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GODREJ CONSUMER PRODUCTS LIMITED (Incorporated in the Republic of India with limited liability with CIN L24246MH2000PLC129806 under the Companies Act, 1956)
Godrej Consumer Products Limited (―GCPL‖ or the ―Company‖) is issuing up to 15,400,100 Equity Shares of face value of Re. 1 each (the ―Equity
Shares‖) at a price of Rs. 345.00 per Equity Share, including a premium of Rs. 344.00 per Equity Share, aggregating to Rs. 5,313.03 million (the ―Issue‖).
All the outstanding Equity Shares are listed on the Bombay Stock Exchange Limited (the ―BSE‖) and the National Stock Exchange of India Limited (the
―NSE‖). The closing price of the outstanding Equity Shares on the BSE and the NSE on June 25, 2010 was Rs. 342.2 and Rs. 341.8 per Equity Share,
respectively. Applications shall be made for the listing of the Equity Shares offered through this Placement Document on the BSE and the NSE
(collectively, the ―Stock Exchanges‖). The Stock Exchanges assume no responsibility for the correctness of any statements made, opinions expressed or
reports contained herein. Admission of the Equity Shares to trading on the Stock Exchanges should not be taken as an indication of the merits of our
business or the Equity Shares.
WE HAVE PREPARED THIS PLACEMENT DOCUMENT SOLELY FOR PROVIDING INFORMATION IN CONNECTION WITH THE
PROPOSED ISSUE OF THE EQUITY SHARES DESCRIBED IN THIS PLACEMENT DOCUMENT.
A copy of the Preliminary Placement Document has been delivered to the Stock Exchanges. A copy of this Placement Document will be filed with the
Stock Exchanges. A copy of this Placement Document will also be delivered to the Securities and Exchange Board of India (―SEBI‖) for record purposes.
INVESTMENTS IN EQUITY SHARES INVOLVE A DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST ANY
FUNDS IN THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENT.
PROSPECTIVE INVESTORS ARE ADVISED TO CAREFULLY READ “RISK FACTORS” BEFORE TAKING AN INVESTMENT
DECISION IN THIS ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS ADVISORS ABOUT THE PARTICULAR
CONSEQUENCES TO IT OF AN INVESTMENT IN THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS PLACEMENT
DOCUMENT.
THIS ISSUE AND THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT IS BEING DONE IN RELIANCE ON CHAPTER VIII OF
THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS,
2009 (THE “SEBI REGULATIONS‟). THIS PLACEMENT DOCUMENT IS PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES
NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO THE PUBLIC OR TO ANY OTHER PERSON
OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA.
YOU MAY NOT BE AND ARE NOT AUTHORISED TO (1) DELIVER THIS PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2)
REPRODUCE THIS PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER. ANY DISTRIBUTION OR REPRODUCTION OF
THIS PLACEMENT DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS INSTRUCTION
MAY RESULT IN A VIOLATION OF THE SEBI REGULATIONS OR OTHER APPLICABLE LAWS OF INDIA AND OTHER
JURISDICTIONS.
Invitations, offers and sales of Equity Shares shall only be made pursuant to this Placement Document together with the Application Form and
Confirmation of Allocation Note. For further information, see ―Issue Procedure‖. The distribution of this Placement Document or the disclosure of its
contents without our prior consent to any person, other than Qualified Institutional Buyers (―QIBs‖), as defined in the SEBI Regulations, and persons
retained by QIBs to advise them with respect to their purchase of Equity Shares, is unauthorised and prohibited. Each prospective investor, by accepting delivery of this Placement Document, agrees to observe the foregoing restrictions and make no copies of this Placement Document or any documents
referred to in this Placement Document.
This Placement Document has not been and will not be registered as a prospectus with the Registrar of Companies in India, will not be circulated or
distributed to the public in India or any other jurisdiction and will not constitute a public offer in India or any other jurisdiction.
The information on our website or any website directly or indirectly linked to our website does not form part of this Placement Document and prospective
investors should not rely on such information contained in, or available through, such websites.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the ―Securities Act‖), and may not be
offered or sold within the United States (as defined in Regulation S (―Regulation S‖) under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Equity Shares are being offered and
sold under the Securities Act outside the United States in offshore transactions in reliance on Regulation S. See ―Distribution Restrictions‖ and ―Transfer
Restrictions‖.
Book Running Lead Managers
Kotak Mahindra Capital Company Limited
1st Floor Bakhtawar
229, Nariman Point
Mumbai 400 021
HSBC Securities and Capital Markets (India) Private Limited
52/60
Mahatma Gandhi Road, Fort
Mumbai 400 001
This Placement Document is dated July 1, 2010.
Placement Document
Not for Circulation
Serial Number: ___
TABLE OF CONTENTS
NOTICE TO INVESTORS ............................................................................................................................................................. i
REPRESENTATIONS BY INVESTORS .................................................................................................................................... iii
DISCLAIMER CLAUSE OF THE STOCK EXCHANGES .................................................................................................... viii
OFFSHORE DERIVATIVE INSTRUMENTS ......................................................................................................................... viii
FORWARD-LOOKING STATEMENTS.................................................................................................................................... ix
ENFORCEMENT OF CIVIL LIABILITIES ............................................................................................................................... x
PRESENTATION OF FINANCIAL AND OTHER INFORMATION ..................................................................................... xi
INDUSTRY AND MARKET DATA ........................................................................................................................................... xii
CERTAIN DEFINITIONS AND ABBREVIATIONS .............................................................................................................. xiii
SUMMARY OF BUSINESS .......................................................................................................................................................... 1
SUMMARY OF THE ISSUE ......................................................................................................................................................... 8
SUMMARY FINANCIAL INFORMATION ............................................................................................................................. 11
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF THE MEGASARI
GROUP .......................................................................................................................................................................................... 20
RISK FACTORS .......................................................................................................................................................................... 25
USE OF PROCEEDS ................................................................................................................................................................... 49
CAPITALISATION...................................................................................................................................................................... 50
MARKET PRICE AND OTHER INFORMATION CONCERNING THE EQUITY SHARES ........................................... 51
DIVIDEND .................................................................................................................................................................................... 53
RECENT DEVELOPMENTS ..................................................................................................................................................... 54
EXCHANGE RATE INFORMATION ....................................................................................................................................... 57
MANAGEMENT‟S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
........................................................................................................................................................................................................ 58
INDUSTRY OVERVIEW ............................................................................................................................................................ 78
BUSINESS ..................................................................................................................................................................................... 83
DIRECTORS AND SENIOR MANAGEMENT ...................................................................................................................... 102
PRINCIPAL SHAREHOLDERS .............................................................................................................................................. 113
ISSUE PROCEDURE................................................................................................................................................................. 117
PLACEMENT ............................................................................................................................................................................. 125
DISTRIBUTION RESTRICTIONS .......................................................................................................................................... 127
TRANSFER RESTRICTIONS .................................................................................................................................................. 131
THE SECURITIES MARKET OF INDIA ............................................................................................................................... 132
DESCRIPTION OF THE EQUITY SHARES ......................................................................................................................... 135
TAXATION ................................................................................................................................................................................. 138
LEGAL PROCEEDINGS .......................................................................................................................................................... 147
INDEPENDENT ACCOUNTANTS .......................................................................................................................................... 148
GENERAL INFORMATION .................................................................................................................................................... 149
FINANCIAL STATEMENTS .................................................................................................................................................... 150
DECLARATION ........................................................................................................................................................................ 151
i
NOTICE TO INVESTORS
We have furnished and accept full responsibility for the information contained in this Placement Document and to
the best of our knowledge and belief, having made all reasonable enquiries, confirm that this Placement Document
contains all information with respect to us and the Equity Shares which is material in the context of this Issue. The
statements contained in this Placement Document relating to us and the Equity Shares are, in all material respects,
true and accurate and not misleading, and the opinions and intentions expressed in this Placement Document with
regard to us and the Equity Shares are honestly held, have been reached after considering all relevant circumstances
and are based on reasonable assumptions and information presently available to us. There are no other facts in
relation to us and the Equity Shares, the omission of which would, in the context of the Issue, make any statement in
this Placement Document misleading in any material respect. Further, we have made all reasonable enquiries to
ascertain such facts and to verify the accuracy of all such information and statements.
Neither the Book Running Lead Managers nor any of their respective members, employees, counsel, officers,
directors, representatives, agents or affiliates make any express or implied representation, warranty or undertaking,
and no responsibility or liability is accepted by the Book Running Lead Managers as to the accuracy or
completeness of the information contained in this Placement Document or any other information supplied in
connection with the Equity Shares. Each person receiving this Placement Document acknowledges that such person
has neither relied on the Book Running Lead Managers nor on any person affiliated with the Book Running Lead
Managers in connection with its investigation of the accuracy of such information or its investment decision, and
each such person must rely on its own examination of us and the merits and risks involved in investing in the Equity
Shares issued pursuant to the Issue.
No person is authorised to give any information or to make any representation not contained in this Placement
Document, and any information or representation not so contained must not be relied upon as having been
authorised by or on behalf of us or the Book Running Lead Managers. The delivery of this Placement Document at
any time does not imply that the information contained in it is correct as at any time subsequent to its date.
The Equity Shares have not been approved, disapproved or recommended by any regulatory authority in any
jurisdiction. No regulatory authority has passed or endorsed the merits of this Issue or the accuracy of
adequacy of the Placement Document. Any representation to the contrary may be a criminal offence.
The distribution of this Placement Document and the issue of the Equity Shares in certain jurisdictions may be
restricted by law. As such, this Placement Document does not constitute, and may not be used for or in connection
with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to
any person to whom it is unlawful to make such offer or solicitation. In particular, no action has been taken by us
and the Book Running Lead Managers which would permit an issue of the Equity Shares or distribution of this
Placement Document in any jurisdiction other than India. Accordingly, the Equity Shares may not be offered or
sold, directly or indirectly, and neither this Placement Document nor any other Issue-related materials in connection
with the Equity Shares may be distributed or published in or from any country or jurisdiction, except under
circumstances that will result in compliance with any applicable rules and regulations of any such country or
jurisdiction.
In making an investment decision, investors must rely on their own examination of us and the terms of this Issue,
including the merits and risks involved. Investors should not construe the contents of this Placement Document as
legal, tax, accounting or investment advice. Investors should consult their own counsel and advisors as to business,
legal, tax, accounting and related matters concerning the Issue. In addition, neither we nor the Book Running Lead
Managers are making any representation to any offeree or purchaser of the Equity Shares regarding the legality of an
investment in the Equity Shares by such offeree or purchaser under applicable legal, investment or similar laws or
regulations.
Each purchaser of the Equity Shares in this Issue is deemed to have acknowledged, represented and agreed
that it is eligible to invest in India and in the Equity Shares to be issued pursuant to the Issue under Indian
law, including under chapter VIII of the SEBI Regulations and is not prohibited by the SEBI or any other
regulatory authority from buying, selling or dealing in securities. Each purchaser of Equity Shares in the
ii
Issue also acknowledges that it has been afforded an opportunity to request from, and review information
relating to us and the Equity Shares.
