange programme, which includes setting out governing guidelines pertaining to identifying areas of research, agreeing timelines, resource requirements; scientific research based on hypothesis testing and experimentation which leads to new / improved / alternative technologies; supporting the development of launch-ready product formulation based on research and implementation of the launch ready product formulations in markets. Your Company continuously imports technology from Unilever under the Technical Collaboration Agreement and the same is fully absorbed. The benefits derived by your Company through technology absorption and R&D have been detailed earlier in this report.
Your Company also receives continuous support and guidance from Unilever to drive functional excellence in marketing, supply management, media buying and IT, among others, which help your Company to build capabilities, remain competitive and further step-up its overall business performance. Unilever is committed to ensuring that the support in terms of new products, innovations, technologies and services is commensurate with the needs of your Company and enables it to win in the marketplace.
The details of expenditure on scientific Research and Development at the Company''s in-house R&D facilities eligible for a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 for the year ended 31st March, 2017, are as follows:
Capital Expenditure : Rs, 2 crores
Revenue Expenditure : Rs, 28 crores
9. ENVIRONMENT, SAFETY, HEALTH AND ENERGY CONSERVATION
Your Company upholds Safety, Health and Environment as non-negotiable values. The Company''s Safety approach not only encompasses employees and assets, but also the communities that it operates in. An environment of safe work, safe behavior and safe travel is achieved through implementation and internalization of your Company''s vision of an injury-free organization. This is reflected in the continually reducing injury rates, which came down by over 20% in 2016 as compared to 2015. The absolute injury rate in 2016 was less than 0.4 injuries per million man-hours worked.
To further improve the safety performance, your Company has introduced âWCM Risk Assessment Tools'' at specific sites in addition to the existing Be Safe initiatives across all factories and offices. Be Safe is a behavioral safety framework, which helps in bringing about a change in the behavior patterns and aims to eliminate unsafe acts by improving risk perception of the employees, be it in factories, offices or homes.
Your Company has a robust system of recording and investigating safety incidents. All cases of injuries requiring medical intervention are reported in Unilever''s global safety portal and the same is audited by an external agency. Learnings from safety incidents are cascaded top-down for mitigation of risks, which can avoid repeat incidents.
Your Company celebrates National Safety Day each year across all sites. Special programmes are designed by the Corporate Safety Team jointly with the sites and many of them extend the events to a full Safety Week.
Your Company has a Central Safety, Health and Environment Sub-Committee, which is led by the Managing Director and Chief Executive Officer of the Company. In this forum, performances of specific safety and environment related sub-committees, each of which is led by a Managing Committee (MC) member, are reviewed. This helps in bringing newer insights and direction from the top management.
As part of Unilever Sustainable Living Plan (USLP), your Company strives to grow the business whilst reducing environmental footprint and increasing positive social impact. Accordingly, your Company has taken ambitious targets of year-on-year reductions in CO2 emissions (kg per tonne of production), groundwater abstraction (cubic meter per tonne of production) and waste generation (kg per tonne of production) in its operations. Some of the sustainability initiatives undertaken during the year were:
- In order to reduce groundwater usage, factories are working on direct use of rainwater in plants and processes. In several sites, make-up water for utilities is taken from rainwater harvested during monsoons. 2016 saw an impressive increase of 22% in rainwater re-use in operations over 2015. Water consumption, in cubic meter per tonne of production, reduced by 53% as compared to 2008 baseline and by 9% over 2015.
- In continuation of your Company''s successful trials of using vegetable oil residue as fuel in Orai, similar equipment was installed in Pondicherry and Bhuj to maximize in-house use of such residue as source of renewable energy.
- Amli and Kandla factories installed solar thermal plants for heating of process water, utilizing the high solar insulation. The project at Amli has also received partial subsidy from Ministry of New and Renewable Energy (MNRE). More such installations have been planned.
- Biogas plants for utilization of canteen waste for gas generation were installed in five factories.
- The contribution of renewable energy in total energy consumed for the year was 28.5%. This was supported by sustained usage of biogenic fuels across factories. CO2 emissions (kg per tonne of production) reduced by 49% versus 2008 baseline and by over 13% versus 2015.
- Over 23 million units (KWH) were reduced from your Company''s energy footprint during the financial year 2016-17 due to execution of various capital projects ranging from installation of energy efficient chillers and motors, condensate recoveries, air compressor heat recoveries, etc. Your Company has made investments totaling Rs, 17 crores in such projects in the above period.
- Total waste generated from the factories reduced by 21.5% in 2016 as compared to 2015. Factories identified newer avenues for re-use and energy recovery from waste, in addition to the current reduction and recycling streams, within the purview of statutory guidelines of waste disposals. Your Company maintained the status of âzero non-hazardous waste to landfill'' from all factories and offices.
With the continuous evolution of the USLP in a changing landscape, in January 2017, Unilever announced a commitment to ensure that all of our plastic packaging will be fully re-usable, recyclable or compostable by 2025.
Your Company''s initiatives in the area of Safety and Environment were recognized through awards from National Safety Council, Shrishti Green Governance, Karnataka State Pollution Control Board, Confederation of Indian Industry (CII), Green Tech, Frost & Sullivan, etc.
10. HUMAN RESOURCES
Your Company considers Great Brands and Great People as its biggest assets. The Human Resource agenda continues to support the business in achieving sustainable and responsible growth by building the right capabilities in the organization. It continues to focus on progressive employee relations policies, creating an inclusive work culture and a strong talent pipeline.
Your Company is known as the âLeadership Factory'', that exports talent to Unilever and to India Inc., the industry at large. The foundation of all your Company''s learning practices is based on a 70-20-10 approach to learning. 70% of learning is done through on-the-job training, building business-linked capabilities to achieve ambitious business targets. 20% of learning is coaching and 10% of learning is through formal development. Your Company''s learning curriculum is designed to support the entire life cycle of an employee''s career.
Driven by the âLeaders build Leaders'' philosophy, your Company''s flagship management trainee programme, the Unilever Future Leaders Programme (UFLP) has been the training ground for many inspiring leaders, which provides extensive cross functional experience through live projects and assignments.
As per the latest Campus Track Business School Survey, conducted by Nielsen for B-School students, your Company has been chosen as the preferred employer across all sectors. Your Company has also retained the âDream Employer'' status. Your Company is known for having the best people practices for developing future leaders. The ability to attract the best talent, provides a competitive edge to the organization.
A series of programmes like maternity and paternity support, Career by Choice and location flexibility have helped in driving the Inclusion and Diversity agenda. Your Company continues to focus on driving inclusion through building leadership capability and recognizing line managers who provide a simple, flexible and respectful work environment for their teams.
Your Company has been recognized as one of the âTop 10 Best Companies for Women in India'' by The Best Companies for Women in India (BCWI) Study 2016. This award is a recognition of your Company''s commitment towards creating a diverse and inclusive work-culture.
In the beginning of the year, Unilever launched the âConnected 4 Growth'' (C4G) framework which entailed setting up of empowered Cluster Category Business Teams (CCBTs) with representatives from different functions. During the year, the C4G framework has been embedded well in the business through 15 fully functional CCBTs. Your Company is confident that this framework will help bring more speed and agility in its operations to compete in the marketplace and strengthen the consumer connect.
Over the years, the Industrial Relations function of your Company achieved many milestones by strengthening its base through Institutional Capability
Development Initiatives, Gender Diversity, Digitization and Community Development. Your Company drives sustainable growth by leveraging employee-potential through capability development initiatives in line with Unilever Production System and by reducing cost and complexity in Supply Chain units.
Your Company is focused on building a high-performance culture with a growth mindset where employees are engaged and empowered to be the best they can be. Developing and strengthening capabilities of all employees in your Company has remained an ongoing priority.
Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Act and Rule 5 (1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Rules) have been appended as Annexure to this report. Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of Rules are available at the Registered Office of the Company during working hours, 21 days before the Annual General Meeting and shall be made available to any shareholder on request. Such details are also available on your Company''s website https://www.hul.co.in/investor-relations/.
11. FINANCE, ACCOUNTS & IT
The agenda for the Finance and Accounts function of your Company is to assist in driving superior performance of the business, pioneer thought-leadership and develop future-ready talent in Finance.
During the year, your Company implemented projects to leverage technology for building business intelligence thereby, enabling growth and reducing costs through project Livewire and Zero Based Budgeting (ZBB). Massive simplification of processes led to deploying people on value partnering through projects like Finance Excellence Team (FET), Amazingly Simple and One Accounting Centre.
Project âLivewire'' was implemented for end to end business analytics. It continues to evolve as a pioneering technology enabling your Company to drive business performance management with speed and agility. The tool based on bringing together raw data from different sources, delivers ready-made off-the-shelf analytics in pictorial and graphical form, and offers actionable insights that help us spot opportunities and challenges in a faster manner.
To enhance standardization of accounting processes, improve efficiency in operations and enhance accounting expertise, three accounting centers are being formed for consolidating - Sales Accounting, Head Office Accounting and Factory Accounting.
Your Company invested in a common distribution management system that has been further upgraded during the year to make it future-ready. The common mobility solution has also been upgraded. These would enable a sharper and richer sales execution process in the marketplace.
The e-commerce capabilities have been further enhanced. Ability to manage the digital content of our products and brands and to seamlessly publish the same to our partners have helped improve the quality of consumer engagement online. Analytical solutions have been developed for improved understanding of consumer sentiments and to engage with them in an agile manner.
Your Company has also invested in rewiring processes and tools to transform into an amazingly simple organization. Investments in new technologies like Financial Closing Cockpit have cut timelines and improved predictability of the month-end close process. Expanding the SAP Global Available To Promise (GATP) capability to run the order management process has helped move the needle on customer service. Your Company has continued the active engagement with the external environment and is investing to enhance solutions across the value chain, thereby preparing itself for the Goods and Services Tax (GST) era. Your Company continues to drive resilience through targeted remediation of high risk Information Technology (IT) components, including hardware, database, operating systems and applications. Alongside the investment in technology, your Company is also improving its service management processes to prevent any defects in the IT environment and to enable faster resolution of any such incidents with minimum business disruption.
Indian Accounting Standards (IND AS) - IFRS Converged Standards
Your Company, its subsidiaries and joint venture had adopted IND AS with effect from 1st April, 2016 pursuant to Ministry of Corporate Affairs notification dated 16th February, 2015 notifying the Companies (Indian Accounting Standard) Rules, 2015. Your Company has published IND AS Financials for the year ended 31st March 2017 along with comparable as on 31st March 2016 and Opening Statement of Assets and Liabilities as on 1st April 2015.
Your Company has proactively shared all four quarters re-stated IND AS Profit and Loss Statement with Investors along with quarterly results for June, 2016, for comparison.
Capital Expenditure during the year was at Rs, 1,372 crores (Rs, 750 crores in the previous year).
During the year, your Company did not accept any public deposits under Chapter V of Companies Act, 2013. In terms of the provisions of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 / Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, Rs, 5.43 crores of unpaid / unclaimed dividends were transferred during the year to the Investor Education and Protection Fund.
Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for the last four years and for the year ended 31st March,
2017, are given below:
IGAAP |
IND AS |
|||||
Particulars |
2012-13 |
2013-14 |
2014-15 |
2015-16 |
2015-16 |
2016-17 |
Return on Net Worth (%) |
94.70 |
104.10 |
99.50 |
88.70 |
72.80 |
76.70 |
Return on Capital Employed (%) |
109.10 |
130.20 |
127.70 |
128.40 |
105.80 |
105.90 |
Basic EPS (after exceptional items) (?) |
17.56 |
17.88 |
19.95 |
18.87 |
19.12 |
20.75 |
There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which this financial statements relate on the date of this report.
Segment-wise results
During the year, your Company re-organized the businesses into four categories - Home Care, Personal Care, Foods and Refreshments. Accordingly, the Management Committee reviews performance of categories basis new segments.
Your Company identified five business segments, in line with the Accounting Standard on Segment Reporting (IND AS-107), which comprises: (i) Home Care, (ii) Personal Care, (iii) Foods,
(iv) Refreshments, and (v) Others, including Exports, Infant and Feminine Care, etc. The audited financial results of these segments are provided as a part of financial statements.
Details of loans, guarantee or investments made by your Company under Section 186 of the Companies Act, 2013 during the financial year 2016-17 is appended as an Annexure to this report.
11.1 Risk and Internal Adequacy
Your Company has an elaborate Risk Management procedure, which is based on three pillars: Business Risk Assessment, Operational Controls Assessment and Policy Compliance processes. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Company has set up a Risk Management Committee to monitor the risks and their mitigating actions and the key risks are also discussed at the Audit Committee. Some of the risks identified by the Risk Management Committee relate to competitive intensity and cost volatility. The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company''s internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company''s risk management policies and systems.
During the year, your Company started monitoring and reporting Controls through Livewire - a comprehensive analytics tool that tracks compliance with internal controls framework established by the management. The controls dash board allows the management to perform a thematic analysis of its control health across different processes and activities, time periods and responsibility centers. This will enable the management to pro-actively protect value through implementation of a robust control environment.
Your Company manages cash and cash flow processes assiduously, involving all parts of the business. There was a net cash surplus of Rs, 1,671 crores (2015-16: Rs, 2,759 crores), as on 31st March, 2017. The Company''s low debt equity ratio provides ample scope for gearing the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company''s imports and exports. The Company accounts for mark-to-market gains or losses every quarter end, in line with the requirements of Accounting Standard 11. The details of foreign exchange earnings and outgo as required under Section 134 of the Act and Rule 8(3) of Companies (Accounts) Rules, 2014 are mentioned below:
(Rs, In crores)
For the year ended 31st March, 2017 |
For the year ended 31st March, 2016 |
|
Foreign Exchange earnings |
541 |
559 |
Foreign Exchange outgo |
1,214 |
1,084 |
11.2 Mergers, Acquisitions and Divestments
During the year, your Company completed the acquisition of Indulekha Hair oil. The addition of this brand has further strengthened our position in the evolving ânaturals'' segment. The brand is now fully integrated into our Personal Care portfolio and is performing well.
Your Company also completed the sale and transfer of its rice exports business carried out under the brands âGold Seal Indus Valley'' and âRozana'', to LT foods Middle East DMMC, a group Company of LT Foods Limited.
Your Company announced its intention to divest its shareholding in Kimberley Clark Lever Limited (KCLL) to its JV partner Kimberley Clark Corporation (KCC). The decision to divest from this business is in line with our strategy focus on core business.
11.3 Goods and Service tax
Goods and Services Tax (GST) is a landmark reform which will have a lasting impact on the economy and on businesses. Implementation of a well-designed GST model that applies to the widest possible base at a low rate can provide significant growth stimulus to the business and contribute to the Prime Minister''s mission of âMake in India''. Your Company has been preparing for migrating to GST for the past year; changes across IT systems, Supply Chain and operations have been made keeping in mind the sweeping changes that GST would bring in. While there are a few areas that need to be addressed, the Government has announced an intention to go live on GST on 1st July, 2017 and your Company will be ready for this transformative reform.
11.4 Scheme of Arrangement
Subsequent to the approval of the shareholders at the Court Convened Meeting held on 30th June, 2016, to the Scheme of Arrangement for transfer of the balance of '' 2,187 crores standing to the credit of the General Reserves to the Profit and Loss Account, your Company had filed the petition for sanction of the Scheme of Arrangement with the Hon''ble High Court of Mumbai. Upon the Scheme becoming effective, the amount so transferred is proposed to be distributed to the shareholders from time to time, by the Board of Directors, at its sole discretion, in such manner, quantum and at such time, as the Board of Directors may decide.
Consequent to the notification of certain pending sections of Companies Act, 2013 including sections related to the Compromise and Arrangements and National Company Law Tribunal (NCLT), the jurisdiction for sanctioning the Scheme of Arrangement has been transferred to the NCLT from High Court of Mumbai. The Scheme is currently pending with NCLT for sanction.
12. LEGAL, GOVERNANCE AND BRAND PROTECTION
The Legal function of your Company continues to be a valued partner in facilitating the business agenda in the areas of claims management, legislative changes in both emerging and existing regulations, effectively dealing with unfair competition and ensuring regulatory compliance. The Legal function also works closely with different stakeholders like Industry Associations, Regulators, key opinion formers to develop a progressive regulatory environment in the best interest of all the stakeholders.
The focus of the Legal function has been to partner the business on strategic issues that present either areas of opportunities or in mitigating risks besides focusing on core legal work like litigation management, combating unfair competition to protect Company''s brands from counterfeits, look alike and grey imports. One of the activities that the Legal function has engaged itself with across the country is in propagating intellectual property awareness. Your Company believes that it is important to educate students on intellectual property and build awareness and understanding of the subject so that students start respecting intellectual property rights from a young age. Your Company is of the view that the menace of counterfeits can be effectively addressed if enforcement actions are supplemented with building awareness amongst the consumers of tomorrow.
12.1 Update on Kodaikanal Soil Remediation
Your Company had informed the shareholders about the long-standing dispute with the former workers association of the former factory in Kodaikanal. A Memorandum of Settlement was signed towards the end of the last financial year with the association bringing to an end this long-standing issue.
The other issue on this matter, which is pending, pertains to commencement of soil remediation in the premises of the former factory of your Company. Since this issue first came to light in 2001, your Company has actively sought to address it in a responsible and transparent manner. During this year, basis the decision from the Hon''ble Madras High Court, Tamil Nadu Pollution Control Board (TNPCB) in December 2016 granted permission to your Company to commence preparatory work and soil remediation on a trial basis for a period of three months after obtaining applicable local approvals. The grant of consent by TNPCB was challenged in the Southern Bench of the National Green Tribunal (NGT), Chennai. Through an interim order, the NGT has directed that soil remediation should be commenced in accordance with the consent granted by TNPCB. The Company is committed to conduct soil remediation at the factory site at the earliest.
12.2 Corporate Governance
A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.
The extract of annual return in Form MGT-9 as required under Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to this Report.
12.3 Related Party Transactions
In line with the requirements of the Companies Act, 2013 and Listing Regulations, your Company has formulated a Policy on Related Party Transactions which is also available on the Company''s website at https://www.hul.co.in/investor-relations/corporate-governance/. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.
All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Arm''s Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013 and Listing Regulations.
All Related Party Transactions entered during the year were in Ordinary Course of the Business and at Arm''s Length basis. No Material Related Party Transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is not applicable.
12.4 Prevention of Sexual Harassment at Workplace
As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (Act'') and Rules made there under, your Company has constituted Internal Committees (IC). While maintaining the highest governance norms, the Company has appointed external independent persons, who have done work in this area and have requisite experience in handling such matters, as Chairpersons of each of the Committees. During the year, one complaint with allegations of sexual harassment was received by the Company and the same was investigated and resolved as per the provisions of the Act.
In order to build awareness in this area, the Company has been conducting programmes in the organisation on a continuous basis.
13. SUSTAINABLE LIVING
Your Company''s Vision is to accelerate growth in the business, while reducing environmental footprint and increasing positive social impact. This vision has been codified in the Unilever Sustainable Living Plan (USLP), launched in 2010, which is your Company''s blueprint for achieving sustainable growth. By spurring innovation, strengthening Supply Chain, lowering costs, reducing risks and building trust, sustainability is creating value for your Company as well as society.
Your Company has made good progress on the three USLP big goals to be achieved globally: To help more than a billion people take action to improve their health and well-being, to halve the environmental footprint of the making and use of the products while growing the business and to enhance the livelihoods of millions of people while growing the business.
Detailed information on the progress of your Company''s USLP initiatives and CSR activities is available in the Annual Report on CSR and Business Responsibility Report which is appended as Annexure to this Report.
14. EMPLOYEE STOCK OPTION PLAN (ESOP)
Details of the shares issued under Employee Stock Option Plan (ESOP), as also the disclosures in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 are uploaded on the website of the Company https://www.hul.co.in/investor-relations/annual-reports/. No employee has been issued share options during the year, equal to or exceeding one per cent of the issued capital of the Company at the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting held on 23rd July, 2012, the Company adopted the â2012 HUL Performance Share Scheme'' in place of â2006 HLL Performance Share Scheme''. In accordance with the terms of the Performance Share Plan, employees are eligible for award of conditional rights to receive equity shares of the Company at the face value of '' 1/- each. These awards will vest only on the achievement of certain performance criteria measured over a period of three years. The Company confirms that the 2012 HUL Performance Share Scheme complies with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014.
Under the said Plan, eligible Managers were given Conditional Performance Grant of shares of Unilever and the Company in the ratio of 67:33, to mirror your Company''s shareholding, where Unilever held 67% shareholding. During the year, 203 employees, including Whole-time Directors, were awarded conditional rights to receive 135,721 Equity Shares at the face value of '' 1/- each. It comprises conditional grants made to eligible managers covering performance period from 2016 to 2018 and from 2017 to 2019.
The employees of the Company are eligible for Unilever PLC (the âholding Company'') share awards namely, the Management Co-Investment 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 vests after 3-4 years between 0% and 200% of grant level, depending on the satisfaction of the performance metrics. Under the SHARES Plan, eligible employees can invest in the shares of the holding Company for specified amount and after three years one share is granted to the employees for every three shares invested subject to the fulfillment of conditions of the scheme. The holding Company charges the Company for the grant of shares to the Company''s employees based on the market value of the shares on the exercise date.
15. BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. Dev Bajpai, Executive Director, Legal & Corporate Affairs and Company Secretary was appointed as an Additional Director on the Board of the Company with effect from 23rd January, 2017 to hold office till the conclusion of the next Annual General Meeting of the Company. Mr. Dev Bajpai has also been appointed as a Whole-time Director on the Board with effect from 23rd January, 2017, for a period of five years, subject to approval of Members of your Company at the Annual General Meeting.
As per the provisions of the Companies Act, 2013, Independent Directors have been appointed for a period of five years and shall not be liable to retire by rotation. All other Directors, except the Managing Director, will retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-election.
The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013.
The details of training and familiarization programme and Annual Board Evaluation process for Directors have been provided under the Corporate Governance Report.
The policy on Director''s appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for Key Managerial Personnel and other employees, forms part of the Corporate Governance Report of this Annual Report.
16. MANAGEMENT COMMITTEE
The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by the Chief Executive Officer and has Functional / Business Heads as its members.
During the year, your Company re-organized the Foods and Refreshments (F&R) business into two separate businesses of Foods and Refreshments. Accordingly, Mr. Sudhir Sitapati, Category Vice President, Refreshments (South Asia & Africa) was appointed as Executive Director, Refreshments and member of Management Committee. Ms. Geetu Verma, who was Executive Director (Foods & Refreshments) was designated as Executive Director (Foods), responsible for the Foods business of your Company.
During the year, Mr. Punit Misra, Executive Director, Sales and Customer Development resigned from the services of the Company. Mr. Srinandan Sundaram was appointed as Executive Director, Sales and Customer Development and member of Management Committee of the Company.
17. AUDITORS
M/s. BSR & Co. LLP were appointed as Statutory Auditors of your Company at the Annual General Meeting held on 30th June, 2014 for a term of five consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors is required to be ratified by Members at every Annual General Meeting.
The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.
M/s. RA & Co., Cost Accountants carried out the cost audit for applicable businesses during the year. The Board of Directors have appointed M/s. RA & Co., Cost Accountants as Cost Auditors for the financial year 2017-18.
18. OUTLOOK
The global economy continues to remain under pressure from the ongoing political, policy and economic uncertainties around the world. However, it is expected that the global growth should stabilize in future.
The Indian GDP growth rate continues to be one of the fastest growing large economies of the world. Economic growth is expected to further improve on the strengthening consumer sentiment. The medium to long term secular trends based on urbanization, rising aspirations, low level of penetration for most of our categories and improving consumption levels are positive for the FMCG sector. Your Company, with its brands, talent and investment in capabilities, is well placed to leverage this opportunity.
The enactment of the GST legislation has been a milestone reform that will create a win-win environment for all stakeholders and heralds an integrated and productive economy, and is expected to further boost economic growth. However, there could be temporary transition challenges during the cut-over.
