Bajaj Consumer Care Ltd Management Discussions.

Indian Economy

The recovery in growth in 2017 – 18 has been lacklustre. However it is expected to strengthen in the coming year in 2018 – 19. Several factors are expected to accelerate the pace of economic activity in 2018-19. First, there are now clearer signs of revival in investment activity as reflected in the sustained expansion in capital goods production and still rising imports, albeit at a slower pace than in January. Second, global demand has been improving, which should encourage exports and boost fresh investment. GDP growth is projected to strengthen from 6.6 per cent in 2017-18 to 7.4 per cent in 2018-19. The various macroeconomic indicators have been pointing to recovery in growth which is expected to further pick up on normal monsoon in coming months. Expectations of normal monsoon season will further strengthen the rural demand driving up the GDP growth. The surplus liquidity in the system has largely reduced and it is expected to turn negative in the coming months point to pick up in credit growth in the system. Goods and services tax (GST) implementation had an adverse, even if transient, effect on urban consumption through loss of output and employment in the labor-intensive unorganized sector. Government expenditure provided sustained support to aggregate demand, with a pick-up in pace in the second half. Gross fixed capital formation turned around in Q2 and accelerated in the second half – markedly so in Q3 – reflecting the first signs of a sustained expansion in capital goods production and a modest revival of construction activity. Net exports dragged down aggregate demand in 2017-18 due to a surge in imports and deceleration in exports in Q3, the latter being driven in part by GST-related working capital disruptions.

Retail inflation, measured by the year-on-year change in the CPI, fell from a high of 5.1 per cent in January to 4.4 per cent in February due to a decline in inflation in food and fuel. Excluding the estimated impact of an increase in the house rent allowances (HRA) for central government employees under the 7th central pay commission (CPC), the headline inflation for February was at 4.1 per cent. Food inflation declined by 120 bps in February, pulled down by a sharp decline in vegetable prices, especially of onions and tomatoes, along with continuing deflation in pulses. The fall in prices was also observed in other food components such as eggs, sugar, meat and fish, oils, spices, cereals and milk. Headline inflation should remain around 4% levels on account of focus from RBI to contain inflation and its expectations and Central Governments commitment towards fiscal consolidation.

Crude Oil Price Movement

Crude oil prices have become volatile in the recent period. After softening in February from multi-year highs on increased production in the US, crude prices hardened in the second half of March, driven by rebalancing of supply by OPEC and Russia, and drawdown of US inventories. In September 2016, OPEC announced production cuts based on agreement with its members. The signing of the agreement in end-November led to sharp jump in global crude oil prices. If OPEC sticks to the agreed production cuts of 1.2 mb/day till the next review of the agreement in May 2018, global crude oil production will move to deficit in FY 2019 and crude oil prices can potentially move to US $80 per barrel. Going forward crude oil is expected to trade between $ 65 to $ 75 per barrel with potentially upside bias in prices.

USD INR movement

In currency markets, the US dollar, which recovered somewhat in early March on an optimistic outlook of the economy, shed most of its gains in the latter part of the month on a less hawkish stance of the Fed and on anxieties surrounding a possible trade war. Among other major currencies, the euro continued to appreciate on an improving growth outlook for the region. Most EME currencies have retreated in the wake of the recent market volatility and the improving US economic outlook, though investors continued to discriminate on country-specific factors.

Key Highlights of the Company performance in FY 18 :

• Sales increased to Rs. 81,185 lacs in FY18 from Rs. 79,049 lacs in FY17, registering a growth of 2.70 %.

• Earnings before interest, depreciation, brand amortization and tax decreased to Rs. 26,367 lacs in FY18 from Rs. 27,000 lacs in FY 17, registering a decline of 2.34%.

• Profit after Tax (PAT) decreased by 2.12 % from Rs. 22,096 lacs in FY 17 to Rs. 21,627 lacs in FY18.

