3M India Ltd Management Discussions.

Cautionary Statement:

Members and Investors are cautioned that the discussion in this section of the Annual Report may contain statements that involve risks and uncertainties. Forward-looking statements mentioned may involve risks and uncertainties that could cause results to differ materially from those projected. Consequently, actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no obligations, assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forwardlooking statements depending on a variety of factors.

THE COMPANY

The Company is the flagship listed Company of 3M Company, USA in India. 3M Company, USA holds 75% equity stake in the Company and is a diversified technology and science company with a global presence in the following businesses: Safety and Industrial: Transportation & Electronics: Health Care: and Consumer and is among the leading manufacturers of products for many of the markets it serves. Most of its products involve expertise in technology, product development, manufacturing, and marketing, and are subject to competition from products manufactured and sold by other technologically oriented companies.

The Company has manufacturing facilities in India at Ahmedabad, Bengaluru, Pune and has the Corporate Office and Customer Innovation Center (R&D Center) in Bengaluru. As at March 31, 2021, the Company had employee strength of 1,146 personnel. As on March 31, 2021, your Company was ranked 111th (PY: 97th) based on Market Capitalization @ Rs. 34,28,710 Lakhs (PY: Rs. 21,20,982 Lakhs) and is now one among the top 500 (PY: top 100) Companies based on Market Capitalization (Source: NSE). The Company managed its operations in four (4) operating business segments: Safety and Industrial: Transportation & Electronics: Health Care: and Consumer. The Companys four business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources.

3M products are sold through numerous distribution channels, including directly to users and through numerous e-commerce and traditional wholesalers, retailers, jobbers, distributors, and dealers in a wide variety of trades in many countries around the world. Management believes the confidence of wholesalers, retailers, jobbers, distributors and dealers in 3M and its products — a confidence developed through long association with skilled marketing and sales representatives — has contributed significantly to 3Ms position in the marketplace and to its growth.

The Company is committed to creating and returning value to shareholders. Accordingly, the Company is dedicated to achieving high levels of operating performance, cost competitiveness, enhancing the productive asset and resource base and striving for excellence in all areas of operations. The Company firmly believes that its success in the marketplace and good reputation are among the primary determinants of shareholder value. Its close relationship with customers and a deep understanding of their challenges and expectations drive the development of new products and services. With many decades of expertise and know- how, the Company offers its customers solutions that enhance their projects and builds trust. Anticipating customer requirements early and being able to address them effectively requires a strong commercial backbone. The Company continues to develop this strength by institutionalizing sound commercial processes and building world-class commercial capabilities across its marketing and sales teams. The Company uses different innovative approach in the development of its products and services, as well as execution of growth opportunities. Your Company is also committed to creating value for all its stakeholders by ensuring that its corporate actions positively impact all the dimensions viz., economic, social and environment.

GLOBAL ECONOMIC OVERVIEW

Year 2020 was marred by the disruption in global economies triggered by the COVID-19 pandemic. As the pandemic continues to evolve across the world, the global economic output is showing signs of recovery but still lower than pre-pandemic projections. It is estimated that output will remain below pre-pandemic trends for a prolonged period as countries deal with the resurgent virus and deploy vaccination programs.

As per World Bank estimates, the global economic output is expected to expand by 4 percent in 2021 and global growth is projected to moderate to 3.8 percent in 2022. The global recovery, which has been softened in the near term by a resurgence of COVID-19 cases, is expected to strengthen as business confidence, private and Govt. consumption, and trade gradually improve, supported by ongoing vaccination. However, risks continues to dominate, including the

possibility of subsequent waves and spread of the virus, delays in vaccine procurement and distribution, and financial impact on several of the worlds emerging and developing economics which have set back key development goals. As the crisis abates, policy makers need to balance the risks from large and growing debt loads with those from slowing the economy through premature fiscal tightening. It is also critical to foster resilience by safeguarding health and education, prioritizing investments in digital technologies and sustainability, improving governance, and enhancing debt transparency.

INDIA ECONOMIC OVERVIEW

1. Real GDP grew by 0.4% in 3QFY21 following a contraction in two successive quarters. According to the second advance estimates of national accounts, real GDP is estimated to contract by (-)8.0% in FY21.