This Placement Document contains summaries of certain terms of certain documents, which summaries are qualified
in their entirety by the terms and conditions of such documents.
iii
REPRESENTATIONS BY INVESTORS
All references to ―you‖ in this section are to the prospective investors in the Issue. By subscribing to any Equity
Shares under the Issue, you are deemed to have represented and warranted to us and the Book Running Lead
Managers and acknowledged and agreed as follows:
you are a QIB as defined in regulation 2(1)(zd) of the SEBI Regulations and undertake to acquire, hold,
manage or dispose of any Equity Shares that are allocated to you in accordance with chapter VIII of the
SEBI Regulations;
if you are not a resident of India, but are a QIB, you are a FII or a FVCI, and have a valid and existing
registration with the SEBI under the applicable laws in India;
if you are Allotted Equity Shares pursuant to the Issue, you shall not, for a period of one year from the date
of Allotment, sell the Equity Shares so acquired except on the Stock Exchanges;
you are aware that the Equity Shares have not been and will not be registered under the SEBI regulations or
under any other law in force in India and that the Placement Document has not been verified or affirmed by
the SEBI or the Stock Exchanges and will not be filed with the Registrar of Companies and the Placement
Document has been filed with the Stock Exchanges for record purposes only and has been displayed on our
websites and the websites of the Stock Exchanges;
you are aware that the final Placement Document will be filed with Stock Exchanges and SEBI for record
purposes only;
you are permitted to subscribe to the Equity Shares under the laws of all relevant jurisdictions which apply
to you and that you have fully observed such laws and obtained all such governmental and other consents
in each case which may be required thereunder and complied with all necessary formalities;
you are permitted to acquire the Equity Shares under the laws of all relevant jurisdictions and that you have
all necessary capacity and have obtained all necessary consents and authorisations to enable you to commit
to this participation in the Issue and to perform your obligations in relation thereto (including, without
limitation, in the case of any person on whose behalf you are acting, all necessary consents and authorities
to agree to the terms set out or referred to in the Placement Document) and will honour such obligations;
you confirm that, either: (i) you have not participated in or attended any investor meetings or presentations
by our Company or its agents (―Company Presentations‖) with regard to our Company or the Issue; or (ii)
if you have participated in or attended any Company Presentations: (a) you understand and acknowledge
that the Book Running Lead Managers may not have knowledge of the statements that our Company or its
agents may have made at such Company Presentations and are therefore unable to determine whether the
information provided to you at such Company Presentations may have included any material misstatements
or omissions, and, accordingly you acknowledge that the Book Running Lead Managers have advised you
not to rely in any way on any information that was provided to you at such Company Presentations, and (b)
you confirm that, to the best of your knowledge, you have not been provided any material information that
was not publicly available;
you are aware that neither we nor the Book Running Lead Managers are making any recommendation to
you, advising you regarding the suitability of any transactions they may enter into in connection with the
Issue, and that participation in the Issue is on the basis that you are not and will not be a client of the Book
Running Lead Managers and that the Book Running Lead Managers will not have duties or responsibilities
to you for providing the protection afforded to its clients or customers or for providing advice in relation to
the Issue and is in no way acting in a fiduciary capacity;
iv
you are aware that all statements other than statements of historical fact included in the Placement
Document, including, without limitation, those regarding our financial position, business strategy, plans
and objectives of management for future operations (including development plans and objectives relating to
our business), are forward-looking statements and that: (i) such forward-looking statements involve known
and unknown risks, uncertainties and other important factors that could cause actual results to be materially
different from future results, performance or achievements expressed or implied by such forward-looking
statements; (ii) such forward-looking statements are based on numerous assumptions regarding our present
and future business strategies and environment in which we will operate in the future; (iii) you should not
place undue reliance on forward-looking statements, which speak only as at the date of the Placement
Document; and (iv) we assume no responsibility to update any of the forward-looking statements contained
in the Placement Document;
you are aware that if you are Allotted more than 5% of the Equity Shares in this Issue, our Company shall
be required to disclose your name and the number of Equity Shares Allotted to you to the Stock Exchanges
and the Stock Exchanges will make the same available on their website and you consent to such
disclosures;
you are aware and understand that the Equity Shares are being offered only to QIBs and are not being
offered to the general public, and the Allotment of the same shall be on a discretionary basis;
you have made, or been deemed to have made, as applicable, the representations and warranties set forth
under ―Transfer Restrictions‖;
you have been provided a serially numbered copy of the Preliminary Placement Document and the
Placement Document and you have read and understood them in their entirety, including in particular, the
section titled ―Risk Factors‖;
you confirm that in making your investment decision, you have (i) relied on your own examination of us
and the terms of the Issue, including the merits and risks involved, (ii) made your own assessment of us, the
Equity Shares and the terms of the Issue based on such information as is publicly available, (iii) consulted
your own independent counsels, advisors or otherwise have satisfied yourself concerning, without
limitation, the effects of local laws, (iv) relied solely on the information contained in the Preliminary
Placement Document and no other disclosure or representation by us or any other party and (v) received all
information that you believe is necessary or appropriate in order to make an investment decision in respect
of us and the Equity Shares;
you confirm that the Book Running Lead Managers have not provided you with any tax advice or otherwise
made any representations regarding the tax consequences in relation to the purchase, ownership and
disposal of the Equity Shares (including but not limited to the Issue and the use of the proceeds from the
Equity Shares) and that you will obtain your own independent tax advice from a reputable service provider
and will not rely on the Book Running Lead Managers when evaluating the tax consequences in relation to
the Equity Shares (including but not limited to the Issue and the use of the proceeds from the Equity
Shares) and you waive and agree not to assert any claim against the Book Running Lead Managers with
respect to the tax aspects of the Equity Shares or as a result of any tax audits by tax authorities, wherever
situated;
you have such knowledge and experience in financial and business matters as to be capable of evaluating
the merits and risks of the investment in the Equity Shares, and you and any accounts for which you are
subscribing for the Equity Shares (i) are each able to bear the economic risk of your investment in the
Equity Shares, (ii) will not look to us, our officers and/or the Book Running Lead Managers for all or part
of any loss or losses that may be suffered, as a result of the investment in the Equity Shares, (iii) are able to
sustain a complete loss on the investment in the Equity Shares, (iv) have no need for liquidity with respect
to the investment in the Equity Shares and (v) have no reason to anticipate any change in your or their
circumstances, financial or otherwise, which may cause or require any sale or distribution by you or them
of all or any part of the Equity Shares;
v
where you are acquiring the Equity Shares for one or more managed accounts, you represent and warrant
that you are authorised in writing, by each such managed account to acquire the Equity Shares for each
managed account and to make (and you hereby make) the representations, warranties, acknowledgements
and agreements herein for and on behalf of each such account, reading the reference to ―you‖ to include
such accounts;
you are not a Promoter (as defined in the SEBI Regulations) and are not a person related to the Promoters,
either directly or indirectly, and your Bid does not directly or indirectly represent the Promoters or
promoter group or person related to the Promoters;
you have no rights under a shareholders agreement or voting agreement with the Promoters or persons
related to the Promoters, no veto rights or right to appoint any nominee director on our Board of Directors
other than the rights acquired, if any, in the capacity of a lender not holding any Equity Shares which shall
not be deemed to be a person related to the Promoter;
you have no right to withdraw your Bid after the Bid Closing Date;
you are eligible to Bid and hold Equity Shares so Allotted and any Equity Shares held by you prior to the
Issue and you further confirm that your holding upon the issue of the Equity Shares shall not exceed the
level permissible as per any applicable regulation;
you confirm that the Bids submitted by you would not eventually result in triggering a tender offer under
the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended (the
―Takeover Code‖);
to the best of your knowledge and belief, together with other QIBs in the Issue that belong to the same
group or are under common control as you, you confirm that the Allotment under the Issue shall not exceed
50% of the Issue; for purposes of this representation:
a. the expression ―belongs to the same group‖ shall by interpreted by applying the concept of
―companies under the same group‖ as provided in sub-section (11) of Section 372 of the
Companies Act; and
b. ―control‖ shall have the same meaning as is assigned to it by clause (c) of sub clause (1) of
Regulation 2 of the Takeover Code.
you shall not undertake any trade in the Equity Shares credited to your depository participant account until
such time that the final listing and trading approval for the Equity Shares is issued by the Stock Exchanges;
you are aware that applications have been made to the Stock Exchanges for in-principle approval for listing
and admission of the Equity Shares to trading on the Stock Exchanges‘ market for listed securities and that
the applications for the final listing and trading approval will be made only after Allotment and there can be
no assurance that such final approvals will be obtained in time or at all;
you are aware and understand that the Book Running Lead Managers will have entered into a placement
agreement with us whereby the Book Running Lead Managers have, subject to the satisfaction of certain
conditions set out therein, severally and not jointly, undertaken to use their best efforts as our agents to
procure subscription for the Equity Shares;
you are aware and understand that the contents of this Placement Document are exclusively our
responsibility and that neither the Book Running Lead Managers nor any person acting on their behalf has
or shall have any liability for any information, representation or statement contained in this Placement
Document or any information previously published by or on our behalf and will not be liable for your
decision to participate in the Issue based on any information, representation or statement contained in this
Placement Document or otherwise and by accepting a participation in this Issue, you agree to the same and
vi
confirm that you have neither received nor relied on any other information, representation, warranty or
statement made by or on behalf of the Book Running Lead Managers or us or any other person, and neither
the Book Running Lead Managers nor we nor any other person will be liable for your decision to
participate in the Issue based on any other information, representation, warranty or statement that you may
have obtained or received;
you confirm that the only information you are entitled to rely on, and on which you have relied, in
committing yourself to acquire the Equity Shares is contained in this Placement Document, such
information being all that you deem necessary to make an investment decision in respect of the Equity
Shares, and that you have neither received nor relied on any other information given or representations,
warranties or statements made by the Book Running Lead Managers (including any view, statement,
opinion or representation expressed in any research published or distributed by the Book Running Lead
Managers or its affiliates or any view, statement, opinion or representation expressed by the staff (including
research staff) of the Book Running Lead Managers or its affiliates) or us and neither us nor the Book
Running Lead Managers will be liable for your decision to accept an invitation to participate in the Issue
based on any other information, representation, warranty or statement;
you agree to indemnify and hold us and the Book Running Lead Managers harmless from any and all costs,
claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any
breach of the representations, warranties, acknowledgements and agreements in this Placement Document
and you agree that the indemnity set forth in this paragraph shall survive the resale of the Equity Shares by
or on behalf of the managed accounts;
you understand that the Book Running Lead Managers do not have any obligation to purchase or acquire all
or any part of the Equity Shares purchased by you in the Issue or to support any losses directly or indirectly
sustained or incurred by you for any reason whatsoever in connection with the Issue, including non-
performance by us of any of our obligations or any breach of any representations or warranties by us,
whether to you or otherwise;
you are eligible to invest in India under applicable law, including the Foreign Exchange Management
(Transfer or Issue of Security by Person Resident Outside India) Regulations, 2000, as amended from time
to time, and have not been prohibited by the SEBI from buying, selling or dealing in securities;
you are a sophisticated investor who is seeking to purchase the Equity Shares for your own investment and
not with a view to distribution. In particular, you acknowledge that (i) an investment in the Equity Shares
involves a high degree of risk and that the Equity Shares are, therefore, a speculative investment, (ii) you
have sufficient knowledge, sophistication and experience in financial and business matters so as to be
capable of evaluating the merits and risk of the purchase of the Equity Shares, and (iii) you are experienced
in investing in private placement transactions of securities of companies in a similar stage of development
and in similar jurisdictions and have such knowledge and experience in financial, business and investments
matters that you are capable of evaluating the merits and risks of your investment in the Equity Shares;
you are purchasing the Equity Shares in an offshore transaction meeting the requirements of Rule 903 or
904 of Regulation S;
you understand that the Equity Shares have not been and will not be registered under the Securities Act or
with any securities regulatory authority of any state of the United States and accordingly, may not be
offered or sold within the United States, except in reliance on an exemption from the registration
requirements of the Securities Act;
you are, at the time the Equity Shares are purchased pursuant to Regulation S, located outside the United
States (within the meaning of Regulation S) and you are not an affiliate of our Company or a person acting
on behalf of such an affiliate;
vii
each of the representations, warranties, acknowledgements and agreements set out above shall continue to
be true and accurate at all times up to and including the Allotment of the Equity Shares in the Issue; and
we, the Book Running Lead Managers, their respective affiliates and others will rely on the truth and
accuracy of the foregoing representations, warranties, acknowledgements and agreements which are given
to the Book Running Lead Managers on their own behalf and on our behalf and are irrevocable.
viii
DISCLAIMER CLAUSE OF THE STOCK EXCHANGES
As required, copies of this Placement Document have been filed with the Stock Exchanges. The Stock Exchanges do
not in any manner:
warrant, certify or endorse the correctness or completeness of any of the contents of the Preliminary
Placement Document;
warrant that our Equity Shares will be listed or will continue to be listed on the Stock Exchanges; or
take any responsibility for our financial or other soundness, our Promoters, our management or any scheme
or project of ours or any business of ours.
The filing of the Preliminary Placement Document should not for any reason be deemed or construed to mean that
the Preliminary Placement Document has been cleared or approved by the Stock Exchanges. Every person who
desires to apply for or otherwise acquire any Equity Shares may do so pursuant to an independent inquiry,
investigation and analysis and shall not have any claim against the Stock Exchanges whatsoever by reason of any
loss which may be suffered by such person consequent to or in connection with such subscription or acquisitions
whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.
_________________________________
OFFSHORE DERIVATIVE INSTRUMENTS
Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of
Regulation 15A(1) of the SEBI (Foreign Institutional Investors) Regulations, 1995 (the ―FII Regulations‖), as
amended, an FII may issue or otherwise deal in offshore derivative instruments such as participatory notes, equity-
linked notes or any other similar instruments (all such offshore derivative instruments are referred to herein as ―P-
Notes‖) against underlying securities listed or proposed to be listed on any stock exchange in India only in favour of
those entities which are regulated by appropriate foreign regulatory authorities in the countries of their incorporation
or establishment and subject to compliance with ―know your client‖ requirements. An FII shall also ensure that no
further issue or transfer of any instrument referred to above is made to any person other than such entities regulated
by appropriate foreign regulatory authorities. P-Notes have not been and are not being offered or sold pursuant to the
Placement Document. This Placement Document does not contain any information concerning P-Notes, including,
without limitation, any information regarding any risk factors relating thereto. In terms of the FII Regulations, as
amended with effect from May 22, 2008, no sub-account of a FII is permitted to directly or indirectly issue P-Notes.
