Marico Ltd

BSE: 531642 | NSE: MARICO | ISIN: INE196A01026 
Market Cap: [Rs.Cr.] 13,507 | Face Value: [Rs.] 1
Industry: Personal Care - Indian

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Management Discussions


This discussion covers the financial results and other developments during April '12 -March '13 in respect of Marico Consolidated comprising its domestic Consumer ProductsBusiness (CPB) under Marico Limited (Marico) in India, its International Business Group(IBG) comprising consumer products exports from Marico and the operations of its overseassubsidiaries and the Kaya skin care solutions business in India and overseas. TheConsolidated entity has been referred to as 'Marico' or 'Group' or 'Your Group' in thisdiscussion.

Some statements in this discussion describing projections, estimates, expectations oroutlook may be forward looking. Actual results may however differ materially from thosestated on the account of various factors such as changes in government regulations, taxregimes, economic developments within India and the countries within which the Groupconducts its business, exchange rate and interest rate movements, impact of competingproducts and their pricing, product demand and supply constraints.


The economic environment continued to be challenging during the current fiscal. Thefinancial year 2013 was characterized by continuous moderation in volume growths, risingadvertisement spends to retain market share and the competitive landscape intensifying forthe Fast Moving Consumer Goods (FMCG) sector. The year witnessed moderation in the growthrates with real GDP growth declining from 6.2% in FY12 to 5% in FY13 [Source: Centre forMonitoring Indian Economy], Higher spillover impact of recession in Europe, elevatedcommodity prices, declining productivity and decline in potential growth have sustainedhigh inflation and rising current account deficit. A combination of all these factors hasresulted in broad-based deceleration in investments, consumption and export demand.

However, all categories were not impacted equally in the FMCG sector. Spending on eachconsumption category changes disproportionately with changes in overall income. Theslowdown in automobile and white goods sales points to anecdotal evidence of slowdown inconsumer discretionary purchases. The slowdown is much stronger in urban India, but ruralIndia seems to be doing much better.

Inflation in India has been running at high single/low double digits for several yearsnow driven by increases in food and energy prices. Price increases disproportionately hitthe lower income segments of society, who spend an overwhelming proportion of income onnon-discretionary items such as food. This will delay the expected upward mobility in theIndian consumer pyramid.

Despite the ongoing challenges, India continues to be amongst the fastest growing FMCGmarkets in the world with 17% CAGR in the last 5 years, valued at USD 35 billion in 2012.Yet, in terms of per capita spend, India remains much lower as compared to otherdeveloping economies. Eg: India's per capita spend on Home and Personal Care (HPC)category is at USD 8 vs. USD 19 in China and USD 187 in Brazil [Source: World Bank], By2020, India is projected to be the world's third largest middle class consumer marketbehind China and USA. By 2030, India is likely to surpass both countries with an aggregateconsumer spend of nearly USD 13 trillion [Source: OECD Development Centre]. Increase inincome levels of the Indian middle classes is driving greater aspirations, the need forworld class infrastructure, high quality healthcare, leading brands of consumer products,and sophisticated public and private services.

As household incomes continue to increase further, consumers will have the ability andwillingness to shift purchases towards discretionary goods. India has only recentlyreached about USD 1500 GDP per capita [Source: Bloomberg], providing significant runwayfor high levels of growth. Commonly accepted convention states that GDP per capita growthstarts to moderate only after surging past the USD 10,000 GDP per capita. This indicates alot of headroom for growth.

The consumption pattern for Indian consumers has also undergone a marked shift fromfood to non-food categories. While the percentage of expenditure on food has declined from45% in 1990 to 27% in 2012 [Source: CEIC], the proportion spent on all other categorieshas risen. There has been a change in the attitude of Indian consumers over the past threeto four years, as they are more willing to buy convenience items even if it means slightlyhigher cash outflow and slightly lower savings.

Further driving increased income levels is rapid urbanization of India's population.Over the last five decades, the urban population has increased from 18% to 30% of theoverall population. Indian cities have accommodated ~288 million people. In 2010, —30% of the Indian population lived in the urban locations, but this is expected toincrease to 35% by 2020, according to World Bank. Urban consumers spend roughly 1.9x morethan rural consumers [Source: Bloomberg], as they have greater access to [obs and goods.As the number of urban consumers increases, spending correspondingly more than their ruralcounterparts, consumption should receive a further boost.

In addition, new city workers send part of their wages to their families in rural areasthereby allowing them to consume more. According to Confederation of Indian Industries(Cll) and Booz and Allen, the bulk of India's consumption growth will come from the640,000 villages that house 70% of the population but proportionally consume only 50% ofthe total.

While India is at the cusp of high growth and voracious consumption, this prospectiveconsumerism may falter if enablers are absent, irrespective of the level ofunder-penetration or rise in affordability. These enablers are employment, education,infrastructure and financial inclusion.

Real wage growth is coming off sharply in the manufacturing and services sectors due toboth a deceleration in nominal wage growth and sustained high inflation (CPI). Wages inthe agriculture sector received a substantial boost following increased social spendingoutlay by the Government about five years ago. But these too are showing initial signs oftapering off. Within private consumption, the impact of wage growth is more pronounced ondiscretionary spending rather than on non-discretionary spending.

FY14 is expected to mark the beginning of the end of the down cycle that began in 2008.That said - the process of recovery is expected to be slow. Government has earmarked INR 3trillion incremental spending through the budget. Moreover, the lagged impact of interestrate cuts and poll related spending of ~INR 450 billion will also buoy consumption. Thus,GDP growth is poised to rise to 6.2% in FY14 [Source: Bloomberg], driven by consumption.India will remain the second fastest growing BRIC nation after China.


FMCG Market in Bangladesh

Bangladesh has a demographic profile very similar to that of India. A population inexcess of 160 million and a developing economy provide the perfect consumer base for theFMCG sector to flourish. The GDP has grown at 5-7% over the last few years and it isamongst the Next Eleven (N-ll) countries identified by Goldman Sachs as having highpotential. Political instability may however be a cause of concern for companies operatingin Bangladesh. Even though the demographic profile is similar to India, the relativelylower spending capacity can be a concern, more so in an inflationary environment.

FY13 has been challenging because of political unrest and uncertainty, rising fuelprices and the negative effect of the global economic slowdown, especially in Europe andUSA, which contribute significantly to the export earnings of Bangladesh.

FMCG Markets in the Middle East and North Africa (MENA)

The Middle East offers a curious mix of local and expatriate population, which is notaverse to the idea of indulgence/extravagance. This provides FMCG companies opportunitiesto offer branded solutions, tailored to the needs of the consumer in the region.

The Egyptian economy has embraced liberalization in the recent past, thereby openingthe doors to foreign direct investment and paving the path to economic growth. It featuresamongst the Goldman Sachs list of N-ll countries. A steady growing population and adeveloping economy provide a good base for FMCG companies. Penetration levels in hairgrooming and skin care products are modest.

Our outlook on the long term trends in demand for personal care products in the MENAregion remains positive.

FMCG Markets in South Africa

The South African economy is a productive and industrialized economy that exhibits manycharacteristics associated with developing countries, including a division of labourbetween formal and informal sectors and an uneven distribution of wealth and income. Theeconomic measures such as Black Economic Empowerment (BEE), adopted by the Government toensure growth and equitable distribution of wealth, have been very effective. SouthAfrican's ascension into BRICS recognizes the country's potential, placing it alongsidethe leading economies of tomorrow. With 6% of Africa's population, it accounts for 25% ofthe continent's GDP. South Africa also forms a gateway to the rest of sub-Saharan Africa.Africa is the fastest growing region after China and India, boasting unexploited mineralwealth, 60% of the world's uncultivated agricultural land and the youngest age profile ofany continent.

FMCG Markets in Vietnam

Vietnam is one of the fastest growing countries in South-east Asia, with a GDP growthof about 6%. The demographics of the country are very promising, with an extremely youngpopulation providing an opportunity for FMCG companies to grow rapidly. The country is inthe process of integrating into the world's economy, as part of globalization. Vietnamfinds a place in the Goldman Sachs list of N-ll countries as a frontier market, indicatingan opportunity to invest but with lower market capitalization and liquidity. Thegovernment is targeting to hold inflation at 6%. Vietnam has also proposed some favorablechanges in tax laws for socio-economic development and to reduce the overall tax rate.


Input Costs

Fluctuations in commodity prices cause fluctuations in product prices and margins. Thisis because domestic commodity prices are often directly or indirectly linked tointernational indices and volatility in these benchmarks causes uncertainty in businessenvironment.

The past few years have witnessed wide fluctuations in the price of input materials.Crude Oil touched its record high and saw considerable fluctuation during the last two tothree years. Moreover, many commodities are often used as separate asset classes resultingin speculation led variations in price trends. As a result, the overall level ofuncertainty in the environment continues to remain high.

Input costs comprise nearly 60% of the production costs in the FMCG sector.Inflationary tendencies in the economy directly impact the input costs and could create astrain on the operating margins of the FMCG companies. However, brands with greater equityand pricing power may find it easier to adjust prices when the input prices increase andhold prices when the input prices decline.

