Marico Kaya Enterprises Ltd Directors Report

To the Members,

Your Board of Directors (‘Board’) is pleased to present the First Annual Report of your Company, Marico Kaya Enterprises Limited ("MaKE" or "Company"), for the first financial year beginning from January 19, 2013 to March 31, 2014 (‘the year under review’, ‘the year’ or ‘FY14’).

In line with the requirements of the Listing Agreement with BSE Limited and the National Stock Exchange of India Limited, your Company is reporting consolidated results – taking into account the results of its subsidiaries. This discussion therefore covers the financial results and other developments during January 2013 March 2014 in respect of Marico Kaya Enterprises Limited Consolidated comprising the Skin Solutions Business of Kaya in India and overseas. The consolidated entity has been referred to as ‘MaKE Group’ or ‘Group’ or ‘Your Group’ in this discussion.

FINANCIAL RESULTS – AN OVERVIEW
	Rs. Lacs
Particulars	Year ended March 31, 2014
Consolidated Summary Financials for the Group
Revenue from Operations	36,246.10
Profit before Tax and Exceptional Items	2,234.26
Profit before Tax	4,382.85
Profit after Tax	3,501.76
Marico Kaya Enterprises Limited – Financials
Revenue from Operations	78.08
Profit before Tax	15.22
Less: Provision for Tax for the current year	9.50
Profit after Tax for the current year	5.72
Add : Surplus brought forward	–
Profit available for Appropriation	–
Appropriations:
Distribution to shareholders	–
Tax on dividend	–
Transfer to General Reserve	–
Debenture Redemption Reserve	–
Surplus carried forward	5.72
Total	5.72

Distribution to equity shareholders

With a view to conserve resources for funding any future business requirements, your Directors do not recommend any dividend on equity shares for the period under review.

Management Discussion and Analysis

An Annexure to this Annual Report contains a detailed Management Discussion and Analysis, which, inter alia, covers the following:

• Industry structure and development

• Opportunities and Threats

• Risks and Concerns

• Internal control systems and their adequacy

• Discussion on financial and operational performance

• Segment-wise performance

• Outlook

In addition, a Review of Operations of your Company has been given in this report.

Review of Operations

During the period under consideration, MaKE posted revenue from operations of Rs. 36,246.10 lacs. MaKE’s Consolidated

Net profit after tax & exception was Rs. 3,501.76 lacs.

Brief on Scheme of Arrangement between Marico Limited and Marico Kaya Enterprises Limited and their respective shareholders and creditors

The Hon’ble High Court of Judicature of Bombay vide its order dated September 27, 2013 had approved the Scheme of Arrangement (the "Scheme") between Marico Limited and Marico Kaya Enterprises Limited ("MaKE") and their respective shareholders and creditors. A copy of the Court order was filed with the Office of Registrar of Companies,

Mumbai, Maharashtra on October 17, 2013 and accordingly the Scheme has come into effect from October 17, 2013 (the "Effective Date"). In accordance with the Scheme, entire Kaya Business of Marico Limited was transferred to and vested with MaKE, with effect from the appointed date viz. April 1, 2013 pursuant to Section 391 to 394 read with Sections 78, 100 to 103 of the Companies Act, 1956.

Consequent to the Scheme, the Company had allotted 1,28,97,100 fully paid up equity shares of face value of INR 10/- each on November 9, 2013 to the shareholders of Marico Limited in the prescribed share exchange ratio of 1: 50 i.e. 1 fully paid-up equity share of INR 10 each of MaKE issued and allotted for every 50 fully paid-up equity shares of INR 1 each held in Marico Limited as on the record date i.e. November 5, 2013.

Listing of the Equity Shares of Marico Kaya Enterprises Limited

MaKE had made an application to Securities Exchange Board of India ("SEBI") through National Stock Exchange of India Limited vide its letter dated March 14, 2014 for relaxation from the strict enforcement of the requirement of Rule 19 (2) (b) of the Securities Contract Regulation (Rules), 1957 ‘‘(SCRR)’’ for the purpose of listing the shares of MaKE. This application was made in accordance with SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013 read with Circular No. CIR/CFD/DIL/8/2013 dated May 21, 2013. SEBI vide letter dated April 25, 2014 granted relaxation from aforementioned requirements of SCRR.

