and Management Discussion and Analysis
Against the backdrop of the external environment discussed earlier, our value creation
model and our strategy, your Board of Directors is pleased to share with you the Business
Performance under each of its strategic pillars along with the Audited Financial
Statements for the financial year ended 31st March, 2018.
WINNING WITH BRANDS AND INNOVATION
Our consumers are at the heart of our value creation model and strategy. We meet the
needs of our consumers through our four categories spanning 40 brands, most of which are
household names.
The key thrust areas for your Company under this strategic pillar of Winning with
Brands and Innovation are building brands with purpose, innovating across the portfolio
and market development.
To make the business future ready, we have implemented the Winning In Many Indias
(WiMi) strategy that resulted in creating 14 Consumer Clusters and the Country Category
Business Teams (CCBTs), which are multi-functional business units consisting of marketing,
R&D, customer development, finance and supply chain resources. Through WiMi and CCBTs,
your Company is crafting sharper strategies and rolling out innovations at a much faster
pace.
Personal Care
Your Company is focusing on key strategic thrusts to further strengthen its leadership
in the Indian Personal Care market, by strengthening the core brands, accelerating
premiumisation of the portfolio, market development and scaling up play in
‘naturals'.
The penetration and consumption of most of the categories in which your Company
operates have a healthy headroom to grow, indicating the potential in the Personal Care
market in India.
Skin Care saw healthy growth across segments including face care, face cleansing, hand
and body. Growth of core brands in Skin Care was driven by a successful re-launch of Fair
& Lovely. The talcum powder business grew ahead of the market with refreshed
communication and focused relevance building.
Skin Cleansing had a good year, with Lifebuoy, Lux, Pears and Dove growing strongly.
Lifebuoy continued its mission of changing handwashing habits across the nation and Lux
held its second edition of the ‘Lux Golden Rose Awards', the only award to celebrate
and recognise best women actors. Dove and Pears led the growth at the premium end of the
market.
In Haircare, your Company launched various new products in the core portfolio of every
brand to meet its growth ambition. Several innovations were delivered in the
‘naturals' space. Two new variants of TRESemme, namely, ‘TRESemme Botanique
Detox and Restore' and ‘TRESemme Botanique Nourish and Replenish' were also launched.
A new variant for Dove called ‘Environmental Defence' was launched to protect hair
damage caused due to pollution.
The re-shaping of the Oral Care market resulted in headwinds to your Company's Oral
Care business. Closeup was re-launched in 2017 with a refreshed proposition and
communication as well as high scale media deployment. Pepsodent had a refreshed
communication to build relevance of the germ protection proposition, with focus on
‘sweet loving' eating habits. Your Company, through LEVER ayush, has forayed into the
‘naturals' segment in Oral Care.
Lakme had a milestone year and entered the list of your Company's ' 1,000 crores
brands. Growth was broad-based, with all sub-ranges (Core, 9to5, Absolute) delivering
strong growth. Lakme continued to lead trends in the market with new ranges like Lakme
Absolute Argan Oil range. The brand also hosted the marquee Lakme Fashion Week.
In Deodorants, the Axe brand performed welt, and a new mini format of Axe Ticket was
launched. Rexona, our leading anti-perspirant brand, has shown encouraging results during
initial launch.
Your Company has a comprehensive ‘naturals' strategy to ensure it is able to
leverage this growing trend. The Company is building a master brand LEVER ayush across
multiple categories like oral care, haircare, skin care and more. The brand strives to
make ancient ayurvedic wisdom accessible to solve modern day beauty problems. LEVER ayush
consists of a wide range of products across toothpaste, soaps, handwashes, shampoos and
face wash, with each segment offering varied solutions. LEVER ayush works with one of the
premier Ayurvedic Institutes, Arya Vaidya Pharmacy, to make products that use the right
ingredients to make the product effective.
Your Company is also building specialist 'naturals' brands like Indulekha and Citra.
Indulekha has delivered impressive performance in the oil format and has now been extended
into shampoos, with a unique product formulation and distinctive packaging.
The third leg of the ‘naturals' strategy involves launching various natural
variants within its existing portfolio of products like TRESemme Botanique, Clinic Plus
Ayurveda, FAL Ayurvedic care, Closeup Nature Boost and Nature Rush.
Home Care
Your Company's Home Care business sustained its competitive, profitable growth agenda
during the year. Your Company's fabric wash business has delivered strong and
comprehensive performance on the back of continuing the premiumisation thrust with Surf
excel and regaining growth in the mass segment led by Wheel. In the emerging segments of
machines and fabric conditioning, Surf excel matic liquid and Comfort fabric conditioner
built momentum and reached more consumer homes. Surf excel hand wash and matic powders
were re-engineered for optimised delivery of fabric whiteness. Sunlight powder was
re-launched with improved performance on cleaning. Wheel powder was re-launched with
malodour masking benefits on fabrics delivered through fragrance technology. Rin bar was
re-launched with improved performance on cleaning and fragrance attributes. Rin Matic
liquid for Top Load washing machines was launched.
In Household Care, Vim led the market development for dishwash through category
adoption of Vim bar in rural India and by upgrading existing bar consumers to the liquid
format. During the year, Vim bar also launched its value-added variant Vim Anti-Smell
(with Pudina) to start upgrading existing bar users to a higher value benefit of removal
of strong leftover smells from clean vessels. Vim liquid was re-engineered to deliver
better value to our consumers. Domex launched India's first low-cost toilet cleaning
powder. Domex toilet rim blocks too were re-launched via e-commerce.
Pureit continued to strengthen its presence in the fast-growing Reverse Osmosis (RO)
business. Launch of the low-priced mineral RO range complemented the existing range well
and has further opened the segment by providing consumers a quality range of RO water
purifiers at an affordable price. Your Company also launched the new Pureit air purifier
range to provide effective solutions to the growing concern around air pollution.
Foods
Your Company's Foods business presents sustainable opportunities for future growth
given low household penetration. Consumers are looking for taste, freshness and
differentiated offerings that satiate their need for experimentation and time saving. The
preference for international cuisines is rising and higher disposable incomes squarely
translate to higher share of wallet for packaged foods, leading to a virtuous cycle of
growth.
The Foods business will continue to focus on volume growth in core categories, while
successfully landing innovations which will be critical to tap into a fast re-shaping
landscape of packaged foods.
During the year, the Foods business embarked on several new initiatives and launches,
notably the launch of new Knorr Italian Margherita and Cheese & Herbs variant of
noodles. This launch in select geographies adds to the noodles portfolio and comes as an
addition to Knorr's flagship Soupy noodles which has a loyal consumer base. Your Company
also launched two new variants of Premium International soups - Italian Mushroom and
Mexican Tomato Corn. Under the food solutions channel, the Company introduced seven
different Masala variants. Knorr noodles tied up with Carnival cinemas to provide a great
snacking experience for moviegoers.
Kissan re-launched its Sweet & Spicy range of ketchups to cater to the evolving
palate of new-age consumers. Kissan entered into a partnership with INOX to provide
consumers with the experience of a new Sweet & Spicy range at every INOX movie hall in
the country, a unique tie-up to distribute samples at the ‘moment of consumption'.
The year also saw the launch of one new variant of premium jam, Kissan Tropical blast and
new packs of Kissan Mixed Fruit jams. Kissan Ketchup and sauces were re-launched during
the year.
Kissan also launched its first ever engagement platform in 2017. In an endeavour to
help make the sometimes-daunting task of packing tiffin easier, Kissan, true to its ethos,
is on a journey via its ‘Kissan Tiffin Timetable' channel to create 200 recipes for
200 schooldays. The recipes are co-created with India's leading recipe platform, India
Food Network, and presented by an assortment of renowned trained chefs, home chefs and
food bloggers. The initiative was recognised by the Indian Food Forum with a ‘Golden
Spoon Award' as the best marketing activation for 2017.