Any P-Notes that may be issued by an FII are not our securities and do not constitute any obligation of, claims on or
interests in us. We have not participated in any offer of any P-Notes, the establishment of the terms of any P-Notes
or preparation of disclosure related to any P-Notes. Any P-Notes that may be offered are issued by, and are the sole
obligations of, third parties unrelated to us. We do not make any recommendation as to any investment in P-Notes
and does not accept any responsibility whatsoever in connection with the P-Notes. Any P-Notes that may be issued
by an FII are not our securities or securities of the Book Running Lead Managers and do not constitute any
obligations or claims on the Book Running Lead Managers. FII affiliates of the Book Running Lead Managers who
are registered as foreign institutional investors as defined under the FII Regulations may purchase, to the extent
permissible under law, Equity Shares in the Issue, and may issue P-Notes in respect thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosures as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the
issuer(s) of such P-Notes. Neither the SEBI nor any other regulatory authority has reviewed or approved any
P-Notes or any disclosure related thereto. Prospective investors are urged to consult with their own financial,
legal, accounting and tax advisors regarding any contemplated investment in P-Notes, including whether P-
Notes are issued in compliance with applicable laws and regulations.
ix
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Placement Document that are not statements of historical fact constitute
―forward-looking statements.‖ Investors can identify forward-looking statements by terminology such as ―aim‖,
―anticipate‖, ―believe‖, ―contemplate‖, ―continue‖, ―could‖, ―estimate‖, ―expect‖, ―intend‖, ―may‖, ―objective‖,
―plan‖, ―potential‖, ―predict‖, ―project‖, ―propose‖, ―pursue‖, ―seek‖, ―shall‖, ―should‖, ―target‖, ―will‖, ―would‖,
and the negative of such terms or other words or phrases of similar import. In addition, statements regarding our
expected financial condition and results of operations and business plans, strategies and prospects are forward-
looking statements. These forward-looking statements include statements as to our business strategy, revenue and
profitability, proposed expansion plans and other matters discussed in this Placement Document regarding matters
that are not historical facts. All forward-looking statements are subject to risks, uncertainties and assumptions about
us that could cause actual results to differ materially from those contemplated by the relevant forward-looking
statement. Important factors that could cause actual results, performance or achievements to differ materially from
our expectations include, among others:
Increased cost of raw materials and interruption in their availability;
If we fail to keep pace with the changes in the industry;
Intense competition which may lead us to increase expenditure on marketing and promotion which may
result in a decline in our revenues and profitability;
Unfair competition from counterfeit, cloned and pass-off products, which may reduce our sales and harm
our brands;
Heavy dependence on sales of our key products in India, namely toilet soaps, household insecticides, hair
colour and liquid detergent;
Risks associated with our international operations, which could negatively affect our sales to customers in
foreign countries as well as our operations and assets in such countries.
Additional factors that could cause actual results, performance or achievements to differ materially include, but are
not limited to those discussed under the sections titled ―Management‘s Discussion and Analysis of Financial
Condition and Results of Operations‖, ―Industry Overview‖ and ―Our Business‖ respectively, of this Placement
Document. Such forward-looking statements and any other projections contained in this Placement Document
(whether made by us or any third party) are predictions and are subject to various known and unknown risks and
uncertainties. Accordingly, there are or will be factors that could cause actual performance, achievements, results or
outcomes to differ materially from those contemplated by the relevant statement. We believe these factors include,
but are not limited to, those described under ―Risk Factors‖. These factors should not be construed as exhaustive and
should be read in conjunction with the other cautionary statements that are included in this Placement Document.
We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new
information, future developments or otherwise.
The forward-looking statements contained in this Placement Document are based on the beliefs of our management,
as well as the assumptions made by and information currently available to our management. Although we believe
that the expectations reflected in such forward-looking statements are reasonable at this time, we cannot assure
investors that such expectations will prove to be correct. Given these uncertainties, investors are cautioned not to
place undue reliance on such forward-looking statements. If any of these risks and uncertainties materialise or if any
of our underlying assumptions, prove to be incorrect, our actual results of operations or financial condition, could
differ materially from that described herein as anticipated, believed, estimated or expected. All subsequent written
and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these
cautionary statements.
x
ENFORCEMENT OF CIVIL LIABILITIES
We are a limited liability company incorporated under the laws of India. Most of our Directors and key managerial
personnel named herein are residents of India and all or a substantial portion of assets belonging to us or such
persons are located in India. As a result, it may be difficult for investors to effect service of process upon us or such
persons outside India or to enforce judgments obtained against such parties outside India.
Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the Code of
Civil Procedure, 1908 (the ―Civil Code‖) on a statutory basis. Section 13 of the Civil Code provides that a foreign
judgment shall be conclusive regarding any matter directly adjudicated upon except: (i) where the judgment has not
been pronounced by a court of competent jurisdiction; (ii) where the judgment has not been given on the merits of
the case; (iii) where it appears on the face of the proceedings that the judgment is founded on an incorrect view of
international law or a refusal to recognise the law of India in cases in which such law is applicable; (iv) where the
proceedings in which the judgment was obtained were opposed to natural justice; (v) where the judgment has been
obtained by fraud; and (vi) where the judgment sustains a claim founded on a breach of any law in force in India.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
However, Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a ―superior
court‖ within the meaning of that section in any country or territory outside India which the Government has by
notification declared to be in a ―reciprocating territory‖, it may be enforced in India by proceedings in execution as
if the judgment had been rendered by the relevant court in India. However, Section 44A of the Code is applicable
only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other charges of a
like nature or in respect of a fine or other penalties and does not include arbitration awards.
Each of the United Kingdom, Singapore and Hong Kong has been declared by the Government to be a reciprocating
territory for the purposes of Section 44A of the Civil Code, but the United States has not been so declared. A
judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced only by a fresh suit upon
the judgment and not by proceedings in execution. The suit must be brought in India within three years from the date
of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a
court in India would award damages on the same basis as a foreign court if an action is brought in India.
Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages
awarded as excessive or inconsistent with public policy and practices. Further, any judgment or award in a foreign
currency would be converted into Rupees on the date of such judgment or award and not on the date of payment. A
party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI to repatriate outside
India any amount recovered, and any such amount may be subject to income tax in accordance with applicable laws.
xi
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
In this Placement Document, unless the context otherwise indicates or implies, references to:
―you‖, ―offeree‖, ―purchaser‖, ―subscriber‖, ―recipient‖, ―investors‖ and ―potential investor‖ are to the
prospective investors in this Issue;
―we,‖ ―us‖ and ―our‖ refer to Godrej Consumer Products Limited and its subsidiaries on a consolidated
basis;
the ―Company‖ or ―our Company‖ refers to Godrej Consumer Products on a standalone basis;
a particular year are to the calendar year ended on December 31; and
a particular ―fiscal‖ or ―fiscal year‖ or ―financial year‖ are to the fiscal or financial year ended on March
31, unless otherwise specified.
In this Placement Document, references to:
―USD‖ and ―U.S. dollars‖ are to the legal currency of the United States of America;
―Rs.‖ and ―Rupees‖ are to the legal currency of the Republic of India;
―ZAR‖ or ―South African Rand‖ are to the legal currency of the Republic of South Africa;
―GBP‖ or ―£‖ and ―Great Britain Pounds‖ are to the legal currency of the United Kingdom;
―EURO‖ or ―€‖ are to the legal currency of the European Union;
―AED‖ are to the United Arab Emirates Dirham, which is the legal currency of the United Arab Emirates;
and
―Rupiah‖ or ―Rp‖ are to the legal currency of the Republic of Indonesia;
Also, all references to:
―U.S.‖ or the ―United States‖ are to the United States of America and its territories and possessions;
―India‖ are to the Republic of India and its territories and possessions;
―UK‖ or the ―U.K.‖ are to the United Kingdom and its territories and possessions;
―South Africa‖ are to the Republic of South Africa and its territories and possessions;
―Indonesia‖ are to the Republic of Indonesia and its territories and possessions;
―Argentina‖ are to the Argentine Republic and its territories and possessions; and
―Nigeria‖ are to the Federal Republic of Nigeria and its territories and possession.
We publish our financial statements in Rupees. Unless otherwise indicated, all financial data in this Placement
Document is derived from our consolidated financial statements, which have been prepared in accordance with
Indian GAAP and the Companies Act.
xii
Our financial statements, consisting of the audited consolidated financial statements as of and for the financial year
ended March 31, 2008, 2009 and 2010 and the audited consolidated financial statements of Godrej Household (we
are in the process of changing the name of this company from Godrej Sara Lee Limited to Godrej Household
Products Limited) as of and for the financial year ended March 31, 2010 included in this Placement Document are
prepared in accordance with Indian GAAP and the Companies Act. Indian GAAP differs in certain significant
respects from International Financial Reporting Standards (―IFRS‖) and U.S. GAAP. We do not provide a
reconciliation of our consolidated financial statements to IFRS or U.S. GAAP financial statements.
The unaudited pro forma condensed combined financial information of the Megasari Group as of and for the year
ended December 31, 2009, included in this Placement Document were prepared based on assumptions set out in
‗Unaudited Pro Forma Condensed Combined Financial Information of the Megasari Group‘.
Any discrepancies in the tables included herein between the amounts listed and the totals thereof are due to
rounding.
_______________________________________________________
INDUSTRY AND MARKET DATA
Information included in this Placement Document regarding markets, market size, market share, market position,
growth rates and other industry data pertaining to our businesses consists of estimates based on data reports
compiled by government bodies, professional organisations and analysts, data from other external sources and
knowledge of the markets in which we compete. In addition, we have compiled certain industry information,
including our information with respect to our market-position, especially with respect to markets outside India based
on our internal studies and based on information provided to us by third-party service providers engaged by us or by
our counter-parties with respect to our recent acquisitions. Certain statistical information included in this Placement
Document pertaining to the various sectors in which we operate has been reproduced from trade, industry and
government publications and websites.
This information is subject to change and cannot be verified with complete certainty due to limits on the availability
and reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. In many
cases, there is no readily available external information (whether from trade or industry associations, government
bodies or other organisations) to validate market-related analysis and estimates, so we have relied on internally
developed estimates.
While we have complied, extracted and reproduced this data from external sources, including third parties, trade,
industry or general publications, we accept no responsibility for accurately or completely reproducing such data.
Neither we nor the Book Running Lead Managers have independently verified this data, nor do we make any
representation regarding the accuracy of such data. Similarly, while we believe our internal estimates to be
reasonable, such estimates have not been verified by any independent sources, and neither we nor the Book Running
Lead Managers can assure potential investors as to their accuracy.
xiii
CERTAIN DEFINITIONS AND ABBREVIATIONS
We have prepared this Placement Document using the definitions and abbreviations below which you should
consider when reading the information contained herein.
Company-Related Terms
Term Description
Argencos Argencos SA and Panamar Producciones SA
Articles/Articles of Association Articles of Association of Godrej Consumer Products Limited
Auditors The statutory auditors of our Company, being M/s. Kalyaniwalla & Mistry,
Chartered Accountants
Board of Directors or Board The Board of Directors of Godrej Consumer Products Limited or any duly
constituted committee thereof
―Company‖ or ―GCPL‖ or
―Issuer‖
Godrej Consumer Products Limited, a public limited company incorporated under
the Companies Act, with its registered office at Pirojshanagar, Eastern Express
Highway, Vikhroli, Mumbai 400 079
Equity Shares Equity shares of our Company of Re. 1 each
GCPL ESOP Godrej Consumer Products Limited Employee Stock Option Plan
Godrej Household
Godrej Sara Lee Limited, whose name is in the process of being changed to Godrej
Household Products Limited
Godrej Middle East Godrej Global Mid East FZE
Issue Group Laboratoria Cuenca and its subsidiaries, Consell SA, Issue Group Uruguay SA,
Decrial SA (Uruguay) and Issue Group Brazil LTDA
Keyline Keyline Brands Limited
Megasari Group PT Megasari Makmur, PT Ekamas Sarijaya, PT Indomas Susemi Jaya, PT Simba
Indosnack, PT Intrasari Raya, PT Sarico Indah in Indonesia and Indovest Capital
Limited (Labuan)
Memorandum of Association Memorandum of Association of the Company
Rapidol Rapidol (Pty) Limited, South Africa
Registrar of Companies Registrar of Companies, Mumbai, Maharashtra
Registered Office The registered office of our Company located at Pirojshanagar, Eastern Express
Highway, Vikhroli, Mumbai, Maharashtra 400 079
―We‖, ―us‖ or ―our‖ Godrej Consumer Products Limited and its subsidiaries on a consolidated basis
Issue-Related Terms
Term Description
Allocated or Allocation The allocation of Equity Shares following the determination of the Issue Price to
QIBs on the basis of Application Forms submitted by them, in consultation with
the Book Running Lead Managers in compliance with chapter VIII of the SEBI
Regulations
Allottees Persons to whom Equity Shares are issued pursuant to the Issue
Allotment or Allotted Unless the context otherwise requires, the issue and allotment of Equity Shares
pursuant to the Issue
Application Form The form pursuant to which a QIB shall submit a bid in the Issue
Bid Closing Date July 1, 2010, the date on which our Company (or the Book Running Lead
Managers, on behalf of the Company) shall cease acceptance of Application
Forms
Bid Opening Date June 28, 2010, the date on which our Company (or the Book Running Lead
Managers on behalf of the Company) shall commence acceptance of Application
Forms
Bid(s) Indication of a QIB‘s interest, including all revisions and modifications of interest,
as provided in the Application Form, to subscribe for Equity Shares in the Issue
xiv
Term Description
Bidding Period The period between the Bid Opening Date and Bid Closing Date, inclusive of both
dates, during which prospective QIBs can submit their Bids
Book Running Lead Managers Kotak Mahindra Capital Company Limited and HSBC Securities and Capital
Markets (India) Private Limited
CAN or Confirmation of
Allocation Note
Note, advice or intimation to not more than 49 QIBs confirming the Allocation of
Equity Shares to such QIBs after discovery of the Issue Price and requiring
payment of the Issue Price for all the Equity Shares allocated to such QIBs
Cut-off Price The Issue Price of the Equity Shares which shall be finalised by our Company in
consultation with the Book Running Lead Managers
Director(s) Director(s) of our Company unless specified
Escrow Banks Kotak Mahindra Bank and the Hongkong and Shanghai Banking Corporation
Limited
Escrow Bank Accounts Accounts into which payment of application money shall be made by the QIBs
Floor Price The floor price of Rs. 345.00 which has been calculated in accordance with
chapter VIII of the SEBI Regulations and below which the Equity Shares shall not
be allotted in the Issue
Issue The offer and sale of 15,400,100 Equity Shares to QIBs, pursuant to chapter VIII
of the SEBI Regulations
Issue Price Rs. 345.00 per Equity Share, which shall be equal to or more than the Floor Price
Issue Size The issue of 15,400,100 Equity Shares aggregating Rs. 5,313.03 million
Listing Agreement The agreement entered into between the Company and the Stock Exchanges in
relation to listing of the Equity Shares on the Stock Exchanges
Pay-in Date The last date specified in the CAN sent to the QIBs
Placement Document This Placement Document dated July 1, 2010 issued in accordance with Chapter
VIII of the SEBI Regulations
Preliminary Placement
Document
The Preliminary Placement Document dated June 28, 2010 issued in accordance
with chapter VIII of the SEBI Regulations
Promoters Godrej & Boyce Manufacturing Company Limited, Godrej Industries Limited, Mr.