2. IIP contracted by (-)1.6% in January 2021 as compared to a growth of 1.6% in December2020.

3. In February 2021, PMI manufacturing remained high at 57.5.PMI services increased to 55.3, its highest level in one year.

4. CPI inflation increased to 5.0% in February 2021 from 4.1% in January 2021.Core CPI inflation also increased toa 78-month high of 6.1% in February2021.

5. Contraction in Centers gross taxes was lower at (-)1.0%during April-January FY21 as compared to (-)2.0% during April-January FY20.

6. During April-January FY21, Centers capital expenditure posted a strong growth of 35.2% while revenue expenditure grew by 7.7%.

7. During April-January FY21, Centers fiscal deficit stood at 66.8% of the annual revised estimate while the corresponding ratio for revenue deficit was at 62.7%.

8. Growth in merchandise exports fell to 0.7% whereas imports growth rose to 7.0% in February 2021.

9. The OECD, in its Interim Economic Outlook, March 2021, estimated a global contraction of (-)3.4% in 2020 while Indias GDP is estimated to contract by (-)7.4% (FY21).

Headwinds to the Indian economy may emerge from higher inflation prospects due to persistently high domestic fuel prices on account of steadily rising global crude prices. The recovery in global crude prices is driven by a pickup in demand as well as supply side factors. These developments have a significant bearing on prices of petroleum products in India. Petrol prices, for example, are at a historic high, nearly touching INR100/litre in some cities in India. These trends are likely to impart upside risks to headline inflation which has reached 5% in February 2021. Core CPI inflation has also increased to 6.1% in February 2021. According to the RBI, the outlook for core inflation may be adversely impacted by broad-based escalation in cost-push pressures in services and manufacturing prices due to increase in industrial raw material prices.

COVID - 19 in India

With the resurgence of Covid-19, second wave, the daily new cases continue to surge. Assuming that we are close to peak tests, the daily number can only move with positivity rate. Thus, from here on the positivity rate may be the key metric to watch. Given that there has been a constraint in the production of Vaccines in the short term, more lockdowns seem to be the only answer and we are seeing more states announcing various levels of lockdowns.

We believe that the supply side impact on the Economy will be much less compared to the first wave given the less restrictive lockdown. However, it is important to note that relatively stricter lockdowns have now been imposed in States which account for more than half the GDP.

However, given that the virus is more widespread, even impacting small towns and rural areas, the impact on demand is should be higher than what happened during the first wave. States with Positivity rate more than 20% account for 39% of the population and almost half the GDP. The much larger impact of the second wave can be seen from the fact that the number of Active Cases has remained above 1 million for 30 days now. As a comparison the number of active cases peaked at 1.02 mn during the first wave and remained above 1 mn only for 5 days.

Demand impact is much more difficult to predict. The extent and the duration of slowdown will depend on the impacts on income and on consumer sentiment. The Mobility Indicators indicate a broader slowdown, at least for now.

STANDALONE RESULTS OF THE OPERATIONS OF THE COMPANY

The Company on a standalone basis declined by 12.46% at Rs. 242,036.39 Lakhs for the financial year ended March 31, 2021 compared to Rs. 276,487.73 Lakhs in the previous financial year. The Profit before Interest and Depreciation is Rs. 26,454.84 Lakhs compared to Rs. 38,139.12 Lakhs for the previous financial year. Profit before Tax is Rs. 20,244.08 Lakhs compared to Rs. 32,040.31 Lakhs for the previous financial year. The operating margin for the current year is 10.81% compared to 13.59% for the previous financial year. Total Comprehensive Income is Rs. 14,674.69 Lakhs compared to Rs. 21,523.02 Lakhs for the previous financial year. Economic slowdown due to Covid-19 affected the topline growth and bottom-line. Export Sales is Rs. 2,497.17 Lakhs for the financial year ended March 31,2021 compared to Rs. 2,210.14 Lakhs in the previous financial year, an increase of 12.99%, due to demand in the global market.

The Company delivered broad-based growth across most of our end markets in the Jan-Mar 2021 quarter, sustaining the sequential improvements since FY Q2 2020-21. Due to the strong demand rebound as well as supply chain interruptions, the Company experienced cost pressures in raw materials and logistics costs. Notwithstanding, our teams worked hard to ensure that we maintained our service levels to customers. During the Jan- Mar quarter, we also announced actions to consolidate our manufacturing footprint in Pune, which will improve our operational efficiencies and customer service.