Company sales during last two years:

Quarterly Sales, EBITDA & PAT of the Company during the year as follows:

The Hair Oil Industry

The hair oil category has shown a strong growth in FY 2017-18 with a value growth of 10.9% and a volume growth of 7.4%. (Source : Nielsen Offtake Nos.)

Overall Hair Oil Market

In this strong growing market, Bajaj Almond Drops Non Sticky Hair Oil, has been able to keep up with the market pace in Urban, thereby maintain its value share at 10% & increasing its volume share in Urban by 0.3% to 7.8%. It has also rectified the issue of slower growths in bottles skus that it had faced last year.

In Rural, however the growths were subdued due to the GST impact and recovery of sales numbers took time. Hence at a rural level, the value share has declined by 0.6% to 8.9% and volume share has declined by 0.3% to 6.6%. This has resulted in a value share loss of -0.3% to 9.5 % at U+R level, but maintained volume share at 7.3%. at U+R

This year, Bajaj Almond drops has been able to improve the gross margins for the entire portfolio, as the saliency of bottles (20ml and above SKUs) has increased. The bottle SKUs have grown at a healthy rate of 9.3% in value and 9.3% in volume for the period of FY 17-18. The SKU wise volume saliency is shown in the following table

The brand continues to maintain strong dominance on the distribution front and is present across 3.92 MM outlets as on Mar 18. In the LHO category, the brand has continued to increase its dominance and the value market share has increased by 0.6% to 61.3%. In urban, the value market share is 59.8% and in rural it is 63.7% as on MAT Mar 18. In order to further expand our footprint in the Hair oils category and to strengthen our product portfolio, we restaged Bajaj Brahmi Amla Hair oil with an Ayurvedic formulation and a premium new packaging and also launched a completely new Hair oil in the value-added coconut oil segment – Bajaj Coco Jasmine Hair oil. With the New Bajaj Brahmi Amla Ayurvedic Hair Oil we intend to leverage our heritage of over 90 years with the benefits of Ayurvedic Brahmi to provide hair oil consumers with an effective solution for their hair-fall problem. We also signed on noted TV actress Dhrashti Dhami as the Brand Ambassador for Bajaj Brahmi Amla Ayurvedic Hair oil.

Bajaj Brahmi Amla Ayurvedic Hair Oil – Offtake and Distribution Trend

New Bajaj Coco Jasmine Hair oil has a unique combination of coconut oil and Vitamin E to reduce hair breakage by 3 times. It also has jasmine extracts to give it a pleasant fragrance. This is the first product to roll out of our newly founded innovation centre and has been tested extensively with consumers before launch. We intend to continue our focus on innovation and come out with more such breakthrough products in the future.

Skin care

NOMARKS has shown strong results this year in offtake and internal sales on the back of investments for the brand with a new TV commercial, print, outdoor, digital, consumer promotions & trade support. The focus on chemist channel through deployment of a pharma sales team in our test market (UP) has also worked and is a key reason for growth. The spillover impact of the media and improved positive sentiment has helped to turnaround the brands internal sales in all zones except the low salience South zone. As a result, the all India market shares have also moved up in line with the strong positive growth rates for the focus product – NM cream in our Domestic business.

We plan to restage the brand in the first half of next year. The restage for brand will mean new packaging & new communication proposition both consumer validated, and a promising new celebrity. We will further build on the claim of "Starts working on Marks from Day 1" as it has worked well for us.

Market Shares: UP- Womens Antimarks cream category

Sales & Distribution

The entire Sales and distribution set up went through the transformation journey towards full automation and consolidation across all channels. 95% of the Field Force is currently working with SFA and each direct outlet coverage is captured. The entire set of direct distributor is 100% operating on DMS which forms the main backbone for data processing. We are in a position to track channel wise sales, range , throughput , effectivity of each ISR and distributor live across the country. The entire manual claim management have shifted to automated process thereby reducing Turn Around Time (TAT) by 90%. Massive consolidation exercise at the distributor level happened last year thereby reducing the distributor count by 35%. In 2 years the turnover per distributor doubled giving us better leverage with our channel partners. Continuing our thrust on Rural we launched & successfully rolled out Rural SFA software and one of the very few FMCG companies to do so. We continue to be the one fastest company in the FMCG to shift to fully automated ITeS. Distribution continues to be the backbone of this organization and we expect Automation to further enhance our reach and presence in the market.