Pricing Power

The equity of a Brand generally allows the organization to pass on the impact of anyincrease in cost structure to the consumers. However, considering the uncertainty in theenvironment, rising competitive pressures as well as the long term objective of expandingconsumer franchise, part of the increased cost may have to be absorbed by theorganizations.

Discretionary Spending / Down Trading

In situations of economic constraints, items which are in the nature of discretionaryspending are the first to be curtailed. In an extended recession, down trading frombranded to non-branded or premium to mass market products could occur and affect thefinancial performance of the Company.


The competitive intensity in the FMCG sector in India is high and companies need tofocus on branding, product development, distribution and innovation to ensure theirsurvival. Marico has recently entered categories such as mass skin care, breakfastcereals, hair styling, post wash leave-on conditioners and deodorants where thecompetitive intensity is relatively higher as compared to the segments it has beenoperating in such as coconut oil, hair oils and refined edible oils.

Product Innovation & New Product Launches

Success rate for new product launches in the FMCG sector is low. New products may notbe accepted by the consumer or may fail to achieve the targeted sales volume or value butthe companies have to keep on trying out newer things. Cost overruns and cannibalizationof sales in existing products cannot be ruled out. Marico has adopted the prototypingapproach to new product introductions that helps maintain a healthy pipeline and at thesame time limits the downside risks.

Currency Risk

The Marico Group has a significant presence in Bangladesh, South East Asia, the MiddleEast, Egypt and South Africa. The Group is therefore exposed to a wide variety ofcurrencies like the US Dollar, South African Rand, Bangladeshi Taka, UAE Dirham, EgyptianPound, Malaysian Ringgit, Singapore Dollar and Vietnamese Dong. Import payments are madein various currencies including but not limited to the US Dollar, Australian Dollar andMalaysian Ringgit.

As the Group eyes expansion into other new geographical territories, the exposure toforeign currency fluctuation risk may increase. Significant fluctuation in thesecurrencies could impact the company's financial performance. The company is, however,conservative in its approach and uses plain vanilla hedging mechanisms.

Funding Costs

Though the FMCG sector is not capital intensive, fund requirements arise on account ofinventory position building, capital expenditure undertaken or funding inorganic growth.Changes in interest regime and in the terms of borrowing will impact the financialperformance of the Group.


This may take the form of purchasing brands or purchase of stake in another company andis used as a means for gaining access to new markets or categories, or increasing marketshare. Acquisitions may divert management attention or result in increased debt burden onthe parent entity. It may also expose the company to country specific risk. Integration ofoperations and cultural harmonization may also take time thereby deferring benefits ofsynergies of unification. Marico is keen on exploring acquisitions in its core segments ofbeauty and wellness, where it believes it can add value.


Marico has a well-established and comprehensive internal control structure across thevalue chain, to ensure that all assets are safeguarded and protected against loss fromunauthorized use or disposition, to ensure that transactions are authorized, recorded andreported correctly and that operations are conducted in an efficient and cost effectivemanner. The key constituents of the internal control system are:

• Establishment and periodic review of business plans

• Identification of key risks and opportunities and regular reviews bytopmanagement and the Board of Directors

• Policies on operational and strategic risk management

• Clear and well defined organization structure and limits offinancial authority

• Continuous identification of areas requiring strengthening of internal controls

• Operating procedurestoensureeffectiveness of business processes

• Systems of monitoring compliance with statutory regulations

• Well-defined principles and procedures for evaluation of new businessproposals/capital expenditure

• A robust management information system

• A robust internal audit and review system

Ernst & Young LLP has been carrying out internal audits for Marico for the last twoyears. The work of the internal auditors is coordinated by an internal team at Marico.This combination of Marico's internal team and the expertise of a professional firmensures independence as well as effective value addition.

Internal audits are undertaken on a continuous basis, covering various areas across thevalue chain like manufacturing, operations, sales and distribution, marketing and finance.The internal audit program is reviewed by the Audit Committee at the beginning of the yearto ensure that the coverage of the areas is adequate. Reports of the internal auditors areregularly reviewed by the management and corrective action is initiated to strengthen thecontrols and enhance the effectiveness of the existing systems. Summaries of the reportsare presented to the Audit Committee of the Board.

The statutory auditors, as part of their audit process, carry out a systems and processaudit to ensure that the ERP and other IT systems used for transaction processing haveadequate internal controls embedded to ensure preventive and detective controls. The auditreport is reviewed by the management for corrective actions and the same is also presentedto and reviewed by the Audit Committee of the Board.


Marico is a professionally managed organization that empowers people and fosters aculture of innovation. The organization believes that great people deliver great resultsand lays emphasis on hiring right and retaining key talent. The company maintains a strongbusiness linkage to all human resource processes and initiatives.

Marico provides an environment of flexibility and empowerment to drive the growth andproductivity of members. The organization is committed to fostering an entrepreneurialspirit and a sense of ownership in all its members. It displays trust in the youngworkforce by giving them control over their time and activities.

Marico firmly believes that "Culture drives business". As the custodian aswell as the facilitator of Marico's values and culture, HR defines people processes,policies, and practices that drive results and enable profitable growth. Marico's culturehas helped in driving sustainable profitable growth over years now. Various manifestationsof Marico's values delivering business results are presented at its Annual Values Awards.

The Strategic Business Planning (SBP) process articulates Marico's future imperativesand capability needs. These are translated into individual actions and outcomes throughits performance management process - Management By Results, (MBR) that requires members toclearly define the outcomes that they will strive to achieve over the next year.

Marico continues to measure and act on improving the 'engagement levels'. The companyhas partnered with Aon-Hewitt to use a more evolved framework for driving engagement,benchmarking Marico with industry and global standards. Action planning sessions for morethan 150 teams across the organization (India and International) were conducted during theyear under review to build engagement and a stronger workplace.

Marico's Talent Value Proposition (TVP) helps articulate the significant offerings anorganization has for its members, builds their commitment and makes them brandambassadors. Marico's TVP is "to continuously challenge, enrich, and fulfill theaspirations of Mariconians so that they can maximize their true potential to Make aDifference". The TVP is one of the most important aspects for attraction andretention of talent in Marico. The experience of the Talent Value Proposition comes alivethrough various HR processes like:

• Talent Acquisition: Hiring is aligned to cater to immediate resourcing needsas well as building capability for the future. Competency-based interviewing is conductedto ensure role fitment and alignment with culture. Aspects of challenging, fulfilling andenriching roles are articulated to make the TVP relevant for prospective talent. The TVPis embedded in the MINTOS - Marico Internal Talent Opportunity Scheme (a process forproviding internal job opportunities for members) and TAREEF - Talent Referral (referralprogram for members to refer talent). Marico also recruits fresh talent from premiertechnical and business schools in India and in the countries it operates in.

• Performance Management System: The process referred to as Management byResults (MBR), enables the performance of the organization and the individual by aligningindividual and team goals with organization goals. It provides an opportunity for membersto stretch themselves, to realize their full potential, to give their best.

• Talent Development: The organization believes in investing in people todevelop and enhance their capability. The Personal Development Planning (PDP) is a processto measure a member's potential and is distinct from Performance. It aims at providingcareer growth through employability enhancement, leveraging member's strengths,perspective building and enhancing skills and knowledge through development plans. Careeropportunities are created based on strength and interest areas of members. A talent reviewprocess is done by all the function heads before the PDP discussion, to provide line ofsight to all members in the discussion. The process also helps in creating a talentpipeline and succession plan for key roles in the organization.

• Leadership Development: This is largely through on-the-job experiences,participation in cross-functional projects, secondments, participation in the StrategicBusiness Planning Process and senior management-led organizational initiatives. It is alsosupplemented with focused class room training that is either a developmental area or isaimed at building capability for future leadership roles. During the year, a program -Leadership Development Program Lead, Encourage and Develop Talent (LEAD Talent) -wasdesigned and implemented to provide a holistic leadership development approach throughclassroom training programmes, leveraging Marico leaders as teachers, and through on thejob experience.

Marico also facilitates development through Executive Development Programs andLeadership Development Programs in India (ISB, IIMs etc.) and abroad (INSEAD, NUS,Michigan, LBS, Harvard etc.). Leadership coaching through external facilitators is alsoconducted for members who are groomed for senior and top management roles. The programmeaims at strengthening the second level and developing the middle level of leadership.

• Member Wellness: Member well-being has a direct impact on the member'sengagement with the organization. Marico gives importance to the overall well-being of itsmembers and offers workshops and seminars in the areas of emotional, financial, health andcommunity well-being.

This year, financial planning workshops were conducted across the organization toeducate and create awareness amongst members on how they can achieve higher financialsecurity. In the area of health well-being, Marico participated in Stepathlon, a unique,pedometer-based, mass participation event which takes place over 100 consecutive days. Itencourages participants to take 10,000 steps a day to remain fit. A total of 35 membersfrom across Mumbai participated in this event. Marico also offers counseling servicesthrough an expert counseling agency. Members can avail counseling for themselves as wellas their immediate family.

The HR team has worked considerably to integrate the international geographies with theMarico Way of Working, at the same time valuing the cultural aspects of the country.