Refreshments
The Refreshments business of your Company, comprising iconic brands like Taj Mahal, Red
Label, Lipton, BRU and Kwality Wall's, had a good year. It delivered strong and
broad-based volume-led growth across Tea, Coffee and Ice Cream. The business continued to
drive the reach through increase in direct distribution. Tea continued to deliver robust,
volume-led growth as all the key brands continued to grow and delight millions of
consumers with their superior taste. Your Company initiated the launch of 13 new premium
variants of Taj Mahal for gifting on the e-commerce channel.
Brooke Bond Red Label and 3 Roses Natural Care Tea, with its differentiated immunity
benefit from goodness of ayurvedic ingredients, continued to delight consumers. In Taaza,
small packs and low unit packs were re-launched.
Brooke Bond Taj Mahal was re-launched with superior product and packaging. Your Company
continues to promote healthy lifestyle through green tea.
During the year, your Company launched a new variant of BRU Coffee in select
geographies. It continues to leverage state-of-the-art roasting and extraction
technologies to deliver superior instant coffee products. For the first time, your Company
launched beaten coffee and new masala tea premix in the Out of Home vending channel.
The Ice Cream and Frozen Dessert business saw competitive growth during the year. New
innovations in Cornetto and sticks range have done well and received good consumer
feedback. Your Company launched the Cornetto Red Velvet variant, Oreo variant, Kwality
Wall's Sandwich and Cloud Bite. In Paddle Pop, your Company launched two new exciting
variants, namely, dragon popper and mango and strawberry zaps. To cater to the health
conscious consumers, your Company introduced Cornetto Mini in reduced portion size and in
multipack.
Brands with Purpose
Our sustainable living brands are those that take action to make sustainable living
commonplace in a way that is relevant to the product, good for society and motivating to
consumers.
We are constantly endeavouring to build brands with purpose. By December 2017, Lifebuoy
reached over 67 million people through Lifebuoy Handwashing Programme in India. Dove
worked with partners such as Fountainhead and World Association of Girl Guides and Girl
Scouts to build the self-esteem of thousands of young girls in India.
The Fair & Lovely Foundation, through relevant online courses, continued its
journey of empowering women to become self-reliant. The programme has seen high degree of
participation with nearly two lakhs women.
Rin introduced the new Rin detergent bar with patented ‘smart-foam' technology
that saves up to two buckets of water in every washing cycle. Surf excel launched its
#HaarKoHarao campaign to make children future-ready by helping them 'Learn from Failure'.
Domex launched India's first toilet cleaning powder in a test market. The innovation
caters to the bottom of the pyramid consumers for whom the powder provides an effective
and affordable solution for cleaning the toilet and removing malodour. Given the initial
success, the brand is extending this innovation to new markets in 2018. Domex also
continued with its purpose by adopting 400 villages in Andhra Pradesh to make them Open
Defecation Free through behaviour change with on-ground interventions.
Till 2017, Pureit provided over 83 billion litres of safe drinking water to consumers
across India and continues to make progress towards its ambition of providing safe
drinking water to millions. The brand is leveraging its partnership with Micro-Finance
Institutions to reach the poorest of the poor.
Sustainable sourcing protects the planet while increasing farmer incomes. Each tomato
that goes into the making of Kissan ketchup is grown by a farmer in the most sustainable
way.
Staying steady on the progress as part of the ‘Reducing salt' commitment under the
USLP, three key variants of Kissan ketchup now meet sodium benchmarks of 5g salt intake
per day. The launch of these variants with reduced sodium in a competitive market serves
as a testimony that we are progressing steadfastly towards our USLP commitments by
providing consumers a variety of options from our portfolio that not only appeal to their
taste buds but also contribute positively towards their health and well-being.
As per the latest statistics by World Food Programme (WFP), 815 million people, or one
in nine of the global population still goes to bed hungry. India is home to a quarter of
undernourished people worldwide, making the country a key focus for tackling hunger on a
global scale. In 2017, to mark the occasion of World Food Day, Knorr gave food lovers the
opportunity to turn a virtual food post into a real meal for someone in need. On 16th
October, 2017, each time our #ShareTheMeal post was shared or re-tweeted on Facebook and
Twitter, Knorr Global donated the equivalent of one meal via the WFP, up to a total of 1.5
million meals, and Knorr India donated 50,000 meals via Akshaya Patra.
Your Company follows global principles of responsible food and beverage marketing and
is also a signatory of the India Policy on Marketing Communications to Children. In
accordance, HUL pledges to advertise products to children under the age of 12 that meet
common ‘Food & Beverage Alliance of India' nutrition criteria.
Your Company continues to collaborate with Confederation of Indian Industry (CII) and
Food Safety Authority of India to run ‘CII-HUL Initiative on Food Safety Sciences',
to propagate science based culture in food safety. This initiative aims to accomplish a
food operations regime in India that embodies the principles of food safety sciences and
is positioned on risk based food safety approaches.
WINNING IN THE MARKETPLACE
The Customer Development ecosystem of your Company encompasses capturing the demand,
fulfilment of demand and generation of demand. Your Company leads market development by
growing new channels with a focus on execution through its Perfect Stores programme. Your
Company works with customers, such as large retail chains, to generate insights about
those who visit their stores through technology that creates detailed shopper profiles.
Key thrust areas under this strategic pillar are WiMi, increasing your Company's
effective coverage and becoming the partner of choice across channels. WiMi is an agenda
that allows your Company to get closer to customers and consumers by providing tailor-made
products across categories and geographies.
It has been a year of strengthening the WiMi thinking across markets, embedding it into
your Company's ways of working. This has helped the Company move the needle on quality of
servicing and in-market execution by getting closer to the customers and consumers. Our
supply chain's capability to offer cluster-specific promotion and formulation is helping
the Company get closer to a diverse set of consumers and address their needs and
aspirations. This approach has strengthened your Company's connect with them across
geographical clusters and will be a source of competitive advantage for years to come.
As far as demand capturing is concerned, the focus of your Company has been on driving
quality of coverage and increasing the assortment using data-centric and analytical
approach. With respect to demand fulfilment, process and technology interventions have
been used for improving service and efficiencies. For demand generation, the strategy of
your Company encompasses winning in traditional trade in both open and closed formats,
winning in ‘route-to-market' as well as winning in emerging channels like modern
trade and e-commerce.
In a rapidly changing world, leveraging technology and data-led decision-making
continue to be a big thrust for your Company. HUL has been a thought leader in the area of
big data and analytics as a tool to drive sustainable growth. The Company uses intelligent
analytics at the backend to deliver better on-shelf availability in stores. Your Company
continues to invest and experiment in this dynamic space to ensure it retains the edge in
the marketplace.
In traditional trade, the focus has been on optimal servicing with appropriate beat
lengths and in improving in-store visibility. In ‘route-to-market', your Company has
been driving the distribution of the market development portfolio through differentiated
investment patterns. The call centres set up for retailers have helped many of your
Company's traditional trade customers reach out directly to us. The calls received from
retail outlets provide useful insights and help the Company understand issues and
opportunities in the marketplace better and address them effectively.
In Modern Trade, the foundation of your Company's success is based on collaborative
planning with key customers. Your Company has also significantly improved investments in
‘assisted selling'. Building ‘brands in store' remains a key thrust in this
channel and has yielded good results. This has translated into healthy growth during the
year on the back of growing brand penetration.
The e-commerce space is growing exponentially in India. Your Company has made
significant investments in capability building, and is committed to being the best FMCG
player in this channel. A specialised team is working closely with all key e-commerce
partners to create competitive advantage for the business and is scaling up at a rapid
pace.
