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Gillette India Ltd.

BSE: 507815 Sector: Consumer
NSE: GILLETTE ISIN Code: INE322A01010
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NSE 00:00 | 25 Sep 5393.65 -34.60
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OPEN 5469.90
PREVIOUS CLOSE 5427.30
VOLUME 401
52-Week high 8200.00
52-Week low 4420.00
P/E 76.45
Mkt Cap.(Rs cr) 17,598
Buy Price 5380.00
Buy Qty 2.00
Sell Price 5392.00
Sell Qty 2.00
OPEN 5469.90
CLOSE 5427.30
VOLUME 401
52-Week high 8200.00
52-Week low 4420.00
P/E 76.45
Mkt Cap.(Rs cr) 17,598
Buy Price 5380.00
Buy Qty 2.00
Sell Price 5392.00
Sell Qty 2.00

Gillette India Ltd. (GILLETTE) - Director Report

Company director report

Your Directors have the pleasure of presenting the 35th Annual Report andthe Audited Financial Statements of the Company for the Financial Year ended June 302019.

FINANCIAL RESULTS

(Figures in Rs Crores)

2018-19 2017-18
Revenue from operations 1862 1677
Profit before tax (PBT) 339 345
Profit after tax (PAT) 253 229

FINANCIAL YEAR

The Company follows its Financial Year as July 1st to June 30th.

DIVIDEND

Your Directors are pleased to recommend a final dividend of Rs 25 per Equity Share forthe Financial Year ended June 30 2019. During the Financial Year the Board of Directorsdeclared an interim dividend of Rs 19 per Equity Share. The payment of interim dividend tothe Shareholders was completed on March 7 2019.

BUSINESS PERFORMANCE

Your Company delivered another strong year with Sales of Rs 1862 crores and PAT of Rs253 crores for the Financial Year 2018-19. The reported sales were up 11% versus year ago.Both the grooming and oral care businesses delivered strong comparable sales growth aheadof market behind strong brand fundamentals strength of the portfolio and improvedin-store execution.

GROOMING

In the men's grooming business Gillette continues to be the market leader. Ourirresistible superiority on product and commercial innovations continued to add millionsof new users to the Gillette franchise.

This year we launched Gillette Mach 3 Start an entry-level premium systemrazor. Gillette Mach 3 continues to be India's leading premium systems brand withstrong business fundamentals. Gillette Guard our pioneering entry-level systemregistered its strongest year on value volume and share growth since its launch in 2010behind strong awareness activation and go-to-market plans. Gillette Double Edgeblades continued to grow primarily led by 7-o'clock and Wilkinson Swordbrands. The recent launch of Gillette Winner will further strengthen our positionin this segment.

In the brand's female portfolio we re-staged the premium razor portfolio behind strongconsumers learning to position Gillette Venus as an aspirational beauty brand forfemale consumers.

As a result of key interventions across the Gillette portfolio this FinancialYear we recorded our highest-ever market share in the Blades and Razors category.

ORAL CARE

After an extremely strong Financial Year 2017-18 your Company delivered another yearof strong results in Financial Year 2018-19 with strong growth across value share volumeshare and penetration for the brand. We led the innovation in category by introducing thepro-health Ultra-thin toothbrush with charcoal extract and crisscross bristles forconsumers with sensitive gums and teeth. Along with this we launched super saver packs inPremium Tier.

In electric toothbrush range we launched the entry tier rechargeable electrictoothbrush 'Oral-B Vitality'.

These innovations coupled with extremely strong go-to-market execution were receivedextremely well by the consumers and trade helping us to grow significantly ahead of thecategory.

We continued to leverage our targeted trial programs and deeper distribution plansenabling more consumers to have access to superior brushes.

 

Oral-B continued its collaboration with dentists to promote oral health awarenessvia the free dental checkup program.

FINANCIAL RATIOS

2018-19 2017-18 Change Explanation for changes over 25% in the ratios if any
Debtors turnover 10.4 10.9 -5%
Inventory turnover 8.6 7.9 8%
Interest coverage ratio 44.2 47.2 -6%
Current ratio 1.7 1.3 29% Improvement in current ratio is due to reduction in tax liabilities
Debt equity ratio 0 0 N.A.
Operating profit margin 19% 21% -11%
Net profit margin 13% 14% -1%
Return on Networth 34% 38% -10%

BUSINESS RESPONSIBILITY REPORT

A separate report on Business Responsibility has been appended as Annexure I to thisReport.