18.1 Cautionary Statement
Statements in the Annual Report, particularly those which relate to Management Discussion and Analysis, describing the Company''s objectives, projections, estimates and expectations, may constitute âforward looking statements'' within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ.
19. APPRECIATIONS AND ACKNOWLEDGMENTS
Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain as industry leaders.
Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories, in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products and introduction of new products.
The Board places on record its appreciation for the support and co-operation your Company has been receiving from its suppliers, redistribution stockiest, retailers, business partners and others associated with the Company as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be your Company''s Endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co- operation with each other, consistent with consumer interests.
The Directors also take this opportunity to thank all Shareholders, Clients, Vendors, Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued support.
On behalf of the Board
Harish Manwani
Chairman
Mumbai, 17th May, 2017 (DIN : 00045160)
Mar 31, 2015
To the Members,
The Company''s Directors are pleased to present the 82nd Annual Report
of the Company, along with Audited Accounts, for the Financial Year
ended 31st March, 2015.
1. FINANCIAL PERFORMANCE (STANDALONE)
1.1. Results
(Rs. crores>
For the year ended For the year ended
31st March, 2015 31st March, 2014
Revenue from operations,
net of excise 30,805.62 28,019.13
Profit before exceptional items
and tax 5,523.12 4,799.71
Profit for the year 4,315.26 3,867.49
Dividend (including tax on
distributed profits) (3,881.22) (3,272.97)
Transfer to General Reserve - (386.75)
Profit & Loss Account balance
carried forward 1,177.09 743.05
1.2. Category Wise Turnover
(Rs. crores)
For the year ended For the year ended
31st March, 2015 31st March, 2014
Sales Others* Sales Others*
Soaps and Detergents 14,640.66 235.95 13,460.98 222.43
Personal Products 8,865.03 141.50 7,979.79 141.10
Beverages 3,581.31 50.18 3,275.12 36.74
Packaged Foods 1,863.42 28.38 1,620.75 27.55
Others (including Exports,
Chemicals, Infant Care
Products, Water, etc.) 1,220.29 92.61 1,071.63 84.67
TOTAL 30,170.71 548.62 27,408.29 512.49
* Others include service income from operations, relevant to the
respective businesses.
1.3. Summarised Profit and Loss Account
(Rs. crores)
For the year ended For the year ended
31st March, 2015 31st March, 2014
Sale of products less
excise duty 30,170.50 27,408.29
Other operational income 635.12 610.84
Total Revenue 30,805.62 28,019.13
Operating Costs (25,597.38) (23,543.87)
Profit Before Depreciation,
Interest, Tax (PBDIT) 5,208.24 4,475.26
Depreciation (286.69) (260.55)
Profit Before Interest &
Tax (PBIT) 4,921.55 4,214.71
Other Income (net) 601.57 585.00
Profit before exceptional
items 5,523.12 4,799.71
Exceptional items 664.30 228.68
Profit Before Tax (PBT) 6,187.42 5,028.39
Taxation (1,872.16) (1,160.90)
Profit for the year 4,315.26 3,867.49
Basic EPS (Rs.) 19.95 17.88
2. DIVIDEND
Your Directors are pleased to recommend a Final Dividend of Rs. 9/- per
equity share of face value of Re. 1/- each for the year ended 31st
March, 2015. The Interim Dividend of Rs. 6/- per equity share was paid
on14th November, 2014.
The Final Dividend, subject to the approval of Members at the Annual
General Meeting on 29 th June, 2015, will be paid on or after 3rd July,
2015 to the Members whose names appear in the Register of Members, as
on the date of book closure, i.e. from Tuesday, 23rd June, 2015 to
Monday, 29th June, 2015 (both days inclusive). The total dividend for
the financial year, including the proposed Final Dividend, amounts to
Rs. 15/- per equity share and will absorb Rs. 3,881 crores, including
Dividend Distribution Tax of Rs. 636 crores.
3. RESPONSIBILITY STATEMENT
The Directors confirm that:
- in the preparation of the annual accounts, the applicable
accounting standards have been followed and that no material departures
have been made from the same;
- they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent, so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits of the
Company for that period;
- they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 2013, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
- they have prepared the annual accounts on a going concern basis;
- they have laid down internal financial controls for the Company and
such internal financial controls are adequate and operating
effectively; and
- they have devised proper systems to ensure compliance with the
provisions of all applicable laws and such systems are adequate and
operating effectively.
12.1. Risk and Internal Adequacy
Your Company has an elaborate Risk Management procedure, which is based
on three pillars: Business Risk Assessment, Operational Controls
Assessment and Policy Compliance processes. Major risks identified by
the businesses and functions are systematically addressed through
mitigating actions on a continuing basis. Some of the identified risks
relate to competitive intensity and cost volatility. During the year,
your Company has set up a new Risk Management Committee in accordance
with the requirements of Listing Agreement to monitor the risks and
their mitigating actions. The key risks and mitigating actions are also
placed before the Audit Committee of the Company.
The Company''s internal control systems are commensurate with the nature
of its business and the size and complexity of operations. These
systems are routinely tested and certified by Statutory as wett as
Internal Auditor and cover att offices, factories and key business
areas. Significant audit observations and fottow up actions thereon are
reported to the Audit Committee. The Audit Committee reviews adequacy
and effectiveness of the Company''s internat controt environment and
monitors the imptementation of audit recommendations, inctuding those
retating to strengthening of the Company''s risk management poticies and
systems.
Foreign Exchange transactions are futty covered with strict timits
ptaced on the amount of uncovered exposure, if any, at any point in
time. There are no materiatty significant uncovered exchange rate risks
in the context of Company''s imports and exports. The Company accounts
for mark-to-market gains or tosses every quarter end, in tine with the
requirements of Accounting Standard 11. The detaits of foreign exchange
earnings and outgo as required under Section 134 and Rute 8(3) of
Companies (Accounts) Rutes, 2014 are mentioned betow:
Foreign Exchange Earnings & Outgo
[Rs. crores]
For the year ended For the year ended
31st March, 2015 31st March, 2014
Foreign Exchange earnings 573.43 547.91
Foreign Exchange outgo 3,846.50 3,132.40
13. LEGAL, GOVERNANCE AND BRAND PROTECTION
Your Company continued to focus on the key areas and projects within
the Legat, Comptiance and Corporate Affairs functions. The Company has
devetoped an in house workftow based comptiance toot ''Setf-Compti''
that tracks comptiances across factories and offices. The toot is one
of the best practices and is being exported to other businesses of
Unitever. The focus on titigation management continued during the year
as atso on combating unfair competition with a series of actions to
protect your Company''s Brands from counterfeits, took-atike and grey
imports. As part of cascading knowtedge of Competition Law, the Company
cottaborated with the Federation of Indian Smatt and Medium Enterprises
to conduct Competition Law Awareness Sessions for Smatt and Medium
Enterprises.
13.1 Corporate Governance
Your Company is renowned for exemptary governance standards since
inception and continues to tay a strong emphasis on transparency,
accountabitity and integrity.
The new Companies Act, 2013 and amended Listing Agreement have
strengthened the governance regime in the country. Your Company is in
comptiance with the governance requirements provided under the new taw
and had proactivety adopted many provisions of the new taw, ahead of
time. Your Company is committed to embrace the new taw in tetter and
spirit. In tine with the requirements of new taw, your Company has
constituted new Board Committees. Your Company has in ptace att the
statutory Committees required under the taw. Detaits of Board
Committees atong with their terms of reference, composition and
meetings of the Board and Board Committees hetd during the year, are
provided in the Corporate Governance Report.
During the year, your Company has adopted new policies and amended
existing policies such as Policy on Related Party Transactions, Policy
on Material Subsidiaries, CSR Policy and Whistle Blower Policy in line
with new governance requirements. These policies are available on the
website of the Company at www.
hul.co.in/investorrelations/CorporateGovernance/. The Company has
established a vigil mechanism for Directors and employees to report
their genuine concerns, details of which have been given in the
Corporate Governance Report annexed to this Report.
During the year, Secretarial Audit and Secretarial Standards Audit were
carried out by M/s S. N. Ananthasubramanian & Co., Company Secretaries,
the Secretarial Auditor of the Company for the financial year 2014-15.
There were no qualification, reservation or adverse remarks given by
Secretarial Auditors of the Company. The detailed reports on the
Secretarial Standards and Secretarial Audit are appended as an Annexure
to this Report.
The extract of annual return in Form MGT 9 as required under Section
92(3) and Rule 12 of the Companies (Management and Administration)
Rules, 2014 is appended as an Annexure to this Report.
A separate report on Corporate Governance is provided together with a
Certificate from the Statutory Auditors of the Company regarding
compliance of conditions of Corporate Governance as stipulated under
Clause 49 of the Equity Listing Agreement with the Stock Exchange(s). A
Certificate of the CEO and CFO of the Company in terms of sub-clause IX
of Clause 49 of Equity Listing Agreement, inter alia, confirming the
correctness of the financial statements and cash flow statements,
adequacy of the internal control measures and reporting of matters to
the Audit Committee, is also annexed.
13.2 Related Party Transactions
In line with the requirements of the Companies Act, 2013 and Equity
Listing Agreement, your Company has formulated a Policy on Related
Party Transactions which is also available on Company''s website at
www.hul.co.in/investorrelations/ CorporateGovernance/. The Policy
intends to ensure that proper reporting, approval and disclosure
processes are in place for all transactions between the Company and
Related Parties.
This Policy specifically deals with the review and approval of Material
Related Party Transactions keeping in mind the potential or actual
conflicts of interest that may arise because of entering into these
transactions. All Related Party Transactions are placed before the
Audit Committee for review and approval. Prior omnibus approval is
obtained for Related Party Transactions on a quarterly basis for
transactions which are of repetitive nature and / or entered in the
Ordinary Course of Business and are at Arm''s Length. All Related Party
Transactions are subjected to independent review by a reputed
accounting firm to establish compliance with the requirements of
Related Party Transactions under the Companies Act, 2013 and Equity
Listing Agreement.
All Related Party Transactions entered during the year were in Ordinary
Course of the Business and on Arm''s Length basis. No Material Related
Party Transactions, i.e. transactions exceeding ten percent of the
annual consolidated turnover as per the last audited financial
statements, were entered during the year by your Company. Accordingly,
the disclosure of Related Party Transactions as required under Section
134(3) (h) of the Companies Act, 2013 in Form AOC 2 is not applicable.
13.3 Prevention of Sexual Harassment at Workplace
As per the requirement of The Sexual Harassment of Women at Workplace
(Prevention, Prohibition & Redressal) Act, 2013 (Act'') and Rules made
thereunder, your Company has constituted Internal Complaints Committees
(ICC). The Company has designated the external independent member as a
Chairperson for each of the Commettees which was beyond the
requirements of law. During the year, 2 complaints with allegations of
sexual harassment were filed with the Company and the same were
investigated and resolved as per the provisions of the Act.
14. SUSTAINABLE LIVING
Your Company has embraced the Unilever Sustainable Living Plan (USLP)
since the year 2010 and has made good progress on the goals set by the
Plan. The Plan spans your Company''s entire portfolio of brands, has a
social and economic dimension and works across the entire value chain;
from the sourcing of raw materials to the delivery of products to the
consumers.
USLP has three big global goals to achieve:
- I mproving Health and Well-being - By 2020, we will help more than
a billion people take action to improve their health and well-being.
- Reducing Environmental Impact - By 2020, our goal is to halve the
environmental footprint of the making and use of the products as we
grow our business.
- Enhancing Livelihoods - By 2020, we will enhance the livelihoods of
millions of people as we grow our business.
Your Company progressed well on its goals. The highlights of progress
in the year 2014 are given below:
- The Company reached out to a total of 63 million people through
Lifebuoy Handwashing Programme since 2010.
- Pureit in-home water purifier provided 55 billions litres of safe
drinking water by the end of 2014.
- All your Company''s children''s ice cream brands now contained, 110
kilocalories or fewer per portion.
- CO2 emission per tonne of production was reduced by 88% compared to
2008.
- Your Company created water conservation potential of nearly 100
billion litres through Hindustan Unilever Foundation partnerships.
- All manufacturing locations of your Company achieved zero
non-hazardous waste to landfills.
- A total of 111 tea estates in Assam, West Bengal, Kerala and Tamil
Nadu are certified as ''Sustainable Estates''
- A total of 85% of tomatoes used in Kissan Ketchup are now sourced
from sustainable sources
- Project Shakti network expanded to include over 70,000 Shakti
Entrepreneurs (Shakti Ammas) by the end of 2014.
During last year, the Unilever Sustainable Living Plan was broadened
with a more substantive and far reaching ''Enhancing Livelihoods
Programme''. The three new commitments under this pillar are:
- Drive Fairness in the Workplace by advancing human rights across
the operations and extended supply chain.
- Advance Opportunities for Women by promoting their safety,
providing up-skilling and expanding opportunities.
- Develop Inclusive Business to improve the livelihoods of
smallholder farmers, improve the incomes of small- scale retailers and
increase the participation of young entrepreneurs in the value chain.
Your Company continued to put more emphasis on human and labour rights
and enhanced the role of women in the value chain while growing the
business sustainably and driving social and economic development.
During the year, your Company recruited over 50 women to work on shop
floors in its factories taking the total number of female employees on
shop floors to 100.
As part of Project Prabhat, your Company initiated projects around its
manufacturing operations to ensure development of local communities.
These focussed on improving health and hygiene, conserving water and
enhancing livelihoods. Prabhat''s livelihood programme saw enrollment of
over 3,000 candidates across 13 livelihood centers in India.
Your Company''s ''Project Sunlight'' which aims to involve consumers as
a part of the USLP, progressed well in 2014. Your Company worked to
make sustainability more relevant to the common people by involving
children as agents of change. Your Company identified two issues that
are important for India to create a brighter future - first, to stop
littering and second, to reduce water wastage. Children were the key
influencers for both the activations.
Your Company has shared its progress on Unilever Sustainable Living
Plan in India which is made available on the website of the Company,
www.hul.co.in/sustainable-living-2015/. Your Company has also released
the Business Responsibility Report that describes the initiatives
undertaken in line with the key principles enunciated in the
''National Voluntary Guidelines on Social, Environmental and Economic
Responsibilities of
Business'' framed by the Ministry of Corporate Affairs. The report is
made available on your Company''s website, www.hul.co.in, and forms a
part of this Annual Report. The Business Responsibility Report shall be
kept open for inspection at the Registered Office of the Company. If a
Member is interested in obtaining a hard copy of the Business
Responsibility Report, they may write to the Investor Service
Department at the Registered Office of the Company.
In accordance with the requirements of Section 135 of Companies Act,
2013, your Company has constituted a Corporate Social Responsibility
Committee. The composition and terms of reference of the Corporate
Social Responsibility Committee is provided in the Corporate Governance
Report.
Your Company has also formulated a Corporate Social Responsibility
Policy which is available on the website of the Company at
www.hul.co.in/investorrelations/ CorporateGovernance/. Annual report on
CSR activities as required under the Companies (Corporate Social
Responsibility Policy) Rules, 2014 has been appended as Annexure to
this Report.
15. EMPLOYEE STOCK OPTION PLAN (ESOP)
Details of the shares issued under Employee Stock Option Plan (ESOP),
as also the disclosures in compliance with Section 62 of Companies Act,
2013 and Rule 12 of Companies (Share Capital and Debentures) Rules,
2014 and SEBI (Share Based Employee Benefits) Regulations, 2014 and
SEBI (Employees Stock Option Scheme and Employees Stock Purchase
Scheme) Guidelines, 1999 are set out in the Annexure to this Report. No
employee has been issued share options during the year, equal to or
exceeding 1% of the issued capital of the Company at the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting
held on 23rd July, 2012, the Company adopted the ''2012 HUL
Performance Share Scheme'' in place of ''2006 HLL Performance Share
Scheme''. In accordance with the terms of the Performance Share Plan,
employees are eligible for award of conditional rights to receive
equity shares of the Company at the face value of Re. 1/- each. These
awards will vest only on the achievement of certain performance
criteria measured over a period of three years.
Under the said Plan, eligible Managers were given Conditional
Performance Grant of shares of Unilever and the Company in the ratio of
67:33, to mirror your Company''s shareholding, where Unilever held 67%
shareholding. During the year, 204 employees, including Whole time
Directors, were awarded conditional rights to receive 1,58,840 Equity
Shares at the face value of Re. 1/- each. It comprises conditional
grants made to eligible managers covering performance period from 2014
to 2016 and from 2015 to 2017.
16. BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year, the Board of Directors appointed Ms. Katpana Morparia
as an Additional Director with effect from 9th October, 2014, to hold
office up to the date of forthcoming Annual General Meeting. Being
eligible, Ms. Morparia offered herself to be appointed as the
Independent Director of your Company.
As per the provisions of the Companies Act, 2013, Independent Directors
are required to be appointed for a term of five consecutive years, but
shatt be eligible for reappointment on passing of a special resolution
by the Company and shatt not be tiabte to retire by rotation. Att other
Directors, except the Managing Director, witt retire at the ensuing
Annuat Generat Meeting and, being etigibte, offer themsetves for
re-etection. The Independent Directors of your Company have given the
certificate of independence to your Company stating that they meet the
criteria of independence as mentioned under Section 149 (6) of the
Companies Act, 2013.
The detaits of training and famitiarization programmes and Annuat Board
Evatuation process for Directors have been provided under the Corporate
Governance Report.
The poticy on Director''s appointment and remuneration inctuding
criteria for determining quatifications, positive attributes,
independence of Director, and atso remuneration for Key Manageriat
Personnet and other emptoyees forms part of Corporate Governance Report
of this Annuat Report.
17. MANAGEMENT COMMITTEE
The day-to-day management of the Company is vested with the Management
Committee, which is subjected to the overatt superintendence and
controt of the Board. The Management Committee is headed by the Chief
Executive Officer and has Functionat / Business Heads as its members.
During the year, Mr. Sridhar Ramamurthy, Executive Director, Finance &
IT and Chief Financiat Officer was etevated to the position of Senior
Vice President, Finance for Gtobat Markets and Mr. P. B. Bataji
succeeded him and joined the Management Committee in his capacity as
Executive Director, Finance & IT and Chief Financiat Officer with
effect from 1st Juty, 2014.
Mr. Hemant Bakshi, Executive Director, Home and Personat Care (HPC) was
etevated as CEO of Unitever''s Indonesia business and ceased to be a
member of the Management Committee of your Company. Considering the
scate of business and requisite focus to further grow the categories in
which the businesses operate, it was decided to divide the Home and
Personat Care business of the Company into Home Care and Personat Care
with separate Executive Directors heading each business. Accordingty,
Ms. Priya Nair and Mr. Samir Singh were appointed as members of
Management Committee as Executive Director, Home Care and Executive
Director, Personat Care, respectivety with effect from 1st October,
2014.
Mr. Manish Tiwary, Executive Director, Sates and Customer Devetopment
was etevated as the Managing Director of the Gutf business of Unitever
and Mr. Punit Misra, VP, CD Gtobat RTM, TT was appointed as Executive
Director, Sates and Customer Devetopment and a member of the Management
Committee, in ptace of Mr. Manish Tiwary with effect from 1st November,
2014.
18. AUDITORS
M/s. B S R & Co. LLP were appointed as Statutory Auditors of your
Company at the tast Annuat Generat Meeting hetd on 30th June, 2014 for
a term of five consecutive years. As per the provisions of Section 139
of the Companies Act, 2013, the appointment of Auditors is required to
be ratified by Members at every Annuat General Meeting.
The Report given by the Auditors on the financiat statements of the
Company is part of the Annuat Report. There has been no quatification,
reservation, adverse remark or disctaimer given by the Auditors in
their Report.
M/s N. I. Mehta & Co., Cost Accountants carried out the cost audit for
appticabte business during the year. The Board of Directors have
appointed M/s R. A. & Co., Cost Accountants for the financiat year
2015-16.
19. OUTLOOK
The gtobat economic ctimate continues to be votatite, uncertain and
prone to geo-potiticat risks. The marked stowdown in gtobat markets is
expected to continue in 2015. The sharp fatt in growth of emerging
markets, notabty China, witt continue to keep commodity prices
inctuding oit, which is significantty tower than tast year, votatite.
The divergence in devetoped market growths as a resutt of the US
recovery is expected to add to the votatitity in the currency markets.
In this gtobat backdrop, India is expected to perform better, aided by
improving macroeconomic fundamentats. However, execution of the reform
agenda and kick starting the investment cycte witt be key determinants
of India''s economic performance. White currentty inftation is benign,
upside pressures on inftation from the vagaries of monsoon or sudden
changes in the rupee, coutd have a significant bearing on inftation.
FMCG markets are expected to grow. White consumer confidence has
increased, this has not yet translated into significant improvement in
FMCG market conditions. There are a few green shoots in market growths;
however, uncertain global economic environment, inflation and
competitive intensity continue to pose challenges. White the near term
conditions pose a challenge for the economy, the medium to tong term
secular trends based on rising incomes, aspirations, tow consumption
levels, are positive and an opportunity for the FMCG sector. Your
Company, with its brands, talent and investment in capabilities, is
wett placed to benefit disproportionatety from this opportunity
20. APPRECIATIONS AND ACKNOWLEDGMENTS
Your Directors ptace on record their deep appreciation to emptoyees at
att tevets for their hard work, dedication and commitment. The
enthusiasm and unstinting efforts of the emptoyees have enabted the
Company to remain as industry leaders.
Your Directors woutd atso tike to acknowtedge the excettent
contribution by Unitever to your Company in providing the tatest
innovations, technotogicat improvements and marketing inputs across
atmost att categories, in which it operates. This has enabted the
Company to provide higher tevets of consumer detight through continuous
improvement in existing products and introduction of new products.
The Board ptaces on record its appreciation for the support and
co-operation your Company has been receiving from its supptiers,
redistribution stockists, retaiters, business partners and others
associated with the Company as its trading partners. Your Company
tooks upon them as partners in its progress and has shared with them
the rewards of growth. It witt be the Company''s endeavour to buitd and
nurture strong tinks with the trade based on mutuatity of benefits,
respect for and co- operation with each other, consistent with consumer
interests.
The Directors atso take this opportunity to thank att Investors,
Ctients, Vendors, Banks, Government and Regutatory Authorities and
Stock Exchanges, for their continued support.
On behatf of the Board Harish Manwani
Mumbai, 8th May, 2015 Chairman
(DIN: 00045160)
Mar 31, 2013
To the Members,
The Company''s Directors are pleased to present the 80th Annual Report
of the Company, along with Audited Accounts, for the financial year
ended 31st March, 2013.
1. FINANCIAL PERFORMANCE (STANDALONE)
1.1. Results
(Rs. crores)
For the
year ended For the
year ended
31st March,
2013 31st March,
2012
Revenue from operations, net of excise 25,810.21 22,116.37
Profit before exceptional items and tax 4,349.48 3,350.16
Profit for the year 3,796.67 2,691.40
Dividend (including tax on distributed
profits)* (4,655.68) (1,883.90)
Transfer to General Reserve (379.67) (269.14)
Profit & Loss Account balance carried forward 535.28 1,773.96
* During the year, the Board of Directors declared a Special Dividend
of Rs. 8.00 per Equity Share, which was paid out of the accumulated
Profit & Loss Account balance and exceptional income generated in the
first half of the financial year 2012-13.
1.2. Category wise Turnover
(Rs. crores)
For the year ended For the year ended
31st March, 2013 31st March, 2012
Sales Others* Sales Others*
Soaps and Detergents 12,460.96 240.86 10,488.38 147.90
Personal Products 7,309.10 162.56 6,486.45 98.91
Beverages 2,913.67 60.99 2,577.02 40.41
Packaged Foods 1,473.86 31.88 1,341.93 17.53
Others (including
Exports, Chemicals,
Infant Care Products, 1,048.79 43.99 841.82 55.04
Water, etc.)
Total 25,206.38 540.28 21,735.60 359.79
* Others represent service income from operations, relevant to the
respective businesses.
