Report Analysis

Ashawath Raina 114

Rohan Mendon 145
Shreyas 154
Khatavkar

Shashank Katishetti 151

After a modest FY18, Marico bounced back to deliver a healthy operating
performance overall. Consumption trends were stable through the year after
witnessing intermittent disruptions in the last two years. We continued to
register market share gains in each of our key portfolios, as brand offtakes
grew ahead of the category.

With unrelenting focus on franchise expansion and future readiness, your

Company synchronized its efforts towards rejuvenating the core and revving
up the innovation engine.

We are confident that fostering a culture of innovation, empowerment,

agility, bias for action and consumer-centricity will enable us to create
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franchises that are 'built to last' and stay undeterred in our journey towards
sustained profitable growth and maximization of shareholder value over the
long-term.

We will continue to significantly invest behind our biggest assets – brands

and people.

Vision & Mission

'COME WIN' ---- Their vision and mission is captured in this acronym, which
when bifurcated means the following: -

consumers:
● They are the reason we exist.
● The primary focus of our efforts will be to not only understand what adds
greatest value to the consumer but also change and reinvent ourselves if
need be.
● We will translate the consumer's needs and desires into marketable products
and an ever-expanding base of loyal consumers, with speed and a quality of
response that surpasses the competition.

Membership:
● For a sense of ownership empowers us.
● Wholesome membership is when a person brings his/her entire being into the
organization. It also gives each member a role in articulating and shaping the
destiny of the organization, which in turn, builds commitment and ownership.

Excellence:
● For it unleashes our potential.
● We will focus on policies and practices where people produce consistently
superior performances and where people are encouraged to discover their
untapped potential.

Wealth:
● For on it hinges our growth.
● All our efforts must culminate in the creation of wealth. We will do soby
continuously adding value in everything we do through a variety of methods.
We will use sources productively, eliminate waste, reduce cycle times and
costs and enhance the consumer base.

INnovation:
● For it gives wings to ideas.
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● The future of our organization rests on our willingness to experiment,push in

new and untested directions, think in uncommon ways and take calculated
risks.Continuous improvement should be a part of everyday work.We
acknowledge that failure is inherent in any new initiative. We will commit
resources for experimentation and invest in processes for reviewing and
sharing of learning.

Highlights of the Results (2018-19)

● Consolidated turnover - FY 2019 - Rs. 7334 crore
● Y-O-Y Growth in FY 2019 - 16%
● Y-O-Y Growth in Profit after tax - 14%
● Y-O-Y Volume growth in the domestic FMCG Business - 8%
● Y-O-Y constant currency growth in FY 2019 in key overseas
markets - 10%
● Overall distribution reach - no. of retail outlets - 5 million
● Indian households reached during the year - 200 million
● Domestic revenue contribution from modern trade and e-
commerce - 17%
● Economic value added - Rs. 593 crores
● Dividend Payout in FY 2019 - 76%
● Return on Capital employed - 41.1%
● Return on net worth - 33.6%

Highlights of the Results (2017-18)

● Consolidated turnover - FY 2019 - Rs. 4969 crore
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● Market Capitalisation on 31st March 2018 - USD 6.5 bn

● Total Shareholder return since listing - 26%
● Total number of members globally - 2,348
● A market leading position (No. 1 or No. 2) - >95%
● Overall distribution reach - no. of retail outlets - 4.7 million
● Total no. of packs sold every month in 2018 - 155+ million
● Minimum population of towns mostly covered by Marico’s
distribution network - 5,000
● Economic value added - Rs. 549.9 crores
● Dividend Payout in FY 2019 - 78%
● Return on Capital employed - 41.3%
● Return on net worth - 33.5%

Management discussion and Analysis

This discussion covers the financial results and other developments for the
year ended March 31, 2019 in respect of Marico Consolidated comprising its
domestic and international business. The Consolidated entity has been
referred to as 'Marico' or 'Group' or 'Company' in this discussion.

Some statements in this discussion describing projections, estimates,

expectations or outlook may be forward looking.