Other Income:

The other income is Rs. 2,686.77 Lakhs for the financial year 2020-21 compared to Rs. 4,158.32 Lakhs for the previous financial year 2019-20.

Cost of Goods sold:

The % of cost of raw material consumed as against sales for the financial year 2020-21 is higher by 3.63% at 61.07% as against 57.44% for the previous financial year 2019-20, due to product mix and increase in foreign currency exchange rate.

Employee Benefits Expense:

Employee cost as a % of sales for the financial year 2020-21 stood at 13.76% (previous financial year was 10.61%) at Rs. 33,677.10 Lakhs (previous financial year: Rs. 29,782.15 Lakhs). Sales per employee has decreased by 2.83% to Rs. 213.55 Lakhs (no. of employees 1,146) in the current financial year 2020-21 from Rs. 219.77 Lakhs (no. of employees 1,277) for the previous financial year 2019-20.

Finance Cost:

The interest cost for the financial year 2020-21 is Rs. 243.22 Lakhs compared to Rs. 361.11 Lakhs in the previous financial year 2019-20. The interest cost is on account of lease rentals of vehicles and office equipment.

Interest earned:

The Company earned Rs. 1,976.53 Lakhs on the surplus during the financial year 2020-21 when compared to Rs. 2,534.76 Lakhs during the financial year 2019-20 by keeping the funds in deposits with the Banks.

Earnings per Share (EPS):

The EPS (Basic and Diluted) of the Company for the financial year 2020-21 was Rs. 132.53 per Share as compared to Rs. 194.38 per Share in the previous financial year, a decrease of 31.82%.

Share Capital:

The Authorized/Issued/Subscribed and Paid-up Capital as at March 31, 2021 is Rs. 11,26,50,700 (divided into 1,12,65,070 Equity Shares of Rs. 10/- each). During the year under review, the Company has not issued Shares with differential voting rights nor granted Stock Options nor Sweat Equity.

Reserves & Surplus:

Entire profit of Rs. 14,674.69 Lakhs is retained in profit and loss account for the year ended March 31, 2021. The Reserves & Surplus is Rs. 221,024.23 Lakhs including the current financial year retained profit.

Shareholders Fund:

The total shareholder funds increased to Rs. 222,150.74 Lakhs as at March 31,2021 from Rs. 207,476.05 Lakhs as of the previous financial year 2019-20, representing a growth of 7.07% mainly because of retained profits of the current financial year.

Depreciation:

The depreciation charge for the current financial year is higher at Rs. 5,967.54 Lakhs when compared to Rs. 5,737.70 Lakhs of previous financial year 2019-20 due to accelerated depreciation of Graphics lines and Glue stick lines and account of new investments.

Fixed Assets-Capital Expenditure:

The gross Fixed Assets as at March 31,2021 was Rs. 43,432.28 Lakhs as compared to Rs. 42,717.30 Lakhs of previous financial year 2019-20. Capital Investments during the financial year 2020-21 were at Rs. 4,041.72 Lakhs (Net of capital work-in-progress and capital advances) (2019-20: Rs. 1,983.52 Lakhs) an increase of 103.77% year on year.

Inventories:

Inventory as at March 31,2021 amounted to Rs. 43,027.05 Lakhs as compared to Rs. 41,104.12 Lakhs of previous financial year 2019-20. The inventory ratio has increased to 105 days as at March 31,2021 from 93 days of previous financial year 2019-20 due to CoVID-19 pandemic.

Trade Receivables:

Trade Receivables as at March 31,2021 amounted to Rs. 46,050.86 Lakhs as against Rs. 50,658.82 Lakhs of previous financial year 2019-20. The debtors turnover ratio is 69 days (previous financial year: 66 days).

Cash and Bank balances:

The total balance of cash and bank balances as at March 31, 2021 was Rs. 93,715.39 Lakhs as compared to Rs. 66,576.71 Lakhs as at March 31,2020.

