Your Directors have the pleasure of presenting the 54th Annual Reportand the Audited Financial Statements of your Company for the Financial Year ended June 302018.
(Rs. in crores)
| ||2017-18 ||2016-17 |
|Revenue from operations ||2455 ||2419 |
|Profit before tax ||582 ||672 |
|Profit after tax ||375 ||433 |
Your Company continues to follow its Financial Year as July 1st toJune 30th pursuant to the approval received from the Company Law Board interms of Section 2 (41) of the Companies Act 2013.
The Directors are pleased to recommend a final dividend of Rs. 40/- for each EquityShare for the Financial Year ended June 30 2018.
Your Company delivered another year of steady balanced performance in a tough externalenvironment. Your Company delivered Sales of Rs. 2455 crores up 10% versus year ago oncomparable* basis. Reported sales were up 1% versus year ago due to treatment of indirecttaxes post Goods and Service Tax (GST). The Profit After Tax (PAT) was Rs. 375 croresdown 13% versus year ago largely behind increased investments on product innovations andadvertising. We continue to focus on growth behind brand fundamentals strength of productportfolio and improved in-store execution.
In the Feminine Care business Whisper continues to be the market leader. Duringthe Financial Year your Company continued to make strong progress in growing more userson sanitary napkins particularly among non-users in their early teen years via clutterbreaking Check Check' campaign and continued focus on the Point ofMarket' entry consumer via school programme. This was reflected in acceleration of Whisperpenetration among teens which was significantly ahead of category penetration growth. Wealso strengthened value proposition on our longer length offerings in Choice lineup as consumers shift towards longer length pads for a better protection experience. Wealso continued to drive depth and breadth of our portfolio via sharply definedgo-to-market plans taking category to more stores. Your Company's strategic foray inemerging Comfort & Soft' segment with Ultra Softs demonstratedstrong sales growth and also won Product of the Year Award-2018' in sanitarynapkins category. We built on the success of Whisper portfolio expansion byextending it from Period protection' to overall Feminine wellness'via Whisper daily liners
* Comparable sales is sales excluding GST / Excise duties on sales further adjusted forother tax costs subsumed under GST and excluded from sales in the base. launch in topchannels. Whisper continued to be the force for good' reflected in ourmarketing campaigns like #SitImproper and #WhisperBreaksSilence winning thehearts of millions of consumers which also brought numerous external awards including BestMedia Campaign Gender Parity' at Indian Digital Marketing Awards 2018.
Old Spice continued to have a challenging Financial Year 2017-18 driven by salesdecline. There is a conscious business choice to hold back investments on Old Spiceuntil there is a winning proposition in a category that is highly dynamic and competitive.
Health Care Business
Your Company's Health Care sales posted strong growth this Financial Year. Your Companycontinued to grow share in the Cough & Cold category (excluding Cough Syrup)with offtake growing strong double-digit behind the strength of our equities and ourportfolio which includes Vicks VapoRub Vicks Cough Drops Vicks Action 500 AdvancedVicks Inhaler and Vicks BabyRub our new launch in Financial Year 2017-18. Thegrowth was driven by a combination of plans to win with consumers winning versuscompetition and winning in whitespaces with the launch of BabyRub.
Vicks Rubs grew penetration behind our Category Development Index program for thesecond year in a row continuing to grow share in the Financial Year 2017-18. VicksCough Drops offtake grew strong with share gain in the cough lozenges categoryin a year of competitive launches.
Overall your Company continued to focus on driving consumer meaningful innovationsbacked by distribution expansion and strong advertising thereby deliveringconsistent growth.
CORPORATE SOCIAL RESPONSIBILITY (CSR')
The only way to build a sustainable business is to improve lives
For your Company sustainability means making every day better for people through howwe innovate and how we act. As a responsible corporate citizen we have builtsustainability into the way we operate and grow our brands to conserve natural resourcesand make a difference to communities across the world. This strategy has inspired anenduring CSR strategy supported by two pillars P&G Shiksha and TimelyDisaster Relief. While P&G Shiksha provides children from underprivilegedbackgrounds with an access to a holistic education your Company's disaster reliefactivities aim to rehabilitate and empower the victims of natural disasters by providingthem with daily essential commodities and safe drinking water.