Your Company continues to focus on and drive ‘Project Shakti', the initiative
aimed at empowering women, enhancing livelihoods and building opportunities for
small-scale entrepreneurs in rural India. Your Company now has nearly 80,000 Shakti
Entrepreneurs (Shakti Ammas) across India who make a respectable living by distributing
HUL products.
WINNING THROUGH CONTINUOUS IMPROVEMENT
Your Company is constantly aligning its products, processes and strategies to the
changing market conditions to stay ahead of competition. The key thrust areas under the
strategic pillar of continuous improvement are achieving profitable growth, improving
customer service and quality, and building back-end capabilities to improve our processes.
Your Company's Supply Chain agenda focuses on building business competitiveness through
consumer and customer-centricity, creating value through cost saving, customer service
excellence ensuring availability of product, ‘partner to win' programme
with suppliers and driving the sustainability agenda in manufacturing.
Your Company continued to improve on-shelf consumer relevant quality standards, thereby
enhancing overall consumer experience. ‘Delighting consumers everyday' is core to how
we drive quality in our products. During the year, on-shelf quality was improved by 20%
over the previous year.
With a robust funnel of savings programme, your Company continued on its path of
delivering consistent end-to-end cost savings. Cash delivery was achieved with the help of
IT tools resulting in optimising and maximising of cash flows. Your Company has brought
down inventory holding by two days. It continues to progress on the world-class
manufacturing journey and this covers 25% of production cost perimeter. Factories started
delivering >10% cost savings on perimeter by eliminating non- value-added activities.
The service delivery standards improved steadily with Customer-Case Fill-On-Time
(CCFOT) upwards of 95%. This was achieved by developing a segmented approach and having a
clear roadmap developed for category, geography and channels. IT has continued to play a
pivotal role in driving both growth and efficiency for the business. IT solutions for
transport management have helped optimise logistics costs and improved demand planning,
while forecasting solutions have enabled a leaner supply chain.
Your Company has increased its renewable energy share to 36%, in line with the USLP
commitments. This was achieved by converting agricultural process waste from our
operations into fuel, besides increasing utilisation of traditional biofuels like
agriwaste. Your Company expanded installation of specialised burners to utilise heavy
vegetable oil residue from operations as fuel, substituting furnace oil. This increase in
renewable energy usage and reduction in specific energy consumption has also contributed
to CO2 reduction in your Company's manufacturing operations by 54% compared to
2008 baseline. All factories and warehouses continue to maintain ‘zero non-hazardous
waste to landfill sites' status. Waste segregation and pre-processing facilities have been
provided at all locations to improve recyclability and reduce total waste quantities.
Increase in harvested rainwater utilisation in processes, reuse of treated effluent water,
reduction of water losses from boilers and cooling tower blow-down, process water
requirement optimisations, etc. have all contributed to reduction of water usage in
manufacturing by 55% compared to 2008 baseline.
For further details on the steps taken by the Company on conservation of energy, water
and reduction of waste, please refer to the Business Responsibility Report which forms
part of this Annual Report.
Technology Absorption
Your Company continues to derive sustainable benefit from the strong foundation and
long tradition of R&D at Unilever, which differentiates it from others. New products,
processes and benefits flow from work done in various Unilever R&D centres across the
globe, including India. The Unilever R&D labs in Mumbai and Bengaluru work closely
with the business to create exciting innovations that help us win with our consumers. With
world-class facilities, and a superior science and technology culture, Unilever attracts
the best talent to provide a significant technology differentiation to its products and
processes.
The R&D programmes, undertaken by Unilever globally, are focused on the development
of breakthrough and proprietary technologies with innovative consumer propositions. The
global R&D team comprises highly qualified scientists and technologists working in the
areas of Home Care, Personal Care, Foods, Refreshments and Water Purification and critical
functional capability teams in the areas of Regulatory, Clinicals, Digital R&D,
Product & Environment Safety and Open Innovation.
Your Company has an existing Technical Collaboration Agreement (TCA) and a Trade Mark
License Agreement (TMLA) with Unilever which was entered into in 2012. The TCA provides
for payment of royalty on net sales of specific products manufactured by your Company,
with technical know-how provided by Unilever. The TMLA provides for the payment of
trademark royalty as a percentage of net sales on specific brands where Unilever owns the
trademark in India. The pace of innovations and the scope of services have expanded over
the years. Unilever's global resources are providing greater expertise and superior
innovations. Your Company is enjoying the benefits of an increasing stream of new products
and innovations, backed by technology and know-how from Unilever. This has helped in
bringing to the Indian consumers bigger, better and faster innovations.
Your Company maintains strong and healthy interactions with Unilever through a
well-coordinated management exchange programme, which includes setting out governing
guidelines pertaining to identifying areas of research, agreeing timelines, resource
requirements, scientific research based on hypothesis testing and experimentation. This
leads to new, improved and alternative technologies, supporting the development of
launch-ready product formulations based on research, and introducing them to markets. Your
Company continuously imports technology from Unilever under the TCA, which is fully
absorbed. The benefits derived by your Company through technology absorption and R&D
have been detailed in the section Winning with Brands and Innovation earlier in this
report.
Your Company also receives continuous support and guidance from Unilever to drive
functional excellence in marketing, supply management, media buying and IT, among others,
which help your Company build capabilities, remain competitive and further step-up its
overall business performance. Unilever is committed to ensuring that the support in terms
of new products, innovations, technologies and services is commensurate with the needs of
your Company and enables it to win in the marketplace.
The details of expenditure on R&D at the Company's in-house facilities, eligible
for a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961, for the year
ended 31st March, 2018, are as follows:
Capital Expenditure : ' 5 crores Revenue Expenditure : ' 23 crores
Finance & IT
The Goods and Services Tax (GST) was one of the biggest indirect tax reforms in the
history of independent India. Your Company, along with 10,000+ vendors and 3,500+
distributors, transitioned swiftly and smoothly to the GST regime on 1st July, 2017. The
transition
began within a few minutes post-midnight across several locations and your Company was
servicing distributors from Day One. This was made possible by meticulous planning and
flawless execution by a cross-functional team. The impact of GST was outlined on various
processes in the areas of customer development, supply chain, procurement, payment
processing and accounting. Almost all the IT systems needed to be rewired and were tracked
rigorously to ensure they landed on time in full. Securing >95% registrations of our
ecosystem and conducting extensive training across multiple locations were key to a smooth
transition.
Price change actions across categories were landed to ensure the benefits were passed
on to consumers from the first day, well ahead of competition.
Effective 15th November, 2017, GST rates were reduced for some of our categories from
28% to 18%. While the implementation of this was done, due to paucity of time, it was not
possible to immediately pass on the benefit of these rate reductions on some of the
pipeline stocks to the end consumers. An estimated value of ' 124 crores has been
proactively disclosed to the authorities on this count and we have offered to pay this
amount suo motu to the Government. This amount is not recognised as revenue and is
accounted as a liability as on 31st March, 2018.
In addition to the above, we have also offered ' 36 crores towards additional
realisation which would have been made by Company's distributors on the closing stocks at
point of transition. This is only a pass through and has no impact on Company's
financials.
The finance function of your Company continues to assist in driving superior
performance of the business, pioneer thought leadership and stewardship.
During the year, your Company's finance team completed a big transformational project
that enabled centralisation and simplification of the accounting and control processes.
Future Finance is a transformative programme that has been initiated this year that will
change the way the finance team functions and partners business in your Company. A core
component of this change is the Finance Excellence Team (FET) which has been organised
around core performance management processes such as forecasting, budgeting and planning,
as well as providing decision support in key areas. FET will focus on specific core
business processes and decision support topics, enabling the team to develop deeper
expertise and greater subject matter knowledge.
