Your Directors have the pleasure of presenting the 55th Annual Report and the Audited Financial Statements of your Company for the Financial Year ended June 30 2019.
(Figures in Rs. crores)
|Revenue from operations||2947||2455|
|Profit before tax (PBT)||607||582|
|Profit after tax (PAT)||419||375|
Your Company follows its Financial Year as July 1st to June 30th.
The Directors are pleased to recommend a final dividend of Rs. 48 for each Equity Share for the Financial Year ended June 30 2019. During the Financial Year the Board of Directors declared an interim dividend of Rs. 40 per Equity Share. The payment of the interim dividend to the Shareholders was completed on March 7 2019.
Your Company delivered another year of steady balanced performance in tough external environment. Your Company delivered Sales of Rs. 2947 crores up 20% versus year ago (comparable* sales up 14%). The PAT was Rs. 419 crores up 12% versus year ago. We continue to focus on growth behind brand fundamentals strength of product portfolio and improved in-store execution.
In the Feminine Care business Whisper continues to hold its position as the market leader. During the Financial Year the brand continued to make strong progress in growing more users on sanitary napkins particularly on top-tier. Our best in class menstrual hygiene school program expanded to reach a critical milestone of 50% urban girls across the country. We also continued to drive depth and breadth of our portfolio via sharply defined go-to-market plans taking category to more stores.
We also re-staged our entire top-tier lineup with a packaging upgrade and a new campaign Meri Life Mere Rules that drove significant social media conversation on breaking societal limitations on girls so they live life unconstrained and achieve their dreams.
Health Care Business
Your Company's Health Care business continued to grow strong double digit behind the strength of our equities and our portfolio which includes Vicks VapoRub Vicks Cough Drops Vicks Action 500 Advanced Vicks Inhaler and Vicks BabyRub. The growth was driven by a combination of plans to win with consumers winning versus competition and winning in whitespaces with the launch of BabyRub.
Vicks Rubs grew penetration behind our Category Development Index program for the third year in a row continuing to grow volume share in the Financial Year 2018-19. Vicks Cough Drops offtake grew strong with share gain in the cough lozenges category in a year of multiple competitive launches and increased investments on media and trade from existing competition. We have also strengthened & premiumized our throat lozenges portfolio with the launch of `Vicks 3 in 1' in June 2019.
Apart from the strong business results the brand received external recognition with the Equity building campaign - Vicks #TouchOfCare One in a Million - becoming the most awarded Indian campaign at the prestigious Cannes Lion 2019. The campaign won 4 metals (1 Silver Lion - Film for Single-market Campaign category & 3 Bronze Lions - Creative Strategy Film Craft and Film Healthcare category).
Overall your Company continued to focus on driving consumer meaningful innovations backed by distribution expansion and strong advertising thereby delivering consistent growth.
Old Spice continued to have a challenging Financial Year 2018-19. There is a conscious business choice to hold back investments on Old Spice until there is a winning proposition in a category that is highly dynamic and competitive.
|FY 2018-19||FY 2017-18||% Change|
|Interest coverage ratio||111.8||110.4||1%|
|Debt equity ratio||0||0||N.A.|
|Operating profit margin||21%||24%||-13%|
|Net profit margin||14%||15%||-8%|
|Return on Networth||49%||56%||-7%|
BUSINESS RESPONSIBILITY REPORT
A separate report on Business Responsibility has been appended as Annexure I to this Report.
CORPORATE SOCIAL RESPONSIBILITY (`CSR')
Since its foundation giving back to the communities has been an integral part of your Company's purpose and values. We have built sustainability into the way we operate and we know that this will enable us to have a bigger impact on the world around us. This has inspired our CSR strategy supported by two pillars - P&G Shiksha and Timely Disaster Relief. P&G Shiksha provides access to holistic education for underprivilege children through 360-degree educational interventions and your Company's disaster relief aims to provide comforts to those affected by natural disasters. Your Company donated health and hygiene kits to more than 50000 families impacted by Kerala floods. 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 water to the affected families. Recently we also donated health and hygiene kits to more than 10000 families displaced by cyclone FANI in Odisha.
Your Company's signature corporate sustainability program P&G Shiksha has focused on three main areas - improving education infrastructure empowering marginalized girls through education and improving learning outcomes. Till date the P&G group in India has supported over 2100 schools (+300 since last year) schools across the country that will impact the lives of over 17 lakh (+300000 since last year) children in partnership with several NGOs/ organizations like - Round Table India (RTI) Pratham Education Initiatives among others.
