What Does Working Capital Management Mean?

A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets and current liabilities, in respect to each other. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. Read more: http://www.investopedia.com/terms/w/workingcapitalmanagement.asp#ixzz1dfb6ij3c Investopedia explains Working Capital Management Implementing an effective working capital management system is an excellent way for many companies to improve their earnings. The two main aspects of working capital management are ratio analysis and management of individual components of working capital. A few key performance ratios of a working capital management system are the working capital ratio, inventory turnover and the collection ratio. Ratio analysis will lead management to identify areas of focus such as inventory management, cash management, accounts receivable and payable management. Read more: http://www.investopedia.com/terms/w/workingcapitalmanagement.asp#ixzz1dfb94ltu Working capital (abbreviated WC) is a financial metric which represents operating liquidityavailable to a business, organization, or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.

Net Working Capital = Current Assets − Current Liabilities Net Operating Working Capital = Current Assets − Non Interest-bearing Current Liabilities Equity Working Capital = Current Assets − Current Liabilities − Long-term Deb
A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.

Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact:
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accounts receivable (current asset) inventory (current assets), and accounts payable (current liability)

The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit. An increase in working capital indicates that the business has either increased current assets (that is has increased its receivables, or other current assets) or has decreased current liabilities, for example has paid off some short-term creditors. Implications on M&A: The common commercial definition of working capital for the purpose of a working capital adjustment in an M&A transaction (i.e. for a working capital adjustment mechanism in a sale and purchase agreement) is equal to: Current Assets – Current Liabilities excluding deferred tax assets/liabilities, excess cash, surplus assets and/or deposit balances. Cash balance items often attract a one-for-one purchase price adjustment. [edit]Working

capital management

Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and itsshort-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. [edit]Decision


By definition, working capital management entails short term decisions - generally, relating to the next one year period - which are "reversible". These decisions are therefore not taken on the same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based on cash flows and / or profitability.

Besides this. given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier. which results from working capital management.   Cash management. In this context. inventories and debtors) and the short term financing. Identify the appropriate credit policy. As a management tool. in that they link short-term policy with long-term decision making. the most useful measure of profitability is Return on capital (ROC). exceeds the cost of capital. Identify the appropriate source of financing.the net number of days from the outlay of cash for raw material to receiving payment from the customer.and minimizes reordering costs . Inventory management. such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa). Identify the cash balance which allows for the business to meet day to day expenses. credit terms which will attract customers. Short term financing. and cash. seeDiscounts and allowances. One measure of cash flow is provided by the cash conversion cycle . These policies aim at managing the current assets (generally cashand cash equivalents. The result is shown as a percentage. Return on equity (ROE) shows this result for the firm's shareholders.   . and if. Economic order quantity (EOQ). Credit policy of the firm: Another factor affecting working capital management is credit policy of the firm. This affects the cash conversion cycle. i. but reduces cash holding costs.e. this metric makes explicit the inter-relatedness of decisions relating to inventories. ROC measures are therefore useful as a management tool. Just In Time (JIT). the return on capital. See Economic value added (EVA). determined by dividing relevant income for the 12 months by capital employed. management generally aims at a low net count. such that cash flows and returns are acceptable. Firm value is enhanced when.and hence increases cash flow. Economic quantity Debtors management. which results from capital investment decisions as above. management will use a combination of policies and techniques for the management of working capital. It includes buying of raw material and selling of finished goods either in cash or on credit. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials . the lead times in production should be lowered to reduce Work in Progress (WIP) and similarly. Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities. the Finished Goods should be kept on as low level as possible to avoid over production .see Supply chain management. accounts receivable and payable.   [edit]Management of working capital Guided by the above criteria.

This growth in incomes has contributed substantially to a sharp turnaround in the FMCG sector (see Chart A). Companies have had to reposition brands.9 per cent in 2004-05. Through a structured implementation of strategic initiatives over the last couple of years. which helped the Company penetrate much deeper into semi-urban and rural markets and tap into the demand growth in these areas. . especially after a couple of years of fierce price competition in some FMCG segments. This was further consolidated during 2004-05. packaging materials and transportation. With the economy growing by 6. The year saw a revival in the FMCG sector which emerged from a phase of sluggish demand to report strong growth in most consumer categories.1 per cent in 2003-04 and by 5. and remained above 5 per cent for most of the year. the FMCG sector continued to remain sluggish. we had seen that while the Indian economy grew by a remarkable 8. Chart B shows that WPI-based inflation increased from 4. The Company had already positioned itself on the herbal specialist platform to create a niche within the FMCG space. On the distribution side. Even before 2004-05. The volume growth has also been accompanied by a degree of price stabilisation. Management Discussion and Analysis INDUSTRY STRUCTURE AND DEVELOPMENTS The year 2004-05 has been a year of sustained growth for the economy as well as for your Company. the process of streamlining of the sales organisation had begun a couple of years ago. It is important to realise that this year‘s revival in the FMCG sector has been largely volume driven. Competitive pressures prevented all FMCG companies from passing on these cost increases to customers. we had pointed out that one good year was not sufficient to improve consumer confidence and improve the fortunes of the FMCG sector. or to "convert debtors to cash" through "factoring". In last year‘s Annual Report.5 per cent. we have witnessed two successive years of impressive income growth — with per capita income increasing by 7.8 per cent at the beginning of 2004-05 to levels above 8 per cent during September 2004. with improved offtake in urban as well as rural areas. Dabur had geared itself for the challenges thrown up during the year. create niches for their products and improve distribution systems to make the best out of the opportunities offered by an improved market environment.however. In 2003-04. it may be necessary to utilize a bank loan (or overdraft). a robust brand architecture with five umbrella brands was put in place with a well-calibrated mix of products under each brand. We felt that it needed a few consecutive high growth years to sustain economic development and increase demand for FMCG products. Therefore. there has been a growing concern of escalating input cost — especially of oils.2 per cent in 2004-05. On the costs side.