During the year, your Company started monitoring and reporting controls through
Livewire, a comprehensive analytics tool that tracks compliance with internal controls
framework established by the management. The controls dashboard allows the management to
perform thematic analysis of its control health across different processes and activities,
time periods and responsibility centres. This will enable the management to proactively
protect value through implementation of a robust control environment.
WINNING WITH PEOPLE
Great Brands and Great People are our biggest assets. Sustainable, profitable growth
can only be achieved in an organisation which focuses on a performance culture and where
employees are engaged and empowered to be the best they can be.
To compete in a fast-changing world that is impacted by digitisation and increased
competition, we have created an organisation that's faster, simpler, more consumer and
customer-centric and future-proofed through our business transformation programme
Connected 4 Growth (C4G). In order to propel the C4G transformation, your Company
identified new behaviours as a key to winning in the market - Empowerment, Collaboration
& Experimentation. We are creating an organisation and culture where our employees are
empowered to act like entrepreneurs and business owners.
HUL retained the 'No. 1 Employer of Choice' amongst key business schools for the
seventh year in a row. HUL continues to be the ‘Dream Employer' and is also the top
company considered for application by B-School students. The Facebook ‘Unilever
Diaries' page has over 5 lakhs fans and helps us deepen our engagement with students, as
well strengthens our brand image among them.
Driven by the ‘leaders build leaders' philosophy, we have sustained an environment
where people get big responsibility early in their career and are also able to constantly
experiment. Our flagship management trainee programme, the Unilever Future Leaders
Programme (UFLP), has been the training ground for many inspiring leaders across HUL and
Unilever, and provides extensive cross-functional experience through live projects and
assignments.
Our thrust is on building an agile and inclusive organisation that celebrates
differences and leverages diversity. Apart from enabling infrastructure and work practices
such as maternity and paternity support programme, flexible work arrangements towards
creating an inclusive culture, we are constantly evaluating various employee support
requirements.
Employee well-being is of utmost importance to us. We focus on four aspects of
well-being - Physical, Mental, Emotional and Purposeful. An Employee Assistance Programme
called ‘Reach Out', a telephonic counselling programme which has round-the-clock
access, has provided timely help to some employees.
At HUL, we believe that purpose is at the heart of what energises people. In line with
this thinking, we kickstarted the Discover Your Purpose (DYP) journey with the intent to
ignite passion and purpose in our employees.
Our mission is to protect and enhance the well-being of our employees, visitors and
partners. A safe work environment is nonnegotiable, for which we follow global safety
standards in all our units. Our safety practices ensure all possible safety hazards are
identified and eliminated, not only at the workplace but also during employee travel. We
promote ‘Beyond Work Safety' as part of our holistic safety culture to improve safety
beyond work.
Employee Stock Option Plan (ESOP)
Details of the shares issued under Employee Stock Option Plan (ESOP), as also the
disclosures in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014, are
uploaded on the website of the Company
https://www.hul.co.in/investor-
relations/annual-reports/hul-annual-report-related-documents. html . No employee has been
issued share options during the year, equal to or exceeding one per cent of the issued
capital of the Company at the time of grant.
Pursuant to the approval of the Members at the Annual General Meeting held on 23rd
July, 2012, the Company adopted the ‘2012 HUL Performance Share Scheme'. In
accordance with the terms of the Performance Share Plan, employees are eligible for award
of conditional rights to receive equity shares of the Company at the face value of ' 1/-
each. These awards will vest only on the achievement of certain performance criteria
measured over a period of three years. The Company confirms that the 2012 HUL Performance
Share Scheme complies with the provisions of SEBI (Share Based Employee Benefits)
Regulations, 2014.
Under this plan, eligible Managers were given Conditional Performance Grant of shares
of Unilever and the Company in the ratio of 67:33, to mirror your Company's shareholding,
where Unilever held 67% shareholding. During the year, 160 employees were awarded
conditional rights to receive 70,267 equity shares at the face value of ' 1/- each. It
comprises conditional grants made to eligible managers covering performance period from
2017 to 2018 and from 2018 to 2020.
The employees of the Company are eligible for Unilever PLC (the ‘holding Company')
share awards namely, the Management Co-Investment Plan (MCIP), the Global Performance
Share Plan (GPSP) and the SHARES Plan. The MCIP scheme has two sets of eligibilities - for
Managers, it allows eligible employees to invest up to 20% of their annual bonus and for
eligible senior leaders to invest up to 100% of their annual bonus in the shares of the
holding Company and to receive a corresponding award of performance related shares. Under
GPSP, eligible employees receive annual awards of the holding Company's shares. The awards
under GPSP and MCIP plans vest after 3-4 years up to 200% of grant level, depending on the
satisfaction of the performance metrics. Under the SHARES Plan, eligible employees can
invest in the shares of the holding Company for specified amount and after three years,
one share is granted to the employees for every three shares invested, subject to the
fulfilment of conditions of the scheme. The holding Company charges the Company for the
grant of shares to the Company's employees based on the market value of the shares on the
exercise date.
Disclosures with respect to the remuneration of Directors and employees as required
under Section 197 of the Act and Rule 5 (1) of the Companies (Appointment and Remuneration
of Managerial Personnel) Rules, 2014 (Rules) have been appended as Annexure to this
report. Details of employee remuneration as required under provisions of Section 197 of
the Companies Act, 2013 and Rule 5(2) and 5(3) of the Rules are available at the
Registered Office of the Company during working hours, 21 days before the Annual General
Meeting and shall be made available to any shareholder on request. Such details are also
available on your Company's website
https://www.hul.co.in/investor-relations/annual-reports/hul-
annual-report-related-documents.html .
PERFORMANCE OF SUBSIDIARIES AND JOINT VENTURE
The summary of performance of the subsidiary and joint venture companies is provided
below:
Unilever India Exports Limited
Unilever India Exports Limited (UIEL) is a 100% subsidiary of your Company and is
engaged in FMCG exports business. The focus of the FMCG exports operation is two-fold: to
develop overseas markets by driving distribution of brands, such as Kissan, BRU, Brooke
Bond, Lakme, Pears and to effectively provide cross-border sourcing of FMCG products to
other Unilever companies across the world. This year was a challenging one for the Company
in view of disruption in its key export markets. However, key brands continued to perform
well in focus markets.
Lakme Lever Private Limited
Lakme Lever Private Limited (LLPL), is a 100% subsidiary of the Company and has over
350 owned / managed and franchisee salons.
In a market witnessing lower discretionary spends, LLPL continued to expand its salons
business in key markets. The 'Runway Rewards' programme continued its successful journey
into the second year and combined with attractive thematic promotion campaigns like Good
Hair Day, Happy New You and Fall Collection helped drive footfall growth. Effective use of
digital media and strong advocacy amongst customers has helped increased customer loyalty.
The boost in confidence is clearly evidenced in the increasing average bill value. Your
Company will continue to support LLPL to drive growth in this attractive market
opportunity.
LLPL also operates a manufacturing unit at Gandhidham which carries out job work
operations for your Company manufacturing toilet soaps, bathing bars and detergent bars.
Unilever Nepal Limited
Unilever Nepal Limited (UNL), a subsidiary of your Company, is engaged in
manufacturing, marketing and sale of detergents, toilet soaps, personal products and
laundry soaps in Nepal. In 2017, UNL completed 25 glorious years in the country.
During the year, UNL continued robust growth in sales which was broad based across all
categories. UNL has maintained its bottom-line performance, driven by mix, judicious price
management and by leveraging on the current manufacturing capability. UNL brands continue
to be market leaders in all the categories they operate in.
Hindustan Unilever Foundation
Hindustan Unilever Foundation (HUF) is a not-for-profit Company that anchors water
management related community development and sustainability initiatives of HUL.