Employee relations throughout the year were supportive of business performance. As onMarch 31, 2013, the employee strength of Marico Limited was 1246 and that of the entiregroup was 3230.


It is important to align the interest of all stakeholders in the environment in whichthe Company operates - its shareholders, consumers, members, associates, government andsociety. Marico has focused on the following areas to make its contributions towardssociety.

Marico Innovation Foundation

Innovation has been, since inception, a cornerstone of Marico's value creationstrategy. It was therefore natural for Marico to turn to innovation while seeking a themefor its corporate social responsibility efforts. Thus, in 2003 Marico InnovationFoundation (Foundation) was formed with the objective to fuel innovation in India.

The Foundation contributes to the innovation cause in India, through a ThoughtLeadership based framework. It provides a platform where the industry and the socialsector can leverage innovation for quantum growth. It is the catalyst that creates aninnovation eco-system through cutting-edge research, knowledge creation and disseminationto enable breakthrough innovations.

The Foundation has worked in several areas to fuel innovation in India over the past 10years. Its research efforts have yielded a best seller publication - 'Making BreakthroughInnovation Happen: 11 Indians who pulled off the impossible'. This publication was borneout of a six-year effort to identify genuine breakthrough innovations in India. Ituncovered cutting-edge unique insights behind each innovation. About 55,000 copies havebeen sold so far, making this India's first best-seller on innovation.

The Foundation instituted the 'Innovation for India Awards' in 2006. This platformrecognizes breakthrough Indian innovations that have positively influenced lives.Innovations that have at their core a great idea coupled with a unique insight areselected. The tally of award-winning innovators is now 41. The Innovation for India awardsare declared biennially.

The Foundation's Social Innovation Acceleration programme launched in 2011 providescustomized capacity building, strategic advisory support and acceleration facilitationover a 12-18 month period, for organisations working on innovative social enterprisemodels, seeking to scale the impact of their work by providing them with innovationinputs, tools and frameworks; helping redesign goals to enable scale and bringing in arange of subject matter experts and practitioners to help organisations find theinnovation levers, necessary to create a quantum leap in their social impact.

The Foundation has so far supported five Social Enterprise Projects over the last twoyears. The first batch (2011) successfully accelerated projects for Yuva Parivartan andWaste Wise Trust to achieve breakthroughs in their impact, while in 2012, three moreprojects were added to the acceleration portfolio (Akshay Patra's hub-and-spoke kitchensystem, Fractal Microspin's product to business model transformation, and YuvaParivartan's Employment Exchange for rural school dropout youth).

Akshaya Patra - Innovative Kitchens to Reach More Schoolchildren

Having setup large scale centralized kitchens that each have a capacity of over 1 lakhmeals per day, Akshay Patra is currently reaching 2.5% of the total children under themid-day meal program of the Government of India; the methodology is now being applied tohelp the team design modular hub-spoke kitchen systems without compromising on the qualityand cost of the meals, in a way that Akshay Patra can go deeper into rural catchments -significantly enhancing its reach across schools.

This prototype will also look at a 2-meal model, breakfast and lunch, which will be abreakthrough in the mid-day meal program for India. A prototype is being designed to coverurban and rural Bangalore, to be implemented in the nearfuture.

Fractal Microspin - Scaling a Technology Innovation into a Successful Business Model

Having invented the technology to create small scale, modular spinning mills thatconvert cotton to yarn, the methodology is now being applied to help the team create ascalable and sustainable business model, a marketing model and a financial feasibilitymodel that creates value for the entire ecosystem of cotton growing farmers, weavers,artisans and consumers of cotton fabric. Fractal's Microspin model is being seen as abreakthrough in the industry as it allows yarn to be manufactured close to the source ofcotton, reducing the cost of operations and enhancing the earning potential for bothfarmers and weavers.

The innovation goal for this project is to demonstrate a route by which 1000 newMicrospin units can be sold and established, leading to production of 15 crore meters offabric through this enhanced process.

Yuva Parivartan - Connecting Youth to Employment Opportunities

Having been able to reach out to large numbers of rural youth and train them withimportant skills, the Yuva Parivartan team is now creating a scalable and sustainableemployment platform that connects rural school-drop out job seekers with relevant jobopportunities on a consistent basis. This will then help Yuva Parivartan complete thetransformation cycle for school dropouts.

One of the Foundation's dreams has been to come up with a unique publication tocontinuously generate and disseminate knowledge and wisdom on innovation. The Foundationhas realised this dream, just as it celebrates a decade of contribution to the cause ofinnovation in India.

Innowin - India's first publication dedicated to innovation has been launched. This isa quarterly magazine committed to sustaining a culture of innovation in India. It seeks toreverse the flow of innovative thinking from the West to India. It also underlines theimportance of fostering a culture of innovation in the Indian corporate sector.

Sustainability Reporting Initiative in Marico

Marico has been doing work in various areas related to sustainability over the past fewyears. There were a wide range of initiatives across energy conservation, waterconservation and waste disposal apart from business initiatives involving communities suchas farmers.


'Farmer First' was launched in safflower growing belts in June 2012, with the vision toachieve socially responsible growth by keeping farmers as the pivot.

A series of initiatives were launched to maximize the ROI of farmers in safflowergrowing areas by keeping farmers as the central pivot. The aim was to promote safflower asa very strong and viable alternative option in the rabi season and thus arrest thesafflower area decline. Concentrated efforts were carried out in 325 villages spreadacross 6 states. Under the initiative 12,500 saplings were distributed among the farmersfree of cost for plantation and 1,300 quintals certified seeds were sown over 32,000 acresof land, improving the farmers' yield by up to 15%. A PPP model with Government ofMaharashtra was worked out in Solapur and Akola districts covering 49 villages, 495farmers and 900 hectares. This initiative has benefitted farmers by increasing theiryield, benefitted Marico through its gain of improved safflower buying surplus fromdomestic sources and benefitted society with a greener tomorrow.

Cluster Farming Program:

This program is aimed at forming a cluster of coconut farms in an area. Farmers thenget together as a group and discuss the agriculture practices to be adopted with the helpof a technical expert. Based on this, the preparation of the farms, fertilization, pestcontrol and intercropping are decided. Agricultural inputs were sourced through localcooperative societies and distributed to farmers. Marico's Copra Collection centers inMalappuram district partnered actively with the Coconut Development Board for the rolloutand execution of the program in which the center uses its reach to farmers to formclusters to avail themselves of the benefit of the above program from the Government ofIndia.

The scientific farming practiced by a group of farmers resulted in a visibleimprovement in the coconut crop. Further, planting intercrops according to the soilcondition, resulted in additional income from the same farms. Collective initiatives ingetting the labour force and technical hands involved in using pesticides has given aboost to the farming culture in the area.

Through the cluster program, Marico has coordinated productivity improvementinitiatives in 61 coconut clusters involving 7982 farmers covering 1737 hectares ofcoconut gardens. The 2 years' intensive productivity improvement program by scientificfertilization, inter-cropping and pest control has given a yield improvement close to 20%in coconut gardens covering over 3 lakh coconut palms. The program has benefitted farmersby increasing their income and benefitted Marico by improving copra availability.

Supplier Relationship Management (SRM)

Supplier Relationship Management (SRM) is a non-agricultural procurement initiativelaunched in 2012 to promote deeper engagement with suppliers and foster innovative ideas.In the initial phase, this has been rolled out to 20 vendors focusing on improvingsystemic efficiencies and facilitating a win - win mindset.


During the Joy of Giving week, the 'Member Volunteering Opportunities' initiative waslaunched, as a prototype in Mumbai. Through this initiative, members are given a platformto offer their expertise to a not-for-profit organization. One of our members hassuccessfully completed content creation for the annual report for Maharashtra DyslexiaAssociation while other projects are in progress.

Apart from this, assistance was provided to neighbouring communities through varioushealth and education programs, help to underprivileged and deprived children and supportto differently - abled and destitute people.

A unique project 'Pratyek Themb Mahatwacha - Each Drop Counts' was undertaken inJalgaon to educate school children, their parents, teachers and society in general aboutthe importance of water conservation. Over 5,000 students were connected directly across 8major schools and 10,000 booklets on water conservation were printed and distributed tomany schools around Jalgaon.

Nihar Shanti Amla started an initiative which empowers women consumers across India todo their bit for the cause of education. As a part of this initiative, every time a womanchooses to buy a bottle of Nihar Shanti Amla, 2% of all proceeds will be contributed tothe cause of children's education in partnership with CRY India. Launched on September 1,2012, this initiative benefitted many villages, addressing their concerns regardingchildren's education. Nihar Naturals is funding 19 projects across Uttar Pradesh, MadhyaPradesh, Rajasthan, Bihar, Haryana and other regions, where each project touches around 25to 30 villages within these geographies. Through this initiative, Nihar Naturals aims toimpact lives of more than 35,000 kids in one year.

Green Initiatives

Several initiatives were taken to reduce Greenhouse Gas (GHG) emission in Kanzikode,Dehradun and Baddi. Rain-water harvesting and tree plantation activities were undertakenat Paonta Sahib. Reduction in power consumption was reported in Kanzikode, Paonta Sahib,Dehradun, Baddi and Pondicherry. Kanzikode won the Kerala State Safety Award for the 3rdconsecutive year for its safety initiatives.