138.187. • Return on capital employed (ROCE) increased from 34.9 per cent in 2003-04 to 38. While leveraging Dabur‘s 100 year old brand equity by retaining the essence of the banyan tree. The highlights of the Company‘s consolidated financial performance are: • Consolidated Net Sales from operations increased by 15. the new brand identity projects a more modern image in consonance with today‘s lifestyle. the food business is undertaken by DIL‘s subsidiary company Dabur Foods Limited (DFL). proactive and progressive. after accounting .6 crore in 2003-04 to Rs.1329.1536. further efficiencies in the supply chain right from procurement to production helped to cap input costs.6. These characteristics are not limited to perception building exercises but are integral to Dabur‘s pursuit of profitable growth.1268. The highlights of Dabur India Limited‘s performance in 2004-05 are: • Revenue from operations increased by 10. The international business is carried out by the Dubai based subsidiary. In addition.2 crore in 2003-04 to Rs. working as a cohesive unit.9 crore in 2004-05 • Interest outgo decreased by 38 per cent from Rs.6 per cent from Rs. entering new categories.101. Going forward.3 per cent from Rs.9 crore for 2003-04 to Rs. The Company‘s growth in 2004-05 was fuelled by launching new products. margins were under some pressure. While the parent company Dabur India Limited (DIL).for the industry as a whole. Source: ORG MARG.148 crore in 2004-05.7 crore in 2004-05 • Operating profit (EBIDTA) increased by 36 per cent from Rs.5 per cent from Rs. These operational factors coupled with good sales growth helped the Company generate impressive profits and return to investors.2 crore in 2003-04 to Rs. 4. spreading its geographical reach and growing its relatively smaller product portfolios like foods. The new visual identity expresses a brand that is dynamic.6 per cent in 2003-04 to 44.1147.9 crore in 2004-05 • Consolidated Profits after tax (PAT). based on sales value 10 Dabur India Limited • Management Discussion & Analysis Chart B: Inflation (WPI) To mitigate the cost push effects. it is important to look at Dabur‘s business on a consolidated basis. continues to be the driving entity operating in the herbal specialist space in India. as the future business plans will involve Dabur India Limited and all its subsidiaries. • Profit after tax (PAT) increased by 46. Dabur has developed an optimal mix of manufacturing facilities at different locations to reap maximum benefits from fiscal concessions and economies of scale. Dabur International Limited.9 crore in 2003-04 to Rs.7 per cent in 2004-05 • Return on net worth (RONW) increased from 38.3 crore in 2004-05.5 per cent in 2004-05 To enhance the perception of Dabur as a contemporary organisation — one that is in tune with customer needs— the Company launched the new identity of its flagship brand ―Dabur‖ during 2004-05.

140 crore. There were several reasons for Dabur to believe in the value proposition that Balsara business offers. Balsara has entrenched brands. with unique positioning in each: • Oral Care: With its clove oil based Promise toothpaste.000 crore. Odomos has a dominant share in the personal application based insect repellents market. Dabur was. • Contract Manufacturing: This includes the private label and herbal extracts and complexes business catering mainly to the international market. The Company had accumulated significant cash reserves over a period of time which needed to be invested judiciously.5 crore in 2003-04 to Rs. Dabur has acquired the entire promoters‘ stake in three Balsara companies: 99. 2005. Taken together. • Household Care: In this segment. First. we would be always open to value enhancing inorganic growth opportunities. The cost of all three taken together has been Rs. too. The acquisition was largely funded through internal accruals .4 per cent in Balsara Hygiene Products.20 crore was funded through debt. increased by 46.2. Sanifresh is the second highest selling toilet cleaner in India. its oral care business fits well with Dabur‘s herbal positioning and will allow the Company to offer a range of strong products . the Balsara oral care brands hold around 4.out of the Rs.3 per cent from Rs. Balsara was a pioneer in herbal oral care products in India. 2005.140 crore investment.for minority interests. the Company found a good value proposition and undertook its largest acquisition till date. by acquiring Annual Report 2004-05 11 Balsara‘s hygiene and home products business in an all-cash deal.8 crore in 2004-05 We have always maintained that while organic growth is the focus area. after obtaining shareholders‘ approval. The Balsara acquisition would add sales turnover of approximately Rs. Odopic. The category market size is estimated to be Rs. and 97.9 per cent of the shareholding in Besta Cosmetics Limited. In 2004-05. As part of the deal. Balsara also has a strong presence in the value segment with Babool toothpaste and in the premium segment with Meswak toothpaste. and has extremely attractive growth opportunities given its current low market penetration levels. 100 per cent in Balsara Home Products. The Board of Directors of Dabur India Limited approved of this deal in its Board meeting held on 27 January. therefore.5 per cent share of the toothpaste market.200 crore to Dabur and brings with it three manufacturing facilities located at Silvassa. only Rs. which is a dishwashing and surface cleaner has strong brand equity in western India. Odonil is almost a generic name in the air freshener segment.155. on the lookout for good acquisition opportunities. and the acquisition of shares took place on 1 April. It operates in three business segments. Kanpur and Baddi.106.

Fourth. Hair Care Hair Care. On a consolidated basis CCD contributes 82 per cent. The ‗South India‘ initiative has begun to pay dividends as sales in the region grew by 23. These divisions. Balsara has a strong strategic fit with Dabur.200 crore. Dabur Amla hair oil grew by 15. Given these factors. Consumer Healthcare Division (CHD) and the wholly owned subsidiary Dabur Foods Limited. the value growth was far less than that of volume. .6 per cent during 2004-05. in terms of geographies. Third. there has been an element of price stabilisation with all FMCG companies repositioning their products in new price segments and consolidating their presence. and its contribution to CCD sales increased from 7. during 2004-05 the Company undertook several initiatives to consciously grow the smaller divisions — CHD and Foods. Balsara‘s strength in the West and the South complements Dabur‘s strength in the North and East India. 12 Dabur India Limited • Management Discussion & Analysis this exercise by developing new products and packaging which are customised to the distinct tastes and needs of the South Indian consumer.1 per cent in 2003-04 to 8. Second. In the following sections we look at the developments in Dabur‘s different businesses in India and abroad. the combined entity can reap greater benefits from economies of scale and scope in terms of advertisement expenses. In hair oils. in shampoos. From a market perspective. and we believe that the acquisition will generate positive gains for the Balsara business as well as the consolidated entity and will prove to be a value enhancing initiative.across different price points in this segment. While in hair oils the market grew faster in value terms compared to volumes. This development in shampoos was a direct fall-out of fierce price based competition in the first half of 2004-05. with relatively smaller sales bases. In the latter half. the two groups of products in this category — hair oil and shampoos — witnessed diametrically opposite market movements. are seen as key drivers of future growth. CHD contributes 8 per cent and DFL contributes 10 per cent to the Company‘s domestic revenues.2 per cent in 2004-05. synergies in marketing.9 per cent during 2004-05 in value terms. registered a growth of 11 per cent during 2004-05. sales and distribution and greater utilisation of backend services. SEGMENT-WISE AND PRODUCT-WISE PERFORMANCE Domestic FMCG Business In India. which is the largest category in Dabur‘s CCD portfolio with a 38 per cent share. While CCD remains the leading division and a focus area. the Company‘s business is carried out by three divisions — Consumer Care Division (CCD). and net sales crossed Rs. the household care products will allow Dabur to expand into a new product category that has very low penetration levels and high growth potential.