1.3. Summarised Profit and Loss Account
(Rs. crores)
For the
year ended For the
year ended
31st March,
2013 31st March,
2012
Sale of products less excise duty 25,206.38 21,735.60
Other operational income 603.83 380.77
Total Revenue 25,810.21 22,116.37
Operating Costs (21,806.46) (18,825.03)
Profit Before Depreciation, Interest,
Tax (PBDIT) 4,003.75 3,291.34
Depreciation (236.02) (218.25)
Profit Before Interest & Tax (PBIT) 3,767.73 3,073.09
Other Income (net) 581.75 277.07
Profit before exceptional items 4,349.48 3,350.16
Exceptional items 608.40 118.87
Profit Before Tax (PBT) 4,957.88 3,469.03
Taxation (1,161.21) (777.63)
Profit for the year 3,796.67 2,691.40
Basic EPS (Rs.) 17.56 12.46
2. DIVIDEND
Your Directors are pleased to recommend a Final Dividend of Rs. 6.00
per equity share of face value of Re. 1/- each for the year ended 31st
March, 2013. The Interim Dividend and Special Dividend of Rs. 4.50 and
Rs. 8.00 per equity share, respectively, were paid on 16th November,
2012.
The Final Dividend, subject to approval of Members at the Annual
General Meeting on 26th July, 2013, will be paid to the Members whose
names appear in the Register of Members, as on the date of book
closure, i.e. from Friday, 12th July, 2013 to Friday, 26 th July, 2013
(inclusive of both dates). The total dividend for the financial year,
including the proposed Final Dividend, amounts to Rs. 18.50 per equity
share and will absorb Rs. 4,655.68 crores, including Dividend
Distribution Tax of Rs. 655.69 crores.
3. RESPONSIBILITY STATEMENT
The Directors confirm that:
- in the preparation of the annual accounts, the applicable
accounting standards have been followed and that no material departures
have been made from the same;
- they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent, so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits of the
Company for that period;
- they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and,
- they have prepared the annual accounts on a going concern basis.
4. CUSTOMER DEVELOPMENT
During the year, your Company ensured that it continues to build on its
reputation of a distribution and execution powerhouse with a best in
class quality and a vast distribution network of more than 2,500
re-distribution stockists.
Your Company has undertaken some important initiatives during the year
to become more customer centric and win in the market place. These
initiatives include establishing dedicated call centres for
distributors as well as retailers to reach out to the Company. The call
centres set up for retailers have helped millions of outlet owners
reach out directly to the Company. The calls received from retail
outlets provide useful insights and help the Company understand issues
and opportunities in the market place better and address them
effectively. Your Company has also launched a structured Consumer &
Customer License programme, under which Company employees spend time
with the customers to understand their needs better. These initiatives
have helped in keeping the consumers and customers at the heart of your
Company''s business model.
During the year, your Company set up a state-of-the-art Customer
Insight and Innovation Centre (CiiC) at Mumbai, the latest among seven
such centres across Unilever worldwide. This centre is equipped with
the latest technologies to help us work closely with our distributive
and modern trade partners to develop sharp and incisive shopper
insights and platforms to win with shoppers.
Your Company further strengthened the Perfect Stores programme to drive
superior availability and visibility of its products at the market
place. The Perfect Stores programme has proven to deliver higher growth
and share for the business. Your Company continues to make good
progress in covering more stores under the Perfect Stores programme.
Modern Trade, which is the growth channel for the future, continues to
be a focus area for your Company. The relentless focus on joint
business planning and ensuring best in class on-shelf availability to
grow the business together was appreciated by modern trade customers.
Your Company was awarded the ''Best Supplier'' by leading modern trade
customers for yet another year.
Leveraging the rural distribution network of the Company, the rollout
of Telecom Distribution alliance with Tata Teleservices Limited (TTSL)
into 13 Telecom Circles nationally for the distribution of telecom
products, was completed during the year. The Company is now
distributing these products in more than 95,000 telecom outlets through
over 720 rural distributors. This distribution alliance has helped the
Company further drive rural growth with enhanced earning potential for
its channel partners, rural distributors and Shakti entrepreneurs.
5.1. Project Shakti
Your Company continued to drive its rural coverage agenda through
Project Shakti, which now has 48,000 Shakti entrepreneurs (Shakti
ammas) complemented by over 30,000 Shaktimaans, the male members of
Shakti amma''s family. Shakti ammas have proved successful in increasing
the Company''s presence in rural areas, building strong local
relationships with consumers, thereby encouraging brand loyalty. Shakti
ammas are also acting as your Company''s ambassadors to spread awareness
of health and hygiene in deep rural India with limited media reach. At
the same time, Shaktimaans distribute Company products on bicycles,
covering over 135,000 villages in 15 States and serving 3.3 million
households.
In order to further strengthen the rural coverage and streamline the
supply chain network, your Company has deployed a low cost mobile IT
solution for Shakti programme, during the year. This is a mini ERP
(Enterprise Resource Planning) package run on an entry level smart
phone to help the Shakti entrepreneurs manage their enterprise better.
The package is now being used by over 40,000 Shakti entrepreneurs
across the country. This solution is available in eight languages and
allows the Shakti entrepreneurs to book orders and manage inventory.
The application also provides updates on the promotions and offers. The
information received through this solution provides business insights
which helps recommend categories to be driven in lower population
markets. This application will equip your Company to become more
organised and scientific in its sales and distribution planning in
rural India.
Your Company''s Supply Chain agenda for the year was focused on
strengthening five key areas: Customer Service Excellence, Focus on
Consumer & Customer Quality, Robust Supply Chain Saving Programme,
Turbo-Charging TPM (Total Productivity Management) and Partner to Win
through Continuous Improvement, Teaming and Collaboration.
Your Company has made significant progress in its vision to deliver
outstanding customer service and enable sustainable growth. The
service delivery standards improved steadily with CCFOT (Customer Case
Fill on Time) increasing to 93%. The Customer Satisfaction Survey
Scores and Best Supplier recognition from customers have been
encouraging and suggest that the actions taken by your Company are in
the right direction. Modern Trade OSA (On-Shelf Availability) has
further improved during the year. Your Company has embedded Sales and
Operation Planning Process (S&OP) and Innovation Process Management
(IPM) as business enabler and is adding value to the business.
The quality performance measured as Consumer Relevant Quality Standard
(CRQS) has shown 50% improvement over last year. Quality continues to
be a major focus area, with a thrust on design quality improvement and
new quality standards implementation for warehousing and
transportation. The consumer care lines have been improved and are
being used as channels to engage with consumers.
Your Company has a robust Supply Chain savings programme with
continuous focus on end-to-end Supply Chain cost reduction through new
technologies, alternative sources of energy, efficient processes and
methods. During the year, your Company has delivered 5% saving in
Supply Chain cost with sourcing network optimisation, logistic
efficiency through improved utilisations, factory production cost
reduction through improvement in energy efficiency, technical
efficiencies, wastage reduction and yield improvement.
The TPM journey, with strong focus on autonomous maintenance,
preventive maintenance, focused improvement and strong circle
engagements, has helped the Company improve employee engagement,
efficiency and derive competitive advantage. The performance across
PQCDSM (Productivity, Quality, Cost, Delivery, Safety, and Morale) is
showing sustained improvement.
Your Company has progressed on the long term plan to create capacities
through efficiency improvement, speed improvement and high speed
technologies to support volume growth while managing costs. Your
Company has successfully executed all capacity creation projects on
time to ensure smooth delivery during the year.
There has been a 15% improvement in innovation OTIF (On Time in Full)
with more than 150 innovation networks being executed during the year
touching more than 50% of the product portfolio. The focus on better
and faster innovation and capability development has significantly
helped the Company launch innovations first time right. Your Company
has identified beauty, foods, modern trade and rural as key
capabilities to win in the future and the supply chain function has
significantly improved capability and skill building in these areas
during the year.
The Partner to Win programme with supplier and business partners in
procurement function focuses on reducing lead time, decreasing
procurement cost, improving reliability and work on new innovation.
Your Company leverages benefits of scale and synergy through Unilever''s
global buying network.
Your Company continues to derive sustainable benefit from the strong
foundation and long tradition of Research & Development (R&D) which
differentiates it from many others. New products, processes and
benefits flow from work done in various Unilever R&D Centres across the
globe as well as in the Research Centres in India. The R&D labs in
Mumbai and Bangalore are aligned to Unilever''s global R&D. Many of the
projects run out of these centres are of global relevance and have a
strong focus on the needs of this region and the overall Developing &
Emerging (D&E) world. With the world class facilities and a superior
science and technology culture, your Company is able to attract the
best talent to provide significant technology differentiation to its
products and processes.
Your Company''s R&D programmes are focused on development of
breakthrough and proprietary technologies with innovative consumer
propositions. The R&D team of over 750 people comprises highly
qualified scientists and technologists working in areas of Home &
Personal Care, Foods & Beverages and Water Purification. The R&D group
also comprises critical functional capability teams in the areas of
Regulatory, Clinicals, Patents, Digital R&D, Product & Environment
Safety and Open Innovation.
During the year, your Company introduced several innovations in Soaps
and Detergents category. In Wheel, a new surfactant was introduced to
enhance superior performance and quality. Surf Excel Blue was
re-launched with significantly improved efficacy. Household Care
launched Domex toilet cleaner in a child safe pouch form to make
hygiene more affordable. New water saving rinse aids ''Magic'' and
''Comfort One Rinse'' were introduced in a test market.
In Personal Care category, particularly Skin Care, the key deliveries
during the year were PPARs (Peroxisome Proliferation- Activated
Receptor) and a new modified sunscreen system. Both of these products
were launched as world''s first skin and spot lightening cream sensory,
with SPF20 under Pond''s White Beauty. The PPARs, along with
next-generation instant optics, were also launched as a part of the new
Fair & Lovely Advanced Multivitamin formula.
In Hair Care category, Clinic Plus was re-launched with improved
formulation that provides enhanced wet and dry conditioning and a
significantly superior hair fall reduction benefit. A colour rescue
variant in Dove, specially formulated for care of coloured hair was
introduced. TRESemme, an international salon brand, with a formulation
tailored for Indian hair and endorsed by salon professionals, was
launched for the first time in India. The entire range of Sunsilk was
re-launched with enhanced benefits and premium packaging. At the end of
the year, premium hair oil under Dove, comprising a special, light and
non-sticky nourishing formula with precious oils and real flowers, was
launched.
In Oral Care category, Pepsodent Expert Protection was launched in the
premium segment with a new regime based claim, ''action of toothpaste,
mouthwash and floss in one tube''. Closeup was re-launched with a new
anti-malodour agent and new claims, such as 3X more fresh breath for 12
hours.
The year witnessed several new R&D innovations in Beverages category.
Brooke Bond Taaza was re-launched with new proposition, packaging and a
superior product delivery aimed at enhancing economy of use for
consumer. Lipton Iced tea powder mixes were revamped with new product
and packaging. Taj Mahal leaf tea range was extended to new
geographies with location specific blends.
The Foods R&D team has continued to focus on delivering winning
formulations and product superiority. A new variant called ''Sweet &
Spicy'' was launched under Kissan ketchups, which is a winning
formulation when compared in blind with other products in the market by
consumers. In the Jams portfolio of Kissan, a new pack at an affordable
price of Rs. 5/- was introduced to drive penetration in the category.
In Frozen Desserts category, a new variant of Cornetto, ''Pistachio''
was also developed and launched. Premium single origin, freeze dried
coffee range under BRU was expanded with the launch of a new unique
variant, Guatemala. R&D along with supply chain and procurement teams,
also focused on developing innovative end-to-end solutions to
proactively manage commodity cost pressures.
In Water business, advanced Pureit with significantly enhanced design
was launched. A long life battery kit was also launched for Pureit
during the year. The year also witnessed the launch of a reverse
osmosis based water purifier, Pureit Marvella UV.
R&D has further contributed to the Company''s sustainability agenda by
enabling significant reduction in packaging material consumption
through several material efficiency initiatives. Your Company''s R&D is
also working on novel technologies to help save substantial amount of
water.
With strong scientific expertise and the potential to deliver high
value technologies, India continues to occupy a premier position in
Unilever R&D. Your Company is well placed to meet the challenges
emanating from the increased competition intensity and the
opportunities to drive faster growth on the back of strong support from
R&D as well as brand development capabilities.
Your Company had entered into a Technical Collaboration Agreement (TCA)
and a Trade Mark License Agreement (TMLA) with Unilever. The TCA
provided for payment of 1% royalty on net sales of specific products,
manufactured with technical inputs developed by Unilever. The TMLA
provided for the payment of trademark royalty at the rate of 1% of net
sales on specific brands, where Unilever owns the trade mark in India.
Given that the pace of innovations and the scope of services have
expanded over the years and that Unilever''s global resources are
providing greater expertise, superior innovations and scale advantage
for all Unilever entities, your Company is enjoying the benefits of an
increasing stream of new products and innovations, backed by technology
and know-how from Unilever. Your Company is also receiving support and
guidance to drive functional excellence in marketing, supply
management, media buying, IT, etc., which helps your Company to remain
competitive and further step-up its overall business performance.
Unilever is committed to ensuring that the support in terms of new
products, innovations, technologies and services is commensurate with
the needs of your Company and enables it to win in the market place.
Given the need for increased levels of service and the consequent
additional costs, your Company has entered into a new agreement with
Unilever in order to ensure a fair recovery of costs by Unilever. In
terms of the new agreement, the existing royalty cost of c. 1.4% of
turnover will increase, in a phased manner, to a royalty cost of c.
3.15% of turnover no later than the financial year ending 31st March
2018, i.e. a total estimated increase of 1.75% of turnover.
The details of expenditure on scientific research and development at
the Company''s in-house R&D facilities eligible for a weighted deduction
under Section 35(2AB) of the Income Tax Act, 1961 for the year ended
31st March, 2013, are as follows:
- Capital Expenditure : 1.67 crores
- Revenue Expenditure : 35.66 crores
8. ENVIRONMENT, SAFETY, HEALTH AND ENERGY CONSERVATION
Your Company continues to focus on the vision of being an ''Injury
Free'' and ''Zero Environment Incident'' organisation. A behavioural
safety programme was deployed across the Company as the core of our
safety journey. This has been supplemented by a consistent focus on
prevention of hand-in-machine and slip-trip- fall injuries at workplace
and multiple initiatives for improving road safety. In 2012, the safety
incident rate measured as total recordable frequency rate (TRFR)
decreased by 61% over 2008 baseline.
The behavioural safety model has now been customised as BeSafE and will
be launched company-wide in latter half of the year. Your Company has
taken safety programmes to the families and homes of employees, through
''Beyond Work Safety'' campaigns, which have been very well received.
Your Company continues to benchmark itself with the units known for
best safety performance in the country and across Unilever. Your
Company has received many awards from the Government and independent
organisations for its safety practices.
Your Company continues to make excellent contribution to the Unilever
Sustainable Living Plan, where Unilever''s vision is to double the size
of its business while reducing the overall impact on environment and
improving its positive social impact. Your Company has been taking
steps to reduce electricity and water consumption in its manufacturing
processes as well as control waste generation. The key actions in this
direction include:
- Use of biomass fired boilers and hot air generators, which reduce
consumption of fossil fuels like coal and furnace oil.
- Use of plant waste / by-products like spent tea leaves and coffee
beans as fuel.
- Shift to cleaner sources of energy like natural gas and other
renewable sources, wherever available.
- Adoption of energy efficient technology, like LED lights, high
efficiency motors, electronic drives / inverters, screw compressors.
Your Company has reduced CO2 emissions (per tonne of production) in
India by 22% compared to 2008 baseline. Use of renewable energy has
increased to 15% of the total consumption. Your Company has reduced
water usage in manufacturing operations by 29% compared to 2008
baseline. Rainwater harvesting has been implemented in 22 units to
recharge up to 3,32,000 KL /annum ground water. In addition, rainwater
recycling being done at seven sites of your Company has reduced up to
51,000 KL / annum of freshwater usage. Total 31 sites became
''zero-discharge site'' i.e. 79% of our sites do not discharge any
liquid effluent.
In all Company units, recyclable waste e.g. packaging material, empty
raw material containers, spent lubricants, project scrap, etc. are
systematically segregated and tracked for effective recycling. More
than 98% of total waste is recycled in environment friendly ways. Total
waste per tonne from the manufacturing sites has reduced by 77% against
the 2008 baseline.
The information required under Section 217(1 )(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of the Board of Directors) Rules, 1988 with respect to energy
conservation is appended hereto and forms part of this Report.
9. HUMAN RESOURCES
Your Company''s Human Resource agenda for the year was focused on
strengthening four key areas: building a robust and diverse talent
pipeline, enhancing individual and organisational capabilities for
future readiness, driving greater employee engagement and strengthening
employee relations further through progressive people practices at the
shopfloor.
Your Company''s employer brand has been built with high levels of rigour
and thoroughness through a large number of student interactions and
qualitative and quantitative analysis of the responses. Your Company is
widely acclaimed for its people development practices and has
reinforced its position in this area. This, coupled with the ability to
attract best talent, gives a competitive edge to the organisation. Your
Company, for the fourth consecutive year, retained its position as the
Dream Employer with students of top business schools. Your Company was
voted to this position from a mix of FMCG, Consulting, Financial
Services organisations, etc. Your Company has also been voted as the
No. 1 Employer for Mid Career recruits in a survey conducted amongst
active job candidates in the FMCG sector.
Your Company has a vision to improve its Gender Balance and the roadmap
involves a four pronged approach:
- Increasing the number of female talent through proactive market
mapping.
- Staying connected with our stakeholders through digital recruitment
campaigns.
- Creating a culture of inclusion.
- Leveraging visible leadership role models.
The enablers for these could be as varied as flexi time to agile
working to customised solutions for women who come back from maternity
breaks. ''Career by Choice'', a unique re-hire programme, provides a
platform for women looking for real opportunities to work flexibly and
part time for live business projects. With these enablers and focused
plans, your Company has witnessed 8% shift in the Gender Balance Ratio
over the last two years.
The initial part of the journey for Talent and Organisation Assessment
was undertaken successfully. Your Company has now institutionalised the
next phase of the Talent and Organisation Assessment charters, which
will take-off during 2013 and chart out the best practices for each
stream. The aim is to meet the requirements of the current talent pool
and to enhance the Company''s future readiness.
In addition to building core capabilities in marketing, sales and
distribution, your Company is investing in the areas of beauty, foods,
digital, e-commerce, frontline capabilities and crafting brands for
life, to win in the future. Your Company has developed comprehensive
plans in each of these key areas that are customised to suit the
present and future business needs. In addition to building
capabilities, your Company has also identified two key behaviours, Bias
for Action and Consumer and Customer Centricity that will supplement
the capabilities to achieve business goals. In order to drive Bias for
Action, your Company has developed Project Sunset which is an online
platform for speedy resolutions of issues within the Company and has a
satisfaction score of over 88% from internal employees. To drive
Consumer and Customer Centricity, your Company has undertaken a number
of activities to regularly communicate with and reach out to its
consumers and has a well defined programme to capture insights from its
consumers.
Your Company undertook intensive training programmes through a
combination of face-to-face and virtual learning approaches. Over
41,600 e-learning registrations took place indicating that the spirit
of ''learn where you are'' is imbibed in employees of the Company. Your
Company is also investing in building capabilities in digital and
social media to find new platforms for brands to engage more
effectively with Indian consumers.
The Global People Survey is a part of the Unilever Employee Insight
Programme, which aims to give a voice to the Company''s people and
provides a vehicle to make their views heard. The Survey also provides
regular, meaningful and actionable feedback to the leaders in the
organisation. It has questions spread across several dimensions in the
areas such as Strategic Leadership, Immediate Boss Effectiveness and
Engagement. Feedback from this survey forms the basis of holistic
engagement plans, which are reviewed regularly. As per Global People
Pulse Survey 2012, India features in the top 25 countries across
Unilever. An extremely favourable 91% of employees expressed pride to
work for your Company. This is in recognition of your Company''s
Performance Management and Reward processes, which are geared towards
building a performance and execution focused culture.
Your Company has been investing in progressive employee relations
practices to ensure that it invests in capability at the grass root
level. ''Sparkle'' is a centrally hosted intranet based tool that
supports skill mapping, skill assessment, performance assessment, gap
analysis and enables training plan identification which is customised
to each workman basis priority areas. Sparkle has been a pioneering
tool in the area of workmen capability development that promotes higher
transparency and focused training intervention linked to individual and
business needs. The tool has delivered results for over two years now
and your Company has successfully completed appraisals, thereby
identifying top performers and completing skill gap analysis of over
10,000 workmen online. ''Sparkle'' has been recognised as a best
practice and adopted for a global roll-out. Business Linked Engagement
and TPM Edge programmes continued with full focus and rigour during the
year and delivered significant improvement in factory operations.
Information as per Section 217 (2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, forms part
of this Report. However, as per the provisions of Section 219(1)(b)(iv)
of the Act, the Report and Accounts are being sent excluding the
statement containing the particulars to be provided under Section
217(2A) of the Act. Any Member interested in obtaining such particulars
may inspect the same at the Registered Office of the Company or write
to the Company Secretary for a copy thereof.
10. INFORMATION TECHNOLOGY (IT)
Your Company continues to invest in IT, leveraging it as a source of
competitive advantage. The enterprise wide SAP platform, the backbone
of IT, encompasses all core business processes in your Company and also
provides a comprehensive data warehouse with analytics capability that
help in better and speedier decisions. SAP is used to collaborate with
the suppliers and customers. Supply Chain optimisation, enabled by the
IT capability, remains a source of significant value. Your Company
continuously invests in upgrading the SAP platform to leverage the
latest functionality and technology enhancements to deliver business
efficiencies.
Your Company has institutionalised an extensive IT capability for
Customer Development function to support front-end execution. All
distributors run a standard distributor management system. The
salesmen of the distributors use handheld devices for accepting retail
orders, which enable faster tracking and real time sales information.
Your Company has used analytics and the existing IT infrastructure to
build a capability for an intelligent sales call. This enables your
Company to customise sales call for each outlet on a scientific basis,
thus helping to significantly improve the effectiveness and efficiency
of the sales process.
Your Company is leveraging GIS (Geographic Information System) based
mapping technology to aid planning for coverage expansion drives in
urban and rural markets. The capability allows field personnel to
identify pockets for coverage and also evaluate their attractiveness to
help derive coverage plans.
Your Company is further enhancing IT capabilities built for rural
expansion to equip Shakti ammas with low cost mobile technology to help
them work in a more controlled and efficient manner. This technology
now allows your Company to standardise selling processes across the
Shakti network and also track outlet sales information which can be
leveraged through analytics to further aid the selling process.
Your Company continues to invest in IT infrastructure to support
business applications and has made use of India''s expanded telecom
footprint to provide high bandwidth terrestrial links to all operating
units. Your Company also uses software as a service to provide agile
and cost effective IT capabilities in select areas.
As the IT systems and related processes get embedded into the ways of
working of the organisation, there is a continuous focus on IT security
and reliable disaster recovery management processes to ensure all
critical systems are always available. These are periodically
reviewed, upgraded and tested for efficacy, adequacy, security and
reliability.
11. FINANCE AND ACCOUNTS
Your Company continued to focus on cash generation. The focus on
managing optimal levels of inventory, sound business performance,
operating efficiencies and cost savings across the organisation helped
generate healthy cash flows. Your Company managed investments prudently
by deploying cash surplus in a balanced portfolio defined to offer
primacy to safety and liquidity of the investments. Capital Expenditure
during the year was at Rs. 409.34 crores (Rs. 310.01 crores in the
previous year).
The Finance function of your Company has initiated a multi-fold
transformation programme, aligned to the ambition to be the Best
Finance Team in the Industry. During the year, multiple finance
processes across accounting and reporting, controls and information
management were reviewed and work streams were defined to implement
global best practices. Significant broad-based progress has been made
on this agenda during the year. Project ''Parivartan'' delivered a
further step up in the efficiency of the Purchase to Pay process along
with a corresponding improvement in vendor satisfaction. This is now
being driven to the next level of simplifying and centralising
end-to-end invoice processing. Project ''My Business Information'' took
an ambitious goal of revamping your Company''s information management
function. Significant steps are underway towards further exploring this
space to get increased information insights to drive growth, margins
and cash.