Sustainability Management at Marico

In 2011-12, Marico started its journey towards sustainability reporting, and iscurrently putting a Sustainability Management Framework in place. This will help theCompany collate sustainability information in a structured manner. The company has engagedCll as a knowledge partner for preparing the sustainability report and assisting insetting up a Sustainability Management Framework.

A task force comprising members from various functions in the Company's corporateoffice as well as manufacturing locations has been formed. This year, the focus is onMarico's 7 manufacturing locations in India viz. Kanjikode, Pondicherry, Goa, Jalgaon,Baddi, Dehradun and Paonta Sahib.

Cll was engaged in the preliminary work on sustainability reporting readiness. Theyvisited Marico sites and recommended setting up of data collection systems. The companyplans to set up these systems this year.


Marico achieved revenue from operations of INR 4596 crore (USD 851 million) duringFY13, a growth of 15% over FY12. The volume growth underlying this revenue growth washealthy at 12%. Profit After Tax (PAT) for FY13 was INR 396 crore (USD 73 million), agrowth of 25% over FY12 (including exceptional items). Over the past 5 years, the toplineand bottom line have grown at a compounded average growth rate (CAGR) of 19% each.


Parachute and Nihar in India

Marico participates in the INR 2800 crore (USD 518 million) branded coconut oil marketthrough Parachute, Nihar and Oil of Malabar. It is estimated that in volume terms, 60% to65% the total coconut oil market is in branded form, while the remaining comprises looseproduct. This loose component provides headroom for growth to branded players. TheCompany's brand Parachute, being the market leader, is well placed to capture thedisproportionate share of this growth potential on a sustainable basis.

Rigid packs (packs in blue bottles) Parachute, Marico's flagship brand, recorded avolume growth of about 10% during the year. The Company has been focusing on rigid packsover the past few years as they enjoy a higher margin as compared to pouch packs. Theproportion of pouch packs has now reduced to about less than 15% of total Parachute salesin value terms. During the 12-month period ended March 2013, Parachute along with Niharimproved its market share by about 240 basis points over the same period last year, toreach 57.6%

Marico has continued to drive conversion from loose oil usage to branded oil - a sourceof growth in the medium term. This is expected to be complemented byshare gain in ruralareas. Its share in the rural markets, in the range of 35% to 40%, is lower than in theurban markets, thus providing potential headroom for growth.


The Saffola refined edible oils franchise grew by about 7% in volume terms during FY13compared to FY12. The growth during the year was lower than expectations. The decelerationin growth can be attributed to two reasons: a softer demand environment in premiumpackaged foods that are discretionary in nature, and inflation in safflower oil and ricebran oil being at significantly higher levels as compared to inflation in sunflower oil.This had led to expansion in the premium of Saffola vis-d-vis the other refined edibleoils. Though the Company doesn't believe that Saffola's existing consumers aredown-trading, there is a deceleration in the rate at which new consumers are upgradinginto the Saffola brand, leading to a lower growth rate.

The Company has initiated some price reduction in select packs in order to bring thepremium back to sustainable levels. The average price correction was 2% to 3%. The Companybelieves that nothing fundamental has changed and that it would record normal growth ratesin the medium term. The initial response to this pricing adjustment (taken in mid-quarterQ4FY13) has been positive and the full impact is expected to be seen in the first quarterof FY14. The Company expects to return to double digit volume growth rates from FY14onwards.

The income levels in India have seen an increase over the past few years. As a resultof this growing affluence, consumers are proactively moving on to healthy lifestyles.Moreover, awareness about health and particularly heart health has been increasing inIndia. Saffola too has made a significant contribution towards increasing this awareness(

Adopting Saffola is one of the shifts that consumers continue to make. The Saffolarange of blended refined oils (available in four variants) operates in the super premiumniche of the refined edible oils market. Saffola is estimated to reach about 3 millionhouseholds of the 22 million SEC A/B households in India. With rising awareness aboutheart health in the country, this provides significant headroom for growth. The brandmaintained its leadership position in the super premium refined edible oils segment with amarket share of about 58.6% during the 12 months ended March 2013. (MAT 12 months endedMarch 2012: 54.8%).

In the long term, Saffola expects to establish itself as a leading healthy lifestylebrand that offers healthy food options for all meals of the day. The rise in the number ofnuclear households and that of working women provides an opportunity for convenient andhealthy breakfast food options. The Company has prioritized the breakfast space in thenear term. The intent of the company will be to come up with value added offerings.Saffola oats are now available in six flavors in the savory oats category. Saffola has anexit market share of about 13% to 14% by volume in the oats category and has emerged asthe number two player in the category showing fast paced growth of over 30% per annum.

Besides offering oats, Saffola strengthened its position in the breakfast category byintroducing muesli on a national basis. The product is available in three variants. Themarket size of muesli is estimated to be around INR 80 crore to INR 100 crore (USD 14.8million to USD 18.5 million) growing rapidly at rates in excess of 40%. Saffola Muesli hasalready become a number 3 player with an exit market share of about 9%.

The Company discontinued Saffola Rice during the year as the product did not receiveexpected results. Moreover, the Company has decided to shift focus to breakfast cereals inthe near term. The Company will continue to innovate in the health based packaged foodspace and prototype new products in the near future.

Hair Oils

Marico's hair oil brands (Parachute Advansed, Nihar and Hair & Care) have performedwell over the past few years. These brands continued to record very healthy growths andmarket share gains during FY13. The volume growth rate was 24% for the year. Marico'sbasket of hair oil brands achieved market leadership position in the Value Added Hair Oilsspace and now have about 27% share (for 12 months ended March 31, 2013) in the INR 4500crore (USD 834 million) market. This compares to a share of about 17%-18% about 5-6 yearsago.

There has been a positive shift of around 280 basis points in FY13 compared to FY12.These market share gains have been achieved through providing consumers with specificsolutions, product innovation, packaging restaging, participation in more sub-segments ofthe value added hair oils category, continued media support in some of the brands andpenetrative pricing action in others and expansion of Marico's direct retail reach in therural markets.

Nihar Shanti Amla continues to gain market share and achieved a volume market share ofover 25% for the 12 months ended March 2013 in the Amla hair oils category (MAT FY12:18.6%).

Hair oiling remains a deeply ingrained habit for leave-in hair conditioning andnourishment on the Indian sub-continent. The Company has carried out scientific researchand conducted successful clinical trials to establish the benefits that hair oilingprovides to consumers. The study has proved that hair oiling improves the strength,thickness, length and softness of hair. Moreover, hair oiling leaves the hair lessdamaged. With rising incomes in India, there exist increasing opportunities to serveconsumers looking for value-added options to their hair oiling needs. The Company believesthat educating the consumer by putting science behind the habit of hair oiling will buildcredibility and create a loyal franchise, ( During the year, theCompany launched another product under the Parachute Advansed brand called 'ParachuteAdvansed Tender Coconut Oil'. The new product is an innovation that offers its nourishinggoodness in a modern, sensorially pleasing avatar. This initiative has been launchednationally and supported by an aggressive multi-media launch plan across TV, Print,Outdoor and Digital media.

Parachute Advansed has also taken some initiatives in the digital space by launchingthe Hairfall e-Clinic during the year. The first of its kind, virtual clinic guideshairfall sufferers through individual consultations, and regimen advice from ourdermatological expert. Since its inception, the e-clinic has witnessed a promising startand has garnered over 60,000 registrations.

Marico has a 'category play' in the segment whereby it offers its consumers a basket ofvalue-added hair oils for their pre-wash and post-wash leave-in hair conditioning,nourishment and grooming needs in the approximately INR 4500 crore (USD 833 million)branded hair oils market. The Company's aim is to participate in all the sub-segments andhave a wider portfolio to drive growth. Nihar, Parachute Advansed and Hair & Care haveeach established significant franchises. This is being built upon further through theintroduction of new products such as Parachute Advansed Ayurvedic Hot Oil, ParachuteAdvansed Ayurvedic Hair Oil & Parachute Advansed Tender Coconut Hair Oil. All thesehave grown the overall hair oils franchise by bringing specificity and creating moreoccasions for use.

The Company is now focusing on scaling up its presence in all the sub segments ofValue-Added Hair Oils so that it can get advantages of operating leverage in fixed costsand advertisement spends leading to expansion in operating margins.

Mass Skin Care: Parachute Advansed Body Lotion

Parachute Advansed Body Lotion has continued to record robust growth rates. It hasachieved a market share of over 7% (moving 12 months basis) within a short period of timeand has become the number 3 participant in the market. The brand gained about 320 basispoints in market share during the current season as compared to the last season.

The Company believes that even though the category is relatively more competitive thanthe other categories it is present in, there is a lot of head room for growth and there isplace for a differentiated product. The penetration levels are still below 20% resultingin category growth rates of over 25%. The total skin care segment is estimated to bearound INR 5000 crore (USD 926 million), of which the body lotion segment is around INR550 crore (USD 102 million). The Company plans to increase its participation in the skincare segment in the longer term.