Chart C : Category Contributions CCD‘s net sales increased by 8.1.9 per cent in 2003-04 to 7. During 200405.75 crore in 2004-05. while Dabur‘s shampoos registered a 14 per cent growth in volume terms.During the year. the company rolled out a focused plan to develop its south Indian markets.9 per cent from Rs. Under this. There has been a concerted effort to develop the Anmol brand on the economy platform across product categories.4 per cent for 2004-05. to a more evolved and trendy message. Chart C gives the relative contribution of these categories to total sales of the Consumer Care Division. the company signed on cricketer Virendra Sehwag to be an ambassador for select brands. health supplements. Vatika hair oil registered double digit growth. its value growth was restricted to 0. your Company had made an entry into the large mustard oil market with its branded hair oil offering Anmol Sarson Amla Hair oil.2 crore in 2003-04 to Rs. A number of new products in various categories have been launched in the last couple of years. Sales of new products accounted for over Rs.1 per cent in 2004-05. the product has shown good growth prospects. the brand communication for this product was transformed from being a purely functional one. The newly launched Dabur Anmol shampoo range enabled the Company to gain entry into the economy segment of the shampoo market. The product increased its market share in the hair oil category from 6. digestives and candies.001.1089.6 per cent in 2004-05. In line with the price rationalization that happened in the shampoo category. Many of these products had the first full year of marketing during 2004-05 and were the prime drivers of growth. the Company repositioned some of its offerings and reduced prices in products such as Vatika Henna Cream Shampoo. As a result. While celebrity film stars like Amitabh Bachchan and Rani Mukherji continue to endorse Dabur‘s brands.9 crore in 2004-05. Growth was impacted in the second half of the year largely due to the country experiencing a delayed and shortened . The Superbrand Council of India acknowledged the strength of the Vatika brand and it was adjudged as one of the 101 super brands in India. The CCD brands continued to get support from aggressive advertisement campaigns. where it had been comparatively weak. with sales value increasing by 13. which was around 8 per cent of the total sales of the division.4 per cent in 2004-05. and baby and skin care. A core group under a new marketing head has been set up to push this initiative. In its first full year in the market Consumer Care Division The FMCG business of the Company is housed in this division and offers a wide range of products in hair care. Health Supplements This category recorded a growth of 2. Dabur continued to promote this brand with its concept of ―Vatika Women‖. oral care. The Company is supporting Annual Report 2004-05 13 during 2004-05.

Another Balsara product Promise toothpaste.7 per cent in 2004-05. sales were under stress due to a 7. However in the near term.7 per cent during 2004-05. sales of Hajmola candy decreased . Sales of Dabur glucose remained stagnant during 2004-05. The Company is in the process of rolling out strategies to expand the usage of Chyawanprash. This brand has been seeing strong growth due to focused marketing and advertising support and increasing usage of honey in food preparations. which experienced marginal decline in sales. will be positioned under the white toothpaste platform. The growth driver in this category was Dabur Honey. Sales of Dabur Red Toothpaste increased by over 100 per cent and reached Rs. it is the toothpastes that are poised for good growth. Oral Care Sales of Dabur‘s Oral Care products increased by 10. In toothpowders. where Dabur has been a dominant player.49. While Hajmola tablets registered a 9. This growth has been driven by wide acceptance of the Dabur Red Toothpaste franchise. In order to drive growth in Health Supplements category. this category recorded a growth of 2 per cent.1 per cent in 2003-04 to 31. Digestives and Confectionery During 2004-05. The Nutritional Supplements category is a large consumer category in which Dabur‘s healthcare and herbal equity fits very well and it offers significant growth potential.winter thus adversely affecting off-take of the flagship product in this category – Chyawanprash. With the Balsara acquisition. The Chyawanprash market as a whole declined by 5. During the second half of the year. which is in the same price band as Dabur Red Toothpaste. which was in the second year of its launch. your Company has planned to introduce a unique and differentiated product in Herbal Nutritional Supplements category.1 per cent growth in 2004-05 with the roll out of a new packaging and advertisement campaign. This product is being test marketed in some select markets.7 crore in 2004-05.6 per cent in value terms.1 per cent. Dabur has strengthened its position in toothpastes. While Babool will be positioned in the economy segment. This helped the company strengthen its position within the category and increase its market share from 30. which grew by 24. Dabur aggressively pushed this product with a new advertisement campaign featuring Virendra Sehwag. An aggressive consumer promotion has been initiated for this brand supplemented by a new advertisement campaign. The brand ―Dabur Chyawanprash‖ bagged the ―Brand Relaunch of the Year‖ award at the first Indian Marketing Awards (IMA) held in October 2004. and now has a robust set of offerings across different price points. and its international brand equity will be leveraged for exports.0 per cent decline in the entire category. Dabur Red toothpaste will be positioned in the mid-priced segment and Meswak in the premium segment.