Current Ratio: 3.0 (2020-21); 3.17(2019-20)

Debt Equity Ratio: 1.03 (2020-21); 2.01 (2019-20)

Interest Coverage Ratio: 84.23 (2020-21); 89.73(2019-20)

Overall analysis of the Profit and Loss (Standalone):

Particulars

Year Ended March 31, 2021

Year Ended March 31, 2020

Rs. in Lakhs % Rs. in Lakhs %
Revenue from operations 242,036.39 98.90 276,487.73 98.52
Other income, net 2,686.77 1.10 4,158.32 1.48
Total Revenue 244,723.16 100.00 280,646.05 100.00
Cost of Materials consumed 93,820.92 38.34 102,856.73 36.65
Purchases of stock-in-trade 53,534.70 21.88 59,157.11 21.08
Changes in inventories of finished goods, work-in-progress and stock-in -trade 2,086.59 0.85 (822.45) (0.29)
Employee benefits expense 33,677.10 13.76 29,782.15 10.61
Other Expenses 35,149.01 14.36 51,533.39 18.36
Profit before Finance costs and Depreciation 26,454.84 10.81 38,139.12 13.59
Finance Costs 243.22 0.10 361.11 0.13
Depreciation and amortization expense 5,967.54 2.44 5,737.70 2.04
Total Expenditure 224,479.08 91.73 248,605.74 88.58
Profit before Tax 20,244.08 8.27 32,040.31 11.42
Tax 5,313.99 2.17 10,143.06 3.61
Profit for the year 14,930.09 6.10 21,897.25 7.80
Items that will not be reclassified subsequently to profit or loss (255.40) (0.10) (374.23) (0.13)
Total comprehensive income for the year 14,674.69 6.00 21,523.02 7.67

Overall analysis of the Profit and Loss (Consolidated):

Particulars

Year Ended March 31, 2021

Year Ended March 31, 2020

Rs. in Lakhs % Rs. in Lakhs %
Revenue from operations 260,483.14 99.06 298,655.09 98.49
Other income, net 2,473.73 0.94 4,589.56 1.51
Total Revenue 262,956.87 100.00 303,244.65 100.00
Cost of Materials consumed 99,441.00 40.63 110,025.50 36.28
Purchases of stock-in-trade 58,365.23 23.85 64,002.11 21.11
Changes in inventories of finished goods, work-in-progress and stock-in -trade 2,101.44 0.86 (399.03) (0.13)
Employee benefits expense 36,990.48 15.12 32,858.51 10.84
Other Expenses 37,636.56 15.38 47,201.52 15.57
Profit before Finance costs and Depreciation 28,422.16 11.61 49,556.04 16.34
Finance Costs 245.41 0.10 366.21 0.12
Depreciation and amortization expense 6,184.59 2.53 5,933.25 1.96
Total Expenditure 240,964.71 98.46 259,988.07 85.74
Profit before Tax from continuing operations 21,992.16 8.99 43,256.58 14.26
Tax 5,754.51 2.35 11,039.66 3.64
Profit for the year from continuing operations 16,237.65 6.64 32,216.92 10.62
Profit for the year 16,237.65 6.64 32,216.92 10.62
Items that will not be reclassified subsequently to profit or loss (292.01) (0.12) (413.22) (0.14)
Total comprehensive income for the year 15,945.64 6.52 31,803.70 10.49

SEGMENTWISE PERFORMANCE:

On a standalone basis, the Safety and Industrial business declined by 6.86%; Transportation business declined by 14.05%; Health Care business declined by 30.24%; and Consumer business declined by 2.13%.

(A) Safety and Industrial Business:

This segment includes businesses that serve the global industrial, electrical and safety markets. This business segment consists of personal safety, industrial adhesives and tapes, abrasives, closure and masking systems, electrical markets, automotive aftermarket, and roofing granules.