CORPORATE SOCIAL RESPONSIBILITY

The only way to build a sustainable business is to improve lives

Since its foundation giving back to the communities has been an integral part of yourCompany's purpose and values. We have built sustainability into the way we operate and weknow that this will enable us to have a bigger impact on the world around us. This hasinspired our CSR strategy supported by two pillars - P&G Shiksha and TimelyDisaster Relief. P&G Shiksha provides access to holistic education forunderprivilege children through 360-degree educational interventions and your Company'sdisaster relief aims to provide comforts to those affected by natural disasters. YourCompany donated health and hygiene kits to more than 50000 families impacted by Keralafloods. Our employees also contributed monetarily to set up health camps across the state.In addition to this we also distributed P&G Purifier of Water providing clean waterto the affected families. Recently we also donated health and hygiene kits to more than10000 families displaced by cyclone FANI in Odisha.

Your Company's signature corporate sustainability program P&G Shiksha hasfocused on three main areas - improving education infrastructure empowering marginalizedgirls through education and improving learning outcomes. Till date the P&G group inIndia

has supported over 2100 schools (+300 since last year) schools across the country thatwill impact the lives of over 17 lakh (+300000 since last year) children in partnershipwith several NGOs/organizations like — Round Table India (RTI) Pratham EducationInitiatives among others.

Along with our NGO partner Round Table India (RTI) we have focused on building andrefurbishing school buildings constructing classrooms building playgrounds and improvinghealth and hygiene facilities for children at schools. In line with the SustainableDevelopment Goals (SDGs) in partnership with NGO Save the Children we are providingquality education to girls by enhancing the education infrastructure and the quality ofeducation available to them.

A key area that we have focused on is 'improving learning outcomes in children'. Withinthis we have concentrated our efforts in bridging learning gaps through on-groundremedial learning interventions strengthening early childhood education and implementingsoftware-based adaptive learning solutions across government schools.

Along with our NGO partner Pratham Education Foundation we are bridging the expectedand existing learning gaps in children through on-ground remedial learning interventions.During the Financial Year we reached out to more than 26000 children across 5 states inIndia and observed remarkable improvement in their learning levels. At the end of theintervention more than 70% students were able to read as per their expected learninglevel compared to less than 25% at the beginning of the intervention. There was a two-foldincrease in the number of students who could perform mathematical operations at the end ofthe intervention.

Through our early childhood education program in partnership with Pratham EducationFoundation we aim to develop motor and cognitive skills in children thereby setting themup for a fast-paced growth as they start school. At the end of the year to assess theirlevel of development children were asked to perform several tasks like matching shapestrace shapes recognize numbers say their name and family background. The results wereoverwhelming 85% children in the intervention groups had competent motor skills (abilityto draw hold a pencil colour within a shape join dots 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 have also partnered with thestate government in Delhi Himachal Pradesh Uttar Pradesh and Rajasthan to buildcapability of Anganwadi workers and mobilize volunteers from the community toassist with pre-school activities. Through this program we reached out to more than 4600units impacting more than 33000 children.

P&G Shiksha also partnered with Educational Initiatives (EI) to implement Mindsparka computer- based adaptive learning tool to remediate learning gaps in students acrossschools in Rajasthan Himachal Pradesh Madhya Pradesh Andhra Pradesh Uttarakhand andChhattisgarh. The tool integrates pedagogy teacher instruction and a learning managementsystem to assess a student's learning level and develop a customized learning path foreach one of them. The tool analyses the

learning levels in language and mathematics by presenting students with questions inincreasing level of difficulty. On answering incorrectly the student is provided astep-by-step explanation that helps strengthen their understanding. The program has beenimplemented in 100+ government schools where more than 17000 students spend over 10000hours annually learning using Mindspark. Post the intervention the learning levelsamong students using Mindspark improved two-fold compared to the control group. Thetool also provides teachers with information on the progress and learning levels ofstudents which is used for effective classroom management and instruction.

Your Company continued to impact the communities around its plants in a holistic mannerthroughout the Financial Year. At Bhiwadi in association with IBTADA we are promotingeducation for girl children and has also been supporting a girl's school in the Gwaldavillage. For five consecutive years the site has been conferred with the prestigiousBhamashah award by the state government for creating a transformational change in thelives of young children.

The government recently launched Samagra Shiksha Abhiyan for the holisticdevelopment of school education and introduced the Draft National Educational Policy toreform the current education system. Your Company's efforts are in line with thegovernment initiatives and it is well poised to play an active role in India's SuccessStory.

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 Corporate Social Responsibility activities as required under theCompanies (Corporate Social Responsibility Policy) Rules 2014 has been appended asAnnexure II to this Report.