HUF operates the ‘Water for Public Good' programme, with a specific focus on water
conservation, building local community institutions to govern water resources and
enhancing farm based livelihoods through adoption of judicious water practices. The
Foundation's programmes reach out to 2,400 villages in 57 districts across India in
partnership with 20 NGOs and multiple co-funders. HUF also supports several knowledge
initiatives in water conservation and governance.
By the end of year, the cumulative and collective achievements through partnered
programme of HUF include:
• Water Conservation: More than 450 billion litres of water conservation potential
created.
• Crop Yield: Additional agriculture production of over 6.5 lakhs tonnes has been
generated.
• Livelihoods: More than 50 lakhs person days of employment have been created
though water conservation and increased agriculture production.
The cumulative impact of HUF supported projects has been independently assured.
Other Subsidiaries
Pond's Exports Limited is a subsidiary of the Company which was engaged in leather
business and has since discontinued operations.
Bhavishya Alliance Child Nutrition Initiatives is a subsidiary of the Company which is
not-for-profit subsidiary of the Company and had launched a hand washing behaviour change
programme in the state of Bihar that aims to reduce diarrhoea and pneumonia in children
under the age of five years. Similar handwashing programme is now being driven by your
Company directly.
Daverashola Estates Private Limited is a subsidiary of the Company which has been
exploring opportunities to enter into appropriate business activities.
Jamnagar Properties Private Limited is a subsidiary of the Company. The litigation over
the land of the Company is now over and accordingly, the Company has initiated the process
of surrendering the land.
Levers Associated Trust Limited, Levindra Trust Limited and Hindlever Trust Limited,
subsidiaries of the Company, act as trustees of the employee benefits trusts of the
Company.
Joint Venture
Kimberly-Clark Lever Private Limited
Kimberly-Clark Lever Private Limited (KCLL) was a joint venture between your Company
and Kimberly-Clark Corporation (KCC), USA, with infant care diapers as its primary product
category sold under the brand Huggies and feminine care products sold under the brand
Kotex.
In line with your Company's decision to focus on its core business, the Company has
divested its stake in KCLL during the year and accordingly the joint venture has ceased to
exist.
Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement
containing salient features of financial statements of subsidiaries, associates and joint
venture companies in Form AOC 1 is attached herewith. The separate audited financial
statements in respect of each of the subsidiary companies shall be kept open for
inspection at the Registered Office of the Company during working hours for a period of 21
days before the date of the Annual General Meeting. Your Company will also make available
these documents upon request by any member of the Company interested in obtaining the
same. The separate audited financial statements in respect of each of the subsidiary
companies are also available on the website of your Company at
https://www.hul.co.in/investor-relations/annual-reports/hul-
annual-report-related-documents.html .
Your Company has not made any downstream investments in subsidiaries or joint venture
during the year.
OPPORTUNITIES & RISKS
Our success as an organisation depends on our ability to identify opportunities and
leverage them while mitigating the risks that arise while conducting our business.
Your Company has an elaborate risk management procedure, which is based on three
pillars: Business Risk Assessment, Operational Controls Assessment and Policy Compliance
Processes. Major risks identified by the businesses and functions are systematically
addressed through mitigating actions on a continuing basis. The Company has set up a Risk
Management Committee to monitor the risks and their mitigating actions and the key risks
are also discussed at the Audit Committee.
Some of the opportunities for the business of your Company and key identified risks
along with the steps taken by your Company to mitigate them are presented below.
| Strategy |
Opportunity |
Details |
| Winning with Brands and Innovation |
Premiumisation and Market Development |
With changing population demographics, higher spending capacity of consumers and wider
reach of products, there is increasing scope of premiumisation of our products. We
constantly innovate to meet needs of all our consumers. Most of the categories in which
your Company operates in are under-penetrated and therefore your Company continuously
invests in market development. |
| Winning in the Marketplace |
Winning in Channels of future |
Winning in traditional trade and ‘route-to-market' continues to be important for
your Company. However, winning in emerging channels like e-commerce and modern trade will
be the differentiator for your Company. Investments in strengthening our capabilities in
the channels of the future while digitalising our distribution in the traditional trade
would be the key thrusts. |
| Winning in the Marketplace and Winning through Continuous Improvement |
Leveraging Big Data |
Your Company has been a thought leader in using big data and analytics as a tool to
drive sustainable growth. The Company uses intelligent analytics at the backend to deliver
better on-shelf availability in stores. Services like order management, shipment planning,
tendering, tracking and monitoring can be improved with building backend capabilities. |
| Winning in the Marketplace and Winning through Continuous Improvement |
Sharper and Richer Execution |
Our continued and relentless focus on flawless execution across the value chain is a
key differentiator and a growth driver for the Company. We will continue to leverage this
opportunity by making appropriate investments. |
| Strategy |
Description of Risk |
Details |
|
Brand Preference |
|
| Winning with Brands and Innovation |
Your Company's success depends on the value and relevance of its brands and products
to consumers and on our ability to innovate and remain competitive. |
Your Company monitors external market trends and collates consumer, customer and
shopper insights to develop category and brand strategies. |
|
Consumer tastes, preferences and behaviours are changing more rapidly than ever. Your
Company's ability to identify and respond to these changes is vital to business success. |
Our R&D function actively searches for ways to translate the trends in consumer
preference and taste into new technologies for incorporation into future products. Our
innovation management process converts category strategies into projects which deliver new
products to market. We develop product ideas both in-house and with selected partners to
enable us to respond to rapidly changing consumer trends with speed. |
|
We are dependent on creating innovative products that continue to meet the needs of
consumers and getting these new products to market with speed. If we are unable to
innovate effectively, sales or margins could be materially adversely affected. |
Your Company has access to Unilever's global resources that provide greater expertise
and superior innovations, backed by technology and know-how from Unilever. This helps your
Company bring bigger, better and faster innovations to its consumers. |
|
Technological change is disrupting our traditional brand communication models. Our
ability to develop and deploy the right communication, both in terms of messaging content
and medium is critical to the continued strength of our brands. |
Our brand communication strategies are designed to optimise digital communication
opportunities. We develop and customise brand messaging content specifically for each of
our chosen communication channels (both traditional and digital) to ensure that our brand
messages reach our target consumers. |
|
Legal and Regulatory |
|
| Winning in the Marketplace |
Compliance with laws and regulations is an essential part of your Company's business
operations. We are subject to laws and regulations in diverse areas as product safety,
product claims, trademarks, copyright, patents, competition, employee health and safety,
the environment, corporate governance, listing and disclosure, employment and taxes. Frequent
changes in legal and regulatory regime and introduction of newer regulations with multiple
authorities regulating same areas lead to complexity in compliance. |
We are committed to complying with all applicable laws and regulations. The relevant
teams are responsible for setting detailed standards and ensuring that all employees are
aware of and comply with regulations and laws specific and relevant to their roles. Our
legal and regulatory specialists are closely engaged in monitoring and reviewing our
practices to provide reasonable assurance that we remain aware of and in line with all
relevant laws and legal obligations.
Your Company has institutionalised the mechanism to monitor changes in legislation,
both existing and proposed. The Company proactively engages with the Government and
regulators to develop a regulatory framework which is in the best interest of the
consumers and other stakeholders including Industry. |
|
Systems and Information |
|
| Winning through Continuous
Improvement |
Your Company's operations are increasingly dependent on IT systems and the management
of information. |
To reduce the impact of external cyber-attacks impacting our business, we have
firewalls and threat monitoring systems in place, complete with immediate response
capabilities to mitigate identified threats. |
|
Increasing digital interactions with customers, suppliers and consumers place even
greater emphasis on the need for secure and reliable IT systems and infrastructure, and
careful management of |
We also maintain a global system for the control and reporting of access to our
critical IT systems. This is supported by an annual programme of testing of access
controls. |
|
the information that is in our possession. |
We have policies covering the protection of both business and personal information, as
well as the use of IT systems and applications by |
|
The cyber-attack threat of unauthorised access and misuse of sensitive information or
disruption to operations continues to increase. |
our employees. Our employees are trained to understand these requirements. We also
have a set of IT security standards and closely monitor their operation to protect our
systems and information. |
|
|
We have standardised ways of hosting information on our public websites and have
systems to monitor compliance with appropriate privacy laws and regulations, and with our
own policies. |
UNILEVER SUSTAINABLE LIVING PLAN (USLP)
Your Company's vision is to accelerate growth in the business, while reducing
environmental footprint and increasing positive social impact. This vision has been
codified in the USLP launched in 2010, which is your Company's blueprint for achieving
sustainable growth. By spurring innovation, strengthening the supply chain, lowering
costs, reducing risks and building trust, sustainability is creating value for your
Company as well as the society.