Through your Company's signature corporate sustainability program P&G Shikshatill date we have supported over 1800 (+300 since last year) schools across the countrythat will impact the lives of over 1.4 million (+200000 since last year) children inpartnership with a number of NGOs/ organizations like Round Table India (RTI)Pratham
Education Initiatives amongst others. These partners serve as specialists lendingtheir expertise to particular aspects of the education system. For example the NGO RTI isdedicated towards constructing educational infrastructure and supporting schools acrossIndia. Pratham has special expertise in remedial learning to help bring children upto speed with the learning levels in their curriculum. Education Initiativesfocuses on computer assisted learning software to improve the learning outcomes inchildren. Education Initiatives has expertise in computer assisted learningsoftware to improve learning levels among children. Since its commencement in 2005 P&GShiksha has also empowered consumers to contribute towards the educationof underprivileged children by making conscious brand choices. This has enabled yourCompany to share a part of the sales towards this movement. P&G Shikshahas till date made a cumulative donation of over Rs. 80 crores towards building newschools providing critical infrastructural amenities at existing schools orreviving non-operational government schools. A key area of our intervention is RemedialLearning and Early Childhood Education. We have partnered with PrathamEducation Foundation to improve the learning outcomes and bridge the existing gapbetween current and existing learning levels. The results on remedial learning werephenomenal; we reached out to more than 670 schools and over 24000 children; andsaw the learning levels in the children rise at the end of the year following ourinterventions. Before the intervention around 20% children in these schools who were ableto read and write as per their curriculum level which increased to around 70% after ourintervention. Similarly there was more than a two-fold increase in the percentage ofchildren who were able to do basic arithmetic after our intervention.
Your Company also identified Early Childhood Education' as a keyopportunity area in the educational landscape of the country. The program buildscapability of Anganwadi workers in order to develop motor and cognitive skills inchildren so that they are set for a fast-paced growth once they start going to school. Weconducted the program in Bihar Uttar Pradesh Rajasthan and Delhi through Pratham'spartnership with the Government (ICDS) to impact early childhood learning in Anganwadicenters to strengthen school readiness in children. At the end of the year to assesstheir level of development children were asked to do several tasks like matching shapesability to trace shapes to recognize number ability to tell their name and familybackground. The results were overwhelming 85% children in the intervention groups hadcompetent motor skills (ability to draw hold a pencil colour within a shape join dotsetc.) versus 42% in the comparison groups. Similarly cognitive competence of the childrenin intervention groups was more than two-fold than that of comparison groups. Through thisprogram we reached out to more than 1100 units impacting around 33000 children.
Your Company continued to impact the communities around its plants in a holistic mannerthroughout the Financial Year. At Goa in association with Matruchhayaa local public charitable trust your Company is providing educational and infrastructuralsupport to a school for the orphaned destitute and abandoned children.
Two years ago P&G Shiksha forayed into impacting learning levels viadigital learning. Your Company entered into a partnership with Education Initiatives(EI) and Government of Rajasthan to implement Mindspark a computer basedadaptive learning solution that integrates pedagogy teacher instruction and a learningmanagement system to help students learn better. The tool analyses the learning levels ofthe students in language and mathematics by presenting them with questions in increasinglevel of difficulty. On answering incorrectly the student is provided a simple ordetailed explanation or be redirected to questions that strengthen the basicunderstanding. The program was implemented in 30 government schools in Rajasthan whereover 6700 students spent over 10000 hours learning using Mindspark. Postthe intervention the learning levels among students using Mindspark improvedtwo-fold compared to the control group. The tool also provides teachers with informationon the progress and learning levels of students which is used for effective classroommanagement and instruction.
We are encouraged by the results on our new areas of focus in 2017-18 and P&GShiksha is all set to build on and strengthen the its efforts in 2018-19. Since thegovernment has highlighted quality of education' as one of the key focus areas forcountry's growth in the next decade your Company is well poised to play an active role inthe India Success Story.
Your Company has constituted a Corporate Social Responsibility Committee. Thecomposition and terms of reference of the Corporate Social Responsibility Committee areprovided in the Corporate Governance section annexed to this report.
Annual report on CSR activities as required under the Companies (Corporate SocialResponsibility Policy) Rules 2014 has been appended as Annexure I to this Report.
ENVIRONMENTAL SUSTAINABILITY AND CONSERVATION OF ENERGY
Environmental sustainability is embedded in our Purpose Values Principles andour business. We are committed to improving lives now and for generations to come byensuring that our products packaging and operations are safe for employees consumers andthe environment. We ensure by focusing on technologies processes and improvements thatmatter for the environment.
Your Company's Head Office at Mumbai reduced its annual energy consumption by over23.5% over the last 15 years. The Goa plant is a zero waste to landfill' site whichmeans that there is no manufacturing discharge into the environment. In the last 5 yearsthe Goa plant has reduced its carbon emission by 17.5%. During this period the plant hasalso improved on both energy and water consumption at 78.9%. The plant is also leveragingtechnology experts employees and renewable sources of energy to reduce our overallfootprint and make our operations more sustainable.