(Rs. in Lakhs)
12 Months Ended 31.03.2021 12 Months Ended 31.03.2020
Financial Highlights Segment Revenue 90,245.49 96,893.89
Profit Before Interest & Tax 9,569.74 15,666.59
Capital Employed 39,407.85 38,641.80
Highlights of Safety and Industrial Business • Despite Automotive Aftermarket Division was the first to get impacted with the COVID lockdowns, the team responded swiftly to address the need of the hour with renewed focus on Cabin Hygiene with the existing Anti-Microbial treatments and new product launch ‘Smoggy. Since more of the dealerships were under financial stress coupled with manpower shortages, the 3M team executed a series of Virtual Technician Skill Development Programs to improve productivity & efficiency to manage increased loads during Q3 and Q4. We have also gained significant share of the digital organic growth of DIY product sales through Market Place Models like Amazon & Flipkart through a series of digital campaigns and strong end user connect.
• Strong end customer mapping & review of our reach during the lockdown helped the Abrasive Systems division to bounce back strongly in Q3 and Q4. Also, during the lockdown, the team conducted series of Seminars focused on Automation & productivity with large end customers. 2020 also saw new initiative to use our Global Technology for ‘Make In India project: the 981CP Cubitron II Fiber Discs to meet the Indian customers value expectations.
• Personal Safety Division worked very closely with the HealthCare Businesses of 3M to address the urgent need for personal protective equipment for the Doctors & frontline healthcare staff. Servicing the healthcare requirements were given paramount importance. A considerable set of health care professionals saw immense value in upgrading from disposable respirators to Full Face Reusable Respirators which offers better protection & safety to the users.
• Like the other businesses, Industrial Adhesive and Tapes Division also focused on end customer mapping & review of channel for a strong comeback post lockdown. Continued their focus on Passive Fire Portfolio, driving relevance in Construction and strengthened Converter Business Model, increasing penetration in Transportation, Metal working market, Electronics and Oil and Gas.
• Renewables business (Part of Electrical Markets Division) delivered strong YoY growth inspite of COVID-19 challenges primarily driven by the Solar segment. Corrosion Protection Products and Locating & Marking businesses were impacted due to curtailed project execution and construction activity due to COVID-19.
• In line with the global business model, SIBG India has successfully implemented the Activation Marketing & SIBG Channel Organization cutting across divisions with very closely alignment with Asia & Global teams.

(B) Healthcare Business:

Products and services provided to these and other markets include medical and surgical supplies, oral care solutions (dental and orthodontic products), separation and purification sciences, inhalation and transdermal drug delivery systems, and food safety products.

(Rs. in Lakhs)

12 Months Ended 31.03.2021 12 Months Ended 31.03.2020
Financial Highlights Segment Revenue 30,309.56 43,448.06
Profit Before Interest & Tax 1,933.85 6,628.17
Capital Employed 14,697.92 17,212.77
Highlights of Healthcare Business • Diverted respirators and hand sanitizers to frontline healthcare workers and nodal agencies servicing healthcare requirements at reasonable prices (lesser than Pre- COVID times). 90% of the locally manufactured FFP2 respirators were assigned to healthcare requirements.
• Prioritized service to Biopharma accounts during peak COVID pandemic times and fulfilled on-time supplies resulting in enhanced customer engagement. Also, focused on trials for new molecules at key accounts. This resulted in an increased share of business in most of the Biopharma accounts across India.
• Driven our efforts in development of guidelines, creating awareness about international best practices and driving compliance by collaborating with Professional Medical Organizations such as INS India, AORN India, IDA and CAHO. All these organizations are committed to upgrade the clinical practices as well as upskill their members and the healthcare facilities where they work. 3M has been appointed as knowledge partner by these organizations.
• 3M Health Care Academy scaled up online education initiatives for delivery of local and global content thereby helping hospitals in continuous education efforts and skill upgradation. We also launched the education modules in local languages to make the content accessible and understandable to larger section of the healthcare workers.

(C) Transportation and Electronics Business:

This segment includes businesses that serve global transportation and electronic original equipment manufacturer (OEM) customers. This business segment consists of electronics (display materials and systems, electronic materials solutions), automotive and aerospace, commercial solutions, advanced materials, and transportation safety.

(Rs. in Lakhs)