Your Company has made good progress on the three USLP big goals to be achieved
globally: to help more than a billion people take action to improve their health and
well-being, to halve the environmental footprint of the making and use of the products and
to enhance the livelihoods of millions of people, while growing the business. Detailed
information on the progress of your Company's USLP initiatives and CSR activities are
available in the Annual Report on CSR and Business Responsibility Report which is appended
as an Annexure to this Annual Report.
| FINANCIAL REVIEW (STANDALONE) |
|
|
| Results |
For the Year ended 31st March, 2018 |
For the Year ended 31st March, 2017 |
| Sales (including excise duty) |
34,619 |
33,895 |
| EBITDA |
7,276 |
6,047 |
| Profit before exceptional items and tax |
7,347 |
6,155 |
| Profit for the year |
5,237 |
4,490 |
a) According to the requirements of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, revenue for the year ended 31st March, 2017 was reported
inclusive of excise duty. Goods and Services Tax ("GST") has been implemented
with effect from 1st July, 2017 which replaces Excise Duty and other input taxes. As per
Ind AS 18, the revenue for the year ended 31st March, 2018 is reported net of GST.
b) In compliance with IND AS 20 on Government Grants, the amount of budgetary support
under Goods and Services Tax, GST Refunds, to be received from the Government of India in
relation to the existing eligible units under the different Industrial Promotion Schemes
have been recognised as "Other Operating Income". In past periods these credits
were netted off from the excise cost reported in the Statement of Profit and Loss.
c) Comparable sales growth and comparable EBITDA margin improvement for FY 2017-18 has
been arrived at by adjusting:
i. Excise Duty, other net input taxes from reported sales of FY 2016-17, and
ii. GST Refunds to the reported sales of FY 2017-18.
d) In view of the accounting impact as shared in note (a) to (c) above, while the
reported Net Sales grew by 2% during the year, comparable Domestic Consumer Sales grew by
12% during the year. The reported EBITDA margin expansion was 320 bps for the year while
comparable EBITDA margin expansion was at 155 bps.
Category-Wise Turnover
|
For the Year ended 31st March, 2018 |
For the Year ended 31st March, 2017 |
| Sales |
Others* |
Sales |
Others* |
| Home Care |
11,464 |
165 |
11,123 |
223 |
| Personal Care |
16,132 |
332 |
16,078 |
226 |
| Foods |
1,147 |
18 1 |
1,102 |
22 |
| Refreshments |
5,181 |
44 |
4,795 |
53 |
| Others (including Exports, Infant and Feminine Care) |
695 |
26 |
797 |
22 |
| TOTAL |
34,619 |
585 |
33,895 |
546 |
*Others include service income from operations, relevant to the respective businesses.
Summarised Profit and Loss Account
|
For the Year ended |
For the Year ended |
|
31st March, 2018 |
31st March, 2017 |
| Sale of products (including excise duty) |
34,619 |
33,895 |
| Other operating income |
599 |
592 |
| REVENUE FROM OPERATIONS |
35,218 |
34,487 |
| Operating Costs |
27,942 |
28,440 |
| Profit Before Depreciation, Interest, Tax (PBDIT) |
7,276 |
6,047 |
| Depreciation |
478 |
396 |
| Profit Before Interest & Tax (PBIT) |
6,798 |
5,651 |
| Other Income (net of finance costs) |
549 |
504 |
| Profit before exceptional items |
7,347 |
6,155 |
| Exceptional items |
(62) |
241 |
| Profit Before Tax (PBT) |
7,285 |
6,396 |
| Taxation |
2,048 |
1,906 |
| Profit for the year |
5,237 |
4,490 |
| Basic EPS (') |
24.20 |
20.75 |
Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for the
last four years and for the year ended 31st March, 2018, are given below:
| Particulars |
2013-14 |
2014-15 |
2015-16 |
2016-17 |
2017-18 |
| Return on Net Worth (%) |
104.10 |
99.50 |
72.80 |
76.70 |
84.50 |
| Return on Capital Employed (%) |
130.20 |
127.70 |
105.80 |
105.90 |
118.90 |
| Basic EPS (after exceptional items) (?) |
17.88 |
19.95 |
19.12 |
20.75 |
24.20 |
There were no material changes and commitments affecting the financial position of the
Company which occurred between the end of the financial year to which this financial
statement relate on the date of this report.
Capital Expenditure during the year was at ' 853 crores (' 1,372 crores in the previous
year).
During the year, your Company did not accept any public deposits under Chapter V of
Companies Act, 2013.
Your Company manages cash and cash flow processes assiduously, involving all parts of
the business. There was a net cash surplus of ' 3,373 crores (2016-17: ' 1,671 crores), as
on 31st March, 2018. The Company's low debt equity ratio provides ample scope for gearing
the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered
with strict limits placed on the amount of uncovered exposure, if any, at any point in
time. There are no materially significant uncovered exchange rate risks in the context of
Company's imports and exports. The Company accounts for mark-to-market gains or losses
every quarter end, are in line with the requirements of Ind AS 21. The details of foreign
exchange earnings and outgo as required under Section 134 of the Companies Act. 2013 and
Rule 8(3) of Companies (Accounts) Rules, 2014 are mentioned below:
|
For the Year ended 31st March, 2018 |
For the Year ended 31st March, 2017 |
| Foreign Exchange earnings |
387 |
541 |
| Foreign Exchange outgo |
1,285 |
1,214 |
Dividend
Your Directors are pleased to recommend a Final Dividend of ' 12/- per equity share of
face value of ' 1/- each for the year ended 31st March, 2018. The Interim Dividend of '
8/- per equity share was paid on 14th November, 2017.
The Final Dividend, subject to the approval of Members at the Annual General Meeting on
Friday, 29th June, 2018, will be paid on or after Wednesday, 4th July, 2018, to the
Members whose names appear in the Register of Members, as on the Book Closure dates, i.e.
from Saturday, 23rd June, 2018, to Friday, 29th June, 2018 (both days inclusive). The
total dividend for the financial year, including the proposed Final Dividend, amounts to '
20/- per equity share and will absorb ' 5,177 crores, including Dividend Distribution Tax
of ' 848 crore.
Unpaid / Unclaimed Dividend
In terms of the provisions of Investor Education and Protection Fund (Accounting,
Audit, Transfer and Refund) Rules, 2016 / Investor Education and Protection Fund
(Awareness and Protection of Investors) Rules, 2001, ' 4.01 crores of unpaid / unclaimed
dividends were transferred during the year to the Investor Education and Protection Fund.
Scheme of Arrangement
Subsequent to the approval of the Members at the Court Convened Meeting held on 30th
June, 2016, to the Scheme of Arrangement for transfer of the balance of ' 2,187 crores
standing to the credit of the General Reserves to the Profit and Loss Account, your
Company had filed the petition for sanction of the Scheme of Arrangement with the Hon'ble
High Court of Mumbai. Upon the Scheme becoming effective, the amount so transferred is
proposed to be distributed to the Members from time to time, by the Board of Directors, at
its sole discretion, in such manner, quantum and at such time, as the Board of Directors
may decide. The Scheme is currently pending with National Company Law Tribunal (NCLT) for
sanction.