Operations

The Company has been continuously striving to strengthen procurement process, manufacturing operations, marketing & human resource management and back-end operations which is demonstrated in the Companys performance during the year 2017-18

1. Supply Chain & Procurement

FY 17-18 was a year of change in domestic market as well as volatility in Global markets. While events like GST, Syria created uncertainty in markets, crude continued its rising trend from $45 range to $60. Your company had taken strategic calls during start of the year to maintain cost within a range of rising trend. While implementation of GST created disruption there were pockets of opportunities which we would encash e.g. reduction in freight cost.

Introduction of bidding process and augmentation of supply base in addition to GST efficiency enabled us to lower primary freight cost with rising crude prices. Consolidation of distribution model is progressing in line with strategy approved last year with depot counts now at 24 v/s 28 last year. Closure of 6 more depots is planned in 2018-19. E-sourcing/e-auction is further extended to include primary freight and sleeves.

Company has also tied up with supply chain analytics firm to improve its statistical forecast model, minimise variability and initiate demand sensing process for various interventions planned in the market place. This has helped us to improve service levels. Batch tracking is implemented in ERP for all products which has also helped us in tracking and reduction of slow and non-moving inventories. Your company has also completed pilot for hedging price risk associated with key commodities, which can now be scaled up to have stable input material pricing for given time period and partially insulate business from unforeseen volatility. GST implementation went on smoothly supported by our strong supply partners and internal cross functional teams. Design work is initiated for our new green field facility at Vadodara

Focus for 2018-19 is on accelerating speed of execution in areas of depot consolidation, sourcing initiatives, improving secondary freight tracking and hygiene of delivery as we prepare for relaunch of key SKUs. Supply chain analytics will also be scaled up to give us more insight into trends and increase planning horizon. Network re-configuration including manufacturing and distribution network with GST and changes in fiscal benefit status of our manufacturing sites is also of significant importance for us as we move into 2018-19 and your company is working towards successful and time bound rollout of same.

2. Manufacturing

Company has nine production facilities including third party operations to cover foot prints across India and overseas, Broadly Hair oil & skin care products are manufactured at factories situated in Himachal Pradesh, Uttarakhand & Guwahati regions. Out of nine manufacturing facilities , 4 Units are there at Paonta sahib & Parwanoo three in Uttrakhand & one in Guwahati for manufacturing all variants of hair oils & Nomarks skin care products.

Other than hair & skin care Portfolio Company have one facility also located in Udaipur, Rajasthan for manufacturing of oral care product.

Plant operations: -

In a similar way of Newly stabilized state of the art, world class manufacturing facilities at Guwahati the other plants of company has also Initiated activities to become Best in class, efficient, cost effective and Green factories. Based on Japanese Improvement system Kaizens, the continuous improvement theme has been rolled out across factories in a big way to improve operational excellences at works.

As a concept implementations across factories, Infrastructural up gradations has been planned in factories to improve overall product quality, New age technology, high speed machines, contamination free stainless steel tanks & piping, dust free environment, fire protection system and high level of Industrial automations .

A special attention has been given to use Natural and energy efficient lighting, Natural cooling and heating along with other energy saving initiatives across plants.