12 Months Ended 31.03.2021 12 Months Ended 31.03.2020
Financial Highlights Segment Revenue 87,642.35 101,970.45
of Transportation Business Profit Before Interest & Tax 1,487.69 6,858.09
Capital Employed 45,965.18 48,808.50
Highlights of Transportation Business • Year 2020 was a damper on Indian economy, but our economy has shown its resilience. Economic recovery has been backed by clear govt. intent and backed by the recent Union budget.
• In the recent Union Budget, about $80B was pledged for core infra development in the next one year. The major beneficiaries of this would be highways, rural roads, Railways, Unban Infra, Aviation, education etc. Huge focus on building the National Highways will keep spurring the demand of companys Transportation Safety solutions.
• While we are building roads at fastest ever pace with an aim is to cross 40km/ day, our roads are one of the most unsafe roads contributing to 150,000 deaths very year almost 10% of global road fatalities gives an opportunity for company to partner with various stakeholders to make Indian roads safer.
• The Company continued gaining share in the Advanced Materials markets with its differentiated offerings from Fluro polymer solutions such as Fluro Elastomers for Automotive industry, Polymer Processing Additives & Evaporation boats for Flexible packaging industry, Fluro Thermoplastics and Poly Tetra Fluro Ethylene in chemical processing industry and Specialty Additives for Paints & coatings Segment in challenging external environment.
• FY 2020-2021 was very challenging to Automotive Industry as any other industry. First time in the history, April 2020 had NIL automotive production. However, industry being resilient and put its right foot forward to drive growth with personal mobility being preference of consumer and also saw rise of digital sales through dealership. 3M has collaborated with industry on delayed launch of BS VI in CV and PV segments. 3M introduced and stabilized the local NPI muphony for NVH needs of industry and continue to work on the next gen version with muphony 2.0 in 2021-2022. The Company is working with host of OEMs for future Growth. In the 2W segment, the Company introduced 3M Bonding solutions to attach Side Reflectors parts. The year also saw closure of graphic business of 3M in India.
• Commercial solution business has lot of headwinds due to lockdown and COVID impact specially in QSR, Hospitality and IT/ITES offices segment but it also came along some opportunities like Social Distancing graphics & Disinfectant solutions need from different markets, and hence CSD solutions became a critical need in fight against Covid-19.
• CSD also witnessed continued growth from Transportation segment (Railways & Metro). Various plants of Indian Railways registered continued new production of coaches and almost dozen plus metro rail projects sanctioned and work started. 3M paint replacement solutions and graphics designed coaches have become key
highlight for passenger experiment in new age Railways & metro coaches. CSD has also seen continued business from PSU banks mergers and rebranding programs. Few of our success in these segments have been with Canara Bank, PNB and J&K bank etc. Commercial solutions Divisions fleet graphics business has also shown green shoots in EVs space (Amazon Fleet graphics, EV Charging station graphics) and some of largest fleet graphics programs from PDS distribution in AP done through Tata Motors. CSD solutions continued to enhance various brands visibility and their customer experience.

(D) Consumer Business:

This business serves global consumers and consists of home improvement, stationery and office supplies, home care, and consumer health care. This segment also includes, within the Construction and Home Improvement Division, certain retail auto care product lines. Products in this segment include office supply products, stationery products, home improvement products (do-it-yourself), home care products, protective material products, certain consumer retail personal safety products, and consumer healthcare products.

(Rs. in Lakhs)

12 Months Ended 31.03.2021 12 Months Ended 31.03.2020
Financial Highlights Segment Revenue 31,286.00 31,966.12
Profit Before Interest & Tax 3,932.58 6,642.82
Capital Employed 10,455.74 11,377.15
Highlights of Consumber • Prioritized sales through eCommerce platform as more and more shoppers preferred shopping from this channel during lockdown and COVID restrictions.
Business • Worked closely and built strong partnership with e-com retailers and Modern trade retailers for their omni channel, for growth through eCommerce channel.
• Consolidated out GT channel to carry entire CBG portfolio - which would help in better distribution of Scotch, Post-it and Command products, along with Home Care range of products.
• Distribution expansion program aimed at increasing availability of Home Care range of products in Tier B & C towns through partnership with wholesalers across the country.
• Partnered with adjacent category & household brands for cross promotional activities thereby expanding household reach for our products.
• Worked closely with key Modern trade retailers to ensure that our sales bounce back to pre-COVID levels with engagement and planning strong programs to end consumers in Home Care and Stationery categories.
• Integrated marketing campaign to drive penetration of ‘Scotch-Brite Silver Sparks - our lead product in scouring segment.
• Built digital programs with focus on pre-store influence for Home Care, Stationery and DIY range of products.
• Set up a new Go To Market model for Meguiars range of car care products.
• Continued investment in the brands viz "Scotch-Brite", Post-It, Scotch and Command through various brand building activities in Mass Media, Digital Media and in Point of Sales.