Particulars of Loan, Guarantee or Investments
Details of loans, guarantee or investments made by your Company under Section 186 of
the Companies Act, 2013, during the financial year 2017-18 are appended as an Annexure to
this report.
Risk and Internal Adequacy
The Company's internal control systems are commensurate with the nature of its business
and the size and complexity of its operations. These are routinely tested and certified by
Statutory as well as Internal Auditors and cover all offices, factories and key business
areas. Significant audit observations and follow up actions thereon are reported to the
Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company's
internal control environment and monitors the implementation of audit recommendations,
including those relating to strengthening of the Company's risk management policies and
systems.
GOVERNANCE, COMPLIANCE AND BUSINESS INTEGRITY
The Legal function of the Company continues to be a valued business partner that
provides solutions to protect your Company and enable it to win in the volatile,
uncertain, complex and ambiguous environment. Through its focus on creating ‘value
with values', the function provides strategic business partnership in the areas including
product claims, legislative changes, combatting unfair competition, business integrity and
governance.
As the markets continue to be disrupted with newer technologies and ever-evolving
consumer preferences, the need to have a framework around data security and privacy is
paramount. Your Company continues to ensure it has an appropriate framework and safeguards
for data privacy of its stakeholders with enhanced legal and security standards.
Your Company is of the view that the menace of counterfeits can be effectively
addressed if enforcement actions are supplemented with building awareness amongst the
consumers of tomorrow. One of the key activities undertaken by your Company in this
direction is propagating intellectual property awareness, particularly among school
students. Your Company believes it is important to educate students on intellectual
property, and build awareness and understanding of the subject so that students start
respecting intellectual property rights from a young age.
The Legal and Communications functions of your Company work with leading industry
associations, national and regional regulators and key opinion formers to develop a
progressive regulatory environment in the best interest of all stakeholders.
Business Integrity
Under its pillar of Business Integrity, your Company communicates its Code of Business
Principles (Code) and Code Policies internally and externally. All Company employees are
required to undertake mandatory annual training on our Code and Code Policies via online
training modules as well as take an annual business integrity pledge. Our Code and Code
Policies extend through our entire value chain including our employees, contractors and
third parties. During the year, we closed 101 incidents across all areas of our Code and
Code Policies, with 70 confirmed breaches. During the year, we terminated the employment
of 18 employees as a consequence of such breaches. The Company also requires its
third-party business partners to adhere to business principles consistent with its own.
These expectations are set out in our Responsible Sourcing Policy (RSP) and Responsible
Business Partner Policy (RBPP), which underpin our third-party compliance programme.
Corporate Governance
Maintaining high standards of Corporate Governance has been fundamental to the business
of your Company since its inception. A separate report on Corporate Governance is provided
together with a Certificate from the Statutory Auditors of the Company regarding
compliance of conditions of Corporate Governance as stipulated under Listing Regulations.
A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter
alia, confirming the correctness of the financial statements and cash flow statements,
adequacy of the internal control measures and reporting of matters to the Audit Committee,
is also annexed.
The extract of annual return in Form MGT-9 as required under Section 92(3) of the
Companies Act and Rule 12 of the Companies (Management and Administration) Rules, 2014 is
appended as an Annexure to this Annual Report.
Prevention of Sexual Harassment at Workplace
As per the requirement of the Sexual Harassment of Women at Workplace (Prevention,
Prohibition & Redressal) Act, 2013 (‘POSH Act') and Rules made thereunder, your
Company has constituted Internal Committees (IC). While maintaining the highest governance
norms, the Company has appointed external independent persons who worked in this area and
have the requisite experience in handling such matters, as Chairpersons of each of the
Committees. During the year, four complaints with allegations of sexual harassment were
received by the Company and they were investigated and resolved as per the provisions of
the POSH Act. To build awareness in this area, the Company has been conducting induction /
refresher programmes in the organisation on a continuous basis.
Update on Kodaikanal Soil Remediation
Your Company had informed the Members about the long-standing dispute with the former
workers association of the former factory in Kodaikanal wherein a Memorandum of Settlement
was signed with the association, bringing this long-standing matter to an end. On the
other issue pertaining to soil remediation on the premises of the former factory of your
Company, the soil remediation trials have been concluded. The Company is committed to
commence full-scale soil remediation at the factory site at the earliest.
Related Party Transactions
In line with the requirements of the Companies Act, 2013 and Listing Regulations, your
Company has formulated a Policy on Related Party Transactions which is also available on
the Company's website at
https://www.hul.co.in/investor-relations/corporate-qovernance/
. The Policy intends to ensure that proper reporting, approval and disclosure processes
are in place for all transactions between the Company and Related Parties.
All Related Party Transactions are placed before the Audit Committee for review and
approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly
basis for transactions which are of repetitive nature and / or entered in the Ordinary
Course of Business and are at Arm's Length. All Related Party Transactions are subjected
to independent review by a reputed accounting firm to establish compliance with the
requirements of Related Party Transactions under the Companies Act, 2013, and Listing
Regulations.
All Related Party Transactions entered during the year were in Ordinary Course of the
Business and at Arm's Length basis. No Material Related Party Transactions, i.e.
transactions exceeding 10% of the annual consolidated turnover as per the last audited
financial statement, were entered during the year by your Company. 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.
BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. Harish Manwani, Non-Executive Chairman of the Company, has decided to retire and
will not seek re-appointment at the forthcoming Annual General Meeting (AGM). The Board
places on record its deep sense of gratitude and appreciation for the leadership and
direction provided by Mr. Manwani, first as the Executive Director and thereafter, as the
Non-Executive Chairman for the past 13 years. The Board has decided to appoint Mr. Sanjiv
Mehta, presently the Managing Director and CEO of the Company, as the Chairman of the
Board of Directors in succession to Mr. Manwani from the conclusion of the forthcoming
AGM. The Board, while taking the above decision, took note of SEBI's amendments to the
Listing Regulations, announced on 28th March, 2018, to accept the recommendation of the
Kotak Committee on Corporate Governance to separate the positions of the Chairman and the
Managing Director, effective April 2020, for top 500 Companies by market capitalisation.
Considering this, the Board decided that the current tenure of Mr. Mehta as the Chairman
shall be till March 2020. The Company shall ensure compliance with the new requirement of
separation of the positions of Chairman and the Managing Director by April 2020.
The present term of appointment of Mr. Mehta as the Managing Director and Chief
Executive Officer is valid up to 9th October, 2018. The Board has, subject to the approval
of the Members in the forthcoming AGM, approved the re-appointment of Mr. Mehta as
Managing Director and Chief Executive Officer for another period of five years, post
completion of his present term.
During the year, Mr. P. B. Balaji resigned as Executive Director (Finance & IT) and
Chief Financial Officer with effect from 13th November, 2017, for pursuing external
opportunities. The Board places on record its deep appreciation for the outstanding
contribution made by Mr. Balaji. Mr. Srinivas Phatak was appointed as an Additional
Director on the Company's Board and the Executive Director (Finance & IT) and Chief
Financial Officer with effect from 1st December, 2017, succeeding Mr. Balaji, after
obtaining requisite approvals of the Members, through Postal Ballot and the Central
Government.
As per the provisions of the Companies Act, 2013, Independent Directors have been
appointed for a period of five years and shall not be liable to retire by rotation. The
Independent Directors of your Company have given the certificate of independence to your
Company stating that they meet the criteria of independence as mentioned under Section
149(6) of the Companies Act, 2013. All other Directors, except the Managing Director, will
retire at the ensuing Annual General Meeting and being eligible, offer themselves for
re-election.