The final listing approval was received from National Stock Exchange of India Limited and BSE Limited vide letter dated June 26, 2014. Consequently, the trading in equity shares on National Stock Exchange of India Limited and BSE Limited commenced from June 30, 2014.

Divestment of Derma Rx Business

As a part of strategy, MaKE sold off Derma Rx entities to KV Asia Capital, a South-East Asia focused PE Fund in January 2014.

DIAL – Derma – Rx International Aesthetics Pte. Ltd.

KME – Kaya Middle East FZE

^ Erstwhile DRx Investments Pte. Ltd.

Kaya Middle East FZE

KME Holdings Pte. Ltd. (‘‘KMEH’’), a 100% step-down subsidiary of Marico Kaya Enterprises Limited (‘‘MaKE’’) had been in negotiations for divesting part of equity stake in its 100% subsidiary, Kaya Middle East FZE (‘‘KME’’). The Company had indicated that these negotiations were underway in its Information Memorandum dated June 19, 2014 (a copy of this is available on the Company’s website www.maricokaya.com). KMEH and the prospective buyer were unable to agree on all terms and consequently arrived at an amicable settlement.

The Board of Directors of KMEH had decided not to pursue any option for the divestment of KME. The Board of Directors of MaKE was informed of this decision and has made a note of the same at its meeting held on July 4, 2014. The Board of Directors of the Company duly notified the Stock Exchanges of the same.

Subsidiaries of Marico Kaya Enterprises Limited

Pursuant to the Scheme of Arrangement and following the sale of DIAL and its operating subsidiaries, the below mentioned companies are the subsidiaries of MaKE:

1. Kaya Limited

2. KME Holdings Pte Ltd.

3. Kaya Middle East FZE

4. DIPL (Singapore) Pte. Ltd (erstwhile DRx Investments Pte Ltd)

Exemption from attaching the Balance Sheets, etc. of the Subsidiary Companies with the Balance Sheet of the Company

The Ministry of Corporate Affairs ("MCA") has vide its circular no. 02/2011 dated February 8, 2011, granted a general exemption under Section 212(8) of the Companies Act, 1956 from attaching copies of the Balance Sheet, Profit and Loss Accounts, Directors’ Report and Auditors’ Report of its subsidiary companies with the Balance Sheet of the Company, subject to fulfillment of certain conditions. Thus, copies of the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors of the Subsidiary Companies have not been attached to the Balance Sheet of the Company. However, the financial statements of major operating subsidiaries Kaya Limited and Kaya Middle East FZE form part of this Annual Report. Such inclusion in the Annual Report is to aid the stakeholders to take informed decisions about the Company.

The Company has presented Consolidated Financial Statements comprising Marico Kaya Enterprises Limited and its subsidiaries duly audited by the Statutory Auditors of the Company. The Consolidated Financial Statements prepared by the Company are in compliance with the Accounting Standard AS-21 as prescribed by the Companies (Accounting Standards) Rules, 2006 and the Listing Agreement with the Stock Exchanges. The statement required under Section 212 of the Companies Act, 1956 is attached to the annual accounts of the Company.

The Annual Accounts and related documents of all the Subsidiary Companies not forming part of this Annual Report shall be made available for inspection to the shareholders of the Company and its subsidiaries at the Registered Office of the Company. The Company will also make available physical copies of such documents upon request by any Member of the Company or its subsidiaries. Further, the same would be made available on the website of the Company www.maricokaya.com

Proposed Scheme of Arrangement between Marico Kaya Enterprises Limited and Kaya Limited and their respective Shareholders and Creditors

The Board of Directors at its meeting held on August 8, 2014 granted an in-principle approval to amalgamate the Company with its wholly owned Subsidiary, Kaya Limited to avail amongst others the following benefits:

i. elimination of a multi-layered structure

ii. unlocking value for the shareholders of MaKE; and

iii. reduction in administrative and operational costs.

Public Deposits

The Company did not accept any public deposits during the year.