OPPORTUNITIES AND THREATS

3Ms globally competitive cost positions and well-crafted business strategies have enabled it to retain its leading market positions. Your Company strongly believes in the 3M™ brand equity and its ability to provide its customers with innovative solutions. Global campaigns and brand building continue to benefit Companys business in India.

The Company is operating in a highly competitive market which may exert pressure both on the top line as well as the bottom line of the Company. The Companys products involve expertise in product development, manufacturing and marketing and are subject to competition from products manufactured and sold by other technologically oriented companies both within India and outside India. In addition, rupee depreciation, fluctuating oil & high commodity prices remain key challenges needing focused attention.

RISKS AND CONCERNS

Provided below are cautionary statements of what your Company believes to be the most important risk factors applicable to the Company.

• Results are impacted by the effects of and changes in economic, political, regulatory, capital markets and risks related to public health crises such as the global pandemic associated with the coronavirus (COVID-19).

• The Companys results are affected by competitive conditions and customer preferences.

• Foreign currency exchange rates and fluctuations in those rates may affect the Companys ability to realize projected growth rates in its sales and earnings.

• The Companys growth objectives are largely dependent on the timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new products and to bring those products to market.

• The Companys future results are subject to fluctuations in the costs and availability of purchased components, compounds, raw materials and energy, including oil and natural gas and their derivatives, due to shortages, increased demand, supply interruptions, currency exchange risks, natural disasters and other factors like Global Pandemic.

• Security breaches and other disruptions to the Companys information technology infrastructure could interfere with the Companys operations, compromise information belonging to the Company or its customers, suppliers, and employees, exposing the Company to liability which could adversely impact the Companys business and reputation.

• The Companys future results may be affected by its operational execution, including scenarios where the Company generates fewer productivity improvements than estimated.

• The Companys strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position.

• Asset impairments.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

All key functions and divisions of the Company are independently responsible to monitor risks associated with in their respective areas of operations such as production, supply chain, marketing, finance, accounting, treasury, legal and other areas like health, safety, and environment. The Company has identified various risks through an internal selfassessment compliance checklist and has laid out necessary procedures to mitigate the same.

The Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies. The Company, through its own Corporate Internal Audit Department, carries out periodic audits to cover all the offices, factories and key areas of business segments based on the plan approved by the Audit Committee and bring out any deviation to internal control procedures. The Internal Auditor functionally reports to the Audit Committee and administratively to the Managing Director. The observations arising out of audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations and status of the implementation is submitted to the Audit Committee of the Board of Directors. The status of implementation of the recommendations is reviewed by the Committee on a regular basis and concerns, if any, are reported to the Board.

DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS

Learning and Development:

Our philosophy of "Development for All" remained a key focus for the Learning and Development function in 2020- 2021. The year for your Company began with focused energies on understanding Change Agility & Growth Mindset to better equip our employees. Supervisory Development remained a priority area with people leaders having the benefit of learning from our well-established local Evolving Leaders Program as well as our global workshops like Leading at the Speed of Trust and 6 Critical Practices for Leading a Team.

Come March 2020 and we realized that this would be a year like no other! The pandemic turned our world virtual in a matter of days. Thanks to our global virtual learning structures created well in advance, 3M India was able to make a quick pivot and Learning became a powerful employee engagement driver in a challenging time. ‘Virtual, ‘Self- paced were the learning mantras for the year, be it Supervisory training, 1:1 Leadership Coaching, All Employee learning, or New Employee Orientations. Conversations around ‘Virtual Collaboration, ‘Remote Supervision, ‘Stress Management and ‘Intercultural Collaboration became particularly meaningful. 85% of our employees, were involved in various forms of learning during the year. The learning appetite was visible with 3M India winning the Asia Virtual Learning Contest in 2020 across the 3M in Asia.

Last year, the Company launched ‘Performance Everyday, a global performance management system which required large scale education. The company was moving from a system of reviews at fixed intervals and numerical ratings systems to an approach of continuous dialogue and feedback. L&D played an important role is educating employees and supervisors about this process.