The details of training and familiarisation programme and Annual Board Evaluation
process for Directors have been provided under the Corporate Governance Report. The policy
on Director's appointment and remuneration including criteria for determining
qualifications, positive attributes, independence of Director, and also remuneration for
key managerial personnel and other employees, forms part of the Corporate Governance
Report of this Annual Report.
MANAGEMENT COMMITTEE
The day-to-day management of the Company is vested with the Management Committee, which
is subjected to the overall superintendence and control of the Board. The Management
Committee is headed by the Chief Executive Officer and has Functional / Business Heads as
its members. During the year, Mr. Srinivas Phatak was appointed as Executive Director,
(Finance & IT) and CFO and member of Management Committee of the Company in succession
to Mr. P. B. Balaji.
AUDITORS
M/s. BSR & Co. LLP, Chartered Accountants were appointed as Statutory Auditors of
your Company at the Annual General Meeting held on 30th June, 2014, for a term of five
consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the
appointment of Auditors is required to be ratified by Members at every Annual General
Meeting.
In accordance with the Companies Amendment Act, 2017, enforced on 7th May, 2018 by the
Ministry of Corporate Affairs, the appointment of Statutory Auditors is not required to be
ratified at every Annual General Meeting.
The Report given by the Auditors on the financial statement of the Company is part of
this Report. There has been no qualification, reservation, adverse remark or disclaimer
given by the Auditors in their Report.
M/s. RA & Co., Cost Accountants carried out the cost audit for applicable
businesses during the year. The Board of Directors have appointed M/s. RA & Co., Cost
Accountants as Cost Auditors for the financial year 2018-19.
OUTLOOK
From a fundamental and medium-term perspective, FMCG markets continue to offer sizeable
headroom for growth by increasing penetration as well as consumption. Secular trends of
young population, growing affluence, rising urbanisation and burgeoning digital
connectivity will increase awareness and drive premiumisation.
India continues to be one of the fastest growing economies in the world and this is
expected to continue in financial year 2018-19, as per the latest economic survey. With
GST having been successfully implemented, trade conditions have stabilised and we are
witnessing a gradual improvement in demand. We expect government spending plans such as
increases to Minimum Support Price (MSP), provision of health insurance, etc. to bolster
rural development and drive consumption. Normal monsoon, as forecasted, will help the
overall economy.
Crude oil led inflation, emerging global events and disruptions, if any, from state
elections are potential headwinds which need to be managed carefully.
Your Company, with its brands, talent and investment in capabilities, is well placed to
leverage the FMCG opportunity. Your Company's strategy to lead market development while
keeping the sustainable living plan its core, will enable it to create long-term value for
all stakeholders.
RESPONSIBILITY STATEMENT
The Directors confirm that:
• In the preparation of the Annual Accounts, the applicable accounting standards
have been followed and that no material departures have been made from the same;
• They have selected such accounting policies and applied them consistently and
made judgements and estimates that are 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 profits of the Company for that period;
• They have 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;
• They have prepared the annual accounts on a going concern basis;
• They have laid down internal financial controls for the Company and such
internal financial controls are adequate and operating effectively; and
• They have devised proper systems to ensure compliance with the provisions of all
applicable laws and such systems are adequate and operating effectively
APPRECIATIONS AND ACKNOWLEDGMENTS
Your Directors place on record their deep appreciation to employees at all levels for
their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the
employees have enabled the Company to remain an industry leader.
Your Directors would also like to acknowledge the excellent contribution by Unilever to
your Company in providing the latest innovations, technological improvements and marketing
inputs across almost all categories in which it operates. This has enabled the Company to
provide higher levels of consumer delight through continuous improvement in existing
products, and introduction of new products.
The Board places on record its appreciation for the support and co-operation your
Company has been receiving from its suppliers, distributors, retailers, business partners
and others associated with it as its trading partners. Your Company looks upon them as
partners in its progress and has shared with them the rewards of growth. It will be your
Company's endeavour to build and nurture strong links with the trade based on mutuality of
benefits, respect for and co-operation with each other, consistent with consumer
interests.
Your Directors also take this opportunity to thank all Shareholders, Clients, Vendors,
Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued
support.
On behalf of the Board
Harish Manwani
Chairman
(DIN:00045160)
Mumbai, 14th May, 2018
Annexure to the Directors' Report
Statement of Disclosure of Remuneration under Section 197 of Companies Act, 2013 and
Rule 5(1) of Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014
i. Ratio of the remuneration of each Executive Director to the median remuneration of
the Employees of the Company for the financial year 2017-18, the percentage increase in
remuneration of Chief Executive Officer, Chief Financial Officer and other Executive
Director and Company Secretary during the financial year 2017-18.
| Name of Director/KMP |
Designation |
Ratio of remuneration of each Director to median remuneration of
Employees |
Percentage increase in Remuneration |
| Sanjiv Mehta |
Managing Director & CEO |
170.01 |
|
| P. B. Balaji# |
Executive Director, Finance & IT and CFO |
47.70 |
|
| Srinivas Phatak# |
Executive Director, Finance & IT and CFO |
27.26 |
Refer Note iv. |
| Pradeep Banerjee |
Executive Director, Supply Chain |
48.29 |
|
| Dev Bajpai |
Executive Director, Legal and Corporate |
52.86 |
|
|
Affairs and Company Secretary |
|
|
# Mr. P. B.Balaji ceased to be Executive Director, Finance &1| and CFO w.e.f. 13th
November, f|7 and Mr. Srinivas Phatak appointed as an Executive Director, Finance
&j and CFO w.e.f, 1st December, 2017
ii. The percentage increase in the median remuneration of Employees for the financial
year was 4.7%.
iii. The Company has 5,725* permanent Employees on the rolls of Company as on 31st
March, 2018.
iv. Average percentage increase made in the salaries of Employees other than the
managerial personnel in the financial year was 9.4%. In line with the changes made to the
Reward Policy in 2017, approved by the Nomination & Remuneration Committee, increases
in managerial remuneration will be made later during the financial year 2018-19. The
average increase every year is an outcome of Company's market competitiveness as against
its peer group companies. In keeping with our reward philosophy and benchmarking results,
the increase this year reflect the market practice.
v. It is hereby affirmed that the remuneration paid during the year is as per the
Remuneration Policy of the Company.
Note:
a) The Non-Executive Directors of the Company are entitled for sitting fees /
commission as per the statutory provisions and within the limits approved by the Members.
The details of remuneration of Non-Executive Directors are provided in the Corporate
Governance Report and is governed by the Differential Remuneration Policy, as detailed in
the said report. The ratio of remuneration and percentage increase for Non-Executive
Directors Remuneration is therefore not considered for the purpose above.
b) Percentage increase in remuneration indicates annual target total compensation
increases, as approved by the Nomination and Remuneration Committee of the Company during
the financial year 2017-18.
c) Employees for the purpose above includes all employees excluding employees governed
under collective bargaining.
* Includes employees working for Hindustan Unilever Limited.
Particulars of Loans, Guarantees or Investments
AMOUNT OUTSTANDING AS AT 31ST MARCH, 2018
(Rs. crores)
| Particulars |
Amount |
| Loans given |
226 |
| Guarantee given |
8 |
| Investments made |
3,111 |
LOAN, GUARANTEE AND INVESTMENTS MADE DURING THE FINANCIAL YEAR 2017-18
| Name of Entity |
Relation |
Amount (In crores) |
Particulars of loan, guarantee and investments |
Purpose for which the loans, guarantee and investments are proposed to be utilised |
| Lakme Lever Private Limited |
Subsidiary |
43 |
Loan |
Business purpose |
| Unilever India Exports Limited |
Subsidiary |
140 |
Loan |
Business purpose |
| Mutual Funds# |
- |
-230 |
Investments |
Cash Management |
|