ENVIRONMENTAL SUSTAINABILITY AND TECHNOLOGY ABSORPTION

CONSERVATION OF ENERGY

Environmental sustainability is embedded in our Purpose Values Principles and ourbusiness. We are committed to improving lives now and for generations to come by ensuringthat our products packaging and operations are safe for employees consumers and theenvironment. We ensure by focusing on technologies processes and improvements that matterfor the environment.

Within our operations we strive to grow responsibly continuously improve ourefficiency while reducing our carbon footprint. All the manufacturing sites in India are'zero waste to landfillRs site which means that there is no manufacturing discharge intothe environment. The Bhiwadi plant took several employee engagement initiatives to drivean energy saving mindset. As a result in the last five years the Bhiwadi plant hasreduced its footprint by 50% on energy water usage per unit of production emissions andwaste generated per units of production. The Baddi plant reduced its energy consumption by39% its water consumption by 72% and CO2 emission by 90% over the last fiveyears.

We are committed to help reduce the flow of plastic by making changes now and bringinglong-term solutions. In India we have put in place a system to recover and recyclemulti-layered plastic packaging waste. We are working with various waste managementcompanies and the industry to collect segregate and recycle multi-layered plasticpackaging waste.

i. Efforts made towards technology absorption:

• Usage of low pressure compressors.

• 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.

• 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:

a. Details of technology imported: Double pitch double edge perforation tool& bruderer press which gives double production on same speed leading to improvementin productivity & reduction in cost.

b. Year of import: 2017

c. Whether the technology been fully absorbed: Yes

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 year ended June 30 2019 For the year ended June 30 2018
Foreign Exchange earnings 14373 27823
Foreign Exchange outgo 52109 50786

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/gillette/corporate_governance/policy.shtml. This policy

deals with the review and approval of related party transactions. All related partytransactions are placed before the Audit Committee for review and approval. Prior omnibusapproval is obtained for related party transactions which are of repetitive natureentered in the ordinary course of business and at arm's length. All related partytransactions are subjected to independent review by chartered accountant firm to confirmcompliance with the requirements under the Companies Act 2013 and the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.

Details of material related party transaction entered into during the Financial Year2018-19 are given below:

Name of Related Party Procter & Gamble International Operations S.A. Singapore Branch
Nature of transaction Import of Finished Goods
Amount of transaction during Financial Year 2018-19 Rs 410.26 Crores

The above transaction was approved by the Shareholders by passing an OrdinaryResolution through Postal Ballot on January 8 2018. The Promoter shareholders hadabstained from voting on the said resolution.

All related party transactions entered during the Financial Year were in the ordinarycourse of business and on arm's length basis. The disclosure of related party transactionsas required under Section 134(3)

(h) of the Companies Act 2013 in Form AOC 2 is not applicable to your Company.

LOANS AND GUARANTEES GIVEN AND INVESTMENTS MADE

During the Financial Year your Company had given a loan of Rs 100 crores to one of itsfelllow subsidiaries Gillette Diversified Operations Private Limited for businesspurpose. The repayment of the said loan has been received during the Financial Year.

The Company has not given any guarantees or made any investments during the FinancialYear.

PUBLIC DEPOSITS

Your Company has not accepted any Public Deposits under Chapter V of the Companies Act2013 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 ('Act') and Rules made thereunder your Company hasconstituted Internal Complaints Committees ('ICC'). During the Financial Year onecomplaint with allegation of sexual harassment was filed with the Company. The saidcomplaint was closed during the Financial Year. No complaints were pending as on June 302019.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Sections 134 (3) (c) of the Companies Act 2013 withrespect to the DirectorsRs Responsibilities Statement it is hereby confirmed:

i. that in the preparation of the Annual Accounts for the Financial Year ended June 302019 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 302019 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.

CORPORATE GOVERNANCE

A separate report on Corporate Governance along with the AuditorsRs Certificate on itscompliance is annexed to this Annual Report.

EXTRACT OF ANNUAL RETURN

The extract of annual return in Form MGT-9 as required under Section 92(3) and Rule 12of the Companies (Management and Administration) Rules 2014 is appended as Annexure IIIto this report and also available on the website of the Company at http://www.pg.com/en_IN/invest/gillette/.

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 Year2018-19 was a year of overall strong growth. Our productivity continues to be thebest-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 Managerial Personnel) Rules 2014is 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 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

Mr. Madhusudan Gopalan was appointed as a Director and Managing Director of the Companyby the Shareholders of the Company effective July 1 2018 subject to the approval of theCentral Government. The Central Government accorded its approval for the said appointmenton May 22 2019.