In the initial phase of the project ''Effective Financial Controls and
Reporting'' (EFCR), the finance control environment has been streamlined
and strengthened with 50% of key controls being automated by further
leveraging SAP. Similarly, significant process and technology
interventions were taken up to achieve over 25% reduction in time
consumed on annual closing processes. The EFCR Project aims to
simplify, standardise and automate processes whilst driving value
beyond transaction processing. Your Company also focused on simplifying
banking processes by driving a reduction in the number of bank accounts
operated across the Company. This has helped to streamline banking
operations, strengthen controls and optimise cash utilisation. All
these initiatives will lead to a transformation of the finance function
to world class standards, thereby ensuring operational excellence.
Your Company has not accepted any fixed deposits during the year and
there was no outstanding towards unclaimed deposit payable to
depositors as on 31st March, 2013. In terms of the provisions of
Investor Education and Protection Fund (Awareness and Protection of
Investors) Rules, 2001, Rs. 3.13 crores of unpaid / unclaimed dividends
and interest / redemption of debentures were transferred during the
year to the Investor Education and Protection Fund.
Return on Net Worth, Return on Capital Employed and Earnings Per Share
(EPS) for the last four years and for the year ended 31st March, 2013,
are given below:
Period pndpd
Particulars 2009-10 2010-11 2011-12 2012-13
31st March,
2009
Return on Net
Worth (%) 103.6* 88.2 74.0 77.7 94.7
Return on Capital
Employed (%) 107.5* 103.8 87.5 96.8 109.1
Basic EPS (after
exceptional items)
(Rs.) 11.46** 10.10 10.58 12.46 17.56
* Annualised numbers for proportionate period.
** For fifteen month period.
Segment-wise Results
Your Company has identified five business segments, in line with the
Accounting Standard on Segment Reporting (AS-17), which comprise: (i)
Soaps and Detergents, (ii) Personal Products, (iii) Beverages, (iv)
Packaged Foods, including Culinary, Branded Staples and Frozen Dessert
and (v) Others, including Exports, Chemicals, Water Business, Infant
Care Products, etc. The audited financial results of these segments are
provided as a part of financial statements.
11.1. Risk and Internal Adequacy
Your Company has an elaborate Risk Management procedure, which is based
on three pillars: Business Risk Assessment, Operational Controls
Assessment and Policy Compliance processes. Some of the risks relate to
competitive intensity and cost volatility. Major risks identified by
the businesses and functions are systematically addressed through
mitigating actions on a continuing basis. These are discussed with both
Management Committee and Audit Committee.
The Company''s internal control systems are commensurate with the nature
of its business and the size and complexity of its operations. These
are routinely tested and certified by Statutory as well as Internal
Auditors and cover all offices, factories and key areas of business.
Significant audit observations and follow up actions thereon are
reported to the Audit Committee. The Audit Committee reviews adequacy
and effectiveness of the Company''s internal control environment and
monitors the implementation of audit recommendations, including those
relating to strengthening of the Company''s risk management policies and
systems.
Your Company manages cash and cash flow processes assiduously involving
all parts of the business. There was a net cash surplus of Rs. 1,707.89
crores, as on 31st March, 2013. The Company''s low debt equity ratio
provides ample scope for gearing the Balance Sheet, should that need
arise. Foreign Exchange transactions are fully covered with strict
limits placed on the amount of uncovered exposure, if any, at any point
in time. There are no materially significant uncovered exchange rate
risks in the context of Company''s imports and exports. The Company
accounts for mark-to-market gains or losses every quarter end, in line
with the requirements of AS-11.
12. LEGAL, COMPLIANCE AND BRAND PROTECTION
Your Company continued to focus on the key areas and projects within
the legal and compliance functions, which include transiting to a
workflow based software tool ''Self-Compli''. This tool enables
compliances to be made and tracked by factories and offices of your
Company across the country. In the area of Brand Protection, your
Company has taken significant actions against counterfeits, fakes and
other forms of unfair competition, during the year, under the Company''s
programme of Combating Unfair Competition.
13. MERGERS, ACQUISITIONS, JOINT VENTURES AND DISPOSALS
Your Company entered into a Share Purchase Agreement with the promoters
of Aquagel Chemicals Private Limited (ACPL) for acquisition of
additional 74% of equity share capital of ACPL. ACPL is engaged in the
business of manufacturing soaps and detergents. Prior to acquisition,
it was a third party manufacturing unit. Your Company earlier held 26%
of ACPL''s equity share capital. Consequent to the acquisition of
remaining 74% of the equity share capital, ACPL became a wholly owned
subsidiary of the Company with effect from 1st April, 2013.
14. SUSTAINABLE LIVING
Sustainability is at the core of your Company''s way of doing business.
It guides your Company on the path to achieve long term success in a
world where the battle for resources can only escalate. In this
direction, Unilever globally has set out the ''Unilever Sustainable
Living Plan'' (USLP), which embeds sustainability in its business model.
The USLP sets out to decouple growth from environmental impact, while
at the same time, increase positive social impact.
USLP has three big goals to achieve by 2020:
- Help more than 1 billion people improve their health and
well-being.
- Halve the environmental footprint of our products.
- Source 100% of our agricultural raw materials sustainably and
enhance the livelihoods of people across our value chain.
Supporting these goals are seven commitments underpinned by targets
spanning your Company''s social, environmental and economic performance
across the value chain. In the second year of the Plan, your Company
made steady progress to achieve these goals.
In the area of health and hygiene, your Company reached over 17 million
people through Lifebuoy Handwashing programmes in 2012. Through
continuous and focused efforts under the Handwashing initiative, your
Company has reached 47 million people since 2010. Your Company''s Pureit
water purifier continued to fight the menace of diarrhoeal diseases.
More than 45 million people gained access to safe drinking water from
Pureit globally by the end of 2012.
Your Company made good progress under its Nutrition Enhancement
Programme to lower the levels of salt, saturated fat, trans fat and
sugar in its Foods and Beverages portfolio. By the end of 2012, 66% of
Foods portfolio (by volume) was compliant with the 5g per day salt
target. Your Company''s portfolio is virtually free from trans fats
originating from partially hydrogenated vegetable oil. For example, the
Frozen Desserts portfolio is fully compliant and does not use any raw
materials containing partially hydrogenated oil. More than 60% of the
products in Frozen Desserts for children contain 110 kilocalories or
fewer per portion, meeting the interim 2012 target.
In the area of environment impact, your Company worked to further
reduce its environmental impact on four priority areas across the value
chain - greenhouse gases, water, waste and sourcing. CO2 emissions per
tonne of production reduced by 22% compared to the 2008 baseline. This
was achieved through several environment friendly initiatives in your
Company''s manufacturing operations such as usage of biomass boilers,
thermic fluid heaters and hot air generators at factory sites. These
projects helped increase the share of renewable energy to 19% by 2012.
Water usage in your Company''s manufacturing operations reduced by 29%
compared to the 2008 baseline. Your Company has launched innovations
that help consumers use less water in laundry process through products
like Magic water saver and Comfort One Rinse fabric conditioner. Magic
saves upto three buckets of water per wash while Comfort One Rinse
saves two buckets of water per wash.
In the area of waste management, your Company continued to focus on
reducing, reusing and recycling waste. Reduction in total waste per
tonne from your Company''s manufacturing sites was 77% against 2008
baseline. A total of 31 factories of your Company became 100% zero
non-hazardous waste to landfill.
Under the USLP, your Company has committed to source 100% of its
agricultural raw materials sustainably. By 2012, your Company sourced
70% of its agricultural raw materials sustainably. All of the palm oil
was from sustainable sources and 100% of palm oil volumes of India were
covered by ''Green Palm'' certificates by end of 2012. During the year,
over 60% of tomatoes used in Kissan Ketchup in India were from
sustainable sources. Your Company aims to source 100% of tomatoes from
sustainable sources by 2015. Your Company entered into a public-private
partnership with the Maharashtra Government for sustainable sourcing of
tomatoes locally. For this project, the Government of Maharashtra
registered 618 farmers who grow tomatoes over 1,208 acres.
Enhancing livelihoods of hundreds of thousands of people by 2020 is
another goal the USLP aims to achieve. Your Company has a wide range of
initiatives from sourcing to distribution focused on improving
livelihoods of small-scale entrepreneurs. Project Shakti is your
Company''s flagship rural distribution initiative that focuses on
enhancing livelihoods in small villages. Project Shakti has 48,000
Shakti entrepreneurs (called Shakti ammas) in 15 States. The details of
Project Shakti is provided at para 5.1 of this report.
As evident from the above initiatives, your Company''s progress to
deliver on USLP has been consistent. However, USLP is ambitious and
your Company has much more to do. Your Company continues to strive to
deliver the stretching goals.
In April 2013, your Company released Unilever Sustainable Living Plan
India Progress Report. This report shares the results of your Company''s
journey so far and chronicles the steps taken to deliver growth that is
competitive, profitable and sustainable. You can view this report on
our website www.hul.co.in.
The Securities and Exchange Board of India (SEBI) vide its circular
dated 13th August, 2012, has mandated the top 100 listed companies, as
on 31st March, 2012, to submit a Business Responsibility Report as part
of the Annual Report of the Company. The Business Responsibility
Report describes the initiatives taken by the Company in line with the
key principles enunciated in the ''National Voluntary Guidelines on
Social, Environmental and Economic Responsibilities of Business'' framed
by the Ministry of Corporate Affairs (MCA). In line with Green
Initiative, the Business Responsibility Report of the Company for the
year 2012-13 is made available on the website of the Company
www.hul.co.in and forms part of this Annual Report. The Business
Responsibility Report shall be kept open for inspection at the
Registered Office of the Company. The Company will also make available
a printed copy of the Business Responsibility Report upon request by
any Member of the Company interested in obtaining the same. A Member
interested in obtaining the hard copy may write to the Investor Service
Department at the Registered Office of the Company.
15. EMPLOYEE STOCK OPTION PLAN (ESOP)
Details of the shares issued under Employee Stock Option Plan (ESOP),
as also the disclosures in compliance with Clause 12 of the Securities
and Exchange Board of India (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure to
this Report. No employee has been issued share options, during the
year, equal to or exceeding 1% of the issued capital of the Company at
the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting
held on 23rd July, 2012, the Company adopted the ''2012 HUL
Performance Share Scheme'' in place of the existing ''2006 HLL
Performance Share Scheme''. The Scheme has been registered with the
Income Tax authorities, in compliance with the relevant provisions of
SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999. In accordance with the terms of the Performance Share
Plan, employees are eligible for award of conditional rights to receive
equity shares of the Company at the face value of Re. 1/- each. These
awards will vest only on the achievement of certain performance
criteria measured over a period of 3 years. During the year, 204
employees, including Wholetime Directors, were awarded conditional
rights to receive 4,19,408 Equity Shares at the face value of Re. 1/-
each. It comprises conditional grants made to eligible managers
covering performance period from 2012 to 2014 and from 2013 to 2015.
16. CORPORATE GOVERNANCE
Your Company is renowned for exemplary governance standards since
inception and continues to lay a strong emphasis on transparency,
accountability and integrity. In 2011, your Company received the
National Award for Excellence in Corporate Governance instituted by the
Institute of Company Secretaries of India, in recognition of its
Corporate Governance practices. In 2012, Investor Relations Global
Rankings (IRGR) ranked your Company amongst top five companies across
the globe for Best Corporate Governance. In 2013, at the Asian Centre
for Corporate Governance and Sustainability Awards, your Company won
the award for Best Audit Committee.
A separate report on Corporate Governance is provided at page no. 50 of
this Annual Report, together with a Certificate from the Auditors of
the Company regarding compliance of conditions of Corporate Governance
as stipulated under Clause 49 of the Listing Agreement with the Stock
Exchange(s). A Certificate of the CEO and CFO of the Company in terms
of sub-clause (v) of Clause 49 of Listing Agreement, inter alia,
confirming the correctness of the financial statements, adequacy of the
internal control measures and reporting of matters to the Audit
Committee is also annexed.
The Ministry of Corporate Affairs, Government of India, introduced the
Corporate Governance Voluntary Guidelines, 2009. These guidelines have
been issued to provide Corporate India a framework to govern themselves
voluntarily as per the highest standards of ethical and responsible
conduct of business. The recommendation of the Voluntary Guidelines
pertaining to separation of offices of the Chairman and the CEO,
constitution of Audit Committee and Nomination and Remuneration
Committee, Risk Management framework, are already practised by your
Company. Your Company has been in substantial compliance of these
guidelines.
During the year, Secretarial Audit and Secretarial Standards Audit were
carried out. The detailed reports on the same are given at page nos. 66
to 67 of this Annual Report.
17. OUTLOOK
Global economic activity remains subdued amidst signs of diverging
growth paths across major economies. While near term risks to global
financial stability are retreating, the global economic climate
continues to be volatile and uncertain.
For India, economic activity is expected to show a modest improvement
over last year, with a pick-up likely only in the second half of the
year. Conditional upon a normal monsoon, agricultural growth could
return to trend levels while the outlook for industrial activity
remains subdued. Accordingly, the RBI projects a baseline GDP growth
for 2013-14 at 5.7%. Upside pressures on inflation, both at wholesale
and retail levels, remain high stemming from elevated food inflation,
ongoing administered fuel price revisions and volatility in exchange
rates.
FMCG markets are expected to grow; however, uncertain global economic
environment, inflation and competitive intensity continue to pose
challenges. While the near term conditions pose a challenge for the
economy, the medium to longer term secular trends based on rising
incomes, aspirations, low consumption levels, etc. are positive and an
opportunity for the FMCG sector in general and for your Company in
particular.
17.1. Cautionary Statement
Statements in this Report, particularly those which relate to
Management Discussion and Analysis, describing the Company''s
objectives, projections, estimates and expectations, may constitute
''forward looking statements'' within the meaning of applicable laws
and regulations and actual results might differ materially from those
either expressed or implied.
18. SUBSIDIARY COMPANIES
As a part of the initiatives in the area of Corporate Social
Responsibility, your Company had promoted a Section 25 Company
''Hindustan Unilever Vitality Foundation'' now known as ''Hindustan
Unilever Foundation'' (HUF) to work in the areas of social, economic and
environment development. During the year, your Company acquired
additional equity share capital of HUF to make it a subsidiary of the
Company.
Pursuant to the Share Purchase Agreement entered into with the
promoters of Aquagel Chemicals Private Limited (ACPL), as detailed in
Para 13, ACPL has become a wholly owned subsidiary of the Company with
effect from 1st April, 2013.
A statement pursuant to Section 212 of the Companies Act, 1956,
relating to Subsidiary Companies, is attached to the Accounts. In
terms of General Exemption, under Section 212(8) of the Companies Act,
1956, granted by Ministry of Corporate Affairs vide its circular no.
02/2011 dated 8th February, 2011, and in compliance with the conditions
enlisted therein, the Audited Statement of Accounts, Auditors'' Reports
thereon and the Reports of the Board of Directors of the Company''s
subsidiaries for the financial year ended 31st March, 2013, have not
been annexed. The Annual Accounts and related documents of the
Subsidiary Companies shall be kept open for inspection at the
Registered Office of the Company. The Company will also make available
these documents upon request by any Member of the Company interested in
obtaining the same. However, as directed by the said circular, the
financial data of the subsidiaries have been furnished under
''Subsidiary Companies Particulars'' forming part of this Annual Report
(refer page no. 150). Further, pursuant to Accounting Standard (AS-21)
issued by the Institute of Chartered Accountants of India, Consolidated
Financial Statements presented by the Company in this Annual Report
include the financial information of its subsidiaries.
Dr. Sanjiv Misra was appointed as an Additional Director on the Board
of the Company with effect from 8th April, 2013, in accordance with
Section 260 and Article 111 of Articles of Association of the Company.
Pursuant to Section 257 of the Companies Act, 1956, notices have been
received from Members, together with necessary deposits, proposing the
appointment of Dr. Sanjiv Misra as a Non-Executive Independent Director
on the Board of the Company.
Dr. R. A. Mashelkar has attained the age of seventy years and in
accordance with the Company policy, will be retiring at the conclusion
of the ensuing Annual General Meeting by not offering himself for
re-appointment as a Director. Dr. Mashelkar was appointed as an
Independent Director of the Company in April 2008 and has served as a
member of the Audit Committee, Nomination and Remuneration Committee
and Corporate Social Responsibility Committee of the Company. The Board
places on record its deep appreciation for the distinguished service
rendered by Dr. Mashelkar during his tenure as a Director of the
Company.
In accordance with the Articles of Association of the Company, all
other Directors, except for the Managing Director, will retire at the
ensuing Annual General Meeting and, being eligible, offer themselves
for re-election.
20. MANAGEMENT COMMITTEE
The day-to-day management of the Company is vested with the Management
Committee, which is subjected to the overall superintendence and
control of the Board. The Management Committee is headed by Mr. Nitin
Paranjpe, as the Chief Executive Officer, and has Functional / Business
Heads as its members.
During the year, Ms. Leena Nair, Executive Director, Human Resources
was elevated to the position of SVP Leadership and Organisation
Development, Unilever PLC. Mr. B. P. Biddappa joined the Management
Committee of the Company as Executive Director, Human Resources in
place of Ms. Leena Nair. Mr. B. P. Biddappa joined the Company in 1992
and has worked in a variety of roles within Unilever. Before joining
the Management Committee of the Company, Mr. Biddappa was the Vice
President, Human Resources - Supply Chain, Asia, Africa and Russia.
M/s. Lovelock & Lewes, Statutory Auditors of the Company retire and
offer themselves for re-appointment as the Statutory Auditors of the
Company, pursuant to Section 224 of the Companies Act, 1956.
22. APPRECIATIONS AND ACKNOWLEDGEMENTS
Your Directors place on record their deep appreciation to employees at
all levels for their hard work, dedication and commitment. The
enthusiasm and unstinting efforts of the employees have enabled the
Company to remain as industry leaders.
Your Directors would also like to acknowledge the excellent
contribution by Unilever to your Company in providing the latest
innovations, technological improvements and marketing inputs across
almost all categories, in which it operates. This has enabled the
Company to provide higher levels of consumer delight through continuous
improvement in existing products and introduction of new products.
The Board places on record its appreciation for the support and
co-operation your Company has been receiving from its suppliers,
redistribution stockists, retailers, business partners and others
associated with the Company as its trading partners. Your Company
looks upon them as partners in its progress and has shared with them
the rewards of growth. It will be the Company''s endeavour to build and
nurture strong links with the trade based on mutuality of benefits,
respect for and co-operation with each other, consistent with consumer
interests.
The Directors also take this opportunity to thank all Investors,
Clients, Vendors, Banks, Government and Regulatory Authorities and
Stock Exchanges, for their continued support.
On behalf of the Board
Harish Manwani
Mumbai, 29th April, 2013 Chairman
Mar 31, 2012
The Company's Directors are pleased to present the 79th Annual Report
of the Company, along with Audited Accounts for the financial year
ended 31st March, 2012.
1. FINANCIAL PERFORMANCE (STANDALONE)
1.1 Results (see para 1.4)
Rs. Crores
for the year ended for the year ended
31st March, 2012 31st March, 2011
Revenue from operations,
net of excise 22,116.37 19,735.51
Profit before exceptional
items and tax 3,350.16 2,730.20
Profit for the year 2,691.40 2,305.99
Dividend (including tax on
distributed profits) (1,883.90) (1,641.96)
Transfer to General Reserve (269.14) (230.60)
Profit & Loss Account
balance carried forward 1,773.96 1,235.60
1.2 Category wise Turnover (see para 1.4)
Rs. Crores
for the year ended for the year ended
31st March, 2012 31st March, 2011
Sales Others* Sales Others*
Soaps and Detergents 10,488.38 147.90 8,683.88 117.18
Personal Products 6,746.95 98.91 5,750.68 99.71
Beverages 2,577.02 40.41 2,309.23 37.27
Packaged Foods 1,341.93 17.53 1,162.28 16.15
Others (including
Exports, Chemicals,
Water etc.) 581.32 55.04 1,474.94 64.37
Total 21,735.60 359.79 19,381.01 334.68
* Others represent service income from operations, relevant to the
respective businesses.
1.3 Summarised Profit and Loss Account (see para 1.4)
Rs. Crores
For the year ended For the year ended
31st March, 2012 31st March, 2011
Sale of products less
excise duty 21,735.60 19,381.01
Other operational income 380.77 354.50
Total Revenue 22,116.37 19,735.51
Operating Costs (18,825.03) (17,057.12)
PBDIT 3,291.34 2,678.39
Depreciation (218.25) (220.83)
PBIT 3,073.09 2,457.56
Other Income (net) 277.07 272.64
Profit before
exceptional item 3,350.16 2,730.20
Exceptional Item 118.87 206.83
PBT 3,469.03 2,937.03
Taxation (777.63) (631.04)
Profit for the year 2,691.40 2,305.99
Basic EPS (Rs.) 12.46 10.58
1.4 Demerger of FMCG Exports Business
In order to fully exploit the opportunity in exports market and to
provide necessary focus, flexibility and speed to the business, the
Board of Directors had approved in-principle a Scheme of Arrangement
for transfer of the FMCG Exports Business Division (demerged business
undertaking) of the Company into its wholly owned subsidiary, Unilever
India Exports Limited (UIEL'), on 9th May, 2011 which subsequently was
approved by the shareholders on 28th July, 2011. The Hon'ble High Court
of Bombay sanctioned the said Scheme with the appointed date of 1st
April, 2011. Accordingly, the financial results of the demerged
business undertaking do not form part of the audited results of the
Company for the year ended 31st March, 2012. However, the audited
results of the Company for the year ended 31st March, 2011 included the
results of the said demerged business undertaking and hence, to that
extent, previous year figures are not comparable with the current year
figures. The results of the Company excluding the results of the
demerged business undertaking for both the years are given below:
Rs. Crores
for the for the
year ended year ended
31st March, 31st March,
2012 2011
Revenue from operations,
net of excise 22,116.37 18,796.24
Profit before exceptional items
and tax 3,350.16 2,654.48
Profit for the year 2,691.40 2,246.19
2. DIVIDEND
Your Directors are pleased to recommend final dividend of Rs. 4.00 per
equity share of face value of Re.1/- each for the year ended 31st
March, 2012. The interim dividend of Rs. 3.50 per equity share was paid
on 22nd November, 2011.
The final dividend, subject to approval of shareholders at the Annual
General Meeting on 23rd July, 2012, will be paid to the shareholders
whose names appear in the Register of Members as on the date of book
closure i.e. from Friday, 6th July, 2012 to Friday, 20th July, 2012
(inclusive of both dates).
The total dividend for the financial year including the proposed final
dividend amounts to Rs. 7.50 per equity share and will absorb Rs.
1,883.90 Crores including Dividend Distribution Tax of Rs. 262.96
Crores.
3. CHANGE Of THE REGISTERED Office
In January 2010, your Company inaugurated the new Corporate Office
named 'Campus' at Andheri, Mumbai. The Board of Directors at their
meeting held on 31st October, 2011, approved the change of Registered
Office of the Company to Unilever House, B. D. Sawant Marg, Chakala,
Andheri East, Mumbai 400 099 from the earlier office at 165/166 Backbay
Reclamation, with effect from 1st January, 2012.
4. RESPONSIBILITY STATEMENT The Directors confirm that:
- in the preparation of the annual accounts, the applicable
accounting standards have been followed and that no material departures
have been made from the same;
- they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent, so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits of the
Company for that period;
- they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and
- they have prepared the annual accounts on a going concern basis.
