REPORT OF THE DIRECTORS
Your Directors have the pleasure of presenting the 53rd Annual Reportand the Audited Accounts of the Company for the Financial Year ended June 30 2017.
(Figures in Rs. crores)
| ||2016-17 ||2015-16 |
|Revenue from operations ||2419 ||2349 |
|Profit before tax ||672 ||636 |
|Profit after tax ||433 ||423 |
The 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. 27/- per Equity Sharefor the Financial Year ended June 30 2017. During the Financial Year the Board ofDirectors declared a special interim dividend of Rs. 362/- per Equity Share out of theprofits for the current year and accumulated surplus from profits of earlier years. Thiswas to celebrate 30th anniversary of Make in India of its flagship brand Whisper.The said interim dividend was paid to the Shareholders on June 1 2017.
Your Company delivered another year of balanced performance in a volatile externalenvironment growing both top and bottom line. This was possible due to its strength ofproduct portfolio and superior value propositions. Sales for the Financial Year 2016-17increased by 3% to Rs. 2419 crores as against Rs. 2349 crores during the previousFinancial Year.
Profit after tax increased by 2% to Rs. 433 crores while Profit before tax increased by6% to Rs. 672 crores. This was behind continued focus on productivity and cost efficiency.
In the Feminine Care business Whisper continues to be the market leader.
During the Financial Year several strategic initiatives were launched to meet theconsumers' needs across both top and mid end of the segment. We made a strategic foray inemerging comfort segment with our NEW Whisper Ultra Soft product launch whichoffers a no trade off experience between comfort and protection. Our digital #LikeAGirlcampaign struck a chord with millions of girls strengthening Whisper's brandconnect with consumers and won several external recognitions: Best Local Execution of aGlobal Brand (Bronze) Festival of Media and Most Engaging Campaign onInstagram across Asia Pacific by Campaign Asia and Unmetric.
On Whisper Choice we continued to drive increased usage of sanitarynapkins particularly among non-users in their early teen years via new CheckCheck' campaign and continued focus on the Point of Market' entryconsumer. We also continued to extend availability of breadth and depth of ourportfolio via sharply designed Go-to-market plan.
Old Spice de-grew on value sales in the Financial Year 2016-17. It was a consciouschoice to hold back investments on the brand until we have a winning proposition in acategory that is highly dynamic and competitive.
Health Care Business
The Company's Health Care sales posted strong growth this Financial Year. The Companycontinued to grow share in the Cough & Cold category with offtake growing strongdouble-digit behind the strength of our equities and our portfolio which includes VicksVapoRub Vicks Cough Drops Vicks Action 500 Advanced and Vicks Inhaler. Thegrowth was driven by combination of strong focus on driving brand fundamentals keybusiness drivers and equity building campaigns like #Touchofcare.
Vicks VapoRub grew penetration and has gained shared in the Financial Year 2016-17.Vicks Cough Drops offtake grew strong with share gain in the cough lozengescategory behind our new campaign with the iconic Khich Khich Monster'.
Overall the Company continued to focus on driving consumer meaningful innovationsbacked by distribution expansion and strong advertising thereby delivering consistentgrowth.
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. This strategy has inspired an enduring CSR strategy supportedby two pillars P&G Shiksha and Timely Disaster Relief. While P&GShiksha provides children from underprivileged backgrounds with an access to aholistic education your Company's disaster relief activities aim to rehabilitate andempower the victims of natural disasters by providing them with daily essentialcommodities and safe drinking water.
Your Company's signature corporate sustainability program P&G Shiksha hastill date built and supported over 1500 (+500 since last year) schools across the countrythat will impact the lives of over 1.2 million (+200000 since last year) children inpartnership with a number of NGOs like
Round Table India (RTI) Save the Children Pratham Army Wives WelfareAssociation (AWWA) Navy Wives Welfare Association (NWWA) Air Force Wives WelfareAssociation (AFWWA) amongst others. These partners serve as specialists lending theirexpertise to particular aspects of the education system. RTI for example is dedicatedtowards constructing educational infrastructure and supporting schools across India. Savethe Children focuses on girl child's education by aiding government funded programslike the Kasturba Gandhi Balika Vidhyalayas. Pratham has special expertise inremedial learning to help bring children up to speed with the learning levels in theircurriculum. Similarly the NGOs AWWA and NWWA are experts in serving theeducational needs of disabled children.
Since its commencement in 2005 P&G Shiksha has also empowered consumers tocontribute towards the education of underprivileged children by making conscious brandchoices. This has enabled your Company to share a part of the sales towards this movement.P&G Shiksha has till date made a cumulative donation of over Rs. 65 crorestowards building new schools providing critical infrastructural amenities at existingschools or reviving non-operational government schools.
