Procter & Gamble Health Ltd Management Discussions.

ECONOMIC SCENARIO

The year 2020 was volatile with unprecedented challenges. The COVID-19 pandemic impacted each aspect of human life and the world economy, including India. The Indian economy contracted by 7.3% in 2020-2021. The outbreak of COVID-19, the subsequent lockdown and restrictions imposed to contain the spread of the COVID-19 pandemic resulted in supply chain disruptions. However, with easing of the lockdown, the economy displayed signs of recovery. The Government introduced several initiatives and measures which provided impetus and boosted the economy.

The pandemic also caused changes in the consumer landscape in India. The increased adoption of digitization and technologies have led to a surge in online consultations and purchases. Movement restrictions have also led to creation of newer distribution channels. During 2020-2021, the rural market recorded strong growth and outpaced the urban demand across categories.

BUSINESS OUTLOOK

The International Monetary Fund (IMF) projects the Indian economy to grow by 9.5% in 2021-2022. The trajectory of the pandemic continues to be unpredictable. However, the roll-out of vaccines and government initiatives are expected to boost the growth of the economy. The government continued its focus on supporting local manufacturing for both pharma API and fixed formulations by extending long term incentives supporting local manufacturing. These initiatives will further strengthen the resilient Indian pharmaceutical industry and help revive economy and increase demand. However, amidst this, it will be imperative for companies to navigate through these uncertainties and capitalize on the available opportunities with agility.

While there are short term challenges this year, the medium to long-term outlook for the healthcare sector remains positive. Your Company is well- positioned to sustain and improve its performance with a resilient workforce, leverage opportunities with agility, address challenges and overcome the risks.

BUSINESS PERFORMANCE 2020-21

Your Company is well known in India for its rich heritage in healthcare with brands that are household names. Despite challenging circumstances during the fiscal year due to the Covid-19 pandemic, your Companys brand franchises delivered strong results

continuing to further our commitment to bringing quality and affordable vitamins, minerals and supplements to patients, consumers and customers across the country.

Neurobion delivered strong growth fuelled by focused initiatives to build awareness on neuropathy, nerve care and the benefit of Neurobion across customer and consumer touchpoints. True to its brand promise, your Companys flagship brand Neurobion Forte has been helping true heroes fight body discomforts due to lack of Vitamin B for over 50 years. Neurobion also launched new variants like Neurobion Alfa & Alfa D for patients with Diabetic Neuropathy.

As a leader in the Vitamin E segment in India, Evion continued to create awareness on the benefits of Vitamin E among Health Care Professionals (HCPs) and consumers and for the first time went direct to consumers with advertisements on TV and Digital medium, delivering strong double digit growth.

Livogen continued to be the No.1 Doctor prescribed Iron Supplement of India. Since January 2021, the brand has doubled down on its efforts to increase reach and awareness by advertising across Uttar Pradesh, Madhya Pradesh, Bihar, Andhra Pradesh and Telangana.

Nasal decongestant brand Nasivion continued to reach consumers through Television, OTT and display mediums.

Overall, your Companys consumer health business saw very strong growth in 2020-21.

EXPORTS

Your Company continued to export its pharmaceutical products to third parties based out of Asia including Sri Lanka, Nepal, Myanmar & Maldives. In 2020-21, the Companys total exports were Rs 12,284 lakhs.

RISK MANAGEMENT

Your Company has set up a Risk Management Committee. The Company has also adopted a risk management policy. The Companys risk management policy is in line with the parent Companys global guidelines and as such adequate measures have been adopted by the Company to anticipate, plan and mitigate the spectrum of risks it faces. The Companys Risk Management process focus on ensuring that these risks are identified on a timely basis and reasonably addressed.

As part of the business sustainability and governance process, in order to ensure a robust risk management system, in line with the applicable laws, the Company follows a proactive risk management policy, aimed at protecting its employees, assets and the environment, while at the same time ensuring growth and continuity of its business.

The risks are identified by a consistent process, across function/division and the Company also strives to link each risk with a mitigation step to ensure business continuity. Risk managers consistently map the risks to establish a risk management culture. The risk report is reviewed at regular intervals, to ensure that risks are planned for mitigation, for the fact that not all risks can be eliminated.

BUSINESS RELATED RISKS

The Companys performance is impacted by factors such as coverage of products under price control, ability to launch successful line extensions or product applications with proper timing, customer behaviour change, new demand development of the Companys products, impact of COVID-19 on economy, changing economic policies due to geopolitical situations, changed composition of legacy brand product sales to total turnover, employee talent development and management, employee union negotiations, trade unions, etc.

LEGAL RISKS

The Companys business is subject to stringent compliances under various laws, such as the local pricing regulations set by the Government, FDA legislation, food safety regulations and standards, DCGI approvals and the Companys internal code of conduct with respect to compliances, including those applicable to interactions with healthcare professionals. Amendments to statutes and the compliance with applicable laws as well as policies may prove to be challenging and time consuming as it requires constant monitoring. To support such monitoring requirement, the Company has implemented an online tool which enables tracking of overall compliance requirements.

Your Company operates within the letter and spirit of all applicable laws. General compliance with legal requirements is an important component of P&Gs Worldwide Business Conduct Manual and the same directs the following action from every employee- to comply with all legal requirements at all times; to understand exactly what legal requirements apply to the work function and to immediately report any instance of violations.