Most of this growth was fuelled by expansions in skin care products. which is a paste in a stick format and comes in two ethnic flavours —imli (tamarind) and aam (mango). Nature Care and Ring Ring.9 crore to Rs. thus breaking the Rs. Skin Care/Baby Oils This is the smallest category in CCD‘s portfolio in terms of size of sales. the overall brand remained stagnant.7 per cent in 2004-05. This business is woven around the Ayurveda segment and therefore. which can be broadly classified into OTC products. Shankhpushpi. branded ethical and generics including Asavs and Classicals. This growth has been fuelled by strong performance of brands like Shilajit. Within skin care.107. The Company has made further inroads into skin care area through test marketing of Dabur Anmol Cold Cream and a test launch in West Bengal of Vatika soap with saffron and honey. The Consumer Healthcare activity has been identified as . therefore the Company has decided to make a calibrated entry into this category. The Company has taken steps to revive the sales of Hajmola candies. During 2004-05. In baby care. which includes re-launch of the product in a smooth format with a more contemporary packaging.4 per cent from Rs. Herbal soaps is another area where the equity of Vatika brand can travel seamlessly to command a niche position. and will be extended nationally in the first half of 2005-06. This business includes popular products such as the OTC Asav tonic brands of Dashmularishta and Ashokarishta and advertised brands such as Dabur Shilajit. Dabur Lal Tail registered a growth of 9.by 3. 95.3 per cent in 2004-05. constitutes a major focus area for the Company. this division‘s sales increased by 12. The fairness platform has also paid rich dividends as seen in the 50 per cent growth in Vatika Fairness Face Pack. 14 Dabur India Limited • Management Discussion & Analysis The focus on newer formats of Hajmola continued with launch of an improved ‗goli‘ format of Hajmola Anardana. Honitus and Ring Ring among others.100 crore barrier for the first time. The re-launch was done in West Bengal and Maharashtra. but in terms of growth this has been one of the leaders.8 crore.1 per cent during 2004-05. The high quality of this product was further endorsed by the fact that it was the only baby oil that passed FDA scrutiny in the test which was conducted on all leading brands of baby oils in Maharashtra. Gulabari grew by 21. Naturecare. with sales increasing by 13. Consumer Healthcare Business Consumer Health Division The Consumer Healthcare Division (CHD) portfolio comprises of pure grantha based products on the Ayurveda platform. A further extension of the Hajmola brand has been planned with the launch of Hajmola Yumstick. given the strong Ayurvedic origins of Dabur‘s equity. Shankhapushp Syrup.5 per cent in 2004-05. Sales of Pudin Hara liquid recorded good growth but due to decline in the Pudin Hara pearls.

This initiative is being supported by aggressive advertising of several products like Honitus and Nature Care. On the branded ethical side. Dabur‘s Consumer Healthcare business continues to be open to further opportunities for acquisitions and partnerships in India and abroad and is strategically poised for good growth. This strategy stresses on taking quantum jumps in growth and is centred around two distinct groups of products that are at two different ends of the divisions product portfolio — the classical grantha based business and the OTC route.one of the growth drivers of your Company‘s business going forward. Marketing activities continue to focus on increasing endorsement from healthcare professional (BAMS and Vaids who prescribe Ayurvedic medicines). territories have been restructured and additional manpower deployed wherever necessary. developing pharmacy selling. your Company has strengthened the number of retail sales force personnel and also stockist networks. Your company has a strong research and development infrastructure comprising about 20 dedicated scientists who are working on developing and strengthening the Ayurvedic platform scientifically. In 2004-05 CHD acquired the brand Honitus from de-merged Dabur Pharmaceuticals Limited. On the distribution side. the division has formulated and will implement a synergised business roadmap during 2005-06. Your company plans to lead this growth. not just penetrate the market but also redefine and grow it. the strategy focuses on marketing Grantha based products. This cough syrup. This included the appointment of senior professionals with wide experience in the FMCG and Healthcare industry. Concurrent with these structural changes. Annual Report 2004-05 15 Building a world class OTC capability is central to the development of this division. the Company is associated with the Dabur Dhanwantary Foundation in Chandigarh and several other regional hospitals for promoting education and R & D in the field of Ayurveda. doctors and pharmacy promotions. In 2004-05. which has an Ayurvedic base. To build effective coverage. Your Company undertakes extensive clinical trials for most of its products so that the products are tried and tested before actual use. Apart from this. was earlier sold through the prescription route. Dabur Dashmularishta became the first branded ethical Asav (tonic) to be advertised on television. In order to develop this division in a focused manner. the Company undertook a major organisational restructuring. which are safety and efficacy driven. increasing the effective coverage in urban pharmacy supported by focused media thrust. The idea is to strengthen relationships with Ayurveda market stakeholders — in other words. Now this is being sold over the counter (OTC). The increasing preference for holistic health remedies as offered in Ayurveda is leading to a sustained growth in the Natural/Herbal segments. The aggressive OTC strategy is based on connecting customers with Ayurveda using various elements of the media. .

has been brought out in its new contemporary and trendy packaging.Foods Business Dabur Foods Limited Dabur India Limited‘s wholly owned subsidiary. These drinks are based on traditional Indian formulations. recorded an impressive growth of 38. The economy end of the portfolio consists of ―Coolers‖. Apart from these. which have no added sugar.10 crore in 2004-05. which have a cooling effect on the body. Institutional sales contribute around 25 per cent of Dabur Foods‘ turnover. which shall be launched nationally during 2005-06. The Company. The Activ range now has five flavours including the two new additions – Mixed Fruit Cucumber Spinach Juice and Mixed Fruit Beetroot Carrot Juice. The Activ range of juices. its first full year of operations. The primary growth driver in this business were its two fruit juice brands –―Real‖ and ―Real Activ‖ which. which has now become distinct from the Real brand. Operations in the Nigerian plant began during 2004-05 and will be scaled up in the next financial year. the brand also offers a range of cooking pastes. Real continues to be DFL‘s offering for the medium segment with growth thrust provided by continuously launching new flavours. Activ‘s new identity. and has recently test marketed a soup concentrate. cater to the health conscious young adults in the premium segment.2 per cent from Rs. which is a more appropriate quantity for a person of this age group to derive nutritional value from a single drink. Real Activ and Coolers. There was impressive growth in sales of honey to institutions. 16 Dabur India Limited • Management Discussion & Analysis care products. Dabur has formulated structured strategies for its foray into . Sales in Pakistan registered a 100% growth. In order to target the 18 to 35 age group the smaller packs of Activ have been enlarged from 200 ML to 330 ML. cooking pastes. A separate brand called Nature‘s Best has been created for institutional sales and it consists of products like ketchup and corn powder. The Hommade brand grew by 31 per cent in 2004-05 with good growth in Coconut Milk and Tomato Puree. Dabur Foods Limited (DFL) operates on the naturals platform with a product portfolio consisting mainly of fruit juices. taken together. now has three distinct brands across the fruit juice category : Real. Dabur International‘s subsidiary in Bangladesh—Asian Consumer Care Private Limited – recorded sales of Rs.85. They were launched in 2004-05 in 3 flavours — Watermelon. The business‘ sales grew by 51.7 crore in 2004-05. During the year the Company repositioned its offerings to put in place a well segmented product strategy. The Company intends to aggressively promote this brand and also introduce new flavours in 2005-06. which is done in special one kg packs. Pomegranate and Aam Panna. The company intends to bring in more products in this distribution system.8 crore in 2003-04 to Rs. sauces and items for institutional food purchases. There was also renewed growth in the Russian and CIS markets.129.5 per cent.