While our non-manufacturing colleagues were able to access resources through our in-house platform, Develop U, learning for shopfloor employees required a new approach in a pandemic year. In regular times, production employee training would be physical, face to face, which was no more an option. We launched ‘TEJ short for ‘The Energy Journey a simplified module to educate employees on well-being and personal energy dimensions. The program was curated from available global content (The Energy Audit, from the Energy Project) and involved the collaborative effort between L&D and the Plant HR teams. What was unique is that our technical associates logged into the sessions through cellphones, the very first time that virtual learning was experimented in a shopfloor environment. Thanks to technology and partnership with the plant leadership teams, social distancing did not come in the way of timely learning connections. By March 2021, we had robust virtual participation from technical associates in all our plants. The program has been recognized internally and externally.

The Company leveraged social learning through an exciting new platform, Novo Ed in a further step to accelerate efforts to bring learning content "Anytime, Anywhere" to learners. Supervisory development was prioritized first, connecting nominated leaders through world class content, technology, and in-house facilitators. Participants from India have been enthusiastic adopters of social learning.

In 2020 the Learning function emerged a strong lever in reinforcing our culture, engaging people in a virtual world, and better equipping them for resilience in changing environment.

HR Business Partnering (HRBP):

Your Company was focused on prioritizing employee safety and providing tools and information for enhancing employee wellness as the pandemic hit us. Employees moved to a Work from Home mode during the lockdown & followed an internally established return to work protocol through the different phases of unlocking and govt regulations.

The HRBP team helped employees by guiding them to participate in programs that enhanced health and wellness with a particular emphasis on psychological safety. Employees were provided curated learning opportunities to thrive in the virtual mode of working. A cross functional team across HR, EHS and Communications came together to create a structured 360-degree wellness engagement through regular initiatives for employees. The initiative covered - Physical & Mental Health , Health & Nutrition, and the overall benefits of "Being Positive" & "Healthier U". These programs conducted weekly and referred to as "Wellness Wednesdays" provided employees with tools, social support, and strategies to adopt and maintain safe and healthy behaviors in the difficult times. All these initiatives were critical in continuing productivity. A partnership with a 3rd party was established to provide a COVID Health support package for employees.

Another area of focus for HRBPs was that of coaching all supervisors in quickly adapting to the new Performance management system- Performance Every day. 3M India also launched several initiatives to enhance inclusive behavior amongst 3Mers. Employees were encouraged to form networks to pursue their interests in supporting inclusive

behavior and becoming allies. The Womens leadership forum had a change of leadership and established a calendar of programs and initiatives. Additionally, during the year, 3M India also established 2 new Employee Resource Networks - The New Employee Opportunity Network (NEON), and the Pride network. NEON is focused on enabling a quick and effective integration of new 3Mers. 3M PRIDE focuses on building an inclusive culture and how we can become allies to the LGBTQI++ community.

In summary the HRBP team played a crucial role in the ongoing engagement and connect with employees.

Employee Relations(ER):

Our continuing focus has been on enhancing the shop floor culture and strengthening our performance philosophy. 3M philosophy on ER has always been ‘direct engagement and communication with the organization. The year was challenging as a decision was made to discontinue the business of Flat Automotive Graphics. This was primarily manufactured in the EC Plant and the Company shared openly and transparently the decision, its rationale, timing, and impact to employees . The Company also offered the opportunity for employees to be transferred to other manufacturing units. This offer was taken up by some employees who have since been transferred to the Ranjangaon facility. The Company also launched an Employee Separation Scheme to facilitate voluntary separation of the impacted employees. This entire process was undertaken with minimum impact to the shopfloor environment and continuous communication with the employees.

Year 2020-21 has also been challenging for our Manufacturing and Supply Chain teams given the context of the pandemic. The Engagement actions in the Plants moved to a virtual mode and programs such as TEJ (The Energy Journey) built the right mindset and positivity amongst employees. The virtual engagement actions in plants extended to family members, even as safe and healthy COVID appropriate behaviors were promoted. Some additional actions undertaken during the year included:

• Changes were made to performance management system for our Technical Associates in early 2021 to further build on the culture of feedback and dialogue.

• Continued focus on discipline in the shopfloor.

• Continued focus of involving our plant employees in local CSR activities.

On behalf of the Board of Directors

Ramesh Ramadurai Mamta Janak Gore
Managing Director
Place : Bengaluru DIN:07109252 Place : Dubai Whole-time Director & Chief Financial Officer
Date : May 28, 2021 Date : May 28, 2021 DIN:08792863