5. CUSTOMER MANAGEMENT
In 2011-12, your Company has built on the initiatives of the previous
years and has further strengthened its reputation as an execution and
distribution powerhouse. One of the key thrusts during the year was
coverage expansion in the rural markets. The Shakti network has been
leveraged to enroll 30,000 Shaktimaan who distribute in 100,000 new
villages. The Company has added a million stores over the last two
years to its coverage, thus doubling its direct coverage and tripling
its rural coverage. Your Company has now built a clear distribution
advantage with a direct reach of more than 2 million outlets.
The Perfect Store programme aimed at improving availability and
visibility of Company's products at the point of purchase continued
making good progress with over a million retail outlets being enrolled
under this programme across urban and rural India. With a single minded
focus on the Perfect Store programme, your Company converted 500,000
enrolled outlets into Perfect Stores during the year. It is now
established that stores which are consistently Perfect grew sales well
ahead of average retail growth and had higher market share growth for
your Company's overall portfolio compared to overall share growth.
Your Company believes that the end consumer can be better served if the
capabilities of the front-end resources on the ground get enhanced.
With this objective in mind, work on a project to build a Human
Resource Information System (HRIS) for 20,000 plus third party
associates, who work in the market, was completed. This project is in
the direction of improving the systems and processes and the
capabilities of our associates and reaffirms your Company's commitment
towards its customers and consumers.
The year also saw greater focus on customers to drive growth and ensure
seamless working relationship with the partners. cross functional
'Customer Care' teams were deployed for the Modern Trade customers to
drive higher levels of customer service and engagement, which resulted
in overall customer delight. This initiative has given very good
results and your Company was awarded the best supplier by almost all
leading Modern Trade customers in this year. Your Company also
developed Best-in-Class' sustainability initiatives with Wal-Mart and
Metro that helped bring alive the Unilever Sustainable Living Plan
(USLP). The learning's of Modern Trade were extended to General Trade
and a Joint Business Planning process with top customer was
institutionalized under the umbrella of Unistar', a comprehensive
customer reward and recognition program.
Your Company launched Customer Credo' across 2300 plus distributors to
further improve customer connect and faster resolution of issues.
Under this initiative, the Company proactively engaged with
distributors and trade to get into the shoes of the customer and
experience issues from their lens. This was supported with a resolution
mechanism using Levercare', the customer helpline, taking customer
centricity to the next level. The programme was christened Happy 2
Help' and is planned to be repeated once every quarter.
During the year, your Company piloted an alliance with Tata
Teleservices Limited (TTSL) for the distribution of telecom products,
leveraging its rural distribution footprint. The Company has scaled the
distribution alliance with TTSL to four states covering over 150
channel partners. This distribution arrangement is aimed at
accelerating rural growth by enabling the Company to go deeper into
rural India due to improved viability for channel partners. This
initiative not only helps the Company build more stable Shakti
entrepreneurs but also enables it to increase rural investments thereby
unlocking growth in this channel.
6.1 Project Shakti
During the year, your Company further strengthened the Shakti
initiative by extending the relationship with Shakti Amma to her
family, through project Shaktimaan. Project Shaktimaan enrols the
unemployed / under employed male members of the family to sell your
Company's products into the satellite villages of Shakti. The
initiative serves two convergent purposes - enhances the livelihood
opportunity of the Shakti family and improves the quality and depth of
your Company's distribution network. This initiative strengthens the
philosophy behind Shakti, which comprises of:
- Leading market development
- Establish a suitable livelihood for the underprivileged
- Creating a self-sustaining business model
- Accessing markets beyond the reach of traditional distribution
models
By the end of this year, the Shakti network has been leveraged to
enroll 30,000 Shaktimaan who distribute in 100,000 new villages and the
Shakti programme had spread to 500,000 outlets, adding another
dimension to your Company's distribution and contributing to tripling
the rural footprint.
7. SUPPLY CHAIN
During the year, your Company has made significant progress towards its
vision of delivering outstanding customer service and enabling
sustainable growth. The service delivery standards showed steady
improvement with CCFOT (Customer Case Fill on Time) maintained at 90%
and loss reduction by 20% in comparison to last year. The Customer
Satisfaction (eQ) survey scores have been encouraging and suggest that
the actions taken by the Company are in the right direction. With the
help of a sustained improvement program, the Modern Trade OSA (On-Shelf
Availability) has seen further improvement with a loss reduction of 25%
in comparison to last year. Your Company has embedded Sales and
Operation Planning Process (S&OP) ways of working as part of the
organization culture and this is adding value to the business.
The Quality performance measured as CCPMU (Consumer Complaints Per
Million Units) has shown 12% reduction over last year. Quality
continues to be a focus area with thrust on design quality improvement
and new quality standard implementation for warehousing and
transportation.
Your Company has a robust Supply Chain savings programme with
continuous focus on end-to-end Supply Chain cost reduction with new
technologies, processes and methods. During the year, your Company has
delivered 6% saving in Supply Chain cost with factories delivering more
than 8% saving with quantum improvement in technical efficiencies,
wastage reduction and yield improvement.
The renewed focus on TPM (Total Productivity Management) and visible
leadership commitment toward turbo charging TPM, through strong focus
on autonomous maintenance, strong circle engagement, loss analysis and
reduced losses to improve PQCDSM (Productivity, Quality, Cost,
Delivery, Safety and Morale), have helped the Company to improve
employee engagement, efficiency and derive competitive advantage.
In order to support the volume growth, your Company has progressed on
the long-term plan to create capacities in line with demand so as to
enable growth while managing costs. Your Company has successfully
executed all capacity creation projects on time to ensure smooth
delivery during the year. A number of projects on sustainable energy
(bio-mass boilers), rain water harvesting and waste reduction projects
like sludge digesters and vermi-composting have been initiated and
commissioned across manufacturing sites.
There has been significant improvement in Innovation OTIF (On Time in
Full) with more than 100 innovation networks being executed during the
year. This ability of execution powerhouse is supporting business to
delight consumers and customers and catering to growth.
The Procurement function of the Company has focused on Partner to Win'
programme with supplier and business partners to reduce lead time,
procurement cost, improving reliability and working on new innovation.
Your Company also leverages benefits of scale and synergy through
Unilever's global buying network.
8. RESEARCH, DEVELOPMENT AND INNOVATION
Your Company continues to benefit from the strong foundation and long
tradition of Research & Development (R&D) which differentiates us from
many others. These benefits flow not only from work done in Research
Centres in India, but also from the centres of Unilever's global
research work. With the world class facilities and a superior science
and technology culture, we are able to attract the best of talent to
provide significant technology differentiation to our products and
processes.
The R&D labs in Mumbai and Bangalore are aligned significantly to
Unilever's global R&D. Many of the projects which are run out of these
centers are of global relevance and with a strong focus on needs of
this region and the overall Developing & Emerging (D&E) world.
The R&D programmes of your Company are focused on development of
breakthrough and proprietary technologies with innovative consumer
propositions. The R&D team of over 750 people comprises highly
qualified scientists and technologists working in the areas of Health
and Hygiene, Laundry, Household Care, Skin Care, Water Purification,
Beverages, Frozen Dessert and Naturals. The R&D group also comprises
critical functional capability teams in the areas of Regulatory,
Clinical, Patents, Information Technology, Safety and Open Innovation
functions.
On the back of strong R&D inventions, close to hundred new products
were launched successfully in the market in 2011-12. In Skin Care,
Vaseline Men range products with improved moisturizing and skin
lightening benefits were re-launched with distinctive packaging and
formats. Fair & Lovely Spot Corrector Pen, Ponds White Beauty daily
spot-less lightening cream with proprietary photo protection technology
delivering SPF 20 PA and Fair & Lovely Anti-Marks were also
introduced during the year. In Skin Cleansing, improved Lux and Hamam
soaps, including a new variant on Lux (Lux Fresh) were launched with
improved consumer benefits. Luxliquid hand wash and body wash were also
introduced in the market along with a range of facial cleansing
products of Pond's, Fair & Lovely, Vaseline and Dove.
New variants of Dove hair care range, including shampoo, conditioner
and other post wash formats, were launched to meet the needs of
different segments of the hair care market.
Clear shampoo was re-launched with a superior formula and a separate
range for men and women. Pepsodent Germicheck was re-launched with
improved formulation during the year. Peps dent Gumcare strengthened
its position by highlighting the mechanism of action in communication.
Fire-Freeze, the new dual-sensation extra-freshness variant of Closeup
was introduced during the year.
During the year, Surf and Wheel range of detergents were re-launched
with improved product propositions. New designs of Pureit, developed by
R&D to the cater to needs of the mass market and premium consumers,
were also launched during the year.
Foods R&D made significant contribution in 2011-12 to the Company's
Foods & Beverages portfolio by delivering several innovations in the
market. Among them were an exciting range of instant soups under
Knorrwith the great taste of soups and crunch of croutons. In the
Instant Coffee segment, R&D delivered two major product and packaging
innovations - Bru Gold, a premium agglomerated 100% instant coffee and
Bru Exotica, a range of single origin freeze dried coffee, both packed
in an innovative triangular glass bottle design. R&D contributed
towards the re-launched formulation and packaging of Kssan tomato
ketchups and Jams. In the Frozen Dessert segment, Unilever's flagship
brand Fruttare made with real fruits was launched. A premium range of
Selection Tubs was launched with a global packaging design and 3 new
flavors'. R&D made a significant contribution in developing a premium
range of flavored tea bags under the Taj Mahal brand and a range of
ready to drink and ready to prepare ice tea under the Lipton brand.
R&D has further contributed to the sustainability agenda of the Company
by enabling significant reduction in packaging material consumption
through several material efficiency initiatives.
The continuous stream of innovative and technically advanced products
launched in the market was a result of significant R&D investments and
the scientific talent that the Company can attract and retain. With its
strong scientific expertise and potential to deliver high value
technologies, India continues to occupy a premier position in Unilever
R&D. With the strong support from R&D as well as the brand development
capabilities, your Company is well placed to meet the challenges
arising from the increased competition intensity and the opportunities
to drive faster growth. Your Company is working towards further
strengthening the in-house scientific capabilities of the Indian R&D
function and building new expertise bases to retain the competitive
edge in the market place.
The details of expenditure on scientific research and development at
the Company's in-house R&D facilities eligible for a weighted deduction
under Section 35(2AB) of the Income Tax Act, 1961 for the year ended
31st March, 2012 are as under:
- Capital Expenditure : Rs. 1.88 Crores
- Revenue Expenditure : Rs. 22.91 Crores
9. ENVIRONMENT, Safety, HEALTH AND ENERGY CONSERVATION
Your Company continues to focus on the vision of being an 'Injury
Free' and 'Zero Environment Incident' organization. The behavioral
safety programme is in place for more than seven years now. With
increased focus on road safety campaigns, defensive driving training,
hand in machine and other campaigns across units your Company has
reduced accidents, measured as Total Recordable Frequency Rate (TRFR),
significantly over the last 4 year period. The TRFR has come down by
46% in 2011 (in comparison to 2008 baseline) with 10.8% reduction in
2011 (in comparison to the previous year).
In line with targets of the Unilever Sustainable Living Plan (USLP),
where Unilever's vision is to double the size of its business while
reducing the overall impact on environment, your Company has steadily
taken steps to reduce CO2 emissions. In 2011, the CO2 emission in
Company units has reduced by 9.9% over 2010 and 14.7% over 2008
baseline. With respect to energy consumption, the Company's operations
achieved 12% improvement over 2010 and 21.7% improvement over 2008
baseline. Your Company has also increased the use of renewable
resources like bio-mass fuel. The renewable energy proportion has
reached 13.7% of total energy consumption in 2011. With respect to
water usage, your Company's operations achieved reduction of 10.1% over
2010 and by 21.5% over 2008 baseline. Rain Water Harvesting (RWH) has
been implemented in more than 50% of the manufacturing units and 5
units of your Company have created the RWH potential to return more
water to the ground than their water consumption and 33 manufacturing
sites have been made zero discharge sites.
Your Company pursues a three pronged approach in waste management;
Reduce, Reuse and Recycle.
- Reduce waste generation through technical interventions and
optimization of processes like CIP (Cleaning in Place), sludge digester
and filter press at Effluent Treatment Plants.
- Reuse waste using new technologies of co-processing with cement
manufacturers and generating fuel from waste.
- Recycle waste through initiative like vermi-composting project.
This has been initiated at three sites to treat the Effluent Treatment
Plant waste into manure. The manure is being used as fertilizer in the
garden which is effective in disposing waste in a sustainable manner.
In 2011, over 96% of waste generated was liquidated through sustainable
recycling.
The information required under Section 217(1 )(e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report
of the Board of Directors) Rules, 1988 with respect to energy
conservation is appended hereto and forms part of this Report.
10. HUMAN RESOURCES
Your Company's Human Resource agenda for the year was focused on
strengthening four key areas: building a robust and diverse talent
pipeline, enhancing individual and organizational capabilities for
future readiness, driving greater employee engagement and strengthening
employee relations further through progressive people practices at the
shop floor.
Your Company's employer brand has been built with high levels of rigor
and thoroughness that has gone into making its consumer brands and
reaching out to its customers. Your Company is widely acclaimed for its
people development practices and has reinforced its position in this
area in 2011-12. This, coupled with its ability to attract the best
talent, gives a competitive edge to the organization. Your Company,
once again, retained its position as the No. 1 Employer Brand with
campus students of top business schools in 2011 and was voted to this
position from a mix of FMCG, Consulting, Financial Services
organizations, etc.
Your Company has a vision to improve its Gender Balance, which requires
an overhaul of your Company's policies and programmes to ensure
alignment and support to our Gender Balance agenda. The roadmap
involves a combination of bringing in women in adequate numbers and
creating enablers to ensure a culture of inclusion. These enablers
could be as varied as flexi time to agile working, to more open and
visible leadership models. 'Career by Choice' is one such initiative
which is a unique re-hire programme that will provide a platform for
women looking for real opportunities to work flexibly and part time for
live business projects.
The initial part of the journey for Talent and Organization Assessment
was undertaken successfully in 2010. Keeping in mind the needs and
requirements of the current talent pool and also enhancing the
Company's preparedness for the future, your Company has now
institutionalized the next phase of the Talent and Organization
Assessment charters by charting out the best practices for each stream.
Your Company has identified Beauty, Foods, Modern Trade, Rural and
Water as key capabilities in order to win in the future and our
investment in capability building is focused on these in addition to
our core capabilities in Marketing, Sales and Distribution. Your
Company has also launched a programme in mid 2011 with an aim to build
capability, manage performance and augment the levels of engagement for
3P sales associates to enable active presence at the Point of Purchase
(PoP), which will be a source of sustainable competitive advantage in
the long run. Your Company undertook intensive training programmes
through a combination of face-to-face and virtual learning approaches.
Over 35,000 e-learning registrations took place indicating that the
spirit of 'learn where you are' is imbibed in employees of the
Company. Your company is also investing in building capability in
digital and social media to find new platforms for brands to engage
with consumers in India more effectively.
The Global People Survey is a part of the Unilever Employee Insight
Programme which aims to give a voice to the Company's people throughout
the organization and provide a vehicle to make the views of everybody
heard, as also to provide leaders with regular, meaningful and
actionable feedback. It has 112 questions spread across 20 dimensions
in the area of Strategic Leadership at Unilever level, Strategic
Leadership at Organisation level, Immediate Boss Effectiveness and
Engagement. Feedback from this survey forms the basis of holistic
engagement plans which are reviewed consistently. Global People Pulse
Survey (2011) confirmed that India scores featured in the top 25
countries across Unilever. An extremely favorable 94% of employees said
that they were proud to work for your Company. This was on account of a
number of proactive and innovative initiatives to engage our employees,
the most significant being continuous and consistent business linked
engagement, a vision for the future of the business and clarity and
transparency to individuals on their own careers. This is also in
recognition of your Company's Performance Management and Reward
processes which are geared towards building a performance and execution
focused culture.
Your Company has been investing in progressive employee relations
practices to ensure that it invests in capability at the grass root
level. 'Sparkle' is a centrally hosted intranet based tool that
supports skill mapping, skill assessment, performance assessment, gap
analysis and enables training plan identification which is customized
to each workman basis priority areas. The tool has been a pioneering
tool in the area of workmen capability development and promotes higher
transparency, focused training intervention linked to individual and
business needs. The tool has delivered results for over a year now and
your Company has successfully completed appraisals thereby identifying
top performers and completed skill gap analysis of over 10,000 workmen
online. Business Linked Engagement and TPM Edge programmes continued
with full focus and rigout during the year and delivered significant
improvement in factory operations.
Information as per Section 217 (2A) of the Companies Act, 1956, read
with the Companies (Particulars of Employees) Rules, 1975, forms part
of this Report. However, as per the provisions of Section 219(1)(b)(iv)
of the Act, the Report and Accounts are being sent excluding the
statement containing the particulars to be provided under Section
217(2A) of the Act. Any member interested in obtaining such particulars
may inspect the same at the Registered Office of the Company or write
to the Company Secretary for a copy thereof.
11. INFORMATION TECHNOLOGY
Your Company continues to invest in Information Technology, leveraging
it as a source of competitive advantage.
The enterprise wide SAP platform forms the backbone of IT and
encompasses all core business processes in the Company and also
provides a comprehensive data warehouse with analytics capability that
helps in better and speedier decisions. SAP is now used for
collaboration with the suppliers and customers. Integrating systems
with the key customers has allowed your Company to partner much more
closely, leading to better customer service. Supply Chain optimization,
enabled by the IT capability, remains a source of significant value.
Your Company has institutionalized an extensive IT capability for
customer development function to support execution in the front-end.
All distributors run a standard distributor management system. The
distributors' salesmen use handheld devices for accepting retail orders
which enable faster tracking and real time sales information. Your
Company has used analytics and the existing IT infrastructure to build
a capability for an intelligent sales call. This gives your Company,
the ability to customize the sales call for each outlet on a scientific
basis. This has helped improve the effectiveness and efficiency of the
sales process significantly.
Your Company is further enhancing IT capabilities built for rural
expansion to equip Shakti Ammas using low cost mobile technology in
order to make their market working more controlled and efficient. This
is one of the key enablers that will allow to leverage our rural
distribution to other partnerships in the future.
Your Company continues to invest in IT infrastructure to support
business applications and has made use of India's expanded telecom
footprint to provide high bandwidth terrestrial links to all operating
units. Your Company also used software as a service to provide agile,
cost effective IT capabilities in select areas.
As the IT systems and related processes get embedded into the ways of
working of the organization, there is a continuous focus on IT security
and reliable disaster recovery management processes to ensure all
critical systems are always available. These are periodically reviewed
and tested for efficacy and adequacy.
12. FINANCE AND ACCOUNTS
Your Company's continued focus on cash generation resulted in a strong
operating cash flow during the year; driven by good business
performance, efficiencies and cost savings across the Supply Chain and
continued focus on working capital management. Your Company managed
investments prudently by deploying cash surplus in a balanced portfolio
of safe and liquid instruments. Capital Expenditure during the year was
at Rs. 310.01 Crores (last year - Rs. 311.31 Crores). This was
primarily in the areas of capacity expansion, consolidation of
operations, information technology, energy and other cost savings.
The finance team of your Company has undertaken a programme to
strengthen the processes across transactions, accounting, reporting and
information to support the Company's growth plans. One of the
significant projects that has been implemented during the financial
year is Project Parivartan' which was aimed at transforming the payment
process. This project, aimed at simplifying the payments process and
improving payment efficiency, has been implemented and rolled out
across all units of the Company and has shown a significant improvement
in efficiency levels. Similar projects are underway in the area of
accounting, reporting and information management which will move the
Company's processes to world class levels and support the growth plans
of the Company. These programmes are aligned with the overall finance
programme within Unilever.
The Company has not accepted any fixed deposits during the year. There
was no outstanding towards unclaimed deposit payable to depositors as
on 31st March, 2012.
In terms of the provisions of Investor Education and Protection Fund
(Awareness and Protection of Investors) Rules, 2001, Rs. 7.76 Crores of
unpaid / unclaimed dividends and interest / redemption of debentures
were transferred during the year to the Investor Education and
Protection Fund.
Return on Net Worth, Return on Capital Employed and Earnings Per Share
(EPS) for the last four years and for the year ended 31st March, 2012
are given below:
Period ended
2007 31st March,2009 2009-10 2010-11 2011- 12
Return on Net
Worth (%) 80.1 103.6* 88.2 74.0 77.7
Return on Capital
Employed (%) 78.0 107.5* 103.8 87.5 96.8
Basic EPS (after
exceptional items)
(Rs.) 8.73 11.46** 10.10 10.58 12.46
* Annualised numbers for proportionate period ** for fifteen month
period
Segment-wise results
Your Company has identified five business segments in line with the
Accounting Standard on Segment Reporting (AS-17), which comprise: (i)
Soaps and Detergents, (ii) Personal Products, (iii) Beverages, (iv)
Packaged Foods, including culinary, branded staples and frozen dessert
and (v) Others, including Exports, Chemicals and Water. The audited
financial results of these segments are given as part of financial
statements.
12.1 Risk and Internal Adequacy
Your Company manages cash and cash flow processes assiduously involving
all parts of the business. There was a net cash surplus of Rs. 1,830.04
Crores as on 31st March, 2012. The Company's debt equity ratio is very
low which provides ample scope for gearing the Balance Sheet, should
that need arise. Foreign Exchange transactions are fully covered with
strict limits placed on the amount of uncovered exposure, if any, at
any point in time. There are no materially significant uncovered
exchange rate risks in the context of Company's imports and exports.
Company accounts for mark-to-market gains or losses every quarter end
in line with the requirements of AS-11.
The Company's internal control systems are commensurate with the nature
of its business and the size and complexity of its operations. These
are routinely tested and certified by Statutory as well as Internal
Auditors and cover all offices, factories and key areas of business.
Significant audit observations and follow up actions thereon are
reported to the Audit Committee. The Audit Committee reviews adequacy
and effectiveness of the Company's internal control environment and
monitors the implementation of audit recommendations including those
relating to strengthening of the Company's risk management policies and
systems.
Your Company has an elaborate process for Risk Management. This rests
on the three pillars of Business Risk Assessment, Operational Controls
Assessment and Policy Compliance processes. Major risks identified by
the businesses and functions are systematically addressed through
mitigating actions on a continuing basis. These are discussed with both
Management Committee and Audit Committee. Some of the risks relate to
competitive intensity and cost volatility.
13. DEMERGER
Consequent to the approval of the Members in the Court Convened Meeting
held on 28th July, 2011 and approval of the Hon'ble High Court at
Bombay, the Scheme of Arrangement for transfer of certain assets,
liabilities and properties of FMCG Exports Business Division of the
Company to its wholly owned subsidiary, Unilever India Exports Limited
was made effective 1st January 2012.
14. CORPORATE SOCIAL RESPONSIBILITY
Sustainability has always been integral to your Company's way of doing
business. In November 2010, Unilever launched the Sustainable Living
Plan, which puts sustainability at the heart of its business strategy.
The central objective of the Unilever Sustainable Living Plan is to
decouple growth from environmental footprint, while at the same time
increasing your Company's positive social impacts. The Unilever
Sustainable Living Plan (USLP) has three significant outcomes by 2020:
- Help more than a billion people to improve their health and
well-being
- Halve the environmental footprint of our products
- Source 100% of our agricultural raw materials sustainably
Underpinning these three broad goals are around 60 time bound targets
spanning our social, economic and environmental performance across the
value chain - from the sourcing of raw materials all the way through to
the use of products in the home.
The Unilever Sustainable Living Plan represents a long term goal and
progress in 2010-11 has already been encouraging. By the end of 2011,
for example, almost two-thirds of the palm oil used in products
globally was being purchased from certified sources. In India, 60% of
tomatoes are sourced sustainably.
Pure it in-home water purifier delivers safe water, without requiring
running water or electricity, and at a low cost, to over 30 million
people in India. In 2010-11, Lifebuoy' shygiene programme reached more
than 30 million people in India, spreading hygiene awareness and
encouraging behavior change.
Your Company has taken steps to ensure that the food brands have a
better nutritional profile. Around 60% of the major food and beverage
brands, viz. Brooke Bond, Bru, Knorr, Kissan and Kwality Wall's, comply
with the 'Healthy Choice' guidelines as on date.