International Business During 2003-04. The data of relative domestic and overseas sales and net profit for the consolidated entity is given in Table 1. dealing primarily with lifestyle ailments.5 per cent shareholding from the minority partners based in Nepal.6 Net Profit 151.0 3. During 2004-05.183.5 183.6 5.4 11. the Company has identified 20 focus countries where it is evaluating the need for having a manufacturing facility or marketing presence. The focus of this initiative would be to cater to this market in UK through OTC products.9 9. Based on market assessment.6 128.5 per cent by acquiring additional 17.0 % of total 88. There are another set of countries. but the need to establish a presence there as a local venture is being carefully evaluated.7 100.6 per cent in 2003-04 to 11. Entry strategies are also being developed to enter the USA supplements market. The Company has already initiated this process.1 90. The entire international operations was reorganised and an umbrella organisation called Dabur International Limited was created to provide focus and structure to the international initiatives. the Company started giving greater impetus to the international business.4 1201.3 8.9 per cent in 2004-05. This entity has an independent team and operates out of Dubai.4 8. where Dabur will forge alliances based on opportunies.7 % of total 96. For this purpose. your Company is exploring opportunities to enter into a marketing alliance with some of the well established retail chains in the UK. which are termed as opportunity markets. Dabur‘s shareholding in Dabur Nepal has been increased from 80 per cent to 97.128 crore in 2003-04 to Rs. Dabur needs to have the selected products and production processes certified with the Medicines and Healthcare Products Regulatory Agency (MHRA)—the executive approving agency of the UK government. Overseas sales grew by 43.the international market. Given similar taste patterns as India. _ Domestic Overseas _ 2004-05 2003-04 2004-05 2003-04 Sales 1353. this is a good market for Dabur.4% per cent from Rs. The shares were acquired by Dabur International with a view to reduce minority shareholding and retain maximum profits under the consolidated Dabur umbrella.6 92. In its first concerted endeavour to extend Dabur‘s products to the mainstream international markets in developed countries.6 crore in 2004-05. One of these countries is Pakistan. There is a large market for herbal based therapeutic products amongst the mainstream population in developed markets. the Company also made investments in .0 Table 1: Relative share of sales and profits of domestic and overseas businesses The Company continues to leverage the herbal specialist platform in the overseas markets and offers products in different geographies based on local tastes and demands. The overseas impetus has been maintained and the share of overseas in Dabur‘ total sales increased from 9.

Amla hair oil.4 per cent growth in net sales during 2004-05 on the back of a major brand building exercise. shampoos. Dabur‘s products are gaining ground in the Middle-East. While the Silvassa and Kanpur facilities are primarily engaged in manufacturing household range of products and the private label business. located at Silvassa. is also fully operational and is being utilized for manufacturing hair oils.56. During 2004-05. Dabur added a toothpaste and Nutritional Supplements manufacturing capacity at its Baddi plant. consistency and productivity. the Company remains focused on leveraging higher operational efficiencies and superior quality levels from this plant. modern manufacturing processes and exacting quality control procedures this plant will go a long way in further strengthening Dabur‘s market position. lean organization structure. Kewra water and intermediaries. the turnover almost doubled in 2004-05 with significant growth in the Company‘s oral care and hair Annual Report 2004-05 17 OPERATIONS Manufacturing India In 2004-05.global brand building which have brought down the net profit as compared to last year.1 Crore. the plant is now fully operational and is being used to manufacture Chyawanprash. an ultra-modern effluent treatment plan and an elaborate environmental management system has been commissioned in Rudrapur. the Baddi plant produces oral care products.The total capital expenditure incurred by the Company on these facilities and other requirements amounted to Rs. In Egypt. Dabur successfully commissioned its largest and state-of-the-art manufacturing facility at Rudrapur. including fluoride based toothpaste. The Company has also set-up a fully operational effluent treatment plant at this facility. commissioned in November 2003. This plant features a modern and compact shop floor design. Vatika hair oil. Baddi and Kanpur. Gulabari. Uttaranchal. This plant was set up in 2004-05 and enjoys tax . Dabur‘s plant in Jammu. As part of our long-standing commitment to environmental safety and protection. Lal Tail and Janam Ghunti. Hajmola tablets. As a result of the Balsara acquisition. which witnessed around 24. Your Company believes that with its superior technology. While the Rudrapur facility enjoys similar fiscal benefits as the Jammu and Baddi plants. improved system processes and stringent quality control norms. This has enabled the Company to enhance manufacturing capacity significantly besides upgrading technology. However the profitability of the business is expected to improve with increasing volumes and better utilization of the infrastructure which has been put in place. Higher batch sizes and larger scales of production at this facility have contributed to major improvements in product quality. Dabur has added three more manufacturing facilities to its fold. Set up in a record time of four months.