Youth Brands (Set Wet, Zatak, Livon)

The acquired portfolio of youth brands has completed its first financial year inMarico's hands (even though this year was of 9 months' duration as the transaction wascompleted at the end of May 2012). The overall performance thus far is tracking higherthan the company's acquisition assumptions.

Having stabilized the distribution integration, the company has taken a number of newinitiatives in the youth portfolio. During the year a new campaign 'Buri Nazar Waale TeraMuh Kaala' was launched for Set Wet hair gels. It has met with a favorable response.Leveraging its portfolio under Code 10 in Malaysia, the new formats of hair gels and waxeswere launched under Set Wet in India. Set Wet and Zatak deodorants have also undergone apackaging restage to enhance their youth appeal. New fragrances were also introduced.

Set Wet and Zatak had earlier seen some decline in market shares in the deodorantsegment given that there was some lack of focus in the hands of the erstwhile sellers.This decline has now been arrested and the company expects to reverse the trend and begingaining share.

The turnover achieved from the youth brands during the year was INR 139 crore (USD 25.7million), a growth of 18% over the corresponding period in FY12. (During FY12 the businesswas being run by Reckitt Benckiser). The operating margin expectation is in line withassumptions. Over the next few years, the growth rates are likely to average around 20% to25% supported by new advertisement communication and product launches.

This acquisition gives the Company an access to youth brands. Brands in the portfoliooccupy leading positions in the hair gel, male deodorant and leave -on hair serumcategories. Set Wet and Zatak provide Marico an opportunity to participate in the rapidlygrowing deodorant and male grooming categories in India. The portfolio addresses thegrooming needs of the youth and is supported by India's demographic profile. Marico willalso leverage its distribution strength in India to provide a fillip to the growth of thebrands. The acquisition of this business is expected to further reduce Marico's dependenceon edible oils and hair oils.

The Company has a significant presence in the male styling/grooming categories in itsoverseas markets. Its brand X-Men is a leading player in male grooming in Vietnam. HairCode and Fiancee provide leadership in hair creams and gels in Egypt. Code 10 participatesin the male grooming market in Malaysia. This is expected to result in synergies throughknowledge on the latest trends, formulations and an available new product pipeline.


Marico's International FMCG business (its key geographical constituents beingBangladesh, Middle East, Egypt, South Africa, South East Asia) comprised —22% of theMarico Group's turnover in FY13.

The year FY13 has been a mixed year for the international FMCG business. The overallbusiness environment in international business remained challenging throughout the year.There were some pockets of the business that performed well whereas others facedchallenges. The overall performance was subdued during the year mainly on account ofde-growth in the Middle East region (GCC).

The business grew by 8% during the year. The operating margin for the year as a wholewas about 8%. If one excludes the impact for GCC then the operating margins stand at about14%.


The overall business environment in Bangladesh remains challenging. The last few monthsof the year saw loss of business days due to strikes in Bangladesh. For example, duringthe month of March 2013 there were only 10 working days available. These have had a directadverse impact on the business. The macro-economic indicators, though still weak, havebegun witnessing an improvement. The positive sign is that inflation is now in singledigits and the Bangladeshi Taka has stabilized in the range of 80 to a USD. GDP growthestimates are at about 6%.

Amidst the political and macro-economic uncertainties, the Bangladesh business was ableto record a growth of 1% in turnover during FY13. Parachute improved its market share toabout 82% in the branded coconut oil market suggesting strong brand fundamentals.

The profit growth however was healthy with Profits After Tax increasing by 62% ascompared to FY12 mainly on account of lower input price led gross margin expansion.

In view of the long term potential that Bangladesh offers, the Company continues tomake investments behind existing and new products such as Value Added Hair Oils (VAHO) andhair dye. These products continue to gain traction and are expected to help create aportfolio of the future in Bangladesh.

Hair Code Hair Dye maintained its leadership position with a market share of about 26%in the powdered hair dye market. The launch of Hair Code ACTIVE, a faster-acting variantof Hair Code is expected to add share points to the brand.

The Company enjoys a number 3 position in the VAHO (Value Added Hair Oils) market,estimated to be about INR 250 crore (USD 46 million) with about 19% share in a shortperiod since its entry in this segment in Bangladesh.

The Company now offers a bouquet of products such as Parachute Beliphool, a light hairoil with a floral fragrance, Parachute Advansed Cooling Oil and Nihar. The portfolioposted a growth of about 39% during the year.

The share of VAHO and Hair Dye in the overall top line continues to increase, therebyde-risking the Company from Parachute Coconut Oil.

The new manufacturing facility was completed and commissioned in August 2012.

MENA (Middle East and North Africa)

The overall environment in Egypt remains somewhat unpredictable. There are increasedlevels of uncertainty due to impending elections. The Company experienced some businessdisruption during the year due to strikes in the ports leading to adverse impact on thesupply chain and logistics. Notwithstanding this, the Egypt business grew by about 12%during the year in volume terms and the leading brands Hair Code and Fiancee maintainedtheir combined market share of about 57%.

The company continues to play out a dual brand strategy leading with Hair Code andFiancee playing the VFM flanker role.

The Company had taken a financial hit on account on impairment of the brand Fianceeduring FY11 amounting to INR 23 crore (USD 4.3 million). The business is tracking well nowresulting in a partial reversal of the impairment amounting to INR 9.1 crore (USD 1.7million).

The Company's performance in the Middle East region faced certain challenges during theyear. It recorded de-growth in turnover during the year FY13 as compared to the previousyear. This also resulted in loss on account of fixed overheads and stepped upadvertisement expenditure. The Company had carried out a packaging change in the ParachuteHair Cream portfolio across the region in the Gulf. This initiative met with someexecution challenges wherein the transition in packaging did not yield the desired resultswith a particular section of consumers. The Company has stepped up its advertisementexpenditure since then to communicate this change which has resulted in a marginalimprovement in the secondary sales over the past few months.

In the midst of the challenges in packaging transition mentioned above there was also aneed to change the company's distributor in Saudi Arabia in order to streamline thedistribution channel and realize efficiencies. This also caused a certain level ofdisruption in the primary sales.

These two factors put together resulted in a performance which was below expectations.The Company is confident that it will come back on track over the next year. The Companyexpects to grow the business in the region by above 25% during FY14, from its loweredbase.

South Africa

The business performed well notwithstanding the challenging economic conditions. Thelatest market statistics for the ethnic hair care category reported a de-growth for allmajor players. Whilst the hair care market is on decline, Marico South Africa gainedmarket share in the category and business grew by 6% during the year FY13 as compared toFY12. The value market share in ethnic hair care category expanded by 70 bps from 6.1% to6.8%.

South East Asia

The business in Vietnam is tracking as per expectations and grew by 28% in FY13 overFY12 in constant currency terms. X-Men maintained its leadership in male shampoos and thenumber two position in male deodorants. The Company continues to scale up its presence inneighboring countries like Malaysia, Myanmar, Nepal and Bhutan.


Kaya offers skin care solutions - technology-led cosmetic dermatological services andproducts -through 105 clinics: 83 in India across 26 cities, 18 in the Middle East and 4DRx clinics and medispas in Singapore and Malaysia.

During the year FY13, Kaya achieved a turnover of INR 336 crore (USD 62 million),registering a growth of about 21% over FY12. The Kaya business in India and in the MiddleEast achieved same store sales growth of about 12% during FY13 as compared to FY12. In anenvironment where the discretionary spends are witnessing a deceleration in growth rates,the Kaya business has continued to report growth.

During FY13, Kaya recorded a loss of about INR 18.5 crore (USD 3.4 million) at the PBITlevel. This compares with a loss of INR 30.8 crore (USD 5.7 million) at the PBIT level forFY12. The losses for the year FY13 also include a financial hit amounting to INR 17.5crore (USD 3.2 million) on account of impairment of certain clinics in India and theMiddle East which are not performing as per expectation. The Company will monitor theperformance of these clinics closely.

The products from Derma-Rx introduced in India continue to gain good traction. TheCompany had started introducing these products in the Middle East from FY13. About 22% to25% of the revenues from Indian operations now come from the sale of products. The shareof products in the Middle East has now increased to 11% from about 7% to 8% earlier. TheCompany will continue to focus on expansion and growth of its product portfolio. Itimproves the stickiness of the brand as some customers may continue to use the productseven after completing their package of service sessions. Taking the objective ofincreasing the product sales further, Kaya has commenced prototyping a new concept in themonth of December 2012 called 'Kaya Skin Bar'. This concept has the following salientfeatures:

• The store format is smaller than a normal Kaya clinic.

• The store will focus on sale of products and select skincare services.Therefore, it will require lower capital investment in machines and lower cost of rent andpayroll.

• The store is expected to generate product sales to the tune of 70% to 80% over aperiod of time.

• This format will not incur the cost of a dermatologist. However it will use aworld-class skin diagnostic tool.

The Company now has three such stores in Delhi and Bangalore. The Company plans toprototype this concept with 4 or 5 stores and, depending upon the response, will decidethe future course of action.

The Kaya business will now be demerged in a separate Company outside of the MaricoGroup by way of a demerger process. This will allow the business to operate in a moreentrepreneurial manner and create value for all the stake holders.