In 2011, your Company reduced CO2 emissions by 14.7% (per tonne of
production over 2008 baseline); water use by 21.5%; and waste by 52.8%
in factories in India. Your Company has improved CO2 efficiency in
transportation by 17.8% despite significant increase in volumes. During
the year, the Frozen Dessert business has deployed over 23,775
environment friendly HC-based freezers in its fleet.
Your Company has extended the Shakti initiative by adding 30,000
Shaktimaan (male family members of existing Shakti entrepreneurs who
have enrolled for the programme), to sell the products by visiting
the surrounding villages on bicycles.
Even though the Company is making changes across the length and breadth
of its business, much remains to be done. The Company has to develop
products and processes that enable growth in a resource stressed world,
and encourage behavior and habits that help people live sustainably.
While your Company has an ambitious and challenging agenda, it
certainly doesn't have all the answers. What it knows, is that it
requires all of us to work together for achieving a sustainable future.
Your Company is also working in partnership with governments and NGOs
to implement water conservation projects in more than 180 villages in
17 districts of India. By 2015, your Company aims to create water
conservation capacity of a hundred billion liters to enable a better
future for a million people.
In April 2012, your Company has released India progress report on
Unilever Sustainable Living Plan as well as a report on your Company's
community water conservation projects.
15. EMPLOYEE STOCK OPTION PLAN (ESOP)
Details of the shares issued under ESOP, as also the disclosures in
compliance with Clause 12 of the Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 are set out in the Annexure to this Report.
No employee has been issued share options, during the year, equal to or
exceeding 1% of the issued capital of the Company at the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting
held on 29th May, 2006, the Company adopted the '2006 HLL Performance
Share Scheme'. The Scheme has been registered with the Income Tax
authorities in compliance with the relevant provisions of SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999. As per the terms of the Performance Share Plan,
employees are eligible for the award of conditional rights to receive
equity shares of the Company at the face value of Re. 1/- per share.
These awards will vest only on the achievement of certain performance
criteria measured over a period of 3 years. During the year 168
employees, including Whole time Directors, were awarded conditional
rights to receive a total of 4,12,633 equity shares at the face value
of Re. 1/- each. The above mentioned comprises of conditional grants
made to eligible managers covering performance period 2012-14.
The '2006 HLL Performance Share Scheme' was introduced as a measure
to reward and motivate employees as also to attract the talent and
retain the key employees. On a review of the operating experience of
the said scheme and bearing in mind the charges in the global trends on
management rewards, it is proposed to revise the approach of award of
share options under the scheme by adopting a revised 2012 HUL
Performance Share Scheme'.
16. CORPORATE GOVERNANCE
Your Company is renowned for exemplary governance standards since
inception and continues to lay a strong emphasis on transparency,
accountability and integrity. In the year 2011 your Company received
the ICSI National Award for Excellence in Corporate Governance, in
recognition of its Corporate Governance practices.
A separate report on Corporate Governance is provided at page no. 50 of
this annual report together with a Certificate from the Auditors of the
Company regarding compliance of conditions of Corporate Governance as
stipulated under Clause 49 of the Listing Agreement with the Stock
Exchange(s). A certificate of the CEO and CFO of the Company in terms
of sub-clause (v) of Clause 49 of Listing Agreement, inter alia,
confirming the correctness of the financial statements, adequacy of the
internal control measures and reporting of matters to the Audit
Committee is also annexed.
The Ministry of Corporate Affairs, Government of India introduced the
Corporate Governance Voluntary Guidelines, 2009. These guidelines have
been issued with the view to provide Corporate India a framework to
govern themselves voluntarily as per the highest standards of ethical
and responsible conduct of business. The recommendation of the
Voluntary Guidelines pertaining to separation of offices of the
Chairman and the CEO, constitution of Audit Committee and Remuneration
Committee, Risk Management framework, are already practiced by your
Company. Your Company has been in substantial compliance of these
guidelines.
During the year Secretarial Audit and Secretarial Standards Audit were
carried out. The detailed reports on the same are given at page nos. 67
to 69 of this annual report.
17. OUTLOOK
The fiscal year 2011-12 witnessed slowdown of economic activities
particularly industrial output. Inflation also remained at elevated
level throughout the fiscal year. Private investment has declined in
its pace of growth considerably affecting the growth rate of the
economy. Higher spending on subsidies on account of oil and fertilizers
widened the fiscal deficit of the centre more than the budget
estimates.
The RBI has projected a GDP growth of 7.2% for 2012-13 whereas the
Economic Survey 2011-12 projected a GDP growth of 7.6%. All these
projections point to continuation or improvement over the pace of
economic activity of the previous year. Combined with a lower inflation
rate, the prognosis for the new financial year is one of improved
performance on growth front. Stable external conditions and a
favorable monsoon would be critical to the realization of these
projections. The growth prospects for agriculture in 2012-13 will hinge
on the performance of monsoon.
FMCG markets are expected to grow, however uncertain global economic
environment, inflation and adverse impact of rupee depreciation and
competitive intensity continue to pose challenges for the future. While
the near term conditions pose a challenge for the economy, the medium
to longer term trends based on rising incomes, aspirations, low
consumption levels, etc. are positive and an opportunity for the
Company.
17.1 Cautionary Statement
Statements in this report, particularly those which relate to
Management Discussion and Analysis, describing the Company's
objectives, projections, estimates and expectations, may constitute
'forward looking statements' within the meaning of applicable laws
and regulations and actual results might differ materially from those
either expressed or implied.
18. SUBSIDIARY COMPANIES
A statement pursuant to Section 212 of the Companies Act, 1956 relating
to Subsidiary Companies is attached to the accounts.
In terms of General Exemption, under Section 212(8) of the Companies
Act, 1956, granted by Ministry of Corporate Affairs vide its circular
no. 02/201 1 dated 8th February, 2011 and in compliance with the
conditions enlisted therein, the Audited Statement of Accounts,
Auditors' Reports thereon and the Reports of the Board of Directors of
the Company's subsidiaries for the financial year ended 31st March,
2012 have not been annexed. The Annual Accounts and related documents
of the Subsidiary Companies shall be kept open for inspection at the
Registered Office of the Company. The Company will also make available
these documents upon request by any Member of the Company interested in
obtaining the same. However, as directed by the said circular, the
financial data of the Subsidiaries have been furnished under
'Subsidiary Companies Particulars' forming part of the Annual Report
(refer page no. 150). Further, pursuant to Accounting Standard AS-21
issued by the Institute of Chartered Accountants of India, Consolidated
Financial Statements presented by the Company in this Annual Report
includes the financial information of its subsidiaries.
19. BOARD OF DIRECTORS
Mr. Deepak Parekh, Independent Director and Chairman of the Audit
Committee of the Company, stepped down from the Board of the Company
with effect from 27th December, 2011, after a tenure lasting more than
14 years. The Board acknowledges and places on record its deep
appreciation for the contribution made by Mr. Deepak Parekh as an
Independent Director and the Chairman of the Audit Committee of the
Company.
Mr. Gopal Vittal, Executive Director, Home & Personal Care resigned
from the Board of the Company with effect from 20th January, 2012, to
pursue opportunities outside Unilever. The Board acknowledges and
places on record its appreciation for the contribution made by Mr.
Gopal Vittal as a Whole time Director on the Board of the Company.
Mr. O. P. Bhatt was appointed as an Additional Director on the Board of
the Company with effect from 20th December, 2011, in accordance with
Section 260 and Articles of Association of the Company. Notices have
been received from Members pursuant to Section 257 of the Companies
Act, 1956 together with necessary deposits proposing the appointment of
Mr. O. P. Bhatt as Non-Executive Independent Director on the Board of
the Company.
The Members of the Company in the Extraordinary General Meeting held on
4th April, 2008 had appointed Mr. Nitin Paranjpe as a Managing Director
and Chief Executive Officer (CEO) of the Company for a period of five
years, with effect from 4th April, 2008. The current term of office of
Mr. Nitin Paranjpe as a Managing Director and CEO of the Company is due
to expire on 3rd April, 2013. It is proposed to re-appoint Mr. Nitin
Paranjpe as the Managing Director and CEO for a further period of five
years commencing from 4th April, 2013.
In accordance with the Articles of Association of the Company, all
other Directors, except for Managing Director, will retire at the
ensuing Annual General Meeting and being eligible offer themselves for
re-election.
20. MANAGEMENT COMMITTEE
The day-to-day management affairs of the Company are vested with the
Management Committee, which is subjected to the overall superintendence
and control of the Board. The Management Committee is headed by Mr.
Nitin Paranjpe, as the Chief Executive Officer, and has Functional /
Business Heads as its members.
During the year, Ms. Geetu Verma joined the Management Committee of the
Company as Executive Director - Foods to succeed of Mr. Shrijeet
Mishra, who resigned from the services of the Company.
Mr. Hemant Bakshi, who earlier held the position of Executive Director
- Sales and Customer Development, was appointed as Executive Director -
Home & Personal Care of the Company. Mr. Hemant Bakshi has succeeded
Mr. Gopal Vittal, Executive Director - Home & Personal Care, who ceased
to be the member of the Management Committee consequent to his
resignation.
Mr. Manish Tiwary was appointed as a member of the Management Committee
as Executive Director - Sales and Customer Development. Before being
appointed to the Management Committee, Mr. Manish Tiwary was Vice
President, Modern Trade of the Company.
21. AUDITORS
M/s. Lovelock & Lewes, Statutory Auditors of the Company retire and
offer themselves for re-appointment as the Statutory Auditor of the
Company pursuant to Section 224 of the Companies Act, 1956.
22. APPRECIATIONS AND ACKNOLLEDGEMENTS
Your Directors place on record their deep appreciation to employees at
all levels for their hard work, dedication and commitment. The
enthusiasm and unstinting efforts of the employees have enabled the
Company to remain at the forefront of the Industry.
Your Directors would also like to acknowledge the excellent
contribution by Unilever to your Company in providing with the latest
innovations, technological improvements and marketing inputs across
almost all categories in which it operates. This has enabled the
Company to provide higher levels of consumer delight through continuous
improvement in existing products and introduction of new products.
The Board places on record their appreciation for the support and
co-operation your Company has been receiving from its suppliers,
redistribution stockists, retailers, business partners and others
associated with the Company as its trading partners. Your Company
looks upon them as partners in its progress and has shared with them
the rewards of growth. It will be Company's endeavor to build and
nurture strong links with the trade based on mutuality of benefits,
respect to and co-operation with each other, consistent with consumer
interests.
The Directors also take this opportunity to thank all investors,
clients, vendors, banks, regulatory and government authorities and
stock exchanges, for their continued support.
On behalf of the Board
1st May, 2012 Harish Manwani
Mumbai Chairman
Mar 31, 2011
The Companys Directors are pleased to present the 78th Annual Report
of the Company, along with Audited Accounts for the financial year
ended 31st March, 2011.
1. FINANCIAL PERFORMANCE (STANDALONE)
1.1 Results
Rs. Crores
For the year ended For the year ended
31st March, 2011 31st March, 2010
Turnover, net of excise 19,401.11 17,523.80
Profit before tax 2,730.18 2,707.07
Net profit 2,305.97 2,202.03
Dividend (including tax on distributed
profits) (1641.96) (1,655.97)
Transfer to General Reserve (230.60) (220.20)
Profit & Loss Account balance carried
forward 1235.60 802.19
1.2 Category wise Turnover
Rs. Crores
For the year ended For the year ended
31st March, 2011 31st March, 2010
Sales Others* Sales Others*
Soaps and Detergents 8,683.88 107.68 8,180.29 85.35
Personal Products 5,750.68 93.42 4,969.36 78.54
Beverages 2,309.23 34.74 2,119.44 22.99
Processed Foods 890.33 12.24 713.97 16.81
Ice creams 271.95 2.63 228.94 2.06
Exports 1093.12 6.53 1000.15 5.10
Others 401.92 36.11 315.50 31.22
Less: Inter segment revenue - (3.85)
Total 19,401.11 293.35 17,523.80 242.07
* Others represent service income from operations, relevant to the
respective businesses.
1.3 Summarised Profit and Loss Account
Rs. Crores
For the year ended For the year ended
31st March, 2011 31st March, 2010
Net sales 19,401.11 17,523.80
Other operational income 334.09 201.53
Total 19,735.20 17,725.33
Operating Costs and expenses (17,035.90) (14,975.36)
PBDIT 2,699.30 2,749.97
Depreciation (220.83) (184.03)
PBIT 2,478.47 2,565.94
Interest Income (net) 251.71 141.13
PBT 2,730.18 2,707.07
Taxation (576.93) (604.39)
PAT (before exceptional items) 2153.25 2,102.68
Exceptional/Extraordinary items
(net of tax) 152.72 99.35
Net profit 2,305.97 2,202.03
Basic EPS (Rs.) 10.58 10.10
2. DIVIDEND
Your Directors are pleased to recommend a final dividend of Rs.3.50 per
equity share of the face value of Re.1/- for the year ended 31st
March,2011. The interim dividend of Rs.3.00 per equity share was paid
on 15th November, 2010.
The final dividend, subject to approval at the AGM on 28th July, 2011,
will be paid to the shareholders whose names appear in the Register of
Members as on the date of book closure i.e. from Tuesday, 12th July,
2011 to Wednesday, 27th July, 2011 (inclusive of both dates).
The total dividend for the financial year including the proposed final
dividend amounts to Rs. 6.50 per equity share and will absorb Rs.
1,641.80 Crores including Dividend Distribution Tax of Rs. 231.34
Crores.
3. BUY-BACK OF EQUITY SHARES
The Board of Directors in their meeting held on 11th June, 2010
approved the buy-back of Companys fully paid-up equity shares of Re.
1/- each, at a price not exceeding Rs. 280/- per equity share, up to an
aggregate maximum amount of Rs. 630 Crores, i.e. within the limit of
25% of the total paid-up equity share capital and free reserves of the
Company as on 31st March, 2010. The approval of the shareholders for
the buy-back was obtained through postal ballot, the results of which
were declared on 26th July, 2010.
The buy-back was made out of free reserves and the share premium
account of the Company through open market purchases through the Bombay
Stock Exchange Limited and National Stock Exchange of India Limited
using their nationwide electronic trading facilities, as per the
provisions contained in the SEBI (Buy Back of Securities) Regulations,
1998. The buy-back offer was open from 23rd August, 2010 to 28th March,
2011.
The cumulative number of Equity Shares bought back under the scheme is
2,28,83,204 equity shares for a total consideration of Rs. 625.30
Crores, at an average price of Rs. 273.26 per share. The paid-up
capital of the Company after the extinguishment of shares bought back
under the scheme stood at Rs. 215.94 Crores comprising of
2,15,94,36,598 equity shares of Re.1/- each.
4. RESPONSIBILITY STATEMENT
The Directors confirm that:
# in the preparation of the annual accounts, the applicable accounting
standards have been followed and that no material departures have been
made from the same;
# they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent, so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits of the
Company for that period;
# they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and they have
prepared the annual accounts on a going concern basis.
15. SUBSIDIARY COMPANIES
During the year, the Board of Directors agreed to divest 43.31% stake
in Hindustan Field Services Private Limited (HFS) in favor of Smollan
Group (the JV partner). Your Company will continue to hold 7.69%
shareholding in HFS. HFS will, accordingly, cease to be a subsidiary of
the Company post completion of the divestment.
A statement pursuant to Section 212 of the Companies Act, 1956 relating
to Subsidiary Companies is attached to the accounts.
In terms of General Exemption under Section 212(8) of the Companies
Act, 1956 granted by Ministry of Corporate Affairs vide its circular
no. 02/2011 dated 8th February, 2011 and in compliance with the
conditions enlisted therein, the Audited Statement of Accounts and the
Auditors Reports thereon for the financial year ended 31st March, 2011
along with the Reports of the Board of Directors of the Companys
subsidiaries have not been annexed. The Annual Accounts and related
documents of the Subsidiary Companies shall be kept for inspection at
the Registered Office of the Company. The Company will also make
available these documents upon request by any Member of the Company
interested in obtaining the same. However, as directed by the said
circular, the financial data of the Subsidiaries have been furnished
under Subsidiary Companies Particulars forming part of the Annual
Report (Refer page no. 146). Further, pursuant to Accounting Standard
AS-21 issued by the Institute of Chartered Accountants of India,
Consolidated Financial Statements presented by the
Company in this Annual Report includes the financial information of its
subsidiaries.
16. CORPORATE SOCIAL RESPONSIBILITY
Your Companys strategy is to integrate the social, economic and
environmental agenda in the fabric of its business and operations.
This requires the business, to identify the relevant impact areas and
define strategies that drive consumer preference, and in parallel,
address these issues i.e. strategies that do well by doing good. The
reasons for growing the business sustainably are compelling and your
Company sees no conflict between promoting sustainable development and
business growth.
Your Companys vision is to increase the positive impact in the social
agenda by improving health and well being, reduce the environmental
impact from greenhouse gases, water and waste and work towards
prosperity of India and business by enhancing livelihoods amongst
farmers through sustainable sourcing and expanding our small
distributor model.
During the year, Unilever launched the Unilever Sustainable Living
Plan globally. The Unilever Sustainable Living Plan (USLP) has three
significant outcomes by 2020:
# Help more than a billion people take action to improve their health
and well-being
# Halve the environmental impact of the making and use of Unilever
products
Enhance the livelihoods of thousands of people in Unilevers supply
chain
The first outcome is to help more than a billion people to take action
to improve their health and well-being. Our everyday use products like
soap, spreads and toothpaste can make a meaningful difference to
peoples lives. The Lifebuoy handwashing education programme has
already reached over 124.7 million people in India and South Asia.
Clinical trials reveal that washing hands at key moments helps in
significantly reducing the risk of diarrhoeal disease - one of the
biggest reasons for fatalities among children.
Today, nearly 1 billion people do not have access to safe drinking
water. The UN estimates that nearly one-and-a-half million children die
each year from water related diseases. A few years ago your Company
decided that there had to be a better, cheaper, more sustainable way to
provide safe drinking water. The product developed to address this is
Pureit, a water purification system. The water it produces is as safe
to drink as boiled water, tastes a whole lot better than water purified
with chlorine based sachets, and is a fraction of the price of bottled
water. It is easy to operate and safe to use.
To make this product affordable to low income groups, your Company
works with NGOs and Womens Self-Help Organisations to facilitate the
availability of low-interest micro-loans. Today, Pureit is protecting
around 20 million people with clean, safe drinking water. After the
success of the product in India, Unilever has decided to introduce
Pureit across other countries in South - East Asia, Latin America and
sub-Saharan Africa.
The second outcome is to halve the environmental impact of the making
and use of our products. This means halving water, waste and greenhouse
gases across the lifecycle of the products. The Company has reduced
water usage in manufacturing operations by 36% since 2004 (measured on
per tonne basis). Fifty six percent of our own manufacturing sites now
have rainwater harvesting facilities and five of the sites have
potential to return more water to the ground than their consumption.
The products/business life cycle impact analysis shows that your
Companys direct impact is relatively small; it is the sourcing of raw
materials and usage of the products that accounts for a much larger
impact. This means that the Company has to design products, which allow
consumers to get better results with less energy and less water
consumption.
The third outcome is to enhance the livelihoods of thousands of people
in Unilevers supply chain. Your Company works with many small holding
farmers, small-scale distributors and micro- entrepreneurs (for example
Project Shakti in India) helping them improve their skills and increase
productivity.
The outcomes that Unilever has committed to itself are ambitious and
challenging and each person at Unilever is willing to stretch, given
the excitement for and the belief that it is the right way to go; for
our business, for the society and for the environment.
Our products touch the lives of 2 out of 3 Indians everyday, hence
changes made to the way the products are designed, sourced and used
will have a far reaching impact in making consumption sustainable.
Your Company released its first Sustainable Development Report at the
Annual General Meeting held on 27th July, 2010. Your Companys
Sustainable Development Report presented the Companys Corporate
Responsibility (CR) framework which integrates the social, economic and
environmental agenda with business priorities. An update on progress on
our commitments made under the CR strategy of the Company is provided
at page no. 17 of the Annual Report.
17. BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE
There are no changes in the Board of Directors and Management Committee
of the Company during the year.
In accordance with the Articles of Association of the Company, all
other Directors, except for Managing Director, will retire at the
ensuing Annual General Meeting and being eligible offer themselves for
re-election.
The day-to-day management affairs of the Company are vested with the
Management Committee, which is subjected to the overall superintendence
and control of the Board. The Management Committee is headed by Mr.
Nitin Paranjpe, as the Chief Executive Officer, and has
functional/business heads as its members.
18. AUDITORS
M/s. Lovelock & Lewes, Statutory Auditors of the Company retire and
offer themselves for re-appointment as the Statutory Auditor of the
Company pursuant to Section 224 of the Companies Act, 1956.
19. APPRECIATIONS AND ACKNOWLEDGEMENTS
Your Directors place on record their deep appreciation to employees at
all levels for their hard work, dedication and commitment. The
enthusiasm and unstinting efforts of the employees have enabled the
Company to remain at the forefront of the Industry.
Your Directors would also like to acknowledge the excellent
contribution by Unilever to your Company in providing with the latest
innovations, technological improvements and marketing inputs across
almost all categories in which we operate. This has enabled the Company
to provide higher levels of consumer delight through continuous
improvement in existing products and introduction of new products.
The Board places on record their appreciation for the support and
co-operation your Company has been receiving from its suppliers,
redistribution stockists, retailers, business partners and others
associated with the Company as its trading partners. Your Company looks
upon them as partners in its progress and has shared with them the
rewards of growth. It will be Companys endeavor to build and nurture
strong links with the trade based on mutuality of benefits, respect to
and co-operation with each other, consistent with consumer interests.
The Directors also take this opportunity to thank all investors,
clients, vendors, banks, regulatory and government authorities and
stock exchanges, for their continued support.
On behalf of the Board
Mumbai Harish Manwani
9th May, 2011 Chairman
Mar 31, 2010
The Companys Directors are pleased to present the 77th Annual Report
of the Company along with Audited Accounts for the financial year ended
31st March, 2010.
1. FINANCIAL PERFORMANCE
1.1 Results Rs. Crores
Twelve Months Fifteen Months
period ended period ended
31st March, 2010 31st March, 2009
Turnover, net of excise 17,523.80 20,239.33
Profit before tax 2,707.07 3,025.12
Net profit 2,202.03 2,496.45
Dividend (including tax on
distributed profits) (1,655.97) (1,912.29)
Transfer to General Reserve (220.20) (250.00)
Profit & Loss Account balance
carried forward 802.19 531.66
1.2 Category wise Turnover
Rs. Crores
Twelve Months period ended Fifteen Months period
ended
31st March, 2010 31st March, 2009
Sales Others* Sales Others*
Soaps and
Detergents 8,180.29 85.35 9,770.26 114.37
Personal Products 4,969.36 78.54 5,272.31 112.22
Beverages 2,119.44 22.99 2,272.29 27.22
Foods 713.97 16.81 791.25 17.05
Ice creams 228.94 2.06 229.44 5.88
Exports 1,000.15 5.10 1,567.29 8.79
Others 315.50 31.22 344.41 14.13
Less : Inter
segment revenue (3.85) (7.92)
Total 17,523.80 242.07 20,239.33 299.66
* Other revenue represents service income from operations, relevant to
the respective businesses.
1.3 Summarised Profit and Loss Account
Rs. Crores (except EPS)
Twelve months Fifteen months
period ended period ended
31st March, 2010 31st March, 2009
Net sales 17,523.80 20,239.33
Other operational income 201.53 384.17
Total 17,725.33 20,623.50
Operating Costs and expenses (14,975.36) (17,583.31)
PBDIT 2,749.97 3,040.19
Depreciation (184.03) (195.30)
PBIT 2,565.94 2,844.89
Interest Income (net) 141.13 180.23
PBT 2,707.07 3,025.12
Taxation : (604.39) (524.41)
PAT (before exceptional items) 2,102.68 2,500.71
Exceptional items (net of tax) 99.35 (4.26)
Net profit 2,202.03 2,496.45
Basic EPS (Rs.) 10.10 11.46
On a like to like basis i.e. comparing the results for the financial
year ended 31st March 2010 with the unaudited results for the 12 months
period ended 31st March 2009, your Company registered an overall
turnover growth of 6.4% and improved operating margin by 10 bps. Net
Profit (after Exceptional Items) grew by 4.1%. Basic Earnings Per Share
for the period 2009-10 was Rs. 10.10.