Dabur Foods‘ multi-fruit processing facility at Siliguri. The plant meets the stringent requirements of the Codex Alimentarius Commission Guidelines. guava. it undertakes regular factory quality audits by trained quality auditors. In this regard. ensures compliance with ISO 9000 procedure and implementation of established standard operating procedures across its manufacturing bases. over the last few years. bringing in improvement in hygiene. thus giving it a smoother finish. Apart from this. As part of its quality assurance programme. During the course of the year. quality. the plant at Nigeria 18 Dabur India Limited • Management Discussion & Analysis became operational. the manufacturing process of Hajmola Anardana Goli has been made free from human touch. Government of UK. The location of this plant is a major source of its competitive strength. giving it access to a variety of fruits including litchi. In 2004-05. thereby reducing time and cost of transportation. mango and tomato at competitive prices. and 2004-05 was the first full year of operations here. became fully operational during the year. West Bengal. The plant currently has manufacturing facilities for 200 ml packs. it is in close proximity to the Dabur Foods‘ juice plant located in Nepal. thus.benefits as are available to new units in Himachal Pradesh. Sharjah and in three of its step-down subsidiaries — Asian Consumer Care Private Limited in Bangladesh. thus. This was stabilised. Dabur Foods acquired a new facility near Jaipur for manufacturing fruit juices. The plant produces pulp and concentrates and has brought the Company a step closer to achieving full backward integration and realising the resultant cost efficiencies. Overseas Dabur International has manufacturing facilities at Dubai. It is located at the heart of a major fruit-producing and trading area. the plants . performance and effectiveness as set by Medicines and Healthcare Products Regulatory Agency (MHRA) — the executive agency of the Department of Health. Production at the Bangladesh plant had begun in 2003-04. Operations at the Nepal plant have been meeting all requirements and have not been impacted by domestic disturbances. This plant will be upgraded to manufacture 1 litre and 200 ml packs of ‗Real‘ brand of fruit juice and the ‗Coolers‘ range of products. The Honitus and Nature Care product lines at the Baddi plant have been set-up to meet appropriate standards of safety. Through significant technological up-gradation. Dabur Egypt Limited in Egypt and African Consumer Care Limited in Nigeria. the Company has maintained a sharp focus on upgrading technology and improving manufacturing processes at all its plants. The production process of Hajomla candy has also been upgraded to convert the product into depositor form. Moreover. Quality Dabur remains resolute in its commitment to enhance quality levels across its product portfolio. the Recommended International Code of Practices and the General Principles of Food Hygiene.

cosmetics. Dabur has made a foray into contract farming for selected herbs as part of the Agrobiotechnology initiative. Dabur continued to realize procurement efficiencies and reduce its input costs in spite of inflationary pressures. Tamil Nadu. oral care and other personal care products. supply chain efficiencies have assumed even greater importance. The Company is also intent upon creating a backwardintegration platform for herbal inputs. which contributes to environment and adds to the income of farmers in addition to providing a sustainable source of herbal inputs to the Company. foods. a number of backward integration programmes have been set up in Andhra Pradesh. organic substances. the research capabilities of DRF were further braced up with the settingup of new world-class laboratories and induction of wellknown . Through usage of innovative procurement strategies and modern forecasting and research tools. tissue culture. The Company also organizes quality-planting material with promising genetic potential to farmers on no-profit-no-loss basis and provides additional technical support. The Research and development activities are undertaken by Dabur Research Foundation (DRF).9 per cent in 2004-05. Phytochemicals (plant derived Annual Report 2004-05 19 medicines). Dabur enters into contract farming agreements with farmers through a local coordinator. Glucose and Honey have received Hazard Analysis and Critical Control Point (HACCP) certifications. Haryana. DRF is engaged in a wide spectrum of research on Ayurvedic and herbal products.manufacturing Chyawanprash. Uttaranchal .7 percent in 2003-04 to 42. the Company‘s material cost as percentage of sales came down from 43. This program has significantly enhanced the quality of information and visibility in sourcing priorities of the Company. Research and Development R&D has been the cornerstone of Dabur‘s success. In fact. In 2004-05. Himachal Pradesh. To this end. Dabur is one of the few companies in the FMCG industry which has reduced its input costs consistently over the last few years by focusing on high degree of skills in the area of procurement and materials management. Uttar Pradesh. Jammu and Kashmir and Nepal to develop sustainable cultivation of these engendered species through contract farming and buy back arrangements. In all about 2500 acres of land and 29 medicinal herbs have been covered under this programme. Under this initiative. Our initiatives over the last couple of years in supply chain management have stood us in good stead and during 2004-05. During the year the Company successfully deployed the ‗Spend Visibility‘ programme in collaboration with ‗Ariba‘ (earlier FreeMarkets) to further strengthen its procurement efficiencies. Supply Chain In the current inflationary backdrop. especially those on the endangered list.

improvements have been made in transferring new products out of the laboratory to commercial production in a much shorter span of time. in 2004-05. Human Resources Dabur takes great pride in the commitment. Dabur is also in active collaboration with Wardha College. your Company introduced Dabur Red Toothpaste Gel. Vatika Honey and Saffron soap. the Company recruited 18 candidates from leading management schools in India. Anmol range of herbal shampoos. The Company has also developed a differentiated product in the herbal nutritional supplements category which is being launched-all on innovation-backed platforms. each candidate is mentored by a member of the senior management and is put through a one year crossfunctional training programme. the Company has conducted more than 115 clinical trials with 40 medical institutes across the country. In the past. your Company also expects to leverage the perfumery. competence and vigour shown by its workforce in all realms of business. the Coolers range and new fruit and vegetable flavours in the Real Activ range of juices. Under this programme.scientists in the field. Going forward. Using the intranet. The Company has adopted . The Company continues to take new initiatives to further align its HR policies to meet the growing needs of its business. The depth and knowledge of DRF‘s research capabilities is particularly reflected in its success in the area of new product development. Dabur has introduced a uniform and structured induction process across all its locations in India. All India Institute of Medical Sciences (AIIMS) and Benaras Hindu University to conduct clinical research and claim support tests. Mumbai. Given their unique properties. In the last few years. commercial production of many researched products was hampered due to limited focus on devising innovative production processes. post-induction programs have been made available at all recruitment locations of the Company. Poddar Institute. The Company is working proactively to upgrade OPD and operation theatre in the hospital as well as to improve facilities at the training institute. In the year under review. To this end. To this end. Improving speed-to-market on newly researched products has been a key focus area of research at DRF. Till date. Dabur had entered into a strong partnership with the Dhanwantri Ayurvedic Hospital— now called Dabur Dhanwantri Hospital — in Chandigarh. Dabur believes that these products will create a niche for themselves in their respective markets. Anmol Cold Cream – a moisturiser with saffron and almonds. with this focus. flavours and home care product capabilities of the Balsara R&D centre based in Thane. This initiative gained further momentum during the period under review. However. Dabur has given a major thrust to clinical trials and generating claims support data. Dabur has also been pursing the Young Manager Development Program (YMDP) to attract and nurture fresh talent in the Company. Under YMDP.