Actual results may however differ materially from those stated, on account of
various factors such as changes in government regulations, tax regimes,
economic developments, exchange rate and interest rate movements among
other macroeconomic factors, competitive environment, product demand
and supply constraints within India and the countries within which the Group
conducts its business.
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In FY19, economic growth in India slowed to 7.0% (according to preliminary

official estimates) as the expansion in agriculture and services slipped, even
though industry and investment strengthened. The non-banking financial
sector, which has played a vital role in meeting credit needs, has been under
stress since a default by a large player, thereby tightening financial
conditions and raising the cost of capital.

On the demand side, private consumption was the main driver of growth in
FY19. It grew by 8.3%, the highest rate in seven years. Consumption is likely
to have received impetus from reduced GST rates across a wide range of
goods and services during the previous year and a cut in key monetary
policy rates. Government
consumption slowed, as
expected, because of
tightened finances. Gross
fixed capital formation
grew by a robust 10% in
FY19, despite coming off
a high base.

Inflation, remaining
largely benign in FY19, is
expected to inch up in
FY20. Food inflation is
likely to experience a
mild uptick as some of
the increase in
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procurement prices passes on to retail prices. Any increase in input costs

such as wages and fertilisers could also push up food prices. Mistimed or
misdirected rainfall could damage harvests and stoke food inflation.
However, retail prices for deregulated fuels such as gasoline and diesel are
unlikely to decline by this much because the government is likely to raise
taxes on them to boost revenue, as it has done in the past. Core inflation is
expected to persist at current rates as proposed budget measures to raise
disposable income would bolster aggregate demand. Steps to alleviate
agricultural distress such as income support to farmers and strong hikes to
procurement prices for food grains are expected to bolster rural demand.

Continued implementation of structural and financial sector reforms with

efforts to reduce public debt remain essential to secure the economy's
growth prospects. This should be supported by strengthening goods and
services tax compliance and further reducing subsidies. Important steps
have been taken to strengthen financial sector balance sheets, including
through accelerated resolution of non-performing assets under a simplified
bankruptcy framework. These efforts should be reinforced by enhancing
governance of public sector banks. Reforms to hiring and dismissal
regulations would help incentivise job creation and absorb the country's
large demographic dividend; efforts should also be enhanced on land reform
to facilitate and expedite infrastructure development.
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Summing up the story of India Business in FY19

● The India business registered a healthy volume growth of 8% in FY19.

Sustained offtake growth coupled with market share gains in more
than 90% of the portfolio on a MAT basis affirmed the underlying
strength of the franchise.

● All portfolios, other than Value Added Hair Oils, grew in line with the
Company's medium term objective.

● The year was also characterised by an unprecedented level of new

products introductions from the Company. The Company made
important strides towards building future engines of growth and driving
premiumisation across its portfolio.

● With core portfolios poised to deliver stable growth over the medium
term, we expect a significant shift in new product contribution to ramp
it up further, especially in the context of new age channels of Modern
Trade and e-Commerce flourishing.

● Positive consumer sentiment in rural areas was one of the remarkable

features of this year. The visible political intent to structurally alleviate
agrarian distress, improve rural infrastructure and increase disposable
income levels in the hands of the rural consumer bodes well for
consumption over the medium term, while food inflation and monsoons
do not spring any negative surprise.
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Profit & Loss Statement Analysis

 The revenue from operations for the year ended 31st march 2019
stands at Rs. 5,971 crores, while income from other sources is Rs. 301
crores. Total Income - 6272 crores.

 It has shown an almost 15% rise from the previous year where the
income stood at Rs. 5,395 crores.

 The cost of materials consumed (COGS) stands at Rs. 3,463 crores for
year ended 2019. COGS is close to 55% of the total revenue
generated.

 Along with the Revenue, COGS for 2019 has risen from 2018, however
at a slightly lower rate then the revenue.

 Earnings before interest and tax for year ended 2019 stand at Rs.
1,187 crores and Profit after tax stands at Rs. 1,132 crores.

 EBITA has shown an increase of more than 20% as compared to year

ended 2018, and PAT has shown an increase of more than 50% from
2018.

 The above results show that the company is going in the right direction
in the past 2 years and has shown tremendous growth potential as one
of the top players in the market.

Earnings Per share (PAT/No. Of equity shares)/

Dividend Payout Ratio

 The EPS for the shareholders of Marico has grown consistently over the
years, currently standing at 7.2.

 EPS has shown a steady growth over the years with significant rise
from 2018 to 2019.
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 The Dividend Payout ratio stands at 0.76 for the year 2019 whereas it
stood at 0.78 for the financial year 2018.