Adi Godrej, Mr. Jamshyd Godrej, Mr. Nadir Godrej, Mr. Vijay Crishna and Mr.
Rishad Naoroji
QIBs or Qualified Institutional
Buyers
Qualified Institutional Buyers as defined under regulation 2(1)(zd) of the SEBI
Regulations
QIP Qualified Institutions Placement under chapter VIII of the SEBI Regulations
Subsidiaries The Subsidiaries of our Company, namely, Godrej Netherlands B.V., Godrej
Consumer Products (U.K.) Limited, Keyline Brands Limited, Inecto
Manufacturing Limited, Rapidol (Pty) Limited, Godrej Global Mid East FZE,
Godrej Consumer Products Mauritius Limited, Godrej Kinky Holdings Limited,
Kinky Group Pty Limited, Godrej Hygiene Products Limited, Godrej Consumer
Products Bangladesh Limited, Godrej Sara Lee Limited (the company is in the
process of changing its name to Godrej Household Products Limited), Godrej
Sara Lee Bangladesh Private Limited, Godrej Sara Lee Lanka Private Limited,
Godrej Consumer Products Holding (Mauritius) Limited, Godrej Consumer
Products Dutch Cooperatief U.A., Godrej Consumer Holdings (Netherlands) B.V.,
Godrej Consumer Products (Netherlands) B.V., Godrej Indonesia Netherlands
Holding B.V., P T Indomas Susemi Jaya, P T Intrasari, P T Sarico Indah; PT
Ekamas Sarijaya, PT Megasari Makmur, PT Simba Indosnack Makmur, Indovest
Capital Limited (Labuan), Godrej Argentina Dutch Cooperatief U.A., Godrej
Netherlands Argentina B.V., Godrej Netherlands Argentina Holding B.V.,
Laboratoria Cuenca, Consell SA, Decrial SA (Uruguay), Issue Group Brazil
LTDA, Issue Group Uruguay SA, Godrej Nigeria Holdings Limited and Godrej
Nigeria Limited.
xv
Industry-Related Terms
Term Description
C & F agents Carrying and Forwarding Agents
FMCG Fast Moving Consumer Goods
R&D Research and Development
TQM Total Quality Management
Conventional and General Terms and Abbreviations
Term Description
AED United Arab Emirates Dirham
AGM Annual General Meeting
BSE The Bombay Stock Exchange Limited
BVQi Bureau Veritas Certification
CAGR Compound Annual Growth Rate
CDSL Central Depository Services Limited
CIN Corporate Identity Number
Civil Code The Code of Civil Procedure, 1908, as amended
Companies Act The Companies Act, 1956, as amended
Depositories Act The Depositories Act, 1996, as amended
Depository Participant A depository participant as defined under the Depositories Act
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
EGM Extraordinary General Meeting
EMS Environment Management System
EPS Earnings Per Share
ERP Enterprise Resource Planning
ESOP Employee Stock Option Plan
FBT Fringe Benefit Tax
FDI Foreign Direct Investment
FEMA The Foreign Exchange Management Act, 1999, as amended, and the regulations
issued thereunder
FII Foreign Institutional Investor (as defined under the Securities and Exchange Board
of India (Foreign Institutional Investors) Regulations, 1995, as amended) registered
with the SEBI
FVCI Foreign Venture Capital Investor (as defined under the Securities and Exchange
Board of India (Foreign Venture Capital Investors) Regulations, 2000, as amended)
registered with SEBI under the applicable laws in India
GAAP Generally Accepted Accounting Principles
GBP Pound Sterling
GDP Gross Domestic Product
GoI or Government Government of India, unless otherwise specified
HR Human Resources
HUF Hindu Undivided Family
ICAI Institute of Chartered Accountants of India
IFRS International Financial Reporting Standards of the International Accounting
Standards Board
ISO International Organisation for Standardization
IT Information Technology
IT Act The Income Tax Act, 1961, as amended
MAT Minimum Alternate Tax
Mutual Fund or MF A mutual fund registered with the SEBI under the SEBI (Mutual Funds)
Regulations, 1996
MIS Management Information Systems
xvi
Term Description
NAV Net Asset Value
NRI Non-Resident Indian
NSDL National Securities Depository Limited
NSE The National Stock Exchange of India Limited
OHSAS Occupational Health and Safety Assessment Series
PAN Permanent Account Number
QMS Quality Management System
RBI Reserve Bank of India
Regulation S/Reg S Regulation S under the Securities Act
Rp Indonesian Rupiah
Rs. or Rupees Indian Rupees
SCRA Securities Contracts (Regulation) Act, 1956, as amended
SCRR Securities Contracts (Regulation) Rules, 1957, as amended
SEBI The Securities and Exchange Board of India
SEBI Act The Securities and Exchange Board of India Act, 1992, as amended from time to
time
SEBI Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009
Securities Act The U.S. Securities Act of 1933, as amended
SENSEX Index of 30 stocks traded on BSE representing a sample of large and liquid listed
companies
SHE Safety, Health and Environment
Stock Exchanges BSE and NSE
STT Securities Transaction Tax
Takeover Code SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1997, as
amended from time to time
USD U.S. Dollar
ZAR South African Rand
1
SUMMARY OF BUSINESS
Overview
We are a part of the Godrej group of companies, which is one of the oldest corporate houses in India. The Godrej
group was established in 1897. It had a total turnover of Rs. 118 billion (US$ 2.62 billion) for the financial year
2010. With five listed companies with an aggregate market capitalisation of Rs. 165 billion as of March 31 2010, 58
manufacturing locations in India and overseas, and operations in 18 countries, it has a significant presence in the fast
moving consumer goods (―FMCG‖), real estate, industrial engineering, appliances, chemicals, furniture, security
and agri care sectors.
We are one of India‘s leading FMCG companies, with significant presence in other developing markets in Asia,
Africa and South America, such as Indonesia, South Africa, Nigeria and Argentina. We manufacture and sell a wide
range of personal wash, hair care and home care products. Our total income and net profit for the financial year 2010
was Rs. 20,885.02 million and Rs. 3,395.86 million, respectively. Our international operations contributed Rs.
3,824.70 million, or 18.3%, of our total income for the financial year 2010. With our recently completed
acquisitions, we expect our international operations to contribute more significantly to our total income going
forward.
Our product range in India includes toilet soaps, hair colorants, household insecticides, toiletries, hand sanitizers,
hand wipes, hand washes and liquid detergents. For the financial year 2010, we had the second largest value market
share of 10.3% in India in the toilet soap category and the largest hair value market share of 33.9% in India in the
hair colorant category. We were also the market leader in liquid detergents in India, with a 76.5% value market
share for the same period. Our Company‘s leading brands include ‗Godrej No.1‘, ‗Cinthol‘ and ‗Godrej FairGlow‘
in toilet soaps, ‗Godrej Expert‘, ‗Renew‘ and ‗Godrej Nupur‘ in hair colorants, ‗Godrej Protekt‘ in hand hygiene,
‗Cinthol‘ deodorants and talcum powder in toiletries and ‗Ezee‘ in liquid detergent, many of which we believe have
become household names in India. For the financial year 2010, our subsidiary, Godrej Household (we are in the
process of changing the name of this company from Godrej Sara Lee Limited to Godrej Household Products
Limited), with leading brands such as ‗Goodknight‘, ‗HIT‘ and ‗Jet‘, had the largest value market share of 33.1% in
India in the household insecticides category. It also has significant presence in the shoe care and male hair care
markets through leading brands such as ‗Kiwi‘ and ‗Brylcreem‘ and has operations in Sri Lanka and Bangladesh as
well.
Our Company has five manufacturing facilities in India at Malanpur (Madhya Pradesh), Guwahati (Assam), Baddi-
Thana (Himachal Pradesh), Baddi-Katha (Himachal Pradesh) and Sikkim. In addition, Godrej Household has
manufacturing facilities in Pondicherry, Chennai, Guwahati, Meghalaya, Jammu, Goa and Sri Lanka. As of March
31, 2010, our Company‘s distribution network in India comprised 33 carrying and forwarding (―C&F‖) agents
servicing 1,258 direct distributors, 263 super stockists and 5,161 sub-stockists. Our Company‘s distributors and sub-
stockists cover approximately 3,700,000 retailers in India. The distribution network of Godrej Household comprises
32 C&F agents servicing approximately 1,100 distributors and sub-stockists across India. Its distributors and sub-
stockists cover approximately 1,600,000 retailers across India.
During the past few years, we completed a number of acquisitions in India and overseas to increase our market share
in selected product categories and expand our geographical reach. In India, we sought to achieve market leadership
in household insecticides and increase our market share in personal care products by acquiring 49.0% of Godrej
Household on June 1, 2009. On May 28, 2010, our Company acquired the remaining 51.0% stake in Godrej
Household from our joint venture partner, Sara Lee Corporation. For the year ended March 31, 2010, Godrej
Household had total income and profit after tax of Rs. 9,425.89 million and Rs. 1,371.80 million, respectively.
As part of our expansion plans to establish our international presence, we have completed the following acquisitions:
United Kingdom. In October 2005, we acquired the business of Keyline Brands Limited (―Keyline‖) which
markets and distributes cosmetics and toiletries. Keyline‘s brands include, among others, ‗Cuticura‘ a hand-
hygiene product, ‗Bio Oil‘, a specialist skincare product line and P20, a popular sun-care brand, in the
United Kingdom. Keyline had total income of £29.05 million (Rs. 2,213.56 million) for the financial year
2010.
2
South Africa. In September 2006, we acquired the Rapidol (Pty) Limited and its wholly-owned subsidiary
Rapidol International Limited (together, ―Rapidol‖). Through this acquisition, we gained entry into the hair
color market for black hair in South Africa and acquired ownership of the ‗Inecto‘ brand, which is one of
the leading ethnic hair color brands in South Africa. Rapidol had total income of ZAR 115.29 million (Rs.
706.14 million) for the financial year 2010.
United Arab Emirates. In October 2007, we acquired Godrej Global Mid East FZE (―Godrej Middle East‖)
from Godrej International Limited. Godrej Mid East was established in Sharjah as the Godrej group‘s
FMCG distributor in the Middle East. It has a widespread distribution network in the Middle East countries
such as the United Arab Emirates, Oman, Saudi Arabia, Kuwait and Bahrain. Godrej Mid East had total
income of AED 13.67 million (Rs. 177.75 million) for the financial year 2010.
South Africa. In April 2008, we acquired Kinky Group (Pty.) Limited (―Kinky‖), which is one of the
leading hair products manufacturing, marketing and distribution companies in South Africa. Kinky markets
and sells its products through its own retail outlets in South Africa, as well as wholesalers and ‗cash n
carry‘ stores in various African countries. It currently owns 24 retails stores in South Africa. Kinky‘s
products include hair braids, hair pieces, wigs, and hair accessories. Kinky had total income of ZAR 118.24
million (Rs. 725.99 million) for the financial year 2010.