2. DIVIDEND
Directors are pleased to recommend a final dividend of Rs.3.50 per
equity share of the face value of Re.1/- for the year ended 31st March,
2010. The interim dividend of Rs.3.00 per equity share was paid on 23rd
November, 2009.
The final dividend, subject to approval at the AGM on 27th July, 2010,
will be paid to the shareholders whose names appear in the Register of
Members with reference to the book closure from Saturday, 10th July,
2010 to Monday, 26th July, 2010 (inclusive of both dates).
The total dividend for the financial year including the proposed final
dividend amounts to Rs. 6.50 per equity share and will absorb Rs.
1655.88 crores including Dividend Distribution Tax of Rs. 238.02
crores.
3. CORPORATE OFFICE & RESEARCH CENTRE
With the need to consolidate the multiple office locations burgeoned
across Mumbai to accommodate growing teams and businesses of your
Company and in order to drive synergies, the new Corporate Office of
your Company was inaugurated in January, 2010.
The new Corporate Office named as Campus is located at Andheri; and
has marked the completion of the journey of bringing together your
Company, physically and culturally under one roof. A journey which
started with the Brookefields, Bangalore office merging into the office
at Backbay Reclamation, Mumbai in the last quarter of 2006 and ending
with five other locations in Mumbai coming together at Andheri in
January, 2010.
The Campus not only physically brought together different teams that
were sitting apart, but also created an environment of oneness towards
the goal of performing better and seeing the organisation soar to newer
heights. The Campus aims to create a flexible, open and vibrant work
space, which enables every employee to perform better. It leverages
technology and progressive workplace practices to meet the needs of
todays business environment.
The new Campus is designed keeping in mind the new trends and emerging
needs of todays talent and boosts the employer brand of your Company
to attract and retain talent.
As an organisation committed towards sustainability, various energy
saving systems and technologies have been incorporated in the design of
the office to drive 100% recycling of water and save energy
consumption. In design and spirit, the new Corporate Office truly
symbolises Companys vision to work as one and leverages its collective
strength to win in the market.
4. RESPONSIBILITY STATEMENT
The Directors confirm that:
in the preparation of the annual accounts, the applicable accounting
standards have been followed and that no material departures have been
made from same;
- they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits of the
Company for that period;
- they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and
- they have prepared the annual accounts on a going concern basis.
5. MANAGEMENT DISCUSSION AND ANALYSIS
In order to avoid duplication between the Directors Report and
Management Discussion and Analysis, we present below a composite
summary of performance of the various businesses and functions of the
Company.
5.1 Economy and Markets
Over the last two years, India has limited the impact of the global
slowdown on its growth. The GDP growth rate in the first three quarters
of the financial year 2009-10 has been 6.7%. The downward pressure on
GDP growth came in the form of poor monsoons which impacted the Kharif
(crops grown in June-September period) agricultural produce this year.
While the services sector has been growing at a rate of over 7.9%, the
industrial growth accelerated sharply from 2% to 11.6% over the last
four quarters. Towards the end of the fiscal year, export growth has
returned to positive territory on revival in global demand, after 13
consecutive months of de-growth.
Though the overall GDP growth rates are encouraging, food price
inflation has been a major cause of worry for over a year. Food
inflation, along with firming up of global commodity prices, has
spilled over into prices of domestic commodities and services as well
with the overall consumer inflation rate hovering at over 15% for
several months. The wholesale price inflation touched 9.9% in February
2010, surpassing Reserve Banks estimate of 8.5% by March end.
The FMCG markets in India continue to be attractive and have grown
during the year under review. In the context of the global slowdown,
the Indian market has become even more attractive and many new
competitive entries have been witnessed leading to a significant
increase in the overall competitive intensity. At the same time, the
increased levels of inflation have had a somewhat dampening impact on
the market growth of some of the categories, particularly in the second
half of the year. Commodity prices have also been fairly volatile,
particularly in the first half of the year.
Your Companys good performance in the year 2009-2010 has to be viewed
in the context of the above economic and market environment.
PERFORMANCE OF BUSINESSES AND CATEGORIES
Some highlights are given below in respect of each of the business
categories of the Company. Increase/growth percentages refer to the
comparison of the financial year ended 31st March, 2010 with the 12
months period ended 31st March, 2009.
5.2 Home & Personal Care Business (HPC)
The HPC Business consists of Fabric Wash, Household Care, Personal Wash
and Personal Care categories which includes products such as
toothpaste, shampoo, skin care, deodorants and colour cosmetics. During
the year, the HPC business delivered sales growth of 6.6%. While the
underlying volume growth was higher, aggressive price reductions were
effected in the market place linked to significant reduction in
commodity prices over the previous year. Further, competitive intensity
increased substantially in most categories, especially in the second
half of the year, evidenced by many new competitive entries as well as
a step up in media spend levels. During the year, your Company
introduced several innovations across the portfolio and stepped up the
level of brand investments to drive growth. Your Company continued to
receive significant technology and brand development inputs from
Unilever which played a key role behind the various innovations
launched during the year. As a result of these efforts, the growth
momentum of the HPC business accelerated through the year with double
digit volume growth in the last quarter of the year under review. This
growth was broad based across categories and was delivered in the
context of significant increase in competitive intensity, both from
existing and new players.
Given the low levels of per capita consumption in India, there is
potential for strong growth in all categories of the Home and Personal
Care market. These favourable market conditions have attracted a host
of international and domestic competitors to participate in the Indian
market. Your Directors believe that making sustained investments behind
the Companys brands, by way of technology led innovations, consumer
communication and continued focus on developing the markets, will
benefit the business in creating long term value.
5.2.1 Soaps & Detergents
Soaps and Detergents category recorded modest turnover growth of 1.5%.
The growth of the Soaps and Detergents category needs to be viewed in
the context of a very high base in the previous year which saw high
price increases linked to commodity cost inflation. During the year
under review, the prices of products, particularly in the Detergents
segment, were reduced taking into account the reduction in commodity
prices. The segmental margin of this category was lower by 100 bps
linked to the volatility in commodity costs in the initial part of the
year and the actions taken to defend the Companys leadership position
in the face of heightened competitive intensity.
Fabric Wash category had a mixed performance. The first half of the
year was impacted by the volatility in pricing linked to commodity
costs while the second half of the year recorded good volume growth.
The improved performance in the second half of the year, despite
intense competitive activity, was driven by brand innovations (Wheel)
and price corrections across the portfolio. The Surf franchise
continued to perform well. The pricing on Rin Powder was
strategically reduced to drive upgradation from the mass markets with
encouraging initial response. Wheel has been re- launched with better
formulation, improved packaging and fresh communication; initial
response has been very positive. The category witnessed significant
competition and your Company responded in a determined manner to defend
its market share. The media spend on the fabric segment was also
augmented to communicate the value proposition to consumers more
effectively. Cost effectiveness programs have been stepped up and have
yielded good results.
Your Company continues to place particular focus on the Fabric Wash
category as it constitutes a significant proportion of the business
volumes, and has been and will be a significant value creator, despite
the short term pressures arising from the intense competition in this
category.
Household Care category performed well during the year recording double
digit growth. After the re-launch in 2009, the dish washing product,
Vim liquid recorded another year of stellar growth. The Vim bar
variant continues to perform well, especially after making price
corrections linked to falling input costs. The Domex line continued
on its journey to provide cleaner and germ free toilets to the Indian
consumer. A first of its kind in India, the Company also successfully
launched the cream variant of Cif for surface cleaning. It has
demonstrated a high degree of relevance and special appeal in the
marketplace as the product experience has successfully demonstrated the
products strong ability to clean tough stains and grime.
Personal Wash category recorded good growth during the year with
significant step-up in growth rates in the latter part of the year.
While the competition from existing players continued to be strong, the
Company deployed its full portfolio effectively with re-launch of most
of the brands on the back of high quality innovations and intensive
consumer activation. Growth was led by the premium segment brands, with
Dove, Pears and Liril registering strong growth. The Lifebuoy
brand was re-invigorated through its re-launch, bolstering its health
credentials with its strong ability to kill germs. The Lux franchise
was also re-launched with improved fragrance and beauty oils for soft
and smooth skin. Furthermore, tactical activations and communications
strategy have helped the brand improve its image within the target
group. Your Company is also maintaining its focus on cherished
regional brands such as Hamam and Rexona and will continue to
promote them aggressively well into the future. While your Company is
the undisputed market leader in this category, it continues to focus on
the challenge of winning back its lost market share in this important
category.
5.2.2 Personal Products
The Personal Products category of the Company comprise of Hair Care,
Skin Care, Oral Care, Deodorants and Colour Cosmetics. The Personal
Products category grew by 16.2% overall with good growth in profits.
Hair Care category continues to be an attractive category given the
potential for increase in per capita consumption. Despite the
significant increase in competitive heat in this category, your Company
improved its leadership position during the year. Bolstered by
additional variants introduced during 2009, the Dove shampoo and
conditioners range continued to deliver high growth momentum with a
sizeable gain in market share. In addition to innovation, the growth
was driven by a combination of high quality and compelling advertising
and field activation during the year. During the year, Clinic Plus
was also successfully re-launched with good results by re-emphasising
the value proposition of being ideal for long hair. Clinic Plus
continued to grow well and strengthened its position as the single
largest shampoo brand. The Sunsilk range was also re-launched in
October 2009 with superior product quality and packaging with the
proposition of a shampoo that is co-created by experts. The product
credentials of Clinic All Clear has been strengthened and was
supported through a high decibel Zero Dandruff campaign in the last
quarter of the year. This is expected to reverse the trend of falling
shares in this brand. The business also continued to grow in the
nascent but emerging hair conditioners segment, which has a high growth
potential as more and more consumers discover the value of using
conditioners regularly.
Skin care category achieved double digit growth during 2009 despite
strong competition and rapid market fragmentation of this category. In
the mass skin lightening category, Fair & Lovely continued to grow by
increasing its relevance and consumption across a range of price
points. Ponds White Beauty witnessed robust growth through the year
due to a highly successful media campaign on acquiring spot free
fairness. Vaseline also grew well on the back of increased traction
in the Vaseline Body Lotion core as well as the introduction of a new
Healthy White variant that offers protection against skin darkening.
Talcum powders saw good growth during the year and your Company
continues to maintain its leadership position.
In Oral Category, your Company took actions to drive growth through
highly attractive value offerings in the up-grader packs to bring
quality oral care within the reach of the mass consumers. This strategy
has started yielding positive results and the category has started to
see increased volume growth in the latter part of the year. The germ
kill credentials of Pepsodent were further enhanced and the freshness
credentials of Close up continues to do well. Your Company has put in
place robust plans to accelerate the growth of its oral care business
in the coming periods through both of its flagship brands Close up
and Pepsodent.
The Lakme range of colour cosmetics achieved stable growth for the
year. New innovations such as the lip duo attractive summer
collections coupled with high quality advertisement and trade and
consumer activations helped in ensuring growth momentum. Lakme Fashion
Week saw another successful run and continues to be a signature
campaign for the brand.
The Deodorant category continued to witness high growth momentum with
its flagship brand of Axe. This category has significant potential of
future growth and your Company is well poised to capitalise on its
existing strong presence in this emerging category.
Kimberly Clark Lever Private Limited (KCLL)
KCLL is a Joint Venture between your Company and Kimberly-Clark
Corporation, USA. The Infant Care business of KCLL continued to grow
solidly with double digit growth registered during the year. New packs
were introduced across the portfolio as the business focused on driving
affordability and building acceptability in this category. The
re-launch of Huggies Care and Huggies Dry Comfort, supported by a
new mix during the year, met with good results and has been gaining
momentum. In Feminine Care, the business rationalised a part of its
portfolio and focused on building an innovation pipeline aligned to its
long term strategic direction for this category. During the year, your
Company received a dividend of Rs. 2.54 Crores from the Joint Venture.
5.3 Foods
The Foods portfolio of your Company comprises of Beverages (Tea and
Coffee), Processed Foods (Kissan, Knorr and Annapurna range of
products), Ice Creams and Bakery products (Modern Foods).
The business has delivered strong double digit growth. This growth has
been broad based across the portfolio and has been driven through a
deep understanding of consumer and customer needs translated into
relevant innovations. The growth in the Foods business has been
achieved in the face of some key challenges :
- High competitive intensity from national as well as local players in
many categories. Your Company has responded through increased brand
investments and value enhancing innovations.
Significant food inflation across the spectrum leading to market
slowdown and downtrading in some categories as the year progressed.
Your Company has responded to this challenge through a combination of
consumer centric value packs and judicious price increases combined
with aggressive cost saving programmes.
Product freshness continues to receive the highest attention with
significant investments made over the years. This is now showing
results and going forward the Company intends to sustain these
investments.
Beverages such as Tea and Coffee are well entrenched habits amongst
Indian consumers. Your Company is focusing on micro marketing
initiatives to increase penetration and consumption and drive growth
across the spectrum.
In addition, your Company is driving upgradation through the tea bags
packaging concept. Further, your Company has expanded its portfolio in
packet tea by launching a new brand to participate in the mass segment
with differentiated offering.
Processed Foods, Ice Creams and Out of Home consumption offer huge
potential for growth with LSM 5+ leading consumption in top 35 cities.
This segment is being addressed through developing products which
combine taste, nutrition and provide cooking convenience.
Annapurna and Modern range are uniquely positioned to capture the
growing consumption in rural areas and capture the opportunity at the
bottom of the pyramid.
5.3.1 Processed Foods
Kissan continues to remain one of the most trusted brands amongst
Indian consumers and continues to register solid and sustained growth.
Consumer friendly innovations such as Jams Squeezee tubes and Ketchup
plastic bottles have been well received in the market and have enhanced
the overall product experience.
Your Company is a clear value leader in the Soups segment. Knorr was
re-launched during the year with 100% real vegetables and without any
MSG. The launch was supported through comprehensive communication and
activation in both Modern and General Trade. This has lead to overall
market growth and category expansion. The Ready to Cook range of
Knorr launched last year is seeing steady volumes with strong repeat
purchases being experienced.
In February 2010, your Company has entered the high growth instant
noodles category through its Soupy Noodles portfolio which provides
wholesome nutrition to childrens snacking moments. The product was
launched in the Modern Trade channel across the country and in all
channels in South India, with excellent consumer response.
The staples business under the brand Annapurna (iodised salt and
wheat flour) posted good growth during the year with significant
improvement in profitability.
Your Company continued its focus on foods sales to institutions such as
restaurants and hotel chains. Although at its nascent stage, yet the
business is making good progress by leveraging Supply Chain
efficiencies and product development capabilities of the Foods
Division.
5.3.2 Beverages
For three consecutive years, inflation in the Te a commodity continues
unabated, driven by strong global demand and local crop shortages. This
has resulted in down trading and the overall growth in the discounted
segment of the market, becoming the major portion of the portfolio.
Notwithstanding such a competitive context, the business has registered
strong turnover growth whilst maintaining satisfactory volumes.
Increasing costs continued to put pressure on margins but these were
mitigated through pricing and Supply Chain cost savings. Market shares
during the year came under pressure due to lack of a strong presence at
the discount end of the market. During the year, your Company has
launched Brooke Bond Sehatmand at the mass end of the market offering
combined benefits of health with immunity. This Tea delivers 50% of RDA
of Vitamin B through 3 cups a day to lower income families that are
otherwise unable to afford such nutrition. The brand is poised for
national roll out in 2010.
3 Roses continued to perform exceptionally well and has shown
significant growth, maintaining its competitive standing in South
India. Taaza has gained market share, and the brand has strengthened
its equity with consumers exceptionally well. Taaza was the Global
Brand of the Year Award for Beverages within Unilever, which is
another testimony to its success. Lipton Yellow Label was
re-launched with the Stay Sharp proposition, with Theanine as the
ingredient. Taj delivered commendable results at the premium end and
registered good growth in the tea bags segments. Tea bags consumption
was encouraged through media campaigns and a large sampling initiative
carried out with Jet Airways.
During the year under review, Coffee markets have decelerated
significantly in comparison to earlier years due to adverse climatic
and weather conditions. Through key innovations, your Company was able
to register strong volume growth in the second half of the year. The
re-launch of Bru was amplified with the Aroma proposition (through
aroma lock) and improved sensorials. This was backed by strong media
campaigns and trade activation programs. Your Company continues to
focus on driving growth in the instant coffee and premiumisation of the
portfolio. In conventional coffee, your Company re-launched the product
with benefits of second decoction, which received excellent response in
markets such as Andhra Pradesh.
The Out of Home business was impacted by the economic slowdown
experienced in the early part of the year but has since picked up pace
as the year progressed. This channel continues to hold the promise of
high growth and appropriate investments are being made to leverage this
opportunity. Lipton and Bru Café models were tested during the year
in key locations and results thus far have been encouraging.
5.3.3 Ice Creams
The year under review has been an excellent year, with strong growth in
both the impulse and take home segments. Growth has been driven by the
three key platforms Cornetto, Selection and Paddle Pop.
Significant inflation in input prices put tremendous pressure on the
margins of the business. Your Company has been able to maintain the
margins by driving operational efficiencies, improved mix and
leveraging economies of scale.
Cornetto Black Forest Flirt launch has been a resounding success,
with the SKU becoming the largest selling Cornetto in the first year
itself. In Paddle Pop, your Company launched four exciting flavours,
driving growth in the Kids range. In the Selection range, three new
fruit flavours were launched in summer 2009 (Strawberry Currant, Choco
Coconut and Litchi Bites), building on the theme of celebrating weekend
family moments. The fact that a scoop of this Ice Cream is less than 99
cal was successfully communicated in this launch. The Selection range
was received exceedingly well in the market. Building Ice Cream
consumption occasions is a key driver for growth. The Diwali activation
on Viennetta was implemented with great success. To further drive
in-home consumption, the business also rolled out value offerings in
the west region, producing results significantly ahead of previous
action benchmarks.
Significant investments are being made by your Company in front end
assets and for leveraging IT for enhanced scalability and asset
productivity. Going forward these are expected to provide the Company a
competitive advantage.
5.3.4 Bakery (Modern Foods)
Bakery (bread and cakes) sustained its growth momentum and continued to
deliver strong underlying profits improved from enhanced scale and
better operational efficiencies. New unified packaging was introduced
during the year which was well received in the markets.
5.4 Exports Business
Following the global recession, international markets turned adverse
during the year with reduced consumer demand. Despite this, your
Company managed to achieve a turnover of Rs. 1,000 crores with good
profits and strong cash delivery. The non-value adding commodity
exports were rationalised resulting in improved Gross Margins. Cash
generation was significantly enhanced by placing specific focus on the
reduction of Working Capital through improved inventory management and
debtors reduction, while simultaneously enhancing customer service.
In the Home & Personal Care exports segment, despite the difficult
environment, the turnover in existing product-customer channels was
maintained to previous year levels. The Pears franchise grew handsomely
by double digits, notably in the United Kingdom and the Emirates.
The ongoing Foods & Beverages exports business delivered a growth of 6%
in an environment with challenging market conditions. The packet tea
business grew strongly by 48% in the US market; as did the bulk tea
business by 6%. Instant tea sales to Europe registered a strong growth
of 32% while Instant coffee sales, primarily to CIS countries, grew by
31% in the latter half of the year after overcoming initial concerns
relating to payment security. The tea bags business presents promising
prospects in the coming years.
The marine exports business remained profitable despite a tough
external environment emanating out of global recessionary trends and
the strengthening of the Indian Rupee. Due to high commodity prices and
a poor fish catch, surimi sales were lower by 39%. This was made up by
higher sales growth in the value added crabstick segment (+19%), which
benefited from a regular flow of orders from a widened customer base.
This resulted in attaining highest production of crabstick in our
Chorwad factory since inception. Rice exports were impacted by lower
customer demand. Significantly, both marine and rice businesses added
value to the bottomline despite the challenging environment.
Leather (Ponds Exports Limited)
The Leather business returned to operating profitability during the
year after a focused restructuring exercise, despite severe
recessionary trends in the EU. China continues to attract large volumes
from the EU and the USA due to its well developed components market and
significant cost advantages compared to Indias advantages of good
quality leather and ability to service small/complex orders. In order
to drive synergy, both upper and shoes divisions of the business were
successfully combined to focus on cost competitiveness and provide
better customer services.
5.5 Water
Pureit is a unique in-home drinking water purification solution that
offers protection to children and families from waterborne diseases.
Pureit runs with a unique Germ Kill Kit that removes all harmful
viruses, bacteria and parasites to give drinking water that is as safe
as boiled water. Leading national and international medical,
scientific and public health institutions have tested Pureits
performance. Most notably, Pureit meets the Germ Kill criteria of the
Environmental Protection
Agency (EPA), the key drinking water regulatory agency in the USA. It
provides this protection without the need for boiling, and without
electricity or continuous tap water supply. It has a unique End of
battery life indicator and Auto shut-off, which ensures that
consumers do not get unsafe water.
In the course of the year, Pureit leveraged its safety credentials and
launched the One Crore Safety Challenge campaign which educated
consumers on the safety features that they must consider before
purchasing a water purifier. The brand developed new distribution
capabilities and established a national level presence in the consumer
durable outlets. A new model, Pureit Auto Fill that connects directly
with the tap and offers dual filling option (inline and manual) was
launched towards in the second half of the year.
In line with Pureits mission of protecting lives from waterborne
diseases, your Company believes that drinking water with highest safety
standard is the fundamental right of every individual. Pureit was
launched nationally in 2008 at an extremely affordable price, so that
access to safe water does not remain confined to the affluent sections
of society. In the past few years, Pureit has helped in creating mass
awareness about the need for safe drinking water. In January 2010, your
Company achieved another milestone in its mission of making safe
drinking water available to every Indian. Pureit Compact was launched
at a price point of Rs. 1,000. This will enable your Company to protect
lives in the segment of society with lower purchasing power, where
incidence of waterborne disease is the highest.
Pureit has already protected more than three million homes covering
1500 towns and cities across India in just two years of its national
launch. The business received a number of awards during the period,
reflecting the continued high regard held by the scientific community
and by the public at large. Key amongst these is the prestigious
British Government award for Consumer Product Innovation 2009 - 2010.
The business is making good progress in line with plan.
5.6 Hindustan Unilever Network
The strategy of the network was redefined in line with its vision of
empowering modern Indian woman by serving her with superior beauty and
health care products through customised and professional services.
In the last one year, your Company has successfully transformed the
Network into a Premium Personal- Care and Health Care channel. However,
the key challenge for the business remains scale which needs to be
enhanced significantly in order to improve the profitability of the
business. Your Company is evaluating appropriate plans in this regard.
5.7 Beauty & Wellness Division
The growing disposable income and changing lifestyles in urban India
has led to a greater awareness about personal grooming, health and
wellness. These trends augur well for the Beauty and Wellness services
sector, presenting a large and exciting opportunity. The Company
currently operates in the Beauty and Wellness services segment largely
through a network of franchised Lakme Beauty Salons. During the
year, your Companys own Lakme Beauty Salons were transferred to
Lakme Lever Private Limited (LLPL), a subsidiary of your Company. LLPL
commenced operations during the course of the year with the objective
of achieving excellence in execution by a specialised and dedicated
team, passionate about beauty services and with a view to create and
nurture a service mindset. The Company launched the Lakme Studio,
a premium salon format commencing with Delhi which has shown early
signs of success. Similarly, Lakme Studio have also been recently
rolled out in Mumbai, Chennai, Hyderabad and Bangalore.