For your Company sustainability inspires and guides everything. Moreover we ensureenvironment friendly practices at our sites. These include a reduction in powerconsumption optimal water consumption and eliminating excess use of paper.
i. Efforts made towards technology absorption:
Usage of low pressure compressors at the Plants; and
Continued implementation of quality control / quality assurance procedures ofproducts and processes were successfully adapted on commercial scale to utilize local rawmaterials and machinery; technical services for reliability quality cost savings andtechnology transfer from overseas.
ii. Benefits derived like product improvement cost reduction product development orimport substitution:
Usage of low pressure compressors resulted in cost reduction and savedelectricity consumption; and
The above efforts resulted in improving process efficiencies consistent qualityof our products introduction of new products import substitution and successfulabsorption of technology.
iii. Imported technology:
Your Company has the advantage of availing advanced technology and continuousupgradation thereof from The Procter & Gamble Company USA and its subsidiaries. Thisis an unmatched competitive advantage that helps the Company deliver strong businessresults.
iv. Expenditure on Research & Development
Your Company has not incurred any expenditure on research and development during theFinancial Year.
FOREIGN EXCHANGE EARNINGS & OUTGO
The details of foreign exchange earnings and outgo as required under Section 134 of theCompanies Act 2013 and Rule 8(3) of Companies (Accounts) Rules 2014 are mentioned below:
Rs. in Lakhs
| ||For the Financial year ended June 30 2018 ||For the Financial year ended June 30 2017 |
|Foreign Exchange earnings ||2635 ||5538 |
|Foreign Exchange outgo ||55999 ||46777 |
RELATED PARTY TRANSACTIONS
Your Company has formulated a policy on related party transactions which is alsoavailable on Company's website at http://www.pg.com/en_IN/invest/pghh/corporate_governance/policies.shtml/. This policy deals with the review and approval of relatedparty transactions. All related party transactions are placed before the Audit Committeefor review and approval. Prior omnibus approval is obtained for related party transactionswhich are of repetitive nature and entered in the ordinary course of business and at arm'slength. All related party transactions are subjected to independent review by externalchartered accountancy firm to confirm compliance with the requirements under theCompanies Act 2013 and the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015.
No material related party transactions were entered during the Financial Year by yourCompany. All related party transactions entered during the Financial Year were in ordinarycourse of the business and on arm's length basis. Accordingly the disclosure of relatedparty transactions as required under Section 134(3)(h) of the Companies Act 2013in Form AOC 2 is not applicable to your Company.
LOANS AND GUARANTEES GIVEN AND INVESTMENTS MADE DURING THE FINANCIAL YEAR 2017-18
Details of loans given by your Company under Section 186 of the Companies Act 2013during the Financial Year 2017-18 are as follows:
|Name of Entity ||Relation ||Amount (Rs. In Crores) ||Purpose for which the loans are proposed to be utilized |
|Procter & Gamble Home Products Private Limited ||Fellow Subsidiary ||90.00 ||General business purpose |
Your Company has not given any guarantees or made any investments during the FinancialYear 2017-18.
Your Company has not accepted any Public Deposits under Chapter V of theCompanies Act 2013 during the Financial Year.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 and Rules made thereunder your Company hasconstituted Internal Complaints Committees (ICC). During the Financial Year no complaintswith allegations of sexual harassment were filed with the Company.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under Sections 134 (3) (c) of the Companies Act 2013 withrespect to the Directors' Responsibilities Statement it is hereby confirmed:
i. that in the preparation of the Annual Accounts for the Financial Year ended June 302018 the applicable accounting standards had been followed along with proper explanationrelating to material departures;
ii. that the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that were reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of theFinancial Year and of the profit or loss of the Company for the Financial Year underreview;
iii. that the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
iv. that the Directors had prepared the accounts for the Financial Year ended June 302018 on a "going concern" basis;
v. that the Directors had laid down internal financial controls to be followed by theCompany and such internal financial controls are adequate and were operating effectively;and
vi. that the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
BUSINESS RESPONSIBILITY REPORT
A separate report on Business Responsibility has been appended as Annexure II to thisReport.
A separate report on Corporate Governance along with the Auditors' Certificate on itscompliance is provided under the Corporate Governance section of this Annual Report.
MANAGEMENT & PERSONNEL
The strength of business over the past few years and resilience in this particular yeardue to multiple economic headwinds in the country demonstrates the core strengths of ouremployees to stay reality based and influence the course of business. Financial Year2017-18 was a year of overall strong growth in many categories. Our productivity continuesto be the best-in-class with major progress in Leadership and Talent Development.