Indonesia. On May 17, 2010, we acquired the Megasari group of companies, which comprises PT Megasari
Makmur, PT Ekamas Sarijaya, PT Indomas Susemi Jaya, PT Simba Indosnack, PT Intrasari Raya, PT
Sarico Indah in Indonesia and Indovest Capital Limited (Labuan) (collectively, the ―Megasari Group‖). The
Megasari Group has a presence across a wide range of FMCG categories, including household insecticides,
air fresheners, wet tissues, baby care, car and motorcycle products, food wrappers, drain openers, bleach,
metal polishers and fly and rat glue. It is one of the leading companies in the Indonesia household products
market holding many popular brands such as ‗HIT‘, ‗Stella‘, ‗Mitu‘ and ‗Simba‘, with six manufacturing
facilities in Indonesia and an extensive distribution network across Indonesia. The Megasari Group had a
total net income (proforma) of Rp. 101.18 billion (Rs. 472.00 million) for the calendar year 2009.
Latin America, including Argentina. On June 1, 2010, we completed the acquisition of the Issue group,
comprising Laboratoria Cuenca and its subsidiaries, Consell SA, Issue Uruguay, Deciral Uruguay and Issue
Brazil (collectively, the ―Issue Group‖). The Issue Group is one of the leading mass market hair color
companies in Latin America with presence in Argentina, Paraguay, Peru and Uruguay and an emerging
presence in Brazil.
Nigeria. On June 16, 2010, we acquired the ‗Tura‘ brand from the Tura group. The ‗Tura‘ brand is a
household name in many West African countries and is the only super brand in Nigeria in the personal care
category. With this acquisition, we own the worldwide rights to manufacture and distribute the ‗Tura‘
brand products, which includes products such as soap, moisturizing lotion and skin toning cream.
Further, on June 2, 2010, we entered into an agreement to acquire Argencos SA (―Argencos‖), a medium-sized hair
care company in Argentina, which we believe will complement the operations of Issue Group. Argencos is one of
the largest businesses in the niche market of hair colors in kit format, with a significant market share and its product
portfolio includes popular hair-spray brands such as ‗Roby‘ and ‗919‘.
Our Strengths
We believe our principal competitive strengths include:
Well-established Brand Name and Market Leadership
We are a part of the Godrej group of companies, which is one of the oldest and leading corporate houses in India.
We believe that we have established a well-recognised brand and a strong customer base in the FMCG industry with
our ability to produce superior quality products. Our brands such as ‗Godrej No. 1‘, ‗Cinthol‘, ‗Ezee‘, ‗Godrej
Expert‘, ‗Renew‘ and ‗Goodknight‘ enjoy leadership positions in their respective categories and have established
3
substantial brand equity amongst the Indian population. ‗Cinthol‘, ‗Godrej Expert‘ and ‗Ezee‘ were recognised as
Superbrands in 2009 by Superbrands Inc. For the financial year 2010, we had the second largest value market share
of 10.3% in India in the toilet soap category and the largest value market share of 33.9% in India in the hair colorant
category. We were also the market leader in the liquid detergent category for the financial year 2010, with a value
market share of 76.5%. For the same period, our wholly-owned subsidiary, Godrej Household was the market leader
in the household insecticides category in India, with a value market share of 33.1%. In addition, ‗Goodknight‘ and
‗Brylcreem‘ were recognized as Superbrands in each of 2008 and 2009 by Superbrands Inc. Goodknight was also
featured as the No. 1 household care brand in ‗Brand Equity‘ survey in 2009 and the 14th
most trusted brand in
‗Brand Equity‘ survey for the FMCG industry in 2009 conducted by The Economic Times.
Our international operations also own leading brands and enjoy leading market share in their respective markets. In
the United Kingdom, Keyline‘s ‗Cuticura‘ and ‗P20‘ products enjoys leadership positions and ‗Bio Oil‘ is one of the
signature brands in one of the large retail chain stores in the United Kingdom. The Megasari Group is the largest
company in air care and wipes market of Indonesia with a value market share of 45% and 80%, respectively, one of
the largest manufacturers of household insecticides in Indonesia with a value market share of 35% and owns leading
brands, such as ‗HIT‘ ‗Stella‘ and ‗Mitu‘. Our South African subsidiary, Rapidol, is one of the largest manufacturers
of ethnic hair color in South Africa with a market share of over 85%. Our other South African subsidiary, Kinky, is
one of the market leaders in hair braids, hair prices, wigs and hair accessories. Tura is the only Superbrand across
personal care category in Nigeria, while the Issue Group enjoys a leadership position in Argentina with over 20%
volume market share.
Strong Presence in Emerging Markets Outside India
We have expanded our presence in the FMCG markets of emerging economies in the past few years through a
number of acquisitions:
We believe that we are currently one of the largest FMCG companies in Asia (excluding Japan). Through
our acquisition of the Megasari Group in Indonesia, we gained significant presence in the second most
populous country in Southeast Asia, whose FMCG market we believe has strong growth potential. Godrej
Household, which recently became our wholly-owned subsidiary, has a presence in Bangladesh and Sri
Lanka as well.
The acquisitions of Kinky and Rapidol have given us a strong foothold in the hair products market in South
Africa and its neighbouring countries. Our recent acquisition of the ‗Tura‘ brand will strengthen our
footprint in the African continent and give us access to Nigeria and other West African countries.
We also gained entry into Latin America with the acquisitions of the Issue Group and Argencos (pending
closure).
As our business is driven by consumer spending, we believe that strong presence in some of the world‘s emerging
markets with large populations that are growing in affluence and brand-consciousness, will put us in a strong
position to grow our income and extend our worldwide FMCG market share. For the financial year 2010, our
international operations contributed 18.3% of our total income on a consolidated basis. Our international businesses
demonstrated growth in revenues over the last two financial years despite the tough economic conditions as a result
of the global downturn. With our recently completed acquisitions, we expect our international operations to
contribute more significantly to our total income going forward.
Widespread Sales and Distribution Network in India and Our Key International Markets
We maintain an extensive distribution network to market our products in India. We have a presence in both the
urban and rural markets, enabling us to benefit from the opportunities in both markets. Our Company has a sales
team which comprises over 290 employees across India, while Godrej Household has a sales team of 214 employees
in India. As of March 31, 2010, our distribution network in India comprised 33 carrying and forwarding (―C&F‖)
agents servicing 1,258 direct distributors, 263 super stockists and 5,161 sub-stockists. Our distributors and sub-
stockists cover around 3,700,000 retailers in India. The distribution network of Godrej Household comprised 32
C&F agents servicing approximately 1,100 distributors and sub-stockists across India and operations in Bangladesh
4
and Sri Lanka, as of March 31, 2010. Its distributors and sub-stockists cover around 1,600,000 retailers across India.
In addition, Godrej Household exports its products to over 50 countries, particularly to markets in South Asia and
Southeast Asia. We also have extensive sales and distribution network in the international markets in which we
operate. For example, the Megasari Group had 11 branches, approximately 75 regional distributors, approximately
620 salesmen and presence through approximately 90,000 retail stores throughout Indonesia as of December 31,
2009.
Strong Research and Product Development Capabilities and Ability to Launch New Products
We believe that we have established a reputation as a manufacturer of superior quality products. In order to cater to
the changing needs of our customers, we have set up an in-house research and development facility in India to
develop products at competitive prices for the domestic and international market. The Godrej Research and
Development Centre is located in Vikhroli, Mumbai and is recognised by the Department of Science and
Technology, New Delhi. The research and development facility of Godrej Household dedicated to research in the
field of household and public health pest control, is also located in Vikhroli, Mumbai. It has also been recognised by
the Ministry of Science and Technology, Government of India.
Our research and development activities broadly comprises various processes for developing new products,
standardizing new analytical methods and identifying substitutes for key raw materials. Through our research and
development centre, we continuously interact with consumers to obtain feedback on our existing as well as new
products to complement our new product development activities. We believe that with our strong research and
development and technical capabilities, we will be able to further expand our product offerings and improve our
product quality and sales.
Our desire to meet the ever-changing needs of our customers can be illustrated by the wide range of new products or
variants of existing products that we launch regularly. We create new products through our innovative design and
ingredients and our ability to identify needs in a particular category. In the past financial year, our Company
introduced a range of new variants of products, including ‗Godrej No. 1 – Moisturizing Soap‘ and ‗Godrej No. 1 –
Lime and Aloe Vera‘, new color shades, ‗plum crazy‘ and ‗wine red‘ for our ‗Renew‘ hair colorant, as well as a
range of hand hygiene products under the ‗Godrej Protekt‘ brand. Through its research and development initiatives,
Godrej Household successfully launched its ‗Goodknight Naturals Mosquito Repellent Cream‘, which was
developed as a product suitable for use by children.
Advanced Information Technology Systems
Our operations are enhanced by our information technology platform, which provides improved connectivity and
facilitates data-based decision-making. We have recently entered into a strategic IT transformation services contract
with Hewlett Packard (―HP‖) to implement a business intelligence system and enhance our MIS systems to ensure
availability and timely delivery of information within our organisation. Our major distributors in India are linked
through an information technology system called ‗Sampark‘, a collaborative planning, forecasting and
replenishment system. This system, along with our enterprise resource planning (―ERP‖) system, enables us to track
the availability of stock with our distributors, warehouses and factories and has stock management, billing,
accounting and report generation capabilities. This system has enabled us to structure our production and shipments
to our distributors in an efficient manner as well as help our distributors to operate effectively with reduced
inventory levels.
Experienced Employee Base and Management Team
We are led by a management team and staffed with employees who have significant experience in the domestic and
international FMCG industry. Through their commitment and experience, our management has grown our business
in India and overseas, nurtured our brands and has demonstrated abilities in successfully integrating acquired foreign
businesses into our corporate set-up.
We believe that a motivated employee base is key to our competitive advantage. The skills and diversity of our
employees gives us the flexibility to adapt to the challenging needs of our diverse businesses. Our personnel policies
are aimed towards recruiting talented employees and facilitating their integration into our organization and
5
encouraging the development of their skills and expertise. Our Company was ranked as one of the 25 Best
Employers in Asia in a study conducted by Hewitt India. Our Company was also ranked No. 11 in the Best
Employers in India 2008 survey conducted by Hewitt Associate and ranked 6th in the ‗Best Companies to Work for
in India‘ Survey 2008 conducted by Business Today and Mercer Human Resource Consulting.
Manufacturing Facilities Located Domestically and Internationally
Our manufacturing facilities enjoy the following strengths:
The manufacturing facilities, owned by our Company and Godrej Household are located in India. Our
widespread manufacturing base in India helps us to manufacture quality products at a low cost.
We have adopted the Total Quality Management (―TQM‖) philosophy for our manufacturing facilities,
which is focused on improving product quality and manufacturing processes. Our Malanpur facility
obtained the QMS and EMS certifications in 1995 and 1998, respectively, while our Baddi-Thana and
Baddi-Katha facilities received the QMS, EMS and OHSAS certifications in 2004 and 2008, respectively.
Our Guwahati and Sikkim facilities also received the QMS certification in 2009.
Four out of our five manufacturing facilities are located in areas which enjoy fiscal benefits, such as
income tax and excise benefits for setting up industrial undertakings in industrially backward states. These
fiscal benefits provide us with substantial cost-advantages.
Internationally, we manufacture a majority of our products in-house, with manufacturing facilities in South
Africa, Indonesia and Argentina which provides us the ability to respond to domestic demands in these
markets swiftly and efficiently.
Our Business Strategy
We are driven by our mission to continuously enhance the quality of life of our consumers in high-growth markets
with superior quality and affordable personal wash, home care and hair care products. We aim to enhance our
leadership position in the FMCG industry in India, while at the same time pursuing growth opportunities in both the
domestic and select international markets. The key elements of our business strategy include:
Focus on Our Core Brands to Grow and Expand Our Market Share
We will continue to focus on gaining market share in the toilet soaps category. We will also continue to focus on
maintaining our market leadership and increasing the market penetration of our hair colorant and household
insecticide products.
We intend to grow our core categories through the following steps:
Toilet Soaps
Introducing additional new variants; and
Strategically marketing our product range to cater to the needs and preference of each regional market,
such as focusing on ‗Cinthol Original‘ in South India and ‗Cinthol Deo‘ and ‗Cinthol Fresh‘ in the rest of
India.
Hair Color
Focusing on ‗Godrej Expert‘ to increase market penetration through value for money offerings; Establish
greater presence in the premium hair color category through ‗Godrej Renew‘;
Strengthen ‗Nupur‘ further as a natural hair color; and
6
Strengthen and expand our distribution network.
Household Insecticides
Launch new variants to increase market penetration;
Continue to focus on all three sub-categories – electric, non-electric and aerosol; and
Renew rural focus.