Ms. Anjuly Chib Duggal was appointed as an Independent Director by the Board ofDirectors of the Company for a period of five years effective March 26 2019 subject tothe approval of the Shareholders of the Company at the ensuing 35th AnnualGeneral Meeting of the Company. The Nomination & Remuneration Committee of the Companyhas recommended the said appointment.

Mr. Gagan Sawhney was appointed as Additional Director (Executive Director - Finance)of the Company by the Board of Directors of the Company effective August 22 2019 to holdoffice upto the ensuing 35th Annual General Meeting of the Company. It isproposed to appoint Mr. Sawhney as Executive Director-Finance at the ensuing 35thAnnual General Meeting of the Company. The Nomination & Remuneration Committee of theCompany has recommended the said appointment.

Mr. Karthik Natarajan Director retires by rotation and being eligible offershimself for re-appointment at the ensuing 35th Annual General Meeting of theCompany.

Mr. Bansidhar S. Mehta completes his first tenure as Independent Director on September28 2019. Owing to personal reasons Mr. Mehta has offered himself for re-appointment fora period of one year only. Accordingly the Board of Directors have approvedre-appointment of Mr. Mehta as an Independent Director for second tenure of one yeareffective September 29 2019 subject to the approval of the Shareholders of the Companyat the ensuing 35th Annual General Meeting of the Company. The Nomination &Remuneration Committee of the Company has recommended the said re-appointment.

Mr. Anil Kumar Gupta completes his first tenure as Independent Director on September28 2019. The Board of Directors have approved re-appointment of Mr. Gupta as anIndependent Director for second tenure of five years effective September 29 2019 subjectto the approval of the Shareholders of the Company at the ensuing 35th AnnualGeneral Meeting of the Company. The Nomination & Remuneration Committee of the Companyhas recommended the said re-appointment.

Mr. Chittranjan Dua completes his first tenure as an Independent Director on September28 2019. The Board of Directors have approved re-appointment of Mr. Dua as an IndependentDirector for second tenure of five years effective September 29 2019 subject to theapproval of the Shareholders of the Company at the ensuing 35th Annual GeneralMeeting of the Company. The Nomination & Remuneration Committee of the Company hasrecommended the said re-appointment.

Mr. Gurcharan Das completes his first tenure as an Independent Director on September28 2019. The Board of Directors have approved re-appointment of Mr. Das as an IndependentDirector for second tenure of five years effective September 29 2019 subject to theapproval of the Shareholders of the Company at the ensuing 35th Annual GeneralMeeting of the Company. The Nomination & Remuneration Committee of the Company hasrecommended the said re-appointment.

Ms. Flavia Machado ceased to be Company Secretary and Compliance Officer of the Companyeffective September 17 2018 and Mr. Ghanashyam Hegde has been appointed as the CompanySecretary and Compliance Officer of the Company effective September 18 2018.

Brief profiles of Directors proposed to be appointed/ re-appointed at the ensuing 35thAnnual 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 appointment/ re-appointment of the aforesaid Directorsare being moved at the ensuing 35th Annual General Meeting which the Boardrecommends for your approval.

The Independent Directors of your Company have given declaration of Independence toyour Company stating that they meet the criteria of independence as mentioned underSection 149 (6) of the Companies Act 2013 and the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.

The details of training and familiarization programmes and Annual Board Evaluationprocess for Directors have been provided under the Corporate Governance Report.

AUDITORS

Kalyaniwalla & Mistry LLP Chartered Accountants were appointed as StatutoryAuditors of your Company at the 33rd Annual General Meeting held on November15 2017 for a term of five consecutive years.

The Report given by Kalyaniwalla & Mistry LLP Statutory Auditors on the financialstatements of the Company for Financial Year ended June 30 2019 is part of the AnnualReport. There has been no qualification reservation or adverse remark given by theAuditors in their Report.

POLICIES

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/gillette/corporate_ governance/policy.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 V to this Report.The dividend distribution policy has also been appended as Annexure VI to this Report.

SECRETARIAL AUDIT

Secretarial Audit was carried out by Dholakia & Associates LLP Company Secretariesfor the Financial Year 2018-19. 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.

SECRETARIAL STANDARDS

During the Financial Year your Company has complied with mandatory SecretarialStandards issued by the Institute of Company Secretaries of India.

TRADE RELATIONS

The Directors wish to thank the retailers wholesalers distributors suppliersclearing and forwarding agents and all other business associates and acknowledge theirefficiency and continued support in promoting such healthy growth in the Company'sbusiness.

ACKNOWLEDGEMENT

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.

The Directors also wish to thank the Company's consumers employees and Shareholdersfor their support and contributions in the growth of the Company.

On behalf of the Board of Directors

B. S. Mehta

 

Chairman

.