During the Financial Year Save the Children in partnership with P&GShiksha has continued to empower marginalized girls through improving learningeffectiveness and has also expanded its impact. Thirteen Kasturba Gandhi BalikaVidyalayas (KGBVs) were supported through the provision of sports kits and laboratoryequipment. Additionally Baal Sansads and School Management Committees (SMCs) havealso been strengthened through capacity building of its members. These initiatives havethus resulted in a positive change in the overall environment of KGBVs. Forexample teachers have started taking initiatives in practicing innovative pedagogicalmethods (such as promoting an effective use of the library facility project work storybuilding as well as an overall better planning and execution of multi-level teaching).
Your Company continued to impact the communities around its plants in a holistic mannerthroughout the Financial Year. At Goa in association with Matruchhaya a localpublic charitable trust your Company is providing educational and infrastructural supportto a school for the orphaned destitute and abandoned children. In Goa with the NGO RTIthe company built and supported 7 schools directly impacting more than 2000 children.
Two years ago we entered into partnership with Pratham Education Foundation aleading NGO in India in the educational space to foray into Remedial Learning and EarlyChildhood Education thereby focusing on learning outcomes as well. P&G Shikshapartnered with Pratham's Read India initiative that aims to bridge the existing gapbetween current and existing learning levels. The results were phenomenal; we reached outto more than 500 schools and 65000 children and saw the learning levels in the schoolsrise at the end of the year following our interventions. Before the intervention only 20%children in these schools who were able to read and write as per their curriculum levelwhich increased to 70% after our intervention. Similarly there was more than a two foldincrease in the percentage of children who were able to do basic arithmetic after ourintervention.
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. Welaunched the program in Bihar Uttar Pradesh and Delhi through Pratham's partnershipwith the Government (ICDS) to impact early childhood learning in Anganwadi centersto strengthen school readiness in children. At the end of the year to assess their levelof development children were asked to do several tasks like matching shapes ability totrace shapes to recognize number ability to tell their name and family background. Theresults were overwhelming 80% children in the intervention groups had competent motorskills (ability to draw hold a pencil colour within a shape etc.) versus 42% in thecomparison groups. Similarly cognitive competence of the children in intervention groupswas more than two-fold than that of comparison groups.
We are encouraged by the results on our new areas of focus in 2016-17 and P&GShiksha is all set to strengthen the Shiksha Upgrade by expanding theseprograms across more states as per their respective needs in 2017-18. Since the governmenthas highlighted quality of education' as one of the key focus areas for country'sgrowth in the next decade your Company is well poised to play an active role in the IndiaSuccess 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 Report 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. In order to improve lives now and for generations to come we ensure thatour products packaging and operations are safe for employees consumers and theenvironment. We ensure this with a focus on technologies processes and improvements thatmatter for the environment.
Your Company's Head Office at Mumbai reduced its annual energy consumption byover 21.2% over the last 15 years.
During the Financial Year our plant in Goa became a certified zero waste tolandfill' site. In the last 5 years the plant has reduced carbon emission by more than90%. During this period the plant has also achieved a 39% improvement in both energy andwater consumption.
For your Company sustainability inspires and guides everything we do. Moreover weensure environmental friendly practices at our sites. These include reduction in powerconsumption optimal water consumption and eliminating excess use of paper.
i. Efforts made towards technology absorption:
Continued implementation of quality control/quality assurance procedures of productsand processes were successfully adapted on commercial scale to utilize local raw materialsand machinery; technical services for reliability quality cost savings and technologytransfer from overseas.
ii. Benefits derived like product improvement cost reduction product development orimport substitution:
All the above efforts resulted in improving process efficiencies consistentquality of our products introduction of new products and importsubstitution and successful absorption 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 a competitive advantage that helps the Company deliver strong business results.
iv. Expenditure on Research & Development
Your Company has not incurred any expenditure on research and development duringthe Financial Year.
FOREIGN EXCHANGE EARNINGS & OUTGO
The details of foreign exchange earnings and outgo as required under Section 134of the Companies Act 2013 and Rule 8(3) of Companies (Accounts) Rules 2014 are mentionedbelow:
| ||For the year ended June 30 2017 ||For the year ended June 30 2016 |
|Foreign Exchange earnings ||499 ||893 |
|Foreign Exchange outgo ||16268 ||18416 |
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 the CompaniesAct 2013 and Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015.