% to Sales & Services (net of excise) FY13 FY12
Material Cost (Raw + Packaging) 48.1 53.0
Advertising & Sales Promotion (ASP) 13.0 10.7
Personnel Costs 8.3 7.7
Other Expenses 17.0 16.4
PBDIT Margins 13.7 12.5
Gross Margins (PBDIT before ASP) 26.7 23.2


1. The above ratios are calculated before considering the effect of exceptional andnon-comparable items to enable like to like comparison.

2. The average market price of copra, the largest component of input costs, was 26%down during FY13 as a whole as compared to FY12. This led to improvement in the grossmargins even though there was an inflationary trend in other input costs. This led to anexpansion in gross margins by 490 bps for the year.

3. A part of the gross margin expansion has been re-invested in business in the form ofAdvertisement & Sales Promotion as is evident from the increase in overall ASP by 230bps for the year as a whole. The Company continues to make investments behind existingproducts and new products such as Saffola Oats, Saffola Muesli, Parachute Advansed BodyLotion in India and Value Added hair Oils in Bangladesh. Moreover, ASP investments madebehind the acquired Youth brands (Set Wet, Zatak and Livon) also resulted in an overallhigher ASP to Sales.


Given below is a snapshot of various capital efficiency ratios for Marico Group:

Ratio FY13 FY12
Return on Capital Employed 24% 25%
• Marico Group
Return on NetWorth (Group) 25% 31%
Working Capital Ratios (Group)
• Debtors Turnover (Days) 15 17
• InventoryTurnover (Days) 63 60
• Net Working Capital (Days) 63 60
Debt: Equity (Group) 0.53 0.71
Finance Costs to Turnover (%) (Group) 1.3% 1.1%

* Turnover Ratios calculated on the basis of average balances

1. There has been no material variation between the ratios in two periods undercomparison.

2. ROCE and RONW have declined mainly on account of the acquisition of Youth brands(Set Wet, Zatak and Livon) in May 2012. The Company will endeavor to maintain the ROCE inthe range of 20% to 25% in the near term and to improve it going forward.

3. The Debt: Equity ratio has improved mainly due to preferential allotment of equityshares aggregating Rs. 500 crore in May 2012 to fund a part of the cost of Youth Brandsacquisition.

4. The Net Debt position of the Marico Group as of March 31, 2013 is as follows:

Particulars Amount (INR/Cr.)
Gross Debt 872
Cash/Cash Equivalentsand Investments 389
Net Debt 483
Foreign Currency Denominated out of the Total Gross Debt 584
Foreign Currency Denominated: Payable in One Year 252
Foreign Currency Debt as a % age of Gross Debt 67%
Rupee Debt out of the Total Gross Debt 287
Rupee Debt: Payable in One Year 187
Total Debt Payable with in One year 439
Average Cost of Debt (%): Pre tax 5.7%

The Company expects healthy cash flows that can support repayment of debt on time. Thecompany may also roll over some of the loans when they fall due during the year orrefinance the same with fresh issuance. Marico has adequate cash flows to maintain healthydebt service coverage.

1. The Debt denominated in foreign currency is either hedged or enjoys a natural hedgeagainst future probable exports. Hence the MTM differences are routed through the balancesheet (Hedge Reserve) rather than the income statement.

2. Pursuant to the Announcement of the Institute of Chartered Accountants of India's(ICAI) 'Accounting for Derivatives' on encouraging the early adoption of AccountingStandard 30 (AS 30), 'Financial Instruments: Recognition and Measurement', the Companyhad, commencing from the year ended March 31, 2009, decided on early adoption of AS 30 tothe extent it does not conflict with existing mandatory accounting standards and otherauthoritative pronouncements, Company Law and other regulatory requirements. Accordingly,the net unrealised gain/loss of Rs. 5,249.45 lacs as at March 31, 2013, Rs. 5,830.37 lacsas at December 31, 2012, Rs. 3,392.52 lacs as at March 31, 2012 and Rs. 4,949.97 lacs asat December 31, 2011 in respect of outstanding derivative instruments and foreign currencyloans at the respective period end which qualify for hedge accounting, stands in the'Hedge Reserve', which would be recognised in the Statement of Profit and Loss onoccurrence of the underlying transactions or forecast revenue.


Marico has focused on deploying its resources in avenues which will result inmaximization of shareholder value. Continuing with this policy, the Board of Directors ofMarico has decided to follow a conservative dividend policy and deploy its internalaccruals to fuel organic and inorganic growth. On a growing profit base, the payout ratiowould be lower. Your Company will periodically review the need for cash and may revise thepayout ratio upwards in case it does not find any suitable avenue to deploy internal cashaccruals other than dividends.

Dividend Declared

The Company has declared two interim dividends of 50% each during the year. With thisthe dividend declared for FY13 is 100%. The payout ratio on the annual profit after tax is19.3%.


Marico achieved revenue from operations of INR 4596 crore during FY13, a growth of 15%over FY12. The volume growth underlying this revenue growth was healthy at 12%.

Profit After Tax (PAT) for FY13 was INR 396 crore, a growth of 25% over FY12. Theseresults include the following items that are not strictly comparable with FY12. Theseitems have been explained in detail in the Notes to the Consolidated Annual FinancialStatements.

Particulars FY13 FY12
Reported Profit After Tax 396 317
Reported Growth % 25%
Normalised Profits After Tax Before Considering Exceptional and Non-comparable Items 384 326
Normalized Growth % 18%

Summary of exceptional or non-comparable items during FY13:

FY13 (INR/Cr.)

Particulars PBT PAT
Impacting Domestic FMCG business and Group 49.3 27.8
Brand Amortization Expense in Marico Consumer Care Limited (6.1) (6.1)
Surplus on Change in Method of Depreciation 40.4 23.4
Reversal of Impairment Loss on 'Fiancee' Trademark 9.1 6.1
Profit on Distribution of Assets by Halite to MCCL on Voluntary Liquidation 5.9 4.4
Impacting Kaya and Group (19.1) (18.8)
Impairment Loss Relating to Kaya Skin Clinics in India / Middle East (17.5) (17.5)
Incremental Provision Towards Contingent Consideration Relating to DRx Entity - Singapore (1.8) (1.5)
Impacting International Business and Group 3.5 2.6
Profit on Sale of Soap Plant in Marico Bangladesh Limited 3.5 2.6
Total 33.7 11.6

Summary of exceptional and non-comparable items during FY12:

FY12 (INR/Cr.)

Particulars PBT PAT
Impacting Marico Limited and Group 5.6
Write Back of Prior Year Income Tax Provision 5.6
Kaya (14.7) (14.7)
Prior Period Items in Kaya Middle East (13.0) (13.0)
Impairment Loss Relating to Kaya Skin
Clinics in India / Middle East (1.7) (1.7)
Total (14.7) (9.1)

Over the past 5 years, Marico has shown a consistent performance with Sales and ProfitAfter Tax growing at a compounded annual growth rate of 19% each.

Total Income

Our total income consists of the following:

1. Revenue from Operations comprising:

a. Sales from Consumer Products including coconut oil, value-added hair oils, premiumrefined edible oils, anti-lice treatments, fabric care, edible salt, functional and otherprocessed foods, hair creams and gels, hair serums, shampoos, hair relaxers andstraighteners, deodorants and other similar consumer products, by-products, scrap salesand certain other operating income.

b. Sale and income from other products including skin care products sold through skincare clinics under the brands Kaya and Derma Rx.

c. Income from services offered at the skin care clinics under the brands Kaya andDerma Rx.

2. Other income, primarily includes profits on sale of investments, dividends, interestand miscellaneous income.

The following table shows the details of income from sales and services for FY13 andFY12:


Particulars FY 12-13 FY 11-12
Revenue from Operations 4596.2 3979.7
Other Income 37.5 32.6
Total Income 4633.7 4012.2

There has been around 15% growth in Net Sales/Income from Operations on account of 18%growth in Consumer Products Business in India, 8% growth in Consumer Products Businessoutside India and 21% in Kaya.

The underlying volume growth was healthy at 12% at Group level led by a volume growthof 16% in Consumer Products Business in India.

Other income mainly accounts for profit on sales of investment, interest and dividendincome arising largely from investment of short term surpluses.


The following table sets the expenses and certain other profit and loss account lineitems for the years FY13 and FY12:



FY 2012-13

FY 2011-12

Amount (INR/Cr.) % of Total Income Amount (INR/Cr.) % of Total Income
Total Income 4,633.7 4,012.2
Cost of Materials 2,209.9 47.7% 2,131.5 53.1%
Employees Cost 380.6 8.2% 307.3 7.7%
Advertisement and Sales Promotion 597.9 12.9% 425.8 10.6%
Depreciation,Amortisation and Impairment 86.6 1.9% 72.5 1.8%
Other Expenditure 782.0 16.9% 630.6 15.7%
Finance Charges 58.0 1.3% 42.4 1.1%
Total Expenses Before Exceptional Items 4,115.0 88.8% 3,610.2 90.0%
PBT Before Exceptional Items 518.7 11.2% 402.1 10.0%
Exceptional Items 33.2 -1.8
Profit Before Tax 551.9 11.9% 400.3 10.0%
Tax 146.2 78.2
Profit After Tax Before Minority Interest 405.7 8.8% 322.1 8.0%
Minority Interest 9.8 5.0
Profit after Tax 395.9 8.5% 317.1 7.9%

Cost of Material

Cost of material includes consumption of raw material, packing material, semi-finishedgoods, purchase of finished goods for re-sale and increase or decrease in the stocks offinished goods, byproducts and work in progress. At an overall level the cost of goodssold was 490 bps lower in FY13 as compared to FY12.