Cash Flow Statement

The cash flow from operating activities stood at Rs. 1,263 crores.

The statement shows a net decrease in cash & cash equivalents at the end
of the year by 2 crores.

The major sources of cash outflow were as follows:

1. Payment for Property, plant, equipment.

2. Investments in bank deposits
3. Dividend paid to company’s shareholders
4. A decrease in trade receivables
5. A decrease in current assets

It is evident that the cash has flown for investment & financing activities
which is a good sign & shows the company in good health.

Some of the major sources of cash inflow were as follows:

1. Sale of investments
2. Interest received
3. Other borrowings

If we compare the cash flow with that of year 2018, it had shown a positive
cash inflow of Rs. 8 crores, however it was due to lack of investment &
financial activities.

Cash Analysis
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In FY19, rural General Trade (32% of India business) grew 17%, while urban
General Trade grew 7%. Urban sales, including Modern Trade and e-
Commerce, grew 18%, thereby matching rural growth. Owing to robust
growth throughout the year, the contribution of Modern Trade and e-
commerce to the India business jumped to 13% and 4% respectively. CSD
sales (7% of India business) grew 9%.

Go-To-Market Transformation is one of the key pillars of long-term growth for

Marico. The Company took the following steps to further strengthen its
capabilities:

• To augment sales capabilities, the Company has been investing behind

analytics to drive decision making. The Company has also ventured into
predictive

analytics, which predicts the churn likely to happen in its infrastructure over
the next three months, thereby taking proactive measures to retain the
same.

The Company also rolled out a tool called Infra Quotient to measure the
health of our infrastructure across a comprehensive set of parameters like
quality, stability, capability, Commercial, Supply Chain, IT and Sales KPIs. We
are now taking active steps to improve the Infra Quotient scores across the
country.

The Company has also deployed a socio-economic clustering tool which

generates SKU recommendations to enable higher assortment selling in
outlets.

The Company is building tools to ensure best-in-class merchandising on the

ground and enhance its competitive advantage. The merchandising platform
enables the Company to track stock levels of key value items, new products
and competitor activity and thereby, fine-tune the replenishment strategy in
traditional trade as well as modern trade stores. The tools are equipped with
integrated image recognition analytics which allows auditing of images on a
real-time basis to ensure compliance with category merchandising
benchmarks.
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Having identified chemist & cosmetic channels as the channels suited to

drive incremental growth for our new-age portfolio, we rolled out a
specialized Go-toMarket initiative for these channels in top metro cities.

With a focus on expanding direct reach in rural though the ongoing program
- Vikas Daud, we have identified feasible van routes with higher efficiency
through the use of geo tags mapped to each route. Such optimisation
enables the Company to drive a sustainable increase in the rural footprint,
prune the underperforming routes and progressively improve manpower
allocation across outlets.

Pursuant to the focus on increasing its rural footprint, the Company has
expanded its direct reach to cover almost everytown with a population of
5,000 and above. The Company has evolved into higher order supply chain
models for key Modern Trade customers with direct-from-factory supplies,
thereby driving further efficiencies in business through this channel..

Ratios

LIQUIDITY RATIOS

2019 2018 2017

Current Ratio 2.08 1.80 1.66

Quick Ratio 1.21 0.78 0.67

SOLVENCY RATIOS

Debt Equity Ratio 0.04 0.04 0.04

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Debt Ratio 0.24 0.24 0.22

Equity Ratio 0.027 0.032 0.343

EFFICIENCY RATIOS

Inventory Turnover Ratio 4.84 3.95 4.50

Assets Turnover Ratio 1.65 1.64 1.61

Accounts Receivable Turnover Ratio 14.59 18.70 22.46

PROFITABILITY RATIOS

Gross Margin(%) 15.03 16.40 18.39

Profit Margin(%) 18.95 13.89 17.37

Return on Assets (%) 27.18 23.56 22.66

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Return On Capital Employed(%) 32.94 33.67 38.06

Return On Equity (%) 3473 24.15 30.93

Market Prospect Ratios

Earnings Per Share (Rs) 8.78 5.57 6.53

PE Ratio 39.34 58.59 45.08

Dividend Payout Ratio 54.15 88.52 60.35