Systems & Processes: -

To deliver best quality products to consumers, all manufacturing facilities has completed annual certification of ISO standards along with implementation of worlds renowned manufacturing excellence programs implementations like TPM, 5S & quality circles. Under this scheme warehouses have also been covered this year as potential locations for ISO systems implementations for improving overall efficiency and productivity. Environment & safety: -

Under go green initiatives company has continued policy of using only BEE 5 star rated equipments, LED lights, Fans, blowers etc. with continual reduction in resource wastages of air & water. Although having best in class safety systems implementations, the company has allocated additional investments this year to improve fire safety protection in plant and warehouses with provisions of sensor based fire control system, last point reach of hydrants, emergency controls, real time drills, fire fighters training etc. New product development: -

To Fulfill grown requirements of market and

Maintaining larger portfolio, company has launched new product of coco jasmine hair oil, Ayurveda brahmi amla hair oil along with packaging improvements in Nomarks portfolio & Almond drop hair oil products this year.

Upkeep & upgrade: -

To keep fit & ready to deliver machines always, the best systems of TPM has been implemented by plants with large nos of supportive Kaizens, one point lessons & autonomous maintenance practices.

List of ISO Certifications

The following manufacturing facilities of the Company have been awarded the prestigious ISO certification in respect of quality management systems, environment management systems and occupational health and safety:

1. PARWANOO PLANT, HIMACHAL PRADESH a. ISO: 9001: 2015 - Quality Management System

b. ISO: 14001: 2015 - Environment Management System

c. OHSAS 18001: 2007 – Occupational Health and Safety.

2. POANTA SAHIB PLANT, HIMACHAL PRADESH a. ISO: 9001: 2015 - Quality Management System

b. ISO: 14001: 2015 - Environment Management System

c. OHSAS 18001: 2007 – Occupational Health and Safety.

3. DEHRADUN PLANT, UTTARAKHAND

a. ISO: 9001: 2015 - Quality Management System

b. ISO: 14001: 2015 - Environment Management System

c. OHSAS 18001: 2007 – Occupational Health and Safety.

4. DEHRADUN WAREHOUSE

a. ISO: 9001: 2015 - Quality Management

System

5. Zirakpur Warehouse a. ISO: 9001: 2015 - Quality Management System

List of Halal Certifications

Export Opportunity seeking – Opportunities to tap the global Halal Food market of about 2 billion people (Middle East, Asia Pacific, EU, USA, LATAM, Central Asia) In order to enhance the marketability of products in Muslim countries/markets. This year we have got the following products HALAAL CERTIFIED:

a. Bajaj Almond Drops Hair Oil b. Bajaj Jasmine Hair Oil

c. Bajaj Amla Hair Oil d. Bajaj Brahmi Amla Hair Oil

e. Bajaj Brahmi Amla Ayurvedic Hair Oil

f. Bajaj Kailash Parbat Cooling Oil

g. Bajaj Kailash Parbat Barfila Thanda Tel h. Bajaj Nomarks For Dry Skin Cream For Blemish Free Glowing Fairness

i. Bajaj Nomarks All Skin Types For Clear Glowing

Fairness Cream j. Bajaj Nomarks For All Skin Face Wash For Clear Glowing Fairness

k. Bajaj Nomarks For Dry Skin Face wash

l. Bajaj Nomarks Neem Face Wash m. Bajaj Nomarks Exfoliating Face Scrub (Walnut & Apricot)

n. Bajaj Nomarks No Pimples Nomarks Soft Scrub o. Bajaj Nomarks – Face Pack (Wet) p. Bajaj Nomarks Face Pack (Dry)

q. Bajaj Almond Drops Moisturising Soap

r. Bajaj Nomarks Neem Soap

s. Bajaj Nomarks Herbal Scrub Soap

t. Bajaj Nomarks Oil Control Soap

u. Bajaj Nomarks Moisturizing Soap

3. Treasury Operations

During the Financial Year your companys Treasury operations continued to focus on generating stable returns for the funds available with the defined framework of investments. The year under review was characterized by extreme volatility with rate cuts till August 2017 and then rising interest rate scenario evolving due to number of internal and external factors. Indian rupee has also shown significant volatility against Dollar while fluctuating between 64 to 68 levels.