Towards these ends, we also intend to focus on:
Increasing brand awareness, improving the image of our brands, new product development and innovation;
and
Marketing initiatives, including advertisements such as the ―buy and win‖ offer for ‗Cinthol‘ during the
India Premier League cricket tournament.
Consolidate and Further Expand our Presence in Emerging Economies in Asia, Africa and Latin America in
Personal Wash, Home Care and Hair Care Categories
Over the past few years, we have successfully expanded our operations in emerging economies through the
acquisitions of Rapidol, Godrej Global Middle East and Kinky. We recently acquired the Megasari Group, Issue
Group, Argencos and the ‗Tura‘ brand. We will focus on integrating and strengthening the operations of our newly
acquired companies through market-specific steps and synergies with our Indian presence. As we seek to maintain
the growth momentum in our current operations, we intend to continue to explore expansion into existing and other
emerging markets, where we believe we have competitive advantages. We believe that strategic acquisitions are
effective catalysts for business growth. We have developed an internal set of investment criteria which include
selecting investments of a strategic nature which are complementary to our existing operations, particularly those
which include expanding our presence in Asia, Africa, Latin America across the personal wash, home care and hair
care categories.
Expand our Distribution Reach especially in Rural Markets in India
We focus on strengthening our network of distributors in almost every major town in India. We believe that this
helps us to increase the visibility of our products, improves awareness for our brands and improves the acceptance of
our products. We have created a network of super-stockists and sub-stockists to tap the market opportunity in
smaller towns and villages.
India is witnessing the creation of many new markets and an expansion of the existing ones, as a result of socio-
economic changes. With the National Rural Employment Guarantee Act and an increasing farm income, estimates
indicate that over 300 million people will move up from the category of rural poor to rural lower middle class
between 2005 and 2025. With this change, rural consumption levels are expected to rise to current urban levels by
2017. Such developments in India‘s markets are expected to create major opportunities for Indian FMCG
companies. In order to take advantage of such changes, we will continue to strengthen our position as one of the
leading FMCG companies in the rural market by increasing market penetration through the expansion of our
existing distribution and retail network. We will also continue to increase the number of distributors, super-stockists
and sub-stockists in the rural areas to assist us in the expansion of our network coverage, particularly in regions that
we do not currently cover. We expanded our network of super stockists and sub-stockists which increased to 263
and 5,161 as of March 31, 2010, from 169 and 3,557, as of March 31, 2009, respectively. Furthermore, we will
continue to invest additional resources toward rural marketing to increase consumer recognition of our brand and
purchase of our products in such areas. For example, in the financial year 2010, we advertised our products on
channels that could reach rural India. In addition, we will continue to offer product variants to enhance our brand
popularity into the rural markets.
7
Continue to Focus on Our Plants and Processes to Manufacture and Supply Products at a Low Cost
We currently operate manufacturing facilities in 11 locations in India and have manufacturing facilities located
abroad in South Africa, Nigeria, Argentina Indonesia and Sri Lanka, that produce a range of personal care products,
hair color products and home care products. To enhance our operating margins and profitability, we will seek to
continuously improve efficiencies and costs across the value chain from sourcing of the raw materials to the supply
of products to consumers. We initiated a cost reduction initiative in the financial year 2010 to reduce our cost of
operations and have formed teams to look at various methods of reducing expenditures for our key manufacturing
and supply activities. We have formed such teams to look at specific areas of supply chain, marketing cost and fixed
costs to achieve better efficiencies. Certain other key areas which we have identified for cost reduction projects
include packaging design, raw material management, improving yields, tax structuring and structuring of financial
transactions.
Leverage and Enhance the Godrej Brand Name and Our Brands
One of our key strengths is being part of the Godrej group of companies and the strong brand equity generated by
the ―Godrej‖ brand name. We believe that the Godrej brand commands a strong brand recall among consumers in
India due to its image and goodwill established over the years. The Godrej group was awarded the ―Corporate
Citizen of the Year‖ award by the Economic Times in 2003 and the Godrej brand was selected as the fourth best
brand in India in The Week magazine‘s ‗Mood of the Nation @ 60‘ survey published on August 19, 2007. We
believe that we have carried forward this brand name and reputation for quality in our products. We intend to
leverage the brand equity that we enjoy as part of the Godrej group of companies.
8
SUMMARY OF THE ISSUE
The following is a general summary of the terms of the Issue:
Issuer .................................................................................. Godrej Consumer Products Limited.
Issue Size ............................................................................ 15,400,100 Equity Shares of face value of Re. 1 each,
aggregating Rs. 5,313.03 million.
A minimum of 10% of the Issue Size (approximately
1,540,010 Equity Shares) shall be available for Allocation to
MFs only, and up to 15,400,100 Equity Shares shall be
available for Allocation to all QIBs, including MFs. If no MF
is agreeable to take up the minimum portion mentioned
above, such minimum portion or part thereof may be Allotted
to other QIBs.
Issue Price ........................................................................... Rs. 345.00 per Equity Share.
Eligible Investors ................................................................ QIBs as defined in regulation 2(1)(zd) of the SEBI
Regulations. See ―Issue Procedure—Qualified Institutional
Buyers‖.
Equity Shares issued, paid-up and outstanding
immediately prior to the Issue ............................................ 308,190,044 Equity Shares.
Equity Shares issued, paid-up and outstanding
immediately after the Issue ................................................. 323,590,144 Equity Shares.
Listing ................................................................................. We have applied for and received the in-principle approval of
the Stock Exchanges under clause 24 (a) of the Equity Listing
Agreement.
Lock Up .............................................................................. Company Lock-up
Our Company has undertaken that it will not for a period of
180 days after the date of allotment of Equity Shares under
the Issue, without the prior written consent of the Book
Running Lead Managers (a) directly or indirectly, offer, lend,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or
dispose of, any Equity Shares or any securities convertible
into or exercisable for Equity Shares (including, without
limitation, securities convertible into or exercisable or
exchangeable for Equity Shares which may be deemed to be
beneficially owned), or file any registration statement under
the U.S. Securities Act of 1933, as amended, with respect to
any of the foregoing or (b) enter into any swap or other
agreement or any transaction that transfers, in whole or in
part, directly or indirectly, any of the economic consequences
associated with the ownership of any of the Equity Shares or
any securities convertible into or exercisable or exchangeable
for Equity Shares (regardless of whether any of the
transactions described in clause (a) or (b) is to be settled by
9
the delivery of Equity Shares or such other securities, in cash
or otherwise), or (c) deposit Equity Shares with any other
depositary in connection with a depositary receipt facility or
enter into any transaction (including a transaction involving
derivatives) having an economic effect similar to that of a
sale or deposit of Equity Shares in any depositary receipt
facility or publicly announce any intention to enter into any
transaction falling within (a) to (c) above; provided, however,
that the foregoing restrictions do not apply to any sale,
transfer or disposition of Equity Shares by our Company to
the extent such sale, transfer or disposition is required by
Indian law.
Promoter Lock-up
Godrej & Boyce Manufacturing Company Limited and
Godrej Industries Limited hold 199,471,435 Equity Shares of
our Company aggregating 64.73 % of the Equity Share
capital of our Company. To induce the investors that may
participate in the Issue and to assist the efforts of the Book
Running Lead Managers in connection with the Issue, Godrej
& Boyce Manufacturing Company Limited and Godrej
Industries Limited, during the period commencing on the
date hereof and ending 60 days after the date of allotment of
Equity Shares under the Issue agrees not to, (a) directly or
indirectly, offer, lend, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, any Equity
Shares or any securities convertible into or exercisable for
Equity Shares (including, without limitation, securities
convertible into or exercisable or exchangeable for Equity
Shares which may be deemed to be beneficially owned by
Godrej & Boyce Manufacturing Company Limited and
Godrej Industries Limited), or file any registration statement
under the U.S. Securities Act of 1933, as amended, with
respect to any of the foregoing or (b) enter into any swap or
other agreement or any transaction that transfers, in whole or
in part, directly or indirectly, any of the economic
consequences associated with the ownership of any of the
Equity Shares or any securities convertible into or exercisable
or exchangeable for Equity Shares (regardless of whether any
of the transactions described in clause (a) or (b) is to be
settled by the delivery of Equity Shares or such other
securities, in cash or otherwise), or (c) deposit Equity Shares
with any other depositary in connection with a depositary
receipt facility or enter into any transaction (including a
transaction involving derivatives) having an economic effect
similar to that of a sale or deposit of Equity Shares in any
depositary receipt facility or publicly announce any intention
to enter into any transaction falling within (a) to (c) above;
provided, however, that the foregoing restrictions do not
apply to (i) any sale, transfer or disposition of Equity Shares
by Godrej & Boyce Manufacturing Company Limited and
Godrej Industries Limited to the extent such sale, transfer or
disposition is required by Indian law; and (ii) any sale,
10
transfer or disposition of Equity Shares by Godrej Industries
Limited, pursuant to the creation or enforcement of any
pledge that has been or may be created by Godrej Industries
Limited in respect of the Equity Shares.
Transferability Restrictions ................................................ The Equity Shares being Allotted pursuant to this Issue shall
not be sold for a period of one year from the date of
Allotment, except on the Stock Exchanges.
Use of Proceeds ................................................................. We estimate that our net proceeds from the Issue, after
deducting fees, commission and estimated offering expenses,
to be approximately Rs. 5,228.03 million.
See ―Use of Proceeds‖ for additional information.
Closing ................................................................................ The Allotment of the Equity Shares offered pursuant to this
Issue is expected to be made on or about July 7, 2010 (the
―Closing Date‖).
Ranking............................................................................... The Equity Shares being issued shall be subject to the
provisions of our Memorandum of Association and Articles
of Association and shall rank pari passu with the existing
Equity Shares including rights in respect of dividends.
Shareholders will be entitled to participate in dividends and
other corporate benefits, if any, declared by us after the
Closing Date, in compliance with the Companies Act.
Shareholders may attend and vote in shareholders‘ meetings
on the basis of one vote for every Equity Share held. See
―Description of the Equity Shares‖.
Security Codes for the Equity Shares ................................. ISIN: INE102D01028
BSE Code 532424
NSE Code GODREJCP
Risk Factors ........................................................................ See ―Risk Factors‖ for a discussion of risks you should
consider before investing in the Equity Shares.
11
SUMMARY FINANCIAL INFORMATION
I. GODREJ CONSUMER PRODUCTS LIMITED
The following summary financial information as of and for the financial years ended March 31, 2010, 2009
and 2008 has been derived from our audited consolidated financial statements included elsewhere in this
Placement Document. You should read the following summary financial information in conjunction with
our financial statements and the related notes and ―Management‘s Discussion and Analysis of Financial
Condition and Results of Operations‖ included elsewhere in this Placement Document. Our consolidated
financial statements have been prepared in accordance with Indian GAAP and are presented in Rupees. Our
historical results do not necessarily indicate our results expected for any future periods.