A number of training programs were rolled-out for employees on various compliance related areas

such as Pharma Compliance Guidelines, Global Anti-Corruption Standards, Prevention of Sexual Harassment at Workplace, Whistleblower Mechanism, Conflict of Interest, Data Integrity etc.

THIRD PARTY DEPENDENCE RISKS

The Company uses third party support in regard to manufacturing and distribution of its products. These parties have access to the Companys assets and business process. The Company uses internal control and audit measures to safeguard itself against any adverse events. Periodic audits and review of open items in audit takes place for these units throughout the year. Business interruptions could arise due to any unforeseen negative events taking place or disagreements on contractual terms and conditions with the service provider which can lead to stoppage of outsourced activities.

INFORMATION TECHNOLOGY RISKS

The Company uses varied IT systems and processes in order to have efficient data collection, monitoring and reporting. There are software related precautions like handling of data integrity, access rights, virus firewalls, data protection, social media risk, etc. The Companys guidelines and processes are in place and their adherence is continuously monitored and subject to global audits at regular intervals.

ENVIRONMENT AND SAFETY RISKS

Environment, Health and Safety encompasses the laws, rules, guidance and processes designed to help protect employees, the public and the environment from harm, further supported by group standards, current best approaches and audits at regular intervals. There is a systematic approach for complying with environmental regulations, such as managing waste water and air emissions. This also includes hazardous and other waste management at the plant. The plant ensured 100% compliance to management of waste water via continuous online monitoring of all legal parameters and hazardous waste management via last mile disposal to government authorised waste disposal vendors.

INTERNAL CONTROLS AND THEIR ADEQUACY

Your Company continues to prioritize sustainable control processes that are integral part of organization culture. It has built strong Internal Controls Environment and Risk Assessment / Management systems. These systems enable Company to comply with Internal Company policies, procedures, standard guidelines and local laws to help protect Companys assets and confidential information against financial Losses and unauthorized use. The robust controls environment at your Company is efficiently managed through:

• Controls Self-Assessments (CSAs) are performed during July to December period of every Financial Year across business processes. The purpose of this thorough exercise is to review and evaluate process compliances against standard control objective, activities and attributes. This enables the Company to proactively identify control weaknesses and initiate actions to sustainably mitigate them.

• Stewardship and Global Internal Audit (GIA) Reviews led by a team of independent fulltime Internal Controls experts, their role is to ensure that all key processes i.e. selling, revenue, distribution, trade & marketing spends, vendor payments, and plant operations are reviewed and assessed at appropriate intervals. The observations and findings are shared with senior management for implementing quality action plans to strengthen overall controls environment in these processes. The assessments of High risks and SOX Compliance areas are assessed by an independent internal audit department lead by the Companys Global Internal Audit team. This team comprises of certified internal controls process experts who have experiences across different markets that the company operates in. The action taken by the management to correct the processes is then reviewed and reported appropriately.

• Governance Board comprises of the Managing Director, Chief Financial Officer, Chief Human Resource Officer, Supply Chain Leader, General Counsel and Sales leader. The Board assesses and reviews enterprise level risks and works with process owners and functional managers to ensure that corrective action is taken, and risk is mitigated as appropriate.

HR INITIATIVES

For your Company, human capital is an intangible asset or quality which is not listed in the Companys balance sheet. Thus, human capital is the stock of knowledge, skills, know-how and other acquired personal attributes. Human Resources department oversees workforce management, workforce planning and strategy, recruitment, employee training and development, reporting and analytics and employee safety. We continue to facilitate and speed up expansion with a clear roadmap "SMILE" (S- Seamless Teams, M - Meaningful Work, I - Inclusion & Equality, L - Leadership & Capability Building, E - Empowered and Entrepreneurial Organization). We leverage Talent Exposure and Growing talent from within through diverse workforce.

Health & Safety of our employees is our topmost priority. We support employees during these tough situations of COVID-19 pandemic. We have institutionalized COVID Helpdesk and Vibrant Living as platforms which supports employees through regular awareness and safety measures, organizing voluntary vaccination drives for employees and their family, any kind of support during an emergency including cash advance and emergency loans during the COVID peak. "We care" initiative of the Company reached out to employees via check in calls to inquire about their (and families) overall wellbeing. Even at our plant level we have ensured implementation of safety measures through social distancing, sanitization, thermal screening and pick up and drop facilities for our employees. Also, we strictly adhere to the government guidelines.

The employee wellbeing definition refers to the state of employees mental and physical health, resulting from dynamics within and sometimes outside the workplace. P&G offers around the globe an Employee Assistance Program, that all the employees and their family members can use to receive counselling, talk to a professional coach/therapist across a spectrum of topics both personal and work related. Post the harmonization process, there are various policies which would benefit the employees financially, mentally, physically and create work life integration.

We have established key processes like Stewardship and Governance Process, POSH awareness and always doing the right thing. In order to keep the workforce highly engaged & motivated we follow the best-in-class recruitment practices, innovation and digitization, development of employee skills and capabilities, celebrating the key milestones of our employees and employee recognition.

The Company also launched a new initiative ‘WISH 100 (Women In Sales Hierarchy) & beyond to improve gender diversity, successfully tripling the number of women in sales within the first year itself.

To conclude, P&Gs Purpose is to touch and improve the lives of the worlds consumers. In order for us to deliver upon our Purpose, we must first reflect the diversity of the consumers we serve AND we must touch and improve our employees lives through Trusting, Open & Inclusive culture. The number of employees as on June 30, 2021 was 1362.