1. Under rising interest rates scenario, we had systematically reduced the duration of the portfolio and deployed funds in shorter tenor funds and liquid funds. Going forward the duration of the fixed income investments will be dynamically managed, and efforts will be to generate stable accrual income with lower duration of the portfolio.

2. We increased the duration of our portfolio on expectations of falling inflation and improving macroeconomic conditions. Eventually on lower inflation prints RBI cut interest rates by 25 bps in August 2017. However since then due to evolving internal and external macroeconomic conditions, interest rates across the curve have spiked by more than 100 bps.

3. We have started reducing the duration of our bond portfolio as soon as RBI changed its monetary stance from accommodative to Neutral and will continue to remain on lower side of duration till RBI maintains its Neutral stance.

4. We have followed conservative investment policy thereby investing in AAA rated bonds thereby earning stable accrual income through coupon interests which was higher than money market rates which were at their lowest during the year.

5. To maximize our realizations from forex remittances, we have initiated forex hedging mechanism to actively cover our export collections in forward market.

We will continue to tactically shift our between bonds and money market instruments depending upon interest rate scenario and liquidity condition in market. Our company Treasury remains committed to actively manage portfolio to generate higher returns without sacrificing the credit quality of portfolio. Within seven years of treasury operations, our company has achieved credible reputation in debt markets for regular investments.

4. Human Resources & Industrial Relations

In 2017-18, we had institutionalized the BCL Pathfinder, defining the core pillars for the Organization; Winning with Brands, Winning with Sales, Winning with Processes and Winning with People.

Our endeavor was to integrate the organizational processes and initiatives and align them with the core pillars for smooth transition.

As a part of our Employer Branding Strategy, we envisaged to leverage the Social Media Platforms to showcase and highlight the Culture and Initiatives of our organization. Platforms like LinkedIn, Facebook, Glassdoor, Twitter, Instagram were utilized. As a result, there has been a substantial increase in the number of followers on all the platforms. We are also very actively present on twitter & Instagram.

In order to invigorate the change management & readiness and enrich the pool of future ready managers, we had selected management and sales trainees from renowned institutions.

We had scheduled the Town Hall Meetings on a

Quarterly basis from July17. The meetings were organized at Mumbai and all Zonal Locations, including Plants. The objective was to present the company performance and strategy, initiatives and provide an opportunity to the audience to present their ideas, voice their opinions and ask questions to the Leadership team.

As per our Learning Philosophy, the intent is to empower our people assets with the requisite skills and knowledge. We had created the Learning Calendar for the Sales and Non Sales Functions basis the needs identified. The programs were scheduled as per the plan. We had conducted the first Webex Program for the Sales Organization on Performance Management.

In order to gain access to actionable insights and create & sustain the great workplace ethos, we had participated in the GPTW Survey this year. This has now become a Calendar Event that enables the organization to accentuate our strengths and identify the areas of opportunity. Our Managing Director and President – Sales and Marketing were covered in the televised series "Incredible Journeys – Brands and Leaders" on CNBC TV 18 and CNBC Awaaz, wherein they shared the Vision of Bajaj Corp Ltd and the Changing FMCG Industry Landscape. Pursuant to our Organizations Philosophy to provide internal growth opportunities to our employees, we scheduled the Assessment Centre for the frontline executives. The objective was to support our team of Sales Officers in their skill and attitude growth journey by exposing them to Best-in-class development/assessment tools.

We had initiated the 3600 Feedback for our Zonal Sales Heads. The initiative enabled them to identify and Develop their individual strengths and continuously work to improve on the opportunity areas.

We are continuously striving to attract best talent, enhance employee experience and improve employee retention. In order to achieve this objective, we partnered with Aon-Hewitt and launched the HR Process Optimization Study. We are in the process of redesigning the Talent Management and Performance Management processes.