All related party transactions entered during the Financial Year were in ordinarycourse of the business and on arm's length basis. No material related party transactionswere entered during the Financial Year by your Company. Accordingly the disclosure ofrelated party 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 2016-17
Details of loans given by your Company under Section 186 of the Companies Act 2013during the Financial Year 2016-17 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 Pvt. Ltd. ||Fellow Subsidiary ||200.00 ||General business purpose |
Your Company has not given any guarantees or made any investments during the FinancialYear 2016-17.
Your Company has not accepted any Public Deposits under Chapter V of CompaniesAct 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 ( Rs. Act') and Rules made thereunder your Companyhas constituted Internal Complaints Committees (ICC'). During the Financial Year nocomplaints with 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 302017 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 maintenanceof adequate accounting records in accordance with the provisions of the Companies Act2013 for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities;
iv. that the Directors had prepared the accounts for the Financial Year ended June 302017 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.
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 appended as Annexure III to this Report.
A separate report on Corporate Governance along with the Auditors' Certificate on itscompliance is annexed to this 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 Year2016-17 was a year of overall strong growth in many categories. Our productivity continuesto be best-in-class with major progress in Leadership and Talent Development.
The statement of Disclosure of Remuneration under Section 197 of Companies Act 2013and Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is appended as Annexure IV 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 andFinancial Statements are being sent to the Members of the Company excluding the statementof particulars of employees under Rule 5 (2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014. Any Member interested in obtaining acopy of the said statement may write to the Company Secretary at the Registered Office ofthe Company.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
During the year there was no change in the Board of Directors of your Company. Ms.Preeti Bishnoi ceased to be the Company Secretary and Compliance Officer of the Companyeffective January 19 2017. Mr. Ishan Sonthalia was appointed as the Company Secretary andCompliance Officer of the Company effective May 5 2017.
Mr. Karthik Natarajan Director and Mr. Pramod Agarwal Director retire by rotation andbeing eligible offer themselves for re-appointment at the ensuing 53rd AnnualGeneral Meeting of the Company.
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 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 Report.
The policy on Directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of Directors andremuneration for Key Managerial Personnel has been appended as Annexure V to this Report.The same is also available on the website of the Company athttp://www.pg.com/en_IN/invest/pghh/ corporate_governance/policies.shtml.
Brief resumes of Directors proposed to be re-appointed at the ensuing 53rdAnnual General Meeting and the details of the Directorships held by them in othercompanies are given in the "Corporate Governance" section of the Annual Report.
Appropriate resolutions for the re-appointment of the aforesaid Directors are beingmoved at the ensuing 53rd Annual General Meeting which the Boardrecommends for your approval.
The Report given by Deloitte Haskins & Sells LLP Statutory Auditors on thefinancial statements of the Company for Financial Year ended June 30 2017 is part of theAnnual Report. There has been no qualification reservation or adverse remark given by theAuditors in their Report.
Deloitte Haskins & Sells LLP were appointed as Statutory Auditors of your Companyat the 50th Annual General Meeting held on September 24 2014 for a term ofthree consecutive years which will be complete at the ensuing
53rd Annual General Meeting. It is proposed to appoint Kalyaniwalla &Mistry LLP Chartered Accountants as Statutory Auditors of your Company from theconclusion of the ensuing 53rd Annual General Meeting until the conclusion ofthe 58th Annual General Meeting. Resolution for the said appointment is beingmoved at the ensuing 53rd Annual General Meeting.
Ashwin Solanki & Associates Cost Accountants carried out the cost audit forapplicable business during the Financial Year 2016-17. The Board of Directors hasappointed Ashwin Solanki & Associates Cost Accountants for the Financial Year2017-18.
Your Company has adopted policies on related party transactions corporate socialresponsibility vigil mechanism nomination and remuneration materiality of events anddividend distribution which are available on the website of the Company athttp://www.pg.com/en_IN/invest/ pghh/corporate_governance/policies.shtml/. The dividenddistribution policy has been appended as Annexure VI to this Report.
The details of the policies are provided in the Corporate Governance Report annexed tothis Report.
Secretarial Audit was carried out by Dholakia & Associates LLP Company Secretariesfor the Financial Year 2016-17. There were no qualifications reservation or adverseremarks given by Secretarial Auditors of the Company. The Secretarial Audit report hasbeen appended as Annexure VII to this Report.
During the Financial Year your Company has complied with applicable SecretarialStandards issued by the Institute of Company Secretaries of India.
The Directors wish to thank the retailers wholesalers distributors suppliers ofgoods & services clearing and forwarding agents and all other businessassociates and acknowledge their efficiency and continued support in promoting suchhealthy growth in the 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 field ofresearch & 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 23 2017 ||Chairman |