Along with our NGO partner Round Table India (RTI) we have focused on building and refurbishing school buildings constructing classrooms building playgrounds and improving health and hygiene facilities for children at schools. In line with the Sustainable Development Goals (SDGs) in partnership with NGO Save the Children we are providing quality education to girls by enhancing the education infrastructure and the quality of education available to them.
A key area that we have focused on is `improving learning outcomes in children'. Within this we have concentrated our efforts in bridging learning gaps through on-ground remedial learning interventions strengthening early childhood education and implementing software-based adaptive learning solutions across government schools.
Along with our NGO partner Pratham Education Foundation we are bridging the expected and 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 in India and observed remarkable improvement in their learning levels. At the end of the intervention more than 70% students were able to read as per their expected learning level compared to less than 25% at the beginning of the intervention. There was a two-fold increase in the number of students who could perform mathematical operations at the end of the intervention.
Through our early childhood education program in partnership with Pratham Education Foundation we aim to develop motor and cognitive skills in children thereby setting them up for a fast-paced growth as they start school. At the end of the year to assess their level of development children were asked to perform several tasks like matching shapes trace shapes recognize numbers say their name and family background. The results were overwhelming atleast 85% children in the intervention groups had competent motor skills (ability to draw hold a pencil colour within a shape join dots etc.) versus newly 40% in the comparison groups. Similarly cognitive competence of the children in intervention groups was more than two-fold than that of comparison groups. We have also partnered with the state government in Delhi Himachal Pradesh Uttar Pradesh and Rajasthan to build capability of Anganwadi workers and mobilize volunteers from the community to assist with pre-school activities. Through this program we reached out to more than 4600 units impacting more than 33000 children.
P&G Shiksha also partnered with Educational Initiatives (EI) to implement Mindspark a computer-based adaptive learning tool to remediate learning gaps in students across schools in Rajasthan Himachal Pradesh Madhya Pradesh Andhra Pradesh Uttarakhand and Chhattisgarh. The tool integrates pedagogy teacher instruction and a learning management system to assess a student's learning level and develop a customized learning path for each one of them. The tool analyses the learning levels in language and mathematics by presenting students with questions in increasing level of difficulty. On answering incorrectly the student is provided a step-by-step explanation that helps strengthen their understanding. The program has been implemented in 100+ government schools where more than 17000 students spend over 10000 hours annually learning using Mindspark. Post the intervention the learning levels among students using Mindspark improved two-fold compared to the control group. The tool also provides teachers with information on the progress and learning levels of students which is used for effective classroom management and instruction.
Your Company continued to impact the communities around its plants in a holistic manner throughout the Financial Year. At Goa in association with Matruchhaya a local public charitable trust your Company is providing educational and infrastructural support to a school for the orphaned destitute and abandoned children. In Mandideep along with local NGO Arushi we are supporting the overall development of the local Satlapur Government School.
The government recently launched Samagra Shiksha Abhiyan for the holistic development of school education and introduced the Draft National Educational Policy to reform the current education system. Your Company's efforts are in line with the government initiatives and it is well poised to play an active role in India's Success Story.
Your Company has constituted a Corporate Social Responsibility Committee. The composition and terms of reference of the Corporate Social Responsibility Committee are provided in the Corporate Governance section annexed to this Report.
Annual report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules 2014 has been appended as Annexure II to this Report.
ENVIRONMENTAL SUSTAINABILITY AND CONSERVATION OF ENERGY
Environmental sustainability is embedded in our Purpose Values Principles and our business. We are committed to improving lives now and for generations to come by ensuring that our products packaging and operations are safe for employees consumers and the environment. We ensure by focusing on technologies processes and improvements that matter for the environment.
Within our operations we strive to grow responsibly continuously improve our efficiency while reducing our carbon footprint. The Goa manufacturing plant is a `zero waste to landfill' site which means that there is no manufacturing discharge into the environment. In the last 5 years the Goa plant has reduced its carbon emission by 18%. During this period the plant has also improved on both energy and water by 75%. The plant is also leveraging technology experts employees and renewable sources of energy to reduce our overall footprint and make our operations more sustainable.
We are committed to help reduce the flow of plastic by making changes now and bringing long-term solutions. In India we have put in place a system to recover and recycle multi-layered plastic packaging waste. We are working with various waste management companies and the industry to collect segregate and recycle multi-layered plastic packaging waste.
i. Efforts made towards technology absorption:
Usage of low pressure compressors at the Plants.