Copra prices started to show a downward trend at the beginning of the year and wereheld in a band for the rest of the year. On an annual basis the copra prices were 26%lower than FY12. The market prices of the other key input, safflower oil, were up 44%during FY13 as compared to FY12. Rice bran oil was up 7% this year as compared to previousyear. However, considering copra accounts for a major proportion of input costs, thecompany gained on a net basis during FY13.

Employee Cost

Employee cost includes salaries, wages, bonus and gratuity, contribution to providentand other funds and staff welfare schemes expenses. The increase in employee costs isprimarily on account of normal annual compensation revisions and increase in headcount.

Advertisement and Sales Promotion

Advertisement and sales promotion (ASP) expenses in FY13 were higher than that in FY12on a percentage to net income basis. The Company continues to make investments behindexisting products and new products such as Saffola Oats, Saffola Muesli, ParachuteAdvansed Body Lotion in India and Value Added Hair Oils in Bangladesh. Moreover, ASPinvestments made behind the acquired youth brands (Set Wet, Zatak and Livon) also resultedin an overall higher ASP to Sales. About 40% of the absolute ASP was incurred in the newproducts. Also, the Company spends about 75% of the total ASP on brand building and thebalance on promotions.

Depreciation, Amortisation and Impairment

The total increase in depreciation during FY13 as compared to FY12 was INR 14 crore Theincrease was mainly on account of INR 6.1 crore of brand amortization expenses in MaricoConsumer Care Limited (MCCL).

The balance increase was on account of capital expenditure made during the year.

During FY13 the company through industry benchmarking has revisited its policy ofdepreciation. Until December 31, 2012 factory building and plant and machinery weredepreciated using the written down value method of depreciation.

Thus, with effect from January 01, 2013, the company has, with retrospective effect,changed its method of providing depreciation from the written down value method to thestraight line method, at the rates prescribed in Schedule XIV to the Companies Act, 1956.

The change is considered preferable since the assets under consideration are expectedto provide equal amount of benefit throughout their useful life and maintenance costs arenot expected to rise significantly in the future years due to the superior quality. TheManagement therefore believes that this change will result in more appropriatepresentation and will give a systematic basis of depreciation charge, representative ofthe time pattern in which the economic benefits will be derived from the use of theseassets. Also it will provide greater consistency with the depreciation methods used byother companies in the industry. The net gain on account of this change in method ofdepreciation is about INR 40.4 crore.

Other Expenses

Other expenses include items such as conversion charges, freight and forwarding,selling and distribution, rent, travel and other expenses. These expenses grouped hereinclude spends that are variable, semi-variable and fixed in nature. The expenses whichare variable in nature (almost 2/3rd of other expenses) have increased per the volumegrowth and inflation. The fixed part of other expenses has increased on account of normalinflation and increase in rent due to higher inventory positions.

Finance Charges

Financial charges include interest on loans and other financial charges. Interest costsare in line with increase in long-term and short-term borrowings. The Company has bought anew corporate office space during the year in Mumbai amounting to about INR 135 crore Thiswas funded by debt. Moreover, in May 2012, the Company funded a part of the cost ofacquiring the business of Youth brands with the surplus investment it had carried in thebooks. This deployment resulted in reduction of income arising therefrom.

Exceptional Items

There were some items which are exceptional in nature and hence detailed separately onthe face of Profit and Loss account. These are explained in Note 38 of the ConsolidatedFinancial Statements.

Direct Tax

Tax comprises Income Tax and Deferred Tax. The increase in the Effective Tax Rate isprimarily due to higher taxable profits during the year in India as a result of growth inthe coconut oil franchise and reduced profits in international geographies which areotherwise exempt from tax. International business performance is impacted by de-growth inthe Middle East region due some temporary challenges caused due to the packagingtransition. The situation is expected to start returning to normal in the coming year.Consequently, the proportions of profits from businesses that do not enjoy a reduced taxrate have been higher and those from businesses that enjoy a tax holiday have been lowerthan expected.

Balance Sheet

Statement of Assets and Liabilities - Consolidated Financials


Particulars As at March 31, 2013 As at March 31, 2012
Shareholders' Funds
Share Capital 64.5 61.5
Reserves and Surplus 1,917.0 1,081.5
Sub-total Shareholder's fund 1,981.5 1,143.0
Minority Interest 35.1 24.9
Non-current Liabilities
Long-term Borrowings 432.6 390.7
Deferred Tax Liabilities (Net) 5.8 -
Other Long-term Liabilities 1.0 0.6
Long-term Provisions 10.5 41.9
Sub-total Non-current Liabilities 449.9 433.2
Current Liabilities
Short-term Borrowings 358.1 371.6
Trade Payables 478.5 358.4
Other Current Liabilities 293.3 208.2
Short-term Provisions 110.9 77.7
Sub-total Current Liabilities 1,240.7 1,015.9
Non-current Assets
Fixed Assets 1,422.4 501.9
Goodwill on Consolidation 395.5 395.5
Non-current Investments 38.0 29.4
Deferred Tax Assets (Net) - 22.3
Long-term Loans and Advances 119.4 124.4
Other Non-current Assets 142.6 123.4
Sub-total Non-current Assets 2,118.0 1,196.9
Current Assets
Current Investments 113.6 266.3
Inventories 862.7 720.2
Trade Receivables 196.6 208.3
Cash and Cash Equivalents 266.7 132.1
Short-term Loans and Advances 136.1 75.1
Other Current Assets 13.6 18.2
Sub-total Current Assets 1,589.2 1,420.1
TOTAL - ASSETS 3,707.2 2,617.0

Shareholders' Funds

This comprises the paid up share capital and reserves and surplus. This year, theCompany raised capital by issue of additional equity shares amounting to INR 500 crore onpreferential basis. The issue concluded at a price of Rs. 170 per share which was about2.5% premium to the SEBI floor price. The Company allotted 29,411,764 equity shares offace value Re. 1 each at a share premium of Rs.169 each to these investors on 16th May2012. This resulted in increase of Equity share capital by Rs. 2.94 crores and Securitiespremium reserve by Rs. 497.06 crores.

A part of increase is also on account of stock options exercised by the employees underthe ESOP Scheme. Annexure to the Directors' Report provides further details of stockoptions issued, exercised and pending to be exercised.

Minority Interest

Minority Interest represents the share of consolidated profits attributable tonon-Marico shareholders in Marico Bangladesh Limited and International Consumer ProductsCorporation:

1. The Company's Bangladesh subsidiary, Marico Bangladesh Limited, had listed 10% ofits equity share capital on the Dhaka Stock Exchange in September 2009 by issuing freshshares to public in that country.

2. The Company acquired 85% stake in International Consumer Products Corporation (ICP)in Vietnam and started consolidating it with effect from February 18, 2011. The balance15% shareholding continues to be with the company founder.

Increase in minority interest is on account of increase in profits in Marico Bangladeshand ICR

Non-current Liabilities

Non-current Liabilities include borrowings which are payable after one year or morefrom the date of the balance sheet and long term provisions such as gratuity. Theseinclude a judicious blend of borrowings in local and foreign currency. Long termborrowings have increased on account of issue of Non-convertible Debentures worth INR 100crore during FY13.

Current Liabilities

Current Liabilities mainly comprise the amounts payable by the Company for the purchaseof various input materials and services and short-term provisions. Increase in currentliabilities is mainly on account of trade payables which are in line with the businessgrowth. Debentures maturing within a year from the balance sheet date are part of OtherCurrent Liabilities.

Fixed Assets

Fixed Assets represent investments made by the Company in tangible assets such asbuildings, plant and machinery, furniture and fixtures etc. Apart from normal yearlycapital expenditure, the increase is on account of purchase of the new corporate office inMumbai and youth brand trademarks acquired from Reckitt Benckiser.

Goodwill on Consolidation

Goodwill on Consolidation represents the consideration paid to acquire companies inexcess of their net assets. The break-up of goodwill on consolidation is as below:

Acquisitions Amount (INR/Cr.)
Vietnam (85%) 222.3
Derma Rx 141.3
Enaleni & Ingwe (South Africa) 30.9
Haircode & Fiancee (Egypt) 1.0
Total 395.5

Non-current Investments

Non-current Investments comprise long-term investments, the full value of which willnot be realized before one year from the date of the balance sheet. There has been nosignificant change in the non-current investments this year compared to FY12.

Deferred Tax Asset (DTA)

Deferred Tax Asset represents the timing differences resulting due to variations in thetreatment of items as per Income Tax Act, 1961 and Indian GAAP

The amount of Deferred Tax Asset has come down on account of:

• There is incremental deferred tax charge on account of change in method ofdepreciation from written down value to the straight line method, which has resulted inlower DTA.