This has ensured that balance across multiple dimensions of performance is maintained and that good accomplishment in one area is not offset by poor execution elsewhere.268.148. the Company plans to hold day-long workshops at various locations for over 2. down to the level of area sales managers. FINANCIAL PERFORMANCE The abridged financials of Dabur India Limited (DIL) for the year 2004-05 including revenue. which come into effect from 1 April 2005. A training module has been prepared for the Company‘s frontline salesmen. Table 2 : Abridged Profit & Loss Account (Rs. crore) _ Dabur India Dabur India Growth 2004-05 2003-04 (%) 1 Net Sales 1. it will have to deal with the challenges of integrating the two workforces. employees are placed where their potential is best utilised. this programme is conducted by a reputed professional organisation.5 . Annual appraisals. in the medium term the Company will endeavour to fully-integrate the value systems and knowledge based capabilities of the two organisations. All four aspects of the scorecard — financial perspective.000 frontline salesmen and is currently engaged in ‗training the trainers‘ programme for this purpose. customer perspective. are presented in Table 2.7 1. Based on this assessment. expenditure and profits.0 10. are based on the parameters identified as KPIs. internal business process and innovation and learning — have been formally communicated across the management and individual Key Performance Indicators (KPIs) identified thereon. While the immediate integration focus will remain on key functional areas required to maintain continuity in the different businesses. Recruitment costs have been brought down through the introduction of a structured employee referral programme and creation of centralised employment database with access control capabilities. As Dabur builds on the synergies with Balsara. People development continues to be a key focus area at Dabur. The Company is well-placed to manage this integration process. It may be noted that Dabur‘s financial results as on 31 March 2005 do not account for the Balsara acquisition. including those on the rolls of its stockists. These 20 Dabur India Limited • Management Discussion & Analysis centres employ scientific processes to assess the growth potential of each individual. The Company organises regular Management Development Programmes (MDPs) in the form of workshops and training sessions for both the senior and junior management. Based on this module. Dabur has also set-up Assessment and Development Centres to provide employees equitable growth opportunities and a platform to realise their potential. For senior management.the Balanced Scorecard for performance evaluation and strategy deployment.

148 crore in 2004-05.0 101. The net working capital which was at negative 5 days of sales in 2003-04 came down further to negative 20 days of sales during 2004-05.3 1.8 ROCE 38.3 120.101. These factors have contributed to an impressive 46. interest outgo decreased by 37.0 6 Depreciation 17. which grew from 12.9 crore in 2003-04 to Rs.0 5 EBIDTA 187.5 _ As can be seen in Table 2.0 3.6.2 crore in 200304 to Rs.0 PBT/Sales 13.1 -29. Your Company has also found success in reducing its working capital cycle significantly over the last couple of years. from Rs.5 4 Total Expenditure 1.7 per cent 2004-05.2 Other Income 11. Second.7 10 PBT 165.280.3 per cent growth in profit after tax (PAT) from Rs.187.5 11 Current tax 13.3 14 EPS 5. First. This healthy top-line growth.2 crore in 2003-04 to Rs. Baddi and Rudrapur plants—all located in excise free zones— the Company has been able to benefit from the fiscal concessions offered at these locations.1. with the commissioning of the Jammu.5 14.6 7 Amortisation 1. The company also continues to operate with negative working capital. Net profit margin (PAT/ Sales) has also grown from 8.1.1 15.0 per cent in 2003-04 to 14.5 2.6 12 Deferred tax 4.8 8.7 9 PBIT 169.0 10. With the renewed strength of its brands.7 per cent from Rs.2 36.092.9 138.9 RONW 44. all profitability ratios of the Company have gone up in the year under review.0 9. the costs have been driven down substantially.6 13 PAT 148. Consequently.2 1.7 crore in 2004-05.3 40.0 8 Interest 4.4 45. Driven by much tighter working capital management.8 48.9 crore in 2004-05.148 crore in 2003-04 to Rs.138.3 crore in 2004-05.9 -37.8 7.1 3 Total Revenue 1.020. accompanied by efficiencies in manufacturing and supply chain.7 34.8 12.5 _ 15 EPS (Diluted) 5. the ROCE has .0 113.6 There has been a significant improvement in operating margin (EBDITA/Sales).5 11.268.3 6.5 per cent growth in net sales.7 8. due to improvements in supply chain and manufacturing.2 46. The improved margins have been primarily driven by two factors.8 per cent in 2004-05.4. Dabur India continues to pursue its path of high profitable growth.159. contributed to a 36 per cent growth in operating profits (EBIDTA) from Rs. Annual Report 2004-05 21 Table 3: DIL‘s Profitability Ratios (%) _ 2004-05 2003-04 EBDITA/Sales 14.0 8.1 3.2 3.9 PAT/Sales 11. your Company recorded a 10.0 4. As can be seen in Table 3.5 38.8 per cent 2003-04 to 11.

The consolidated net profit (PAT after minority interest) also posted a strong growth of 46.0 12 Deferred tax 4.6 13 PAT 157.2 RONW 43.5 139.9 -61.170.5 crore in 2003-04 to Rs. The dividend payout ratio has been maintained inspite of significant investments made in manufacturing facilities as well as the Balsara acquisition. the net sales of the Company on a consolidated basis registered a growth of 15.0 crore in 200405.0 3. Consolidated Financials Table 4 gives the abridged financials of Dabur on a consolidated basis. Operating margin (EBDITA/sales) also grew from 12.4 13.2 9.329.6 14 Minority interest (1. Table 5: Dabur Consolidated.1329.5 3 Total Revenue 1.3 PAT/Sales (after minority interest) 10.4 15.5 per cent in 2004-05.2 41.328.5 14.4 33.8 106. Abridged Profit & Loss Account (Rs. The Company has declared total dividend of 250 per cent which translates into dividend payout ratio of 48.6 9 PBIT 188.106.6 per cent in 2003-04 to 44.5 38.6 15.1 124.4 3.5 4 Total Expenditure 1.155.5 29.5 9. Profitability Ratios (%) 2004-05 2003-04 EBDITA/Sales 14.6 15.537.7 PBT/Sales 11.3 minority interest 16 EPS 5.0 ROCE 31.2 10 PBT 176. crore) _ _ Dabur Dabur Growth Consolidated Consolidated (%) 2004-05 2003-04 1 Net Sales 1.0 24.0 15 PAT after 155.7 _ 17 EPS (Diluted) 5.338.5 7 Amortisation 1.218.0 109.0 1.8 11 Current tax 15.5 3.6 2 Other Income 9.1 8.3 43.6 per cent from Rs.8 crore in 2004-05.9 12.2 1.8) -57.3 29.5 5 EBIDTA 218.5 8 Interest 12.7 Driven by impressive growth of the Foods and International businesses.6 6 Depreciation 28.1 1.6 per cent from Rs. The strong bottom line has also pushed up the RONW from 38.6 crore in 2003-04 to Rs.3 -18.3 per cent.4 3.9 per cent in 2003-04 to 38.168.1 22 Dabur India Limited • Management Discussion & Analysis The highlights of the consolidated performance are as follows: • Operating profits (EBIDTA) increased by 29. Table 4 : Consolidated.7 per cent in 2004-05.546. all profitability ratios calculated on a consolidated basis have shown a marked improvement in 2004-05.1 11.1 1.4 35.increased from 34.2 12.7 .3 crore in 2003-04 to Rs. As presented in Table 5.2) (2.1537 crore in 2004-05.5 46.3 per cent increasing from Rs.0 168.