We upgraded the version of our HR System "BCL Connect" to provide an enhanced self-service and portal navigation experience to our employees. We benchmarked and strengthened organization structure of our manufacturing units. This initiative helped employees to focus on continuous improvement, enhanced productivity and deliver quality products to our customers and consumers. We initiated the Plant Leadership Team Meetings effective Sep17. This platform has enabled the cross-functional plant teams to provide an update on monthly performance, spot decisioning and sharing of best practices.

We are committed to provide a safe and compliant work place to our employees. We partnered with PWC to assess the statutory compliance status at our Paonta and Guwahati manufacturing sites. As on March 31, 2018 the company had 562 people on its roll. The industrial relations at the Companys units, head office and sales centers were cordial throughout the year, under review.

Financial Review

During FY18 company registered growth in sales. Sales at Rs. 81,185 lacs recorded a growth of 2.70% over previous year.

Abridged Profit & Loss Account of the Company

(Rs. in lacs)

Particulars 2017-18 2016-17 YOY %
Sales 81,185.12 79,049.07 2.70%
Other Operating Income 1,936.21 204.79 845.46%
Total 83,121.33 79,253.86 4.88%
Cost of Material Consumed 27,306.63 26,790.43 1.93%
Employee Cost 7,546.71 5,938.99 27.07%
Advertisement & Sales Promotional Expenses 11,823.51 10,540.00 12.18%
Other Expenses 10,077.09 8,984.20 12.16%
EBITDA 26,367.39 27,000.24 -2.34%
Finance Cost 116.01 93.22 24.45%
Depreciation 685.20 476.46 43.81%
Corporate Social Responsibility 502.50 439.69 14.29%
Other Income 2,434.65 3,934.94 -38.13%
Profit before exceptional item & Tax 27,498.33 29,925.81 -8.11%
Exceptional Item 0.00 1,838.35 -100.00%
Tax 5,871.38 5,991.70 -2.01%
Profit After Tax 21,626.95 22,095.76 -2.12%
Other Comprehensive income (Net off Taxes) 34.84 -84.6 -141.18%
Total Comprehensive income 21,661.79 22,011.16 -1.59%

Total Comprehensive income has declined from 27.84% to 26.68%.

Key Profitability Ratios

(Rs. in lacs)

Particulars 2017-18 2016-17
EBITDA/Sales 32.48% 34.16%
Profit before Tax & Exceptional Item/Sales 33.87% 37.86%
PAT /Sales 26.64% 27.95%
Total Comprehensive Income/Sales 26.68% 27.84%
Earnings Per Share (Rs.) 14.66 14.98

Key Balance Sheet Ratios

(Rs. in lacs)
Particulars 2017-18 2016-17
ROCE 54.84% 57.07%
RONW 42.95% 44.75%
Book Value per Share (Rs.) 34.26 34.02
Net Working Capital* in no. of days sales 1 -8

* Excludes cash & bank balance

With efficient management of supply chain, receivables and creditors, Company managed to keep the net working capital (excluding cash & bank balance) at minimum level..

During the year Company paid an Interim Dividend @ Rs. 12/- per share i.e. 1200% of its share capital. This translated into a cash outflow of Rs. 21,303 lacs (including Corporate Dividend Tax) and a dividend payout of 98.35 % of Total comprehensive income. The Board proposed to confirm the aforesaid interim dividend as final dividend.