• The Company had adjusted in the Books of Account the value of Intangible Assetsagainst the Capital Redemption Reserve and Securities Premium Account under the CapitalRestructuring Scheme in an earlier year and hence created a DTA. As the written down valueof those Intangible Assets as per Taxation books is reducing each year, the DTA is gettingreversed.

These are explained in Note 16 of the Consolidated Financial Statement.

Long-term Loans and Advances

Long-term Loans and Advances include the amounts paid by the Company recoverable incash or in kind after 12 months from the balance sheet date. These include securitydeposits, advances paid to suppliers in select cases etc. There has been no substantialchange in Long-term Loans and Advances in FY13.

Other Non-current Assets

Other Non-current Assets include receivables/ entitlements maturing after more than 12months from the balance sheet date. Increase in Other Non-current Assets is on account ofan increase in MAT credit entitlement.

Current Investments

Current investments comprise short-term investments, the full value of which will berealized before one year from the date of the balance sheet. It includes investments madein Mutual Funds, Bank Certificates of Deposits etc. Decrease in current investments ismainly on account of the investments redeemed for funding the new corporate office inMumbai.


Inventory includes the stocks of raw material, packing material, work in process andfinished goods held for sale in the ordinary course of business. Increase in Inventory isin line with the organic and inorganic business growth.

Trade Receivables

Trade Receivables include the monies to be received from its customers against salesmade to them. Decrease in Trade Receivables is on account of debtor days reducing from 17days in FY12 to 15 days in FY13.

Cash and Cash Equivalents

This includes amounts lying in Cash and with the Company's bankers. There is anincrease in the cash balances primarily due to Fixed Deposits in Bangladesh and Vietnammaturing within one year from the date of the Balance Sheet for working capitalrequirement and other short-term commitments.

Short-term Loans and Advances

Short-term Loans and Advances include monies to be received within one year from thedate of the balance sheet. Increase in Short-term Loans and Advances are mainly on accountof the advances to Welfare of Mariconians Trust which will mature within one year from thedate of the Balance Sheet. This trust manages the long term incentive plan, Marico StockAppreciation Rights Plan (STAR Plan) for its employees. Under the plan, stock appreciationrights are granted to certain eligible employees.

Other Current Assets

Other Current Assets include all other monies to be received within one year from thedate of the balance sheet, such as interest receivable, export incentive receivable etc.There is no significant change in Other Current Assets.


For other corporate developments, refer to the Directors' Report.


Marico has positioned itself strategically, in the Developing and Emerging (D & E)markets of Asia and Africa. Most of these markets have large populations with growingGDPs, where affluence is expected to continue to rise and segments where Maricoparticipates - hair care, body care, skin care and health foods - are under-penetrated.The Company believes that in D & E markets, focus on the long-term is crucial.Long-term success can be ensured only through stronger brands that enjoy loyal consumerfranchises. The Company has therefore chosen to prioritize expansion of consumer franchiseover expansion of margins.

The unified Domestic and International FMCG business will aim at leveraging thesynergies in portfolio unlocking, efficiencies in supply chain and talent mobilization inthe medium term.

Here is a broad outline of Marico's strategies and the expected outcome for its variousbusinesses:

FMCG Business in India:

• With Parachute, the company will aim to grow by leading market expansion throughits recruiter low unit size packs. In rural areas, where the market share is relativelylow as compared to its overall market share, the Company aims to gain market share. TheCompany expects to achieve volume growth of 7% to 8% per annum in the medium to long term.However the growth rates in the near term may be slightly higher.

• With Nihar, Parachute Advansed and Hair & Care, Marico will focus on sharegain through a wider participation, there by providing specificity of benefit to consumersaccompanied by effective and insightful communication. Successful execution of thisstrategy is expected to result in annual volume growth of 15% to 17% in the value-addedhair oils portfolio over the next 2-3 years.

• The Company's efforts in expanding rural reach is also expected to contributetowards franchise expansion in coconut oils and hair oils.

• Saffola is riding a trend in healthy living being adopted by the Indianconsumer.

Its premium refined edible oil franchise expects to return to a growth rate of about15% in volume in the medium term. The growth rates in edible oils are expected to reachdouble digits from FY14 onwards. In addition the Company plans to build a sizeablebusiness in the healthy foods space by leveraging Saffola's equity. It aims to deriveabout 25% revenues of Saffola from healthy foods over a period of 3 to 4 years.

• The company has integrated the newly acquired brands, Set Wet, Zatak and Livoninto its sales and distribution network. Being in tail wind categories, this portfolio isexpected to have a rate of growth higher than Marico's existing portfolio, viz. in theregion of 20% to 25% and operating margins in the region of 17% to 18%, higher than theGroup average.

FMCG Business in International geographies:

• Marico will focus on growing the categories where it has significant marketshare - such as male grooming in MENA and Vietnam.

• The Company will focus on complementing growth of Parachute Coconut Oil inBangladesh by establishing other products already/yet to be introduced in the market. Thepressure on growth experienced during FY13 is expected to come off to normal levels duringFY14.

• In South Africa it would work on increasing share in key categories and over themedium term in expanding its footprint to other parts of sub-Saharan Africa. It will alsocontinue to scout for bolt-on acquisitions to increase the scale of business in SouthAfrica.

• In MENA, the company will focus on driving penetration. The Company is confidentthat it will overcome the challenges it faced in the region from the second half of FY14.

• Both the X-Men business in Vietnam and Code 10 in Malaysia are expected tocontinue to show healthy growths.

• The Company will also explore other countries in the D&E markets of Asia andAfrica for expansion in the long term.

• The EBITDA margin is expected to move up to around 13% over the next 2 to 3years.

The unification of the FMCG business under one leadership is expected to result inswifter movement of portfolio, best practices and talent across geographies. There willalso be synergies across the value chain that will unfold over a period of time.

Kaya Skincare Solutions (business to be demerged with effect from April 1, 2013):

• The near-term focus is on same store sales growth to improve capacityutilization and clinic profitability.

• Kaya will remain cautious in its expansion plans until it gets a higher level ofconfidence over the business model.

• It will endeavor to maximize the potential from sale of products. Kaya Skin Baris another step in that direction. It will prototype the concept with 4-5 stores duringFY14.

• In the Middle East the business is focused on same store growth by increasingfootfalls and retaining existing customers through innovation in its range of services.The addition, the Derma-Rx range of products, will accelerate top line growth.

• The Company believes that Kaya has distinct potential to create value as anindependent business. The proposed demerger into a separate entity will allow it to be runin an entrepreneurial manner, much needed for a business of its size.


• The medium to longer term outlook on both the FMCG Business and the Kayabusiness remains positive.

• In the medium term, the Company will focus on strengthening the building blocksfor future value creation - strong equities for its existing brands amongst its consumers,volume growths, robust new product pipelines and operational effectiveness.

Long Term Outlook

The Company's belief in the long term potential of the businesses continues to bestrong. This belief stands bolstered by the record of strong volume growths acrosscategories in recent years. This emboldens the Company to spell out its preference forgrowing volume franchise as compared to focusing on profit margins alone.

On behalf ofthe Board of Directors,

Harsh Mariwala

Chairman & Managing Director

Place: Mumbai

Date: April 30, 2013


Peer Comparison

Company Market Cap
(Rs. in Cr.)
Dabur India 31,214.02 48.38 19.63 28.30 40.9 44.0 0.18
Godrej Consumer 28,665.08 52.30 10.38 38.60 19.3 22.2 0.10
Marico 13,507.43 30.44 6.78 23.25 27.6 26.5 0.42
Emami 10,556.64 28.22 13.58 21.99 43.9 44.3 0.15
Bajaj Corp 3,236.89 18.53 6.69 14.33 36.7 46.0 0.00
Safal Herbs 176.50 0.00 19.83 0.00 10.8 5.6 1.10
J L Morison(I) 51.38 0.00 0.71 14.19 -3.7 -1.8 0.21
JHS Sven.Lab. 18.08 0.00 0.24 5.72 -10.5 0.9 0.97
Amar Remedies 15.88 0.00 0.07 6.45 19.1 17.6 1.29
MFL India 13.66 94.75 0.41 5.07 0.6 5.2 0.44
GKB Ophthalmics 13.05 18.07 0.76 8.18 -1.8 7.5 0.81
Paramount Cosmet 9.43 6.49 0.44 4.12 6.9 11.5 0.69
Enjayes Natural 7.28 0.00 2.10 0.00 0.0 0.0 0.74
Birla Pacific 6.39 6.33 0.07 0.00 0.0 0.0 0.00
Ador Multi Prod. 3.39 0.00 0.73 0.00 -9.1 -10.4 0.13

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Key Information

Key Executives:

Harsh Mariwala , Chairman  

Nikhil Khattau , Director  

Rajeev Bakshi , Director  

Atul Choksey , Director  

Company Head Office / Quarters:
9th Floor Grande Palladium,
175 CST Rd Kalina Santacruz(E),
Phone : 91-022-66480480
Fax : 91-022-26542636
E-mail :
Web :

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