Directors’ Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956 (‘‘the Act’’) amended by the Companies (Amendment) Act, 2000, the Directors confirm that:

• In preparation of the Annual Accounts of your Company, the Accounting Standards, laid down by the Institute of Chartered Accountants of India from time to time, have been followed and that no material departures have been made from the same;

• Appropriate accounting policies have been selected and applied consistently, and reasonable and prudent judgment and estimates have been made so as to ensure that the accounts give a true and fair view of the state of affairs of your Company as at March 31, 2014 and the profits of your Company for the period ended March 31, 2014;

• Proper and sufficient care has been taken for maintenance of appropriate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

• The annual accounts have been prepared on a going concern basis.

Corporate Governance

A report on Corporate Governance has been provided as a separate part of this Report.

Directors

Mr. Harsh Mariwala, Mr. Milind Sarwate and Mr. Chaitanya Deshpande were appointed as the First Directors of the Company with effect from the date of incorporation of the Company i.e. January 19, 2013. Mr. Milind Sarwate and Mr. Chaitanya Deshpande resigned as Directors at the Board meeting held on August 16, 2013.

Furthermore, Mr. Nikhil Khattau, Mr. B. S. Nagesh and Mr. Rajen Mariwala were appointed as additional directors vide Board resolution passed on the August 16, 2013. Consequently at the Extra Ordinary General Meeting of the Company held on September 26, 2013, Mr. Nikhil Khattau, Mr. B. S. Nagesh and Mr. Rajen Mariwala were appointed as Independent Directors of the Company.

Mr. Harsh Mariwala was appointed as Chairman and Whole Time Director of the Company in the Extra Ordinary General Meeting of the Company held on October 21, 2013. The Board of Directors have now consented to the change in the designation of Mr. Harsh Mariwala from Chairman and Whole Time Director to Chairman and Managing Director at its meeting held on August 8, 2014 subject to the adoption of the revised Articles of Association by the shareholders at the ensuing Annual General Meeting. Such re-designation is also subject to the approval of the Shareholders of the Company. Ms. Ameera Shah was inducted as an Additional Director by the Board of Directors at its meeting held on June 19, 2014.

Directors retiring by rotation

The relevant provisions of the Companies Act, 2013 were notified and made effective April 1, 2014. In terms of Section 149(13) of the Companies Act, 2013, Independent Directors are not liable to retire by rotation. Accordingly, Mr. Rajen Mariwala, Non-Executive Director of the Company is liable to retire by rotation and being eligible offers himself for re-appointment.

Appointment of Independent Directors

In terms of the requirements of the Companies Act, 2013 and amended Clause 49 of the Listing Agreement with the Stock Exchanges, our Independent Directors can be appointed fo two terms of five years each. Accordingly, your Board proposes re-appointment of all Independent directors for a term of 5 years at the ensuing Annual General Meeting.

Additional Statutory Information

Your Company had no employee of the category indicated under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and the Companies (Particulars of Employees) Rules, 2011 as amended from time to time. Your Company has therefore no particulars to disclose under these rules.

Statutory Auditors

M/s. Price Waterhouse, Chartered Accountants and Statutory Auditors of the Company retire at the ensuing Annual General Meeting and have confirmed their eligibility for re-appointment.

Cost Accountants

Your Company appointed M/s. Ashwin Solanki & Associates, Cost Accountants, Mumbai, to comply with mandatory provisions of the Companies (Cost Accounting Records) Rules, 2011.

Internal Auditors

M/s. Ernst & Young LLP, a Chartered Accountant Firm, has been associated with your Company as its internal auditor partnering your Company in the area of risk management and internal control systems.

Conservation of Energy, Technology Absorption & Foreign Exchange

Provisions to Section 217 (1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1998 are not applicable to the Company as the Company does not have any manufacturing activities.

Technology Absorption

No technology has been developed and/or imported by way of foreign collaboration.

Foreign Exchange Earnings and Outgo

There is no foreign exchange earnings and outgo during the period under review.

Acknowledgement

The Board takes this opportunity to thank all its employees for their dedicated service and firm commitment to the goals of the Company. The Board also wishes to place on record its sincere appreciation for the wholehearted support received from shareholders, distributors, bankers and all other business associates. We look forward to continued support of all these partners in progress.

	On behalf of the Board of Directors
Place: Mumbai	Harsh Mariwala
Date: August 8, 2014	Chairman & Whole Time Director