A. GODREJ CONSUMER PRODUCTS LIMITED – CONSOLIDATED BALANCE SHEET AS OF
MARCH 31, 2010, 2009 AND 2008
March 31,
2010
March 31,
2009
March 31,
2008
Rs. Million Rs. Million Rs. Million
SOURCES OF FUNDS:
1. SHAREHOLDERS' FUNDS
a) Share Capital 308.19 256.95 225.84
b) Reserves And Surplus 9238.70 5458.25 1536.54
9546.89 5715.20 1762.38
2. LOAN FUNDS
a) Secured Loans 368.74 2295.72 921.00
b) Unsecured Loans - 480.00 950.00
368.74 2775.72 1871.00
3. DEFERRED TAX LIABILITY (NET) 65.89 42.10 89.05
TOTAL 9981.53 8533.03 3722.43
APPLICATION OF FUNDS:
4. FIXED ASSETS
a) Gross Block 4148.74 3369.56 2936.82
b) Less: Depreciation 1531.43 1097.63 1253.58
c) Net Block 2617.31 2271.93 1683.34
d) Capital Work-in-Progress 8.37 24.97 715.81
2625.68 2296.90 2399.14
5. GOODWILL ON CONSOLIDATION 3118.61 2132.48 1002.76
6. INVESTMENTS 670.00 75.05 0.06
7. CURRENT ASSETS, LOANS AND ADVANCES
a) Inventories 2644.33 1674.73 1915.58
b) Sundry Debtors 1152.58 601.90 509.57
c) Cash And Bank Balances 3051.59 3783.23 425.89
d) Other Current Assets 57.51 90.06 0.00
e) Loans And Advances 2189.28 1177.55 667.67
9095.29 7327.47 3518.71
8. Less: CURRENT LIABILITIES AND PROVISIONS
a) Current Liabilities 5326.18 2918.57 2904.47
b) Provisions 201.87 380.29 322.42
5528.05 3298.87 3226.89
9. NET CURRENT ASSETS 3567.24 4028.60 291.82
12
March 31,
2010
March 31,
2009
March 31,
2008
Rs. Million Rs. Million Rs. Million
10. MISCELLANEOUS EXPENDITURE - - 28.65
(To the extent not written off or adjusted)
TOTAL 9981.53 8533.03 3722.43
13
B. GODREJ CONSUMER PRODUCTS LIMITED – CONSOLIDATED PROFIT AND LOSS
ACCOUNT FOR THE FINANCIAL YEARS 2010, 2009 AND 2008
Financial Year
2010
Financial Year
2009
Financial Year
2008
Rs. Million Rs. Million Rs. Million
INCOME:
1. Sales (Gross) 20817.75 14352.25 11330.19
Less: Excise Duty (405.77) (422.62) (304.50)
20411.98 13929.64 11025.69
2. Processing Income 24.95 36.73 14.11
3. Other Income 448.09 365.01 45.87
20885.02 14331.39 11085.67
EXPENDITURE:
4. Materials Consumed And Purchase Of
Goods 9867.54 7606.27 5414.01
5. Expenses 6875.74 4162.85 3700.98
6. Interest And Financial Charges 110.99 188.59 148.33
7. Depreciation And Amortisation 236.04 192.27 181.70
17090.31 12149.98 9445.01
8. Inventory Change (404.49) 89.14 (234.25)
16685.82 12239.12 9210.76
PROFIT BEFORE TAX: 4199.21 2092.27 1874.92
9. Provision For Taxes
- Current Taxes 795.51 324.24 265.99
- Deferred Taxes 7.83 34.31 9.25
- Fringe Benefits Tax - 7.51 7.32
803.35 366.06 282.55
3395.86 1726.21 1592.36
10. Tax Adjustments in Respect of Prior
Years - 6.37 -
NET PROFIT AFTER TAX: 3395.86 1732.58 1592.36
11. Surplus Brought Forward 1376.24 1010.08 651.43
PROFIT AVAILABLE FOR
APPROPRIATION: 4772.10 2742.66 2243.79
1. Dividend on Equity Shares
- Interim 1258.57 837.12 733.99
- Final (Proposed) - 192.72 193.58
2. Tax On Distributed Profit 230.98 175.02 157.64
3. Transfer To General Reserve 312.98 161.56 148.50
4. Surplus Carried Forward 2969.57 1376.24 1010.08
TOTAL 4772.10 2742.66 2243.79
EARNINGS PER SHARE (in Rupees)
(Face Value Re.1)
Basic and Diluted 11.33 6.83 7.05
14
C. GODREJ CONSUMER PRODUCTS LIMITED – CONSOLIDATED CASH FLOW STATEMENT
FOR THE FINANCIAL YEARS 2010, 2009 AND 2008
Financial Year
2010
Financial Year
2009
Financial Year
2008
Rs. Million Rs. Million Rs. Million
A. CASH FLOW FROM
OPERATING ACTIVITIES:
Profit Before Tax: 4199.21 2092.27 1874.92
Adjustment for:
Depreciation 236.04 192.27 181.70
Foreign Exchange (Gain) / Loss 29.78 (28.49) (11.80)
(Profit) / Loss on Fixed Assets Sold /
Discarded 5.09 1.66 0.83
Profit on Sale of Investment (20.73) (2.16) (2.03)
Discount on Prepayment of Deferred
Sales Tax Loan - (0.15) -
Interest Expense 110.99 188.59 148.33
Interest Income (270.42) (360.73) (22.54)
Bad Debts Written off 9.13 6.15 0.45
Provision for Doubtful Debts and
Advances 0.14 21.49 0.16
Provision for Non Moving Inventory 7.11 - -
Write in of Old Balances (3.95) - -
Other Income Outstanding 15.51 - 2.71
118.70 18.64 297.79
Operating Cash Flows Before
Working Capital Changes 4317.91 2110.91 2172.71
Adjustments for:
Inventories (969.60) 240.85 (563.23)
Trade and Other Receivables (941.91) (629.86) (229.84)
Trade Payables 1778.48 36.29 515.00
(133.03) (352.72) (278.08)
Cash Generated from Operations 4184.88 1758.19 1894.64
Adjustment for:
Direct Taxes Paid (779.56) (325.49) (272.22)
Net Cash Flow from Operating
Activities 3405.32 1432.70 1622.41
B. CASH FLOW FROM INVESTING
ACTIVITIES:
Purchase of Fixed Assets (745.90) (444.98) (647.81)
Sale / Adjustments to Fixed Assets 175.99 (38.28) 6.71
Investment Acquisition Expenses as
per Scheme of Amalgamation (73.11) - -
Purchase of Investments (6679.75) (2861.50) (2474.69)
Sale of Investments 6105.54 2788.66 2418.53
Investment Expenses to be
Capitalized (22.77) - -
Loan to ESOP Trust (net) (205.08) - -
Adjustment for Goodwill on
Consolidation 909.46 (1129.72) 36.93
Interest Received 270.42 270.67 22.54
Net Cash Flow From Investing (265.22) (1415.16) (637.79)
15
Financial Year
2010
Financial Year
2009
Financial Year
2008
Rs. Million Rs. Million Rs. Million
Activities
Balance Carried Forward 3140.10 17.54 984.62
C. CASH FLOW FROM FINANCING
ACTIVITIES:
Proceeds from Issue of Share Capital -
Rights Issue - 3964.57 -
Buyback of Equity Share Capital - (149.00) -
Borrowings (net) (2339.66) 819.15 134.90
Cash credits (net) (119.13) 85.73 -
Interest Paid (110.99) (186.37) (155.27)
Dividend Paid (873.33) (1002.37) (840.73)
Tax on Distributed Profits (165.51) (171.20) (143.93)
Rights Issue Expenses written off - (20.72) (28.65)
Net Cash Flow From Financing
Activities (3608.63) 3339.80 (1033.68)
NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENTS: (468.52) 3357.34 (49.06)
CASH AND CASH
EQUIVALENTS:
AS AT THE BEGINNING
Cash and Bank Balances 3783.23 425.89 474.95
Acquired Pursuant to the Scheme Of
Amalgamation 1.64 - -
Acquisition of Balance 50% Share in
Godrej Hygiene Products Ltd
7.28 - -
Acquisition of 49% Share in Godrej
Sara Lee Ltd. 254.20 - -
AS AT THE ENDING
Cash and Bank Balances 3051.59 3783.23 425.83
Unrealized Foreign Exchange
Restatement in Cash and Cash
Equivalents
- - 0.06
NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENTS: (468.52) 3357.34 (49.06)
16
II. GODREJ HOUSEHOLD:
The following summary financial information of Godrej Household as of and for the financial year ended
March 31, 2010 has been derived from the audited consolidated financial statements of Godrej Household
included elsewhere in this Placement Document. The consolidated financial statements of Godrej
Household have been prepared in accordance with Indian GAAP and are presented in Rupees.
The historical results of Godrej Household do not necessarily indicate the results expected for any future
periods.
A. CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010 (All amounts in Rupees millions unless otherwise indicated)
As at
March 31, 2010
SOURCES OF FUNDS
Shareholders' Funds
Share Capital 102.15
Reserves and Surplus 2,651.97
2,754.12
Minority Interest -
Deferred Tax Liability / (Asset) (Net) 3.61
TOTAL 2,757.73
APPLICATION OF FUNDS
Fixed Assets
Gross Block 1,229.39
Less: Depreciation/ Amortisation 551.09
Net Block 678.30
Capital Work-in-Progress 10.82
Exchange Fluctuation 1.33
Net Block 690.45
Current Assets, Loans and Advances
Inventories 806.96
Sundry Debtors 385.34
Cash and Bank Balances 1,668.69
Other Current Assets 6.13
Loans and Advances 1,230.74
4,097.86
Less: Current Liabilities and Provisions
Current Liabilities 1,986.69
Provisions 43.89
2,030.58
Net Current Assets 2,067.28
TOTAL 2,757.73
17
B. CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2010 (All amounts in Rupees millions unless otherwise indicated)
2009-2010
INCOME
Sales 9,648.36
Less: Excise Duty 329.02
9,319.34
Other Income 106.55
TOTAL 9,425.89
EXPENDITURE
Cost of Goods Sold 4,760.96
Employee Costs 836.03
Administrative and Other Expenses 2,092.80
Interest and Financial Charges 7.43
Depreciation/ Amortisation 83.89
TOTAL 7,781.11
Profit Before Taxation 1,644.78
Tax Expense
- Current Tax [Net of Provision in respect of earlier years Rs. 1.85] 286.03
- MAT Credit 11.70
- Deferred Tax (Credit)/ Charge (24.75)
Profit After Taxation 1,371.80
Less: Minority Interest -
Add: Balance Brought Forward from Previous Year 1,174.83
PROFIT AVAILABLE FOR APPROPRIATIONS 2,546.63
APPROPRIATIONS
Interim Dividend 204.30
Tax on Interim Dividend 34.86
Transfer to General Reserve 132.20
Balance carried to Balance Sheet 2,175.27
Earnings per Share in Rs. (Basic and Diluted)
(Face value of Rs. 4 per Equity Share) 53.72
18
C. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2010 (All amounts in Rupees millions unless otherwise indicated)
Particulars 2009-2010
A. Cash flow from operating activities :
Net Profit Before Tax 1,644.78
Adjustments for:
Depreciation/ Amortisation 83.89
(Profit)/ Loss on Sale of Fixed Assets (net) (13.65)
Interest Income (23.59)
Interest and Financial Charges 7.43
Provision for Doubtful Advances / (written back) (net) (2.32)
Provision for Doubtful Debts (net) 19.68
Provision for Leave Encashment and Gratuity 5.82
Provision for Slow Moving Inventories 5.12
Advances / Deposit Written Off 1.01
Liabilities No Longer Required Written Back (4.96)
Foreign Exchange (Gain)/ Loss (7.90)
Operating profit before working capital changes 1,715.31
Adjustments for change in working capital:
- (Increase)/ Decrease in Inventories (112.61)
- (Increase)/ Decrease in Sundry Debtors (10.43)
- (Increase)/ Decrease in Loans and Advances (95.24)
- Increase/ (Decrease) in Current Liabilities and Provisions 459.40
Cash generated from operations 1,956.43
- Direct taxes paid (283.93)
Net cash from Operating Activities 1,672.50
B. Cash flow from Investing Activities :
Business Acquisition (0.62)
Purchase of Fixed Assets including Capital Work-in-Progress (94.97)
Sale Proceeds from Fixed Assets 17.10
Interest Received 20.49
Net cash used in investing activities (58.00)
C. Cash flow from Financing Activities :
Proceeds from Borrowings (8.73)
Dividend Paid (204.30)
Dividend Tax Paid (102.13)
Interest and Financial Charges paid (7.43)
Net cash used in Financing Activities (322.59)
Net (Decrease) / Increase in Cash and Cash Equivalents 1,291.91
Cash and Cash Equivalents at the beginning of the year 376.78
Cash and Cash Equivalents, end of year 1,668.69
Cash and Cash Equivalents comprise :
Cash on Hand 0.69
19
Particulars 2009-2010
Balances with Scheduled Banks in:
- Current Accounts 40.86
- Deposit Account 1,533.67
Balances with Non Scheduled Banks
- Current Accounts 22.83
- Deposit Account 70.64
1,668.69
20
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF THE
MEGASARI GROUP
The following unaudited pro forma condensed combined financial information of Megasari Group covers the
unaudited pro forma combined balance sheet as of December 31, 2009 and the related unaudited pro forma
combined statement of income for the year then ended.
The basic assumptions used in the preparation of the Unaudited Pro Forma Condensed Combined Financial
Information are as follow:
1. Megasari Group represents the resulting combined entity of the following entities, which form the
Unaudited Pro Forma Condensed Combined Financial Information of Megasari Group as of and for the
year ended December 3,1 2009:
PT Megasari Makmur (an entity incorporated in the Republic of Indonesia);
PT Intrasari Raya (an entity incorporated in the Republic of Indonesia);
PT Ekamas Sarijaya (an entity incorporated in the Republic of Indonesia);
PT Simba Indosnack Makmur (an entity incorporated in the Republic of Indonesia);
PT Indomas Susemi Jaya (an entity incorporated in the Republic of Indonesia);
PT Sarico Indah (an entity incorporated in the Republic of Indonesia);
Indovest Capital Ltd. (an entity incorporated in the Federal Territory of Labuan, Malaysia).
As the entities mentioned above are controlled by the same controlling ultimate shareholder, therefore, the
financial information of such entities is combined using the pooling-of-interest method of accounting.
Such combination is assumed as if it had occurred since January 1, 2009.
2. The Unaudited Pro Forma Condensed Combined Financial Information of Megasari Group as of and for the
year ended December 31, 2009 were prepared based on the audited historical financial statements presented
in Indonesian Rupiah of the entities mentioned above (except for Indovest Capital Ltd.), after giving effect
to the elimination journal entries related to the intercompany transactions among the entities mentioned
above and the pro forma adjustments. For Indovest Capital Ltd., the historical financial statements used for
preparing the Unaudited Pro Forma Condensed Combined Financial Information are the audited historical
financial statements presented in US Dollar, after being translated into Indonesian Rupiah by the
Company‘s management.