The statement of Disclosure of Remuneration under Section 197 of the Companies Act2013 and Rule 5 (1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is appended as Annexure III to the Report.
The information as per Rule 5 (2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this Report. As per the provisions offirst proviso to Section 136 (1) of the Companies Act 2013 the Report and FinancialStatements are being sent to the Members of the Company excluding the statement ofparticulars of employees under Rule 5 (2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014. Any Member interested in obtaining a copy of thesaid statement may write to the Company Secretary at the Registered Office of the Company.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the Financial Year Mr. Al Rajwani ceased to be the Director and ManagingDirector of the Company effective June 30 2018 consequent to his retirement after37 years of service with the P&G group. Subsequently Mr. Madhusudan Gopalan wasappointed as Director and Managing Director of the Company effective July 1 2018.
Mr. Ishan Sonthalia ceased to be the Company Secretary and Compliance Officer of theCompany effective March 31 2018. Ms. Flavia Machado has been appointed as theCompany Secretary and Compliance Officer of the Company effective September 18 2018.
Mr. Shailyamanyu Singh Rathore and Ms. Sonali Dhawan Directors retiring by rotationand being eligible offer themselves for re-appointment at the ensuing 54thAnnual General Meeting of the Company.
Brief resumes of Directors proposed to be reappointed at the ensuing 54thAnnual General Meeting and the details of the Directorships held by them in othercompanies are provided under the Corporate Governance section of the Annual Report.
Appropriate resolutions for the re-appointment of the aforesaid Directors are beingmoved at the ensuing 54th Annual General Meeting which the Boardrecommends for your approval.
The Independent Directors of your Company have given Certificate of Independence toyour Company stating that they meet the criteria of Independence as mentioned underSection 149 (6) of the Companies Act 2013 and the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015.
The details of training and familiarization programme and Annual Board Evaluationprocess for Directors have been provided under the Corporate Governance section of theAnnual Report.
Kalyaniwalla & Mistry LLP were appointed as Statutory Auditors of your Company atthe previous 53rd Annual General Meeting held on November 16 2017 for a termof five consecutive years.
The Report given by the Statutory Auditors on the financial statements of the Companyfor Financial Year ended June 30 2018 is part of the Annual Report. There has beenno qualification reservation or adverse remark given by the Auditors in their Report.
Ashwin Solanki & Associates Cost Accountants carried out the cost audit forapplicable business during the Financial Year 2017-18. The Board of Directors hasappointed Ashwin Solanki & Associates Cost Accountants for the Financial Year2018-19.
Your Company has adopted policies on related party transactions corporate socialresponsibility vigil mechanism nomination and remuneration materiality of events anddividend distribution policy which are available on the website of the Company athttp://www.pg.com/ en_IN/invest/pghh/corporate_governance/policies.shtml/.
The policy on Director's appointment and remuneration including criteria fordetermining qualifications positive attributes independence of Director andremuneration for Key Managerial Personnel has been appended as Annexure IV to this Report.The dividend distribution policy has been appended as Annexure V to this Report.
The details of the policies are provided in the Corporate Governance Section annexed tothis Annual Report.
Secretarial Audit was carried out by Dholakia & Associates LLP Company Secretariesfor the Financial Year 2017-18. There were no qualifications reservation oradverse remarks given by Secretarial Auditors of the Company. The Secretarial Audit reporthas been appended as Annexure VI to this Report.
During the Financial Year your Company has complied with applicable SecretarialStandards issued by the Institute of Company Secretaries of India.
EXTRACT OF ANNUAL RETURN
The extract of annual return in Form MGT 9 as required under Section 92(3) of theCompanies Act 2013 and Rule 12 of the Companies (Management and Administration)Rules 2014 is available on the website of the Company athttp://www.pg.com/en_IN/invest/pghh/corporate_governance/annual_return.shtml/
The Directors wish to thank the retailers wholesalers distributors suppliers ofgoods & services clearing and forwarding agents and all other business associates andacknowledge their efficiency and continued support in promoting such healthy growth inyour Company's business.
We are grateful to The Procter & Gamble Company USA and its subsidiaries for theirinvaluable support in terms of access to the latest information / knowledge in the fieldof research & development for products ingredients and technologies; timely inputs toexceptional marketing strategies; and the goodwill of its world-renowned Trademarks andsuperior brands. We are proud to acknowledge this unstinted association that has vastlybenefited the Company.
| ||On behalf of the Board of Directors |
|Mumbai ||R. A. Shah |
|August 22 2018 ||Chairman |