Initial Public Offer (IPO)

In the year 2010, the Company through an Initial Public Offering ("IPO") had raised Rs. 297 crore. The Net Issue proceeds Rs. 275.46 crore [Actual Rs. 278.04 crore] was proposed to be applied for the following objects set out in the Prospectus:

(Rs. in crores)

Sr. No. Expenditure Items Total Estimated Expenditure
1. Promote our future products 220.00
2. Acquisitions and other strategic initiatives 50.00
3. General Corporate Purposes 5.46
Total 275.46

At the 7th Annual General Meeting held on August 2, 2013, the shareholders of the Company authorized the Board of Directors to vary and/or revise the aforesaid utilization of proceeds. Pursuant to the said authority granted by the shareholders, the Board of Directors have revised the aforesaid IPO proceeds as under:

(Rs. in crores)

Sr. No. Expenditure Items Estimated Expenditure as per Prospectus Revised Expenditure for net IPO proceeds Amount utilized up- to March 31, 2018
1. Promote our future products 220.00 28.60 28.60
2. Acquisitions and other strategic initiatives 50.00 200.00 140.94
3. General Corporate Purposes 5.46 49.44 7.67
Total 275.46* 278.04* 177.21

*Budgeted IPO expenses Rs. 21 crore (approx) Actual IPO expenses Rs. 18.96 crore (approx) Pending utilisation, net proceeds of the IPO have been invested in interest bearing liquid instruments, bank deposits and other financial products as mentioned herein below:

(Rs. in crores)

Particulars Amount
In Corporate Bonds 100.83
Total 100.83

Internal Control Systems & Adequacy

Company has in place, an adequate internal control and internal audit system managed by qualified and experienced people. Main objective of the system is

• to safeguard the Companys assets against loss through unauthorized use and pilferage

• to ensure that all transactions are authorized, recorded and reported correctly and timely

• to ensure that operations are conducted in an efficient and cost effective manner

• to ensure various compliances under statutory regulations and corporate policies are made on time

• to figure out the weaknesses persisting in the system and suggest remedial measure for the same Internal audits are undertaken on a continuous basis covering all the operations i.e., manufacturing, sales & distribution, marketing, finance, etc. Reports of internal audits are reviewed by management from time to time and desired actions are initiated to strengthen the control and effectiveness of the system.

Risks & Concerns

Our Company, like any other enterprise, is exposed to business risk which can be an internal risks as well as external risks.

One of the key risks faced by the Company in todays scenario is the wide and frequent fluctuations in the prices of its raw material. Our major raw material LLP is the derivative of crude and the prices of Crude Oil remain highly volatile whole year on account of various international political and economical reasons which are beyond our control and which may results into hike in prices of its derivatives. Similarly the prices of Refined Mustard Oil which is another major ingredient also remain volatile on account of various reasons. The crop mainly depends on monsoon and bad monsoon may result into increase in the prices of RMO. Any further increase in prices of raw materials could create a strain on the operating margins of the Company. While Bajaj Almond Drops has exhibited adequate pricing power, unprecedented increase in raw material prices consequent to crude price increase and

RMO price increase may not be fully passed on and some impact may have to be absorbed by the Company. Inflationary tendencies in the economy and deterioration of macro economic indicators, coupled with unseasonal rain in India, damaging rabi crop to a great extent, can impact the spending power of the consumer because of which down trading from branded products to non- branded can occur which can affect the operating performance of the Company.

We operate in a highly competitive FMCG market with competitors who may have better ability to spend more aggressively on advertising and marketing and more flexibility to respond to changing business and economic conditions. Further, there are regional or smaller competitors who have certain advantages over us. An increase in the amount of competition that we face could have a material adverse effect on our market share and sales.

The FMCG environment is competition intensive and to ensure survival in this industry one has to focus on branding, product development and innovation but such expenditure carry the inherent risk of failure.

Any unexpected changes in regulatory framework pertaining to fiscal benefits and other related issue can affect our operations and profitability.

However the Company is well aware of the above risks and as part of business strategy has put in mechanism to ensure that they are mitigated with timely action.

Cautionary Statement

Statements in the management discussion and analysis report describing the Companys objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable laws and regulations and futuristic in nature. Actual performance may differ materially from those either expressed or implied. Such statements represent intentions of the management and the efforts put into realise certain goals. The success in realising these depends on various factors both internal and external. Investors, therefore, are requested to make their own independent judgments before taking any investment decisions.