6. CUSTOMER MANAGEMENT
The year under review has been a landmark year in terms of customer
management across channels with the roll out of new-age ÃGo to MarketÃ
model in 32 cities across the country. This model was successfully
piloted in the Mumbai metro area featuring an efficient back end; a
world class front-end; delivering innovations and activation schemes at
a much faster pace to the market. Coupled with the Zero Inventory Plan,
the ÃGo to Marketà model has yielded significant dividends in terms of
customer service and satisfaction. Customers today handle your
Companys consolidated general trade business, with the ability to
leverage scale with high efficiencies.
Your Company has also made great strides in expanding its rural
distribution network, with significant investment made in expanding the
infrastructure. Across the country, rural markets were brought under
direct coverage, enabling better servicing and control. The ability to
reach out into the corners of the rural market gives your Company a
distinct competitive advantage. This has allowed us to offer the right
assortment of packs to rural consumers, keeping up with rapidly
changing needs and wants. The number of distributors in rural markets
has been scaled up and rural salesmen are now being equipped with Hand
Held Terminals to facilitate the order taking process and billing.
The Company has also deployed next generation technology in urban
markets, with analytics based recommendations making selling campaigns
more intelligent, and through Hand Held Terminal based applications,
making selling more scientific and assortments more relevant to an
outlet. It is henceforth possible to customise the range and quantity
sold to every outlet.
Apart from investing in infrastructure and setting up IT enabled
processes, your Company has embarked upon an enormous coverage
expansion project, in both the rural and urban businesses. This
expansion has been a scientifically driven process, facilitated by
know-how such as digital maps to identify potential markets to be
brought under coverage. Commencing with this initiative from the end of
2009, the Company expects to triple its rural coverage and improve
urban coverage by 15%.
6.1 Project Shakti
Shakti is an initiative which focuses on reaching out to consumers in
very small villages that typically have a population of less than 5,000
individuals. It is a great example of Doing Well by Doing Good as it
serves two purposes simultaneously; it provides livelihood
opportunities to women in rural areas and enhances the quality and
depth of your Companys distribution.
The objectives of Shakti as a program are:
- leading market development efforts through consumer education
programmes
- establishing a suitable livelihood opportunity for women irrespective
of their background
- creating a self sustaining business model
- accessing markets beyond the reach of traditional distribution models
The Shakti programme is essentially built on two pillars: the Shakti
Entrepreneurship program and the Shakti Vani program. The Shakti
Entrepreneur program is a classic case of a win-win model involving a
variety of stakeholders - the Company, women seeking livelihoods, women
from Self Help Groups, Micro Finance Institutions and NGOs. The
win-win model comes alive when an investment results in a sustainable
business opportunity with little requirement for advanced business
skills. The strength of the model lies in its simplicity wherein any
woman who is interested in earning a livelihood can participate in the
programme. Linkages such as microfinance facilitates working capital
to start such businesses. Your Company makes significant investments in
capability building through on-the-job training and classroom training
programmes through a large and dedicated field force exclusively for
Shakti Entrepreneurs. This helps build confidence and develop the
business acumen necessary to run a micro- enterprise. Rural consumers
also benefit by having access to some of Indias most trusted brands at
their doorstep at affordable prices.
The Pureit pilot under the Shakti programme, which was launched in
Andhra Pradesh, has been further scaled up to Orissa and Maharashtra.
The objective of this initiative was to enhance the income of the
Shakti Ammas enabling them to offer a high quality water purifying
product to rural consumers at affordable prices. The Pureit addition is
just the first step in increasing the bouquet of products which the
Shakti Ammas can offer to her customers.
The Shakti Vani program focuses on building awareness about health
and hygiene in the rural community. Vanis are trained communicators
who target congregations such as village schools and mohallas and
engage with key opinion leaders of villages like the sarpanch and the
school teachers.
During the year, your Company piloted a new version of Vani where
technology has been used to communicate with rural consumers. Animated
films explaining the story of health and hygiene using the platform of
our brands have been made accessible through hand held DVD players
provided to the Vanis. Your Company is developing a model which can be
scaled across larger geographies to impact a wider audience.
By the end of the year 2009, the Shakti network comprised 45,000 Shakti
Ammas covering 1,00,000 plus villages across 15 states in the country
and reaching over 3 million households every month.
7. SUPPLY CHAIN
Your Company has made significant progress in achieving the vision of
delivering outstanding customer service while supporting sustainable
growth for the Company. Improving service levels to ensure
availability of products at all points in the Supply Chain was a key
focus area during the year. Supply Chain service levels as measured by
CCFOT (Customer Case Fill On Time) were the highest achieved in the
recent past. IT solutions based on SAP application systems led to
significant improvements in planning and logistics efficiencies.
The factories made significant progress in increasing plant and
operational efficiencies and helped deliver innovations on time while
working on improving product quality. The Companys initiative
Levercare, focusing on connecting with customers and consumers, gave
valuable inputs on product performance which helped to understand
consumer behaviour and to improve the quality of certain products in
design and manufacturing.
Continued focus was maintained through cross functional teams to drive
cost effectiveness throughout the Supply Chain by identifying
opportunities for eliminating waste. This helped the business achieve
significant Supply Chain savings. Energy conservation activities
through all our manufacturing sites have helped reduce specific energy
consumption. Use of sustainable alternative bio-fuels has become the
norm at many of our major manufacturing sites which has helped reduce
fuel costs and carbon emissions. We also executed appropriate capital
expenditure investments in creating fresh capacity in all categories.
These investments have facilitated growth and de-bottlenecked
capacities of existing assets. The principles of Total Productive
Maintenance were applied and progress tracked across all the
manufacturing sites. This has resulted in an increase in asset
productivity levels.
Our buying function also delivered improved efficiencies and reduction
in procurement costs, fully leveraging benefits of scale and synergy
through Unilevers global buying network.
8. RESEARCH AND DEVELOPMENT
This is the 51st year of Research and Development (R&D) of your
Company. Your Company has continued to build on this heritage by
further strengthening the R&D Units in Bangalore and Mumbai with
stronger integration with Unilever Global R&D. The R&D programmes are
geared towards delivering bigger, better and faster innovations with a
robust pipeline of radically new technologies with innovative consumer
propositions. R&D in India continues to focus on Water Treatment,
Health and Hygiene, Laundry, Skin Care, Tea, Ice Cream and Ayurveda.
Your Company continues to benefit from the strong linkages with the
Global R&D organization of Unilever. This has become even more
critical in the context of entry of many global players in the
attractive Indian FMCG market. These players are keen to get a slice of
the large and fast growing FMCG market in India. With the strong
support from Unilever R&D as well as the brand development
capabilities, your Company is well placed to meet the challenges
arising from the increased competition intensity.
Your Company had entered into a Technical Collaboration Agreement (TCA)
in August 1999 with Unilever PLC, which provided a non-exclusive
license to manufacture specified products in accordance with and using
the Technical Documentation, Information and Know-how in consideration
of payment of royalty at the rate of 1% (net of tax) both on domestic
and export sales of the specified products. In December 2009, the Board
of Directors of the Company have approved amendments to the said TCA to
include additional product categories where technical inputs are
provided by Unilever as well as products of specified categories
manufactured by third party manufacturers where technical inputs
developed by Unilever are made available to the third party
manufacturer. In addition, the Board have approved a trademark license
agreement with Unilever which provides for payment of trademark royalty
at the rate of 1% of net sales on specific brands where Unilever owns
the trade mark and your Company is the licensed user. Both these
amendments are well within the Government of India Guidelines for
payment of royalty.
On the back of strong R&D initiatives, a number of new products were
launched successfully in the market. Pureit, a breakthrough
innovation of your Companys R&D, was launched with additional
technical features such as Auto Shut-Off and Auto Fill that enhance
its safety and convenience. A winter variant of a skin lightening
formulation was developed and launched as Fair & Lovely Winter
Fairness Cream. Also, during the year Lifebuoy was re-launched with
clinically proven hygiene benefits.
Foods R&D continue to focus on delivering healthy options with superior
taste and flavours. In 2009, Knorr soups were re-launched with new
formulations without MSG and with 100% real vegetables. The Ice Cream
business grew on the back of several successful innovations such as
Cornetto variants - Strawberry Tease Cake and Black Forest. During the
year, Beverages introduced a premium Green Tea, Lipton Clear Green and
launched a new blend of Lipton Yellow Label with higher levels of
Theanine. Your Company also re-launched a superior Bru Coffee with
improved aroma.
The continuous stream of innovative and technically advanced products
launched in the market was a result of significant R&D investments and
the scientific talent that your Company can attract and retain.
India continues to occupy a premier position in Unilevers R&D
initiatives with a significant share of Global Programmes backed by
strong in-house scientific expertise. Your Company has been working
aggressively towards building these expertise bases further to address
emerging needs of our consumers and to retain our competitive edge in
the market place.
The details of expenditure on Scientific Research and Development at
the Companys in-house R&D facilities eligible for a weighted deduction
under Section 35(2AB) of the Income Tax Act, 1961 for the year ended
31st March, 2010 are as under :
- Capital Expenditure : Rs. 1.05 crores
- Revenue Expenditure : Rs. 27.55 crores
Report of the Auditors in this regard is annexed at page no. 104 of the
Annual Report.
9. ENVIRONMENT, SAFETY AND HEALTH AND ENERGY CONSERVATION
Your Company continues another significant year with focus on the
vision of an Injury Free and Zero Environment Incidents
organisation. During the year, your Company followed a three pronged
strategy to achieve the vision. While continuing the safety journey
through behavioral safety initiative as per the DuPont model, we
renewed our focus on safety systems and processes, and an extensive
road safety programme covering all employees was carried out.
The behavioral safety programme has now been in place for more than
five years and continues to deliver better safety statistics and the
leading indicators are becoming more rooted than ever before. Several
measures have been implemented to revitalise safety systems and
processes especially across the extended Supply Chain operations - in
co-packing locations and in distribution centres.
Road risk assessments were conducted in key units and Road safety was
taken as key thrust area during the year. Employees across the Company
were extensively trained and educated on defensive driving and road
safety measures. These efforts have led to a substantial improvement in
safety performance across the Company.
Our environment agenda is marked by taking a progressive stance on
several environmental issues that include launching voluntary
initiatives to reduce GHG emissions, waste optimisation, and water
conservation. During the year, 5 sites recorded water positive status
and 28 sites became zero discharge units by re-using the treated ETP
water within the factory premises. This was achieved through a
combination of water conservation through optimisation of usage,
plugging the wastage source, rain water harvesting and water recycling.
In reviewing the environmental strategy in 2009, it was determined to
retain focus on the fundamental priorities of managing environmental
impacts of the operations, with a particular focus on key issues;
driving continuous improvement; and complying with applicable laws and
regulations.
On the energy conservation front your Company achieved substantial
savings by carrying out energy audits across most units and
implementing key projects to save energy. The use of bio-mass fuel has
now been adopted by four units and many additional units are now
exploring this option as an alternate fuel.
10. HUMAN RESOURCES
The Human Resources (HR) agenda for the year focused on strengthening
four key areas - completing the final phase of the HR Transformation
(HRT) programme that had been initiated in 2007; building
organisational and individual capabilities; significantly enhancing
people productivity to drive sustainable business growth and driving
harmonious employee relations through progressive people practices at
the shop floors.
HRT has been a business change programme that has impacted how we work
across the organisation. At the core of this programme was world class
IT enabled processes to efficiently manage Human Resources
transactions. The programme also aligned HR systems and processes in a
similar way across Unilever. The technology applications have been made
available on a self service portal which has increased the productivity
of every line manager and HR manager by freeing up their time from
managing routine and transactional workload. The year marked the
completion of this exercise as the HR transactions were successfully
transferred to Accenture with high standards of delivery and
performance.
The belief that great people create great organisations has been at
the core of the Companys approach to its people. We continued to make
significant investments for training in the areas of marketing
excellence, customer service and building capabilities for organised
retail trade. Many training programmes were delivered through
classrooms, new capability building courses and external learning
sessions. Our e-learning platform offers a bouquet of 3000+ courses via
internet. Nearly 20,000 course registrations took place in 2009
providing access to learning anywhere, anytime.
Our ability to attract the best talent in the market has been a key
factor of our success, thus the endeavour to sustain and fortify our
employer brand. As per AC Neilsen study, the HUL employer brand made
significant progress in 2009 and we continue to retain our top spot as
the Dream Employer on all top B-School campuses.
In our factories, the TPMedge programme continued in full focus during
the year and delivered significant improvement in factory operations.
Education and training are important components of our approach to
people and in consonance a License to Operate programme was created for
Supply Chain officers which resulted in every officer undergoing at
least three e-learning courses during 2009.
Our focus on proactive and employee focused shop floor practices, quick
grievance resolution mechanisms and alignment to overall business goals
ensured that there was practically no loss of man days due to
industrial issues in 2009. Seven productivity linked long term
settlements were signed through the process of collective bargaining
involving over 2,200 employees. All these settlements were signed with
zero disruption to business activity reflecting the maturity of workmen
collectively. The process of rehabilitation was undertaken with utmost
concern for our people. One unit went through a process of
consolidation and there were some separations in the field force and
Head Office. The process of separations was handled with the utmost
care and sensitivity to our peoples needs.
An important development during the year was the resolution of the
pending Sewree factory issue. Your Company signed an amicable
settlement, with the Union representing erstwhile workers of the Sewree
factory, with regard to all the pending issues and cases, including
closure of the factory. The settlement, which benefited about 800
workers, was achieved by rebuilding high level of trust between the
ex-employees, union and management, and was signed in the presence of
the Labour Secretary, Government of Maharashtra. As per the settlement,
the erstwhile workers will receive benefits of the VRS offered at the
time of closure of the factory.
11. INFORMATION TECHNOLOGY
Your Company continues to invest in Information Technology and leverage
it as a source of competitive advantage.
As part of the backbone IT capability for Sales and Customer
Development, we successfully established a common transaction system
that is used by all Redistribution Stockists and that is fully
integrated with Companys systems. Distributor salesmen use a Hand Held
Terminals as an aid for taking retail orders. In 2009, we have enhanced
this capability for analytics and intelligent sales calls. As part of
the thrust of further improving our direct coverage in rural areas, we
are leveraging geospatial aids extensively. We have also established an
IT enabled consumer interaction centre for addressing complaints and
suggestions.
An enterprise wide SAP platform was a significant capability created
over the last few years. This forms the foundation for all business
processes in the Company and for collaboration with our suppliers and
customers. It provides a comprehensive data warehouse with analytics
capability that helps in better and speedier decisions. Supply Chain
optimisation, enabled by this IT capability, is a source of significant
value.
We continue to invest in IT infrastructure to support business
applications. We have leveraged the expanded telecom footprint in the
country to provide high bandwidth terrestrial links to all operating
units. Video conferencing is extensively used to collaborate across
locations while reducing travel costs.
As the IT systems become more sophisticated and mission critical, there
is continuous focus on IT security and on reliable disaster recovery
management processes. These are periodically reviewed and tested to
provide reassurance on their efficacy and adequacy.
12. FINANCE AND ACCOUNTS
Focus on cash generation continued and we delivered a strong operating
cash flow during the year; this was driven by the business performance,
efficiencies and cost savings across Supply Chain and greater focus on
working capital management. Your Company managed the investments
prudently by deployment of cash surplus in a balanced portfolio of safe
and liquid instruments. Capital Expenditure during the year was at Rs.
572 crores (during the 15 months period ended 31st March, 2009 - Rs.
609 crores) and was in the areas of capacity expansion, consolidation
of operations, information technology, energy and other cost savings.
The Company has not accepted any fixed deposits during the year. There
was no outstanding towards unclaimed deposit payable to depositors as
on 31st March, 2010.
In terms of the provisions of Investor Education and Protection Fund
(awareness and protection of investors) Rules, 2001, Rs. 2.67 crores of
unpaid/unclaimed dividends, interest on debentures and deposits were
transferred during the year to the Investor Education and Protection
Fund.
Return on Net Worth, Return on Capital Employed and Earnings Per Share
(EPS) for the last four years and for the year ended 31st March, 2010
are given below:
For the year 2005 2006 2007 Period ended 2009 - 10
31st March, 2009
Return on Net
Worth (%) 61.1 68.1 80.1 103.6* 88.2
Return on Capital
Employed (%) 68.7 67.0 78.0 107.5* 103.7
Basic EPS (after
exceptional items)
(Rs.) 6.40 8.41 8.73 11.46** 10.10
*Annualised numbers for proportionate period
** for fifteen month period
Key figures for 12 months comparison
As indicated earlier, the full year audited results for the period
ended 31st March, 2009 were for a 15 months period. Hence, these are
not comparable with the full year audited results for the year ended
31st March, 2010. However, on a memorandum basis, for comparative
purposes, the audited results for year ended 31st March, 2010 along
with the un-audited results for the 12 months period ended 31st March,
2009 are given below:
- Net Sales for 2009-10 at Rs.17,523.80 crores (2008-09: Rs.16,476.75
crores) grew by 6.4%.
- Profit from Operations before Interest and Exceptional items for
2009-10 at Rs.2,565.94 crores (2008-09: Rs. 2,396.06 crores) grew by
7.1%.
- Profit after Tax from ordinary activities before exceptional items
for 2009-10 at Rs.2,058.71 crores (2008-09:Rs. 2,065.20 crores)
declined marginally by 0.3%.
- Net Profit for 2009-10 at Rs. 2,202.03 crores (2008- 09: Rs. 2,115.50
crores) grew by 4.1%.
Segment-wise results
Your Company has identified seven business segments in line with the
Accounting Standard on Segment Reporting (AS-17). These are: (i) Soaps
and Detergents, (ii) Personal Products, (iii) Beverages, (iv) Foods,
including culinary and branded staples, (v) Ice Creams, (vi) Exports,
and (vii) Others, including Water. The audited financial results of
these segments are given as part of financial statements.
13. MERGERS, ACQUISITIONS, JOINT VENTURES AND DISPOSALS
13.1 Divestment of 49% shareholding in Capgemini Business Services
(India) Limited to Cap Gemini SA
In October 2006, your Company divested its 51% controlling stake in
Unilever India Shared Services Limited, now known as Capgemini Business
Services (India) Limited (CGSL) to Cap Gemini SA. Your Company believed
that the business would benefit from the systems and processes brought
in by a leading player in the BPO space. Cap Gemini SA had a call
option for the balance 49% stake in CGSL.
Consequent to the exercise of the call option by Cap Gemini SA in March
2010, the balance stake of 49% in the business held by the Company has
been sold to Cap Gemini SA for a consideration of Rs. 91.1 crores.
13.2 Merger of Bon Limited with the Company
Bon Limited a wholly owned subsidiary of your Company was not engaged
in any significant business activity since 2003. During the year 2005,
your Companys undertaking at Sewree (Mumbai) was transferred to Bon
Limited pursuant to Section 293(1)(a) of the Companies Act, 1956 to
facilitate transparent understanding and review of viability of the
unit costs and productivity on a standalone basis.
Despite all efforts by your Company, the undertaking could not be
revived and was eventually closed after following the due process of
law in July 2006. All legal issues with relation to the undertaking
have been settled and Bon Limited was not having any operations.
Therefore, for the purpose of administrative simplification, the Board
of Directors of your Company, subject to the necessary approvals,
decided in January 2010 to merge Bon Limited with your Company with
effect from 1st April, 2009.
The Honble High Court of Bombay has, vide its order dated 16th April,
2010, approved the scheme of amalgamation of Bon Limited with the
Company. The appointed date for the above mentioned scheme was 1st
April, 2009 and the scheme has been made effective from 28th April,
2010 i.e. from the date of filing certified copy of order of Honble
High Court with the Registrar of Companies, Mumbai.
14. EMPLOYEE STOCK OPTION PLAN (ESOP)
Details of the shares issued under ESOP, as also the disclosures in
compliance with Clause 12 of the Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 are set out in the Annexure to this Report.
No employee has been issued share options, during the year equal to or
exceeding 1% of the issued capital (excluding outstanding warrants and
conversions) of the Company at the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting
held on 29th May, 2006, the Company adopted the 2006 HLL Performance
Share Scheme. The Scheme has been registered with the Income Tax
authorities in compliance with the relevant provisions of SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999. As per the terms of the Performance Share Plan,
employees are eligible for the award of conditional rights to receive
equity shares of the Company at the face value of Re. 1/- per share.
These awards will vest only on the achievement of certain performance
criteria measured over a period of 3 years. 192 employees, including
Wholetime Directors, were awarded conditional rights to receive a total
of 6,16,121 equity shares at the face value of Re. 1/- each. The above
mentioned comprises of conditional grants made to eligible managers for
calender years 2009 and 2010 covering performance periods 2009-2012 and
2010-2013 respectively.
15. CORPORATE GOVERNANCE
Your Company has been practising the principles of good Corporate
Governance over the years and lays strong emphasis on transparency,
accountability and integrity. A separate section on Corporate
Governance is given on page no. 44 of the Annual Report and a
Certificate from the Auditors of the Company regarding compliance of
conditions of Corporate Governance as stipulated under Clause 49 of the
Listing Agreement with the Stock Exchange(s) and a certificate of the
CEO & CFO in terms of sub-clause (v) of Clause 49 of Listing Agreement,
inter alia, confirming the correctness of the financial statements,
adequacy of the internal control measures and reporting of matters to
the Audit Committee is annexed to the Corporate Governance Report.
The Ministry of Corporate Affairs, Government of India, during the year
introduced the Corporate Governance Voluntary Guidelines, 2009. These
guidelines have been issued with the view to provide Corporate India a
framework to govern themselves voluntarily as per the highest standards
of ethical and responsible conduct of business. The recommendation of
the Voluntary Guidelines pertaining to separation of offices of the
Chairman and the CEO, constitution of Audit Committee and Remuneration
Committee, Risk Management framework, are already practised by your
Company. Your Company, while in substantial compliance of these
guidelines, had initiated appropriate action for implementation of
these guidelines.
15.1 Risk and Internal Adequacy
Your Company manages cash and cash flow processes assiduously involving
all parts of the business. There was net cash surplus of Rs. 1,892.21
crores as on 31st March, 2010. The Companys debt equity ratio is very
low which provides ample scope to gear up the Balance Sheet should that
need arise. Foreign exchange transactions are always fully covered with
strict limits placed on the amount of exposure, if any, at any point in
time. There are no materially significant uncovered exchange rate risks
in the context of Companys imports and exports. Company accounts for
mark to market gains or losses at every quarter end in line with the
requirements of AS-11. These are being highlighted separately every
quarter.
Companys internal control systems are well commensurate with the
nature of its business and the size and complexity of its operations.
These are routinely tested and certified by Statutory as well as
Internal Auditors and cover all the offices, factories and key areas of
business. Significant audit observations and follow up actions thereon
are reported to the Audit Committee.
Audit Committee reviews the adequacy and effectiveness of the Companys
internal control environment and monitors the implementation of audit
recommendations including those relating to strengthening of the
Companys risk management policies and systems.
Your Company has an elaborate process for Risk Management. This rests
on the three pillars of Business Risk Assessment, Operational Controls
Assessment and Policy Compliance at all levels through a Positive
Assurance Process. Major risks identified by the businesses and
functions are systematically addressed through mitigating actions on a
continuing basis. These are discussed with both Management Committee
and Audit Committee. Some of the risks relate to competitive intensity,
pressure on margins and slower market growth and/ or downtrading.
15.2 Outlook
It is believed that Indias GDP will continue to witness strong growth
in the future. However, managing growth and inflation will be a key
challenge for India in the near term. The agricultural growth is
expected to pick up in the last quarter of the fiscal year 2009-10 on
account of a good Rabi crop. As global trade continues its recovery,
Indian industry is expected to continue its strong growth, since over
1/3rd of Indias manufacturing output is exported. Export growth has
been positive since November 2009, which is an encouraging sign for the
manufacturing sector.
Indias improving growth prospects, augurs well for the economy as a
whole and for the FMCG sector in particular. The FMCG categories in
which your Company operates have significant growth potential given
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