Continued implementation of quality control / quality assurance procedures of products and processes were successfully adapted on commercial scale to utilize local raw materials and machinery; technical services for reliability quality cost savings and technology transfer from overseas.
ii. Benefits derived like product improvement cost reduction product development or import substitution:
Usage of low pressure compressors resulted in cost reduction and saved electricity consumption.
The above efforts resulted in improving process efficiencies consistent quality of our products introduction of new products import substitution and successful absorption of technology.
iii. Imported technology:
Your Company has the advantage of availing advanced technology and continuous upgradation thereof from The Procter & Gamble Company USA and its subsidiaries. This is an unmatched competitive advantage that helps the Company deliver strong business results.812>
iv. Expenditure on Research & Development:
Your Company has not incurred any expenditure on research and development during the Financial Year.
FOREIGN EXCHANGE EARNINGS & OUTGO
The details of foreign exchange earnings and outgo as required under Section 134 of the Companies Act 2013 and Rule 8(3) of the Companies (Accounts) Rules 2014 are mentioned below: Rs. in Lakhs
|For the Financial Year ended June 30 2019||For the Financial Year ended June 30 2018|
|Foreign Exchange earnings||2422||2635|
|Foreign Exchange outgo||75321||55999|
RELATED PARTY TRANSACTIONS
Your Company has formulated a policy on related party transactions which is also available 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 related party transactions. All related party transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and at arm's length. All related party transactions are subjected to independent review by chartered accountant firm to confirm compliance with the requirements under the Companies Act 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015.
No material related party transactions were entered during the Financial Year by your Company. All related party transactions entered during the Financial Year were in ordinary course of the business and on arm's length basis. Accordingly the disclosure of related party transactions as 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 2018-19
Details of loans given by your Company under Section 186 of the Companies Act 2013 during the Financial Year 2018-19 are as follows:
|Name of the Company||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 Financial Year 2018-19.
Your Company has not accepted any Public Deposits under Chapter V of the Companies Act 2013 during the Financial Year.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
As per the requirement of The Sexual Harassment of Women at Workplace (Prevention Prohibition & Redressal) Act 2013 and Rules made thereunder your Company has constituted an Internal Complaints Committees (ICC). During the Financial Year one complaint with allegation of sexual harassment was filed with the Company. The said complaint was closed during the Financial Year. No complaints were pending as on June 30 2019.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under Sections 134(3)(c) of the Companies Act 2013 with respect to the Directors' Responsibilities Statement it is hereby confirmed:
i. that in the preparation of the Annual Accounts for the Financial Year ended June 30 2019 the applicable accounting standards had been followed along with proper explanation relating to material departures;
ii. that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit or loss of the Company for the Financial Year under review;
iii. that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv. that the Directors had prepared the accounts for the Financial Year ended June 30 2019 on a going concern basis;
v. that the Directors had laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and were operating effectively; and
vi. that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
EXTRACT OF ANNUAL RETURN
The extract of annual return in Form MGT 9 as required under Section 92(3) of the Companies 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 its compliance is provided under the Corporate Governance section of this Report.
MANAGEMENT & PERSONNEL
The strength of business over the past few years and resilience in this particular year due to multiple economic headwinds in the country demonstrates the core strengths of our employees to stay reality based and influence the course of business. Financial Year 2018-19 was a year of overall strong growth. Our productivity continues to 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 Act 2013 and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is appended as Annexure IV to this Report.
The information as per Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of this Report. As per the provisions of first proviso to Section 136(1) of the Companies Act 2013 the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014. Any Member interested in obtaining a copy of the said 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 Company by the Shareholders of the Company effective July 1 2018 subject to the approval of the Central Government. The Central Government accorded its approval for the said appointment on May 20 2019.
Mr. Gagan Sawhney was appointed as Non-Executive Director of the Company by the Shareholders of the Company effective January 24 2019.
Ms. Meena Ganesh was appointed as an Independent Director by the Board of Directors of the Company for a period of five years effective March 19 2019 subject to the approval of the Shareholders of the Company at the ensuing 55th Annual General Meeting of the Company. The Nomination & Remuneration Committee of the Company has recommended the said appointment.
Mr. Shailyamanyu Singh Rathore resigned as Director of the Company effective May 8 2019.
Mr. Ghanashyam Hegde was appointed as Additional Director (Non-Executive) of the Company by the Board of Directors of the Company effective May 9 2019 to hold office upto the ensuing 55th Annual General Meeting of the Company. It is proposed to appoint Mr. Hegde as Non-Executive Director at the ensuing 55th Annual General Meeting of the Company. The Nomination & Remuneration Committee of the Company has recommended the said appointment.