1 times in 2003-04 to 14. • Finance and Treasury risks – apart from regular risks like authorisation risks. • The interest coverage ratio (ratio of profit before interest and tax to interest payments) has increased from 9. with an increasing international presence. • Net profit margin (PAT/Sales) increased from 8 per cent in 2003-04 to 10. However Dabur has put in place necessary systems to mitigate these risks which is reflected in the high success rate of its new product initiatives and sustained revenue growth. The market space is also filled with counterfeits and spurious products. There are also inherent risks associated with new products that are constantly being introduced by Dabur. Dabur. Many of the Company‘s inputs‘are in the nature of herbs and plant extracts. • Supply chain and procurement risks – These are risks associated with the market dynamics of the Company‘s inputs. • Return on Capital Employed has gone up from 29.1 per cent in 2003-04 to 43. some of which are endangered. RISKS AND CONCERNS Uncertainties in business offer opportunities and downside risks. which are a threat to the Company‘s brand equity and revenue.8 times in 2004-05. The inherent risks across operational. They are linked to issues related to media.5 per cent in 2004-05.per cent in 2003-04 to 14.5 per cent in 2004-05. Consequently. strategic and tactical issues are mapped in terms of likelihood of occurrence and materiality. your Company recognises the importance of a well structured system to identify and manage the different elements of risk. PR and competition. Your Company has put in place a system of backward linkages where contract farming of such inputs is promoted. Dabur is also exposed to risks attached to economic and political uncertainty.1 per cent in 2004-05.2 per cent in 2003-04 to 31. reporting risks and exposure risks. • Return on Net Worth increased from 38. The basis of this process driven risk management system is the risk register that not only lists a comprehensive set of risks across 15 functional domains but also states control tools under process owners that are there to minimise each risk. where the Company needs to take positions. There are systems in place that enhance transparency and scientific decision making in procurement and production planning. • Other set of risks deal with development and retention . which has a long-term market standing and high brand equity. is continuously exposed to risks associated with foreign exchange fluctuations. Some key areas where risks have been identified and mitigation tools put in place are: • Brand Equity risks –These risks are inherent to any FMCG Company like Dabur.2 per cent in 2004-05. Like any other Company. Dabur has introduced a risk-based control system and appointed risk officers across all Company locations.

assessing and subsequently developing controls to minimise risks. that provides reasonable assurance regarding the effectiveness and efficiency of operations. We believe that. The internal control system at Dabur is a process. Annual Report 2004-05 23 INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Dabur has a robust internal audit and control system. A Chief Risk officer has been appointed. regulations and internal policies of the company. THREATS AND OUTLOOK Dabur is cautiously optimistic about its prospects in 200506. The Internal Audit Department reports to the Audit Committee and recommends control measures from time to time. The enterprise-wide risk management system analyses and deals with these risks based on the overall objective with a focus on identifying. refer to the section on Corporate Governance of the Annual Report. and compliance with applicable laws and regulations Price Waterhouse Coopers is the internal auditor for the Company and its subsidiaries. The Company‘s Internal Audit function is staffed with qualified and experienced people. are in line with the best global practices. along with authority controls for each activity. the sector will face margin pressures. and have been laid down across the process flows. if the Indian economy continues to grow by over 6. It is widely accepted that with output prices under pressure and input costs being higher. This also points to the fact that growth will largely be volume driven. To read the report of the Audit Committee on internal control and adequacy. OPPORTUNITIES. However.5 per cent. data security and recovery systems across the company‘s IT infrastructure and issues related to quality and research and development. who is responsible for the entire risk governance of the Company.of human resources. overseen by the Board of Directors. The major concern for 2005-06 is to do with prices of inputs. The Company is putting in place a Business Continuity Plan and a Disaster Recovery Plan to mitigate risks in the event of unforeseen exigencies. reliability of financial reporting. demand for FMCG products is bound to increase. The Standard Operating Procedures (SOPs) put in place by the Company. management and other personnel. Under this framework. . Dabur has introduced the COSO framework for internal controls and adequacy of internal audit. In the year under review. The framework so designed ensures adherence to the rules. compliance and regulatory activities. a bulk of this demand growth will be from smaller towns and rural centres. various risks facing the Company are identified and assessed routinely across all levels and functions and suitable control activities are designed to address and mitigate the significant risks.

The challenge for your Company in the next financial year is to be able to accelerate growth and maintain margins.With the possibility of Foreign Direct Investment being allowed in the retail sector and consequent entry of large international retail chains. and strategically positioning our products in different market segments. CAUTIONARY STATEMENT Statements in this management discussion and analysis describing the Company‘s objectives. projections. We believe that by leveraging our herbal specialist brand equity. exchange rate fluctuations. and significant changes in political and economic environment in India. if any. Actual results may differ substantially or materially from those expressed or implied. the FMCG industry will see some structural changes happening which could result in a strong growth momentum. tax laws. environment standards. rise in input costs. Your Company is gearing up to capitalize on this opportunity by putting in place a specialized sales structure dedicated to modern retail channels. coupled with procurement and supply chain efficiencies. estimates and expectations may be‘‗forward looking statements‘ within the meaning of applicable laws and regulations. we will largely de-risk ourselves from pricing pressures and segmental contractions. On the production side. Important developments that could affect the Company‘s operations include a downward trend in the domestic FMCG industry. the location of our plants deriving fiscal benefits. we will be able to maintain good margins. offering a wider product portfolio. litigation and labour relations .

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