Mr. Karthik Natarajan and Mr. Pramod Agarwal Directors retire by rotation and being eligible offer themselves for re-appointment at the ensuing 55th Annual General Meeting of the Company.
Mr. Rajendra A. Shah completes his first tenure as Independent Director on September 23 2019. Owing to personal reasons Mr. Shah has offered himself for re-appointment for a period of one year only. Accordingly the Board of Directors have approved re-appointment of Mr. Shah as an Independent Director for second tenure of one year effective September 24 2019 subject to the approval of the Shareholders of the Company at the ensuing 55th Annual General Meeting of the Company. The Nomination & Remuneration Committee of the Company has recommended the said re-appointment.
Mr. Bansidhar S. Mehta completes his first tenure as Independent Director on September 23 2019. Owing to personal reasons Mr. Mehta has offered himself for re-appointment for a period of one year only. Accordingly the Board of Directors have approved re-appointment of Mr. Mehta as an Independent Director for second tenure of one year effective September 24 2019 subject to the approval of the Shareholders of the Company at the ensuing 55thAnnual 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 September 23 2019. The Board of Directors have approved re-appointment of Mr. Gupta as an Independent Director for second tenure of five years effective September 24 2019 subject to the approval of the Shareholders of the Company at the ensuing 55th Annual General Meeting of the Company. The Nomination & Remuneration Committee of the Company has recommended the said re-appointment.
Ms. Flavia Machado was appointed as the Company Secretary and Compliance Officer of the Company effective September 18 2018.
Brief profile of Directors proposed to be appointed/ re-appointed at the ensuing 55th Annual General Meeting and the details of the Directorships held by them in other companies are provided under the Corporate Governance section of the Report.
Appropriate resolutions for the appointment/re-appointment of the aforesaid Directors are being moved at the ensuing 55th Annual General Meeting which the Board recommends for approval of the Shareholders of the Company.
The Independent Directors of your Company have given declaration of Independence to your Company stating that they meet the criteria of Independence as mentioned under Section 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 Evaluation process for Directors have been provided under the Corporate Governance section of the Report.
Kalyaniwalla & Mistry LLP Chartered Accountants were appointed as Statutory Auditors of your Company at the 53rd Annual General Meeting held on November 16 2017 for a term of five consecutive years.
The Report given by the Statutory Auditors on the financial statements of the Company for the Financial Year ended June 30 2019 is part of the Report. There has been no qualification reservation or adverse remark given by the Auditors in their Report.
Ashwin Solanki & Associates Cost Accountants carried out the cost audit for applicable business during the Financial Year 2018-19. The Board of Directors has re-appointed Ashwin Solanki & Associates Cost Accountants for the Financial Year 2019-20.
Your Company has adopted policies on related party transactions corporate social responsibility vigil mechanism nomination and remuneration materiality of events and dividend distribution policy which are available on the website of the Company at http://www.pg.com/ en_IN/invest/pghh/corporate_governance/policies.shtml/.
The policy on Director's appointment and remuneration including criteria for determining qualifications positive attributes independence of Director and remuneration for Key Managerial Personnel has been appended as Annexure V to this Report. The dividend distribution policy has been appended as Annexure VI to this Report.
Secretarial Audit was carried out by Dholakia & Associates LLP Company Secretaries for the Financial Year 2018-19. There were no qualifications reservation or adverse remarks given by the Secretarial Auditors of the Company. The Secretarial Audit report has been appended as Annexure VII to this Report.
During the Financial Year your Company has complied with the mandatory Secretarial Standards issued by the Institute of Company Secretaries of India.
The Directors wish to thank the retailers wholesalers distributors suppliers of goods & services clearing and forwarding agents and all other business associates and acknowledge their efficiency and continued support in promoting such healthy growth in your Company's business.
We are grateful to The Procter & Gamble Company USA and its subsidiaries for their invaluable support in terms of access to the latest information / knowledge in the field of research & development for products ingredients and technologies; timely inputs to exceptional marketing strategies; and the goodwill of its world-renowned Trademarks and superior brands. We are proud to acknowledge this unstinted association that has vastly benefited the Company.
The Directors also wish to thank the Company's consumers employees and Shareholders for their support and contributions in the growth of the Company.
|On behalf of the Board of Directors|
|Mumbai||R. A. Shah|
|August 21 2019||Chairman|