3. The following elimination journal entries are included in the pro forma adjustments in order to eliminate
the intercompany balances and transactions among the entities mentioned above:
a. Accounts Payable vs Accounts Receivable;
b. Accrued Expenses vs Accounts Receivable Trade Indovest Capital Ltd.;
c. Sales and purchase transactions, including commission and elimination of profit on inventories;
d. Rental income and expenses within the entities premises;
e. Royalties income and expenses with Indovest Capital Ltd.
4. Taxation implication was not considered in preparing the Unaudited Pro Forma Condensed Combined
Financial Information.
5. The rounding adjustments were made on the presentation of the Unaudited Pro Forma Condensed
Combined Financial Information presented in millions of Rupiah.
21
6. The exchange rates used to translate the US Dollar amounts into the Indonesian Rupiah amounts in the
Indovest Capital Ltd.‘s balance sheet as of December 31, 2009 and the statement of income for the year
ended December 31, 2009 were US$1 = IDR9,400 and I US$1 = IDR10,356, respectively. The resulting
difference after the translation was recorded as a component of shareholders‘ equity in the balance sheet.
7. The exchange rates used to translate the Indonesian Rupiah amounts into the Indian Rupee amounts in the
Unaudited Pro Forma Combined Balance Sheet as of December 31, 2009 and the Unaudited Pro Forma
Combined Statement of Income for the year ended December 31, 2009 were INR1 = IDR202,12 and INR1
= IDR214,19, respectively. The resulting difference after the translation was recorded as a component of
shareholders‘ equity in the Unaudited Pro Forma Combined Balance Sheet.
22
Unaudited pro forma combined balance sheet of Megasari Group as of December 31, 2009
As of
December 31, 2009
(In Million of
As of December 31, 2009 (In Million of Rupiah) Indian Rupee)
PT Simba Pro Forma Pro Forma Pro Forma
Indovest PT Megasari PT Intrasari Indosnack PT Ekamas PT Indomas PT Sarico Balance (Before Pro Forma Balance (After
Balance (After
Capital Ltd. Makmur Raya Makmur Sarijaya Susemi Jaya Indah Adjustments) Adjustments Adjustments)
Adjustments)
CURRENT ASSETS
Cash and cash equivalents 1,981 15,054 20,201 1,622 374 468 1,184 40,884 - 40,884 202
Trade receivables, net 12,896 235,694 206,680 40,959 10,115 22,679 1,267 530,290 (319,376) 210,914 1,043 Other receivables 31 479 20,215 51 2,867 786 23 24,452 (20,207) 4,245 21
Inventories, net - 121,200 93,385 14,980 3,580 3,244 780 237,169 (27,807) 209,362 1,036
Prepaid value added tax - - 3,390 - - 299 - 3,689 - 3,689 18 Prepaid expenses - 229 1,828 7 25 58 - 2,147 - 2,147 11
Other current assets - 3,501 1,767 3 10 18 1,170 6,469 - 6,469 32
Total Current Assets 14,908 376,157 347,466 57,622 16,971 27,552 4,424 845,100 (367,390) 477,710 2,363
NON-CURRENT ASSETS
Fixed assets, net of
accumulated depreciation - 71,661 19,468 32,500 10,128 815 6,087 140,659 - 140,659 696
Deferred tax assets, net - 3,134 1,912 2,012 859 456 21 8,394 - 8,394 42 Other non-current assets 701 3,693 905 334 - 356 - 5,989 - 5,989 30
Total Non-current Assets 701 78,488 22,285 34,846 10,987 1,627 6,108 155,042 - 155,042 768
TOTAL ASSETS 15,609 454,645 369,751 92,468 27,958 29,179 10,532 1,000,142 (367,390) 632,752 3,131
23
Unaudited pro forma combined balance sheet of Megasari Group as of December 31, 2009 (continued) As of
December 31, 2009
(In Million of
As of December 31, 2009 (In Million of Rupiah) Indian Rupee)
PT Simba Pro Forma Pro Forma Pro Forma
Indovest PT Megasari PT Intrasari Indosnack PT Ekamas PT Indomas PT Sarico Balance (Before Pro Forma Balance (After
Balance (After
Capital Ltd. Makmur Raya Makmur Sarijaya Susemi Jaya Indah Adjustments) Adjustments Adjustments)
Adjustments)
LIABILITIES AND
SHAREHOLDERS‟ EQUITY
CURRENT LIABILITIES
Trade payables - 85,635 308,656 8,711 3,020 2,201 31 408,254 (307,001) 101,253 501 Other payables 175 17,534 9,023 999 1,276 4,877 128 34,012 (19,683) 14,329 71
Accrued expenses (a) 67 49,152 26,666 2,899 973 1,006 316 81,079 (13,023) 68,056 337
Tax payables 57 13,746 532 1,498 296 573 209 16,911 - 16,911 84 Other current liabilities - 557 - - - - - 557 - 557 3
Total Current Liabilities 299 166,624 344,877 14,107 5,565 8,657 684 540,813 (339,707) 201,106 996
NON-CURRENT LIABILITIES
Long-term loans (b) - 263,979 - 81,265 21,252 2,350 6,298 375,144 - 375,144 1,856
Provision for employee service
entitlement benefits - 5,268 7,452 1,752 93 1,455 40 16,060 - 16,060 79 Other non-current liabilities - - 130 - - - - 130 - 130 1
Total Non-current Liabilities - 269,247 7,582 83,017 21,345 3,805 6,338 391,334 - 391,334 1,936
Total Liabilities 299 435,871 352,459 97,124 26,910 12,372 7,022 932,147 (399,707) 592,440 2,932
SHAREHOLDERS‟ EQUITY
Capital stock 2 1,750 1,000 7,000 2,500 1,760 2,500 16,512 - 16,512 82
Capital paid in excess of Rupiah par value - - - - - - 56 56 - 56 -
Differences arising from foreign
currency translations (2,578) - - - - - - (2,578) 1,482 (1,096) 23 Retained earnings 17,886 17,024 16,292 (11,656) (1,452) 14,957 954 54,005 (29,165) 24,840 94
Total Shareholders‘ Liabilities 15,310 18,774 17,292 (4,656) 1,048 16,717 3,510 67,995 (27,683) 40,312 199
TOTAL LIABILITIES AND
SHAREHOLDERS‟ EQUITY 15,609 454,645 369,751 92,468 27,958 29,179 10,532 1,000,142 (367,390) 632,752 3,131
(a) Including accrual of Know How Expenses of PT Megasari Makmur and PT Indomas Susemi Jaya to Indovest Exim Pty Ltd., Australia. (b) Represents Secured Medium-Term Notes (MTN) issued to Tiger Financial Limited, Labuan, Malaysia.
24
Unaudited pro forma combined statement of income of Megasari Group for the year ended December 31, 2009
Year Ended
December 31, 2009
(In Million of
Year Ended December 31, 2009 (In Million of Rupiah) Indian Rupee)
PT Simba Pro Forma Pro Forma Pro Forma
Indovest PT Megasari PT Intrasari Indosnack PT Ekamas PT Indomas PT Sarico Balance (Before Pro Forma Balance (After Balance (After
Capital Ltd. Makmur Raya Makmur Sarijaya Susemi Jaya Indah Adjustments) Adjustments Adjustments) Adjustments)
NET SALES 28,085 792,836 1,118,547 137,856 25,891 27,396 4,584 2,135,195 (975,321 ) 1,159,874 5,415
COST OF GOODS SOLD - 556,621 925,783 101,863 16,627 14,880 3,622 1,619,396 (919,397 ) 699,999 3,268
GROSS PROFIT 28,085 236,215 192,764 35,993 9,264 12,516 962 515,799 (55,924 ) 459,875 2,147
OPERATING EXPENSES
Selling expenses (a) - 140,139 104,527 11,748 3,879 6,535 - 266,828 (26,878 ) 239,950 1,120
General and administrative
expenses 119 17,193 76,754 8,316 1,719 2,912 623 107,636 (646 ) 106,990 500
Total Operating Expenses 119 157,332 181,281 20,064 5,598 9,447 623 374,464 (27,524 ) 346,940 1,620
OPERATING INCOME 27,966 78,883 11,483 15,929 3,666 3,069 339 141,335 (28,400 ) 112,935 527
OTHER INCOME (EXPENSES)
Gain (loss) on foreign
exchange, net 4 48,646 - 11,262 3,243 516 1,252 64,923 - 64,923 303
Interest income 9 502 255 53 13 18 13 863 - 863 4
Interest expenses (b) - (32,921) - (10,739) (2,112) (250) (524) (46,546) - (46,546) (217)
Others - 8,522 (5,792) 577 353 (62) 16 3,614 (764 ) 2,850 13
Total Other Income
(Expenses), net 13 24,749 (5,537) 1,153 1,497 222 757 22,854 (764 ) 22,090 103
INCOME BEFORE
CORPORATE INCOME TAX 27,979 103,632 5,946 17,082 5,163 3,291 1,096 164,189 (29,164 ) 135,025 630
CORPORATE INCOME TAX
EXPENSE (BENEFIT)
Current 63 12,796 365 - - 785 164 14,173 - 14,173 66
Deferred - 14,503 (289) 4,188 1,237 57 (21) 19,675 - 19,675 92
Total Corporate Income
Tax Expense, Net 63 27,299 76 4,188 1,237 842 143 33,848 - 33,848 158
NET INCOME 27,916 76,333 5,870 12,894 3,926 2,449 953 130,341 (29,164 ) 101,177 472
(a) Including payments of Know How Expenses of PT Megasari Makmur and PT Indomas Susemi Jaya to Indovest Exim Pty Ltd., Australia, totaling to Rp45,372,253,666 and depreciation of fixed assets totaling to Rp25,586,720,109. (b) Represents payments of interest expenses of long-term loans to Tiger Financial Limited, Labuan, Malaysia.
25
RISK FACTORS
An investment in the Equity Shares involves a high degree of risk. You should carefully consider all the information
in this Placement Document, including the risks and uncertainties described below, before making an investment in
the Equity Shares. If any one or some combination of the following risks were to occur, our business, results of
operations and financial condition and prospects could suffer, and the price of the Equity Shares could decline and
you may lose all or part of your investment. Unless specified in the relevant risk factor below, we are not in a
position to quantify the financial implication of any of the risks mentioned below. In addition, the risks set forth in
this Placement Document may not be exhaustive and additional risks and uncertainties not presently known, or
which our Company currently deems immaterial, may arise or become material in the future. In making an
investment decision, prospective investors must rely on their own examination of us on a consolidated basis and the
terms of the Issue including the merits and the risks involved.
Risks Related to our Business and Industry
Increased cost of raw materials and interruption in their availability may affect our business and results of
operations.
Our business is significantly affected by the availability, supply, cost and quality of the materials which expose us to
market demand and supply fluctuations. Our principal raw material is palm oil and its derivatives and we also
require other materials such as, packaging, perfumes and colors. The prices and supply of these and other materials
depend on factors beyond our control, including economic conditions, competition, consumer demand, production
levels, transportation costs and import duties. The availability and supply of palm oil and other agriculture-based
materials are subject to additional risks, including agricultural disease, insect or animal infestation, adverse weather
conditions, adverse ground conditions and natural and other disasters.
Our raw materials and packaging materials are sourced from third-party suppliers. We do not currently have any
long-term supply contracts for our material requirements. If, for any reason, our primary materials suppliers should
curtail or discontinue their delivery of such materials to us in the quantities we need or at prices that are competitive
or expected by us, our ability to meet our production levels could be impaired, our production schedules could be
disrupted or our earnings and business could suffer. We also use third-party transportation providers for the supply
of most of our materials and for deliveries of our products to our customers. Transportation costs have been steadily
increasing, which escalate our costs. In addition, extreme weather conditions, strikes, inadequacies in the road
infrastructure and port facilities, shipping delays or other events could impair our procurement of materials and our
ability to supply our products to our customers. Disruptions or other problems related to transportation and
deliveries of products may adversely affect our results of operations.
Any of the above factors could adversely affect the availability and cost of our raw materials and packaging
materials. Any significant change in the cost or disruption in supply of materials may affect the pricing and supply
of our products. If we are unable to increase our product prices to significantly offset increased material or
production costs or if our volume sales are reduced, it could have a negative impact on our business and results of
operations.
If we fail to keep pace with the changes in the industry and market, it would result in a decline in the demand for
our products, which could have an adverse effect on our business and results of operations.
The markets in which we operate are characterised by frequent changes, particularly customer preferences, new
product and product variant introductions. Consumer preferences in this market are difficult to predict and changes
in those preferences or the introduction of new products by our competitors could put our products at a competitive
disadvantage. Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-
effective manner to changes in consumer tastes for our products, especially personal wash, hair care and home care
products, as well as to where and how consumers shop for those products. We must continually work to develop,
produce and market new products, maintain and enhance the recognition of our brands, achieve a favourable mix of
products, and refine our approach as to how and where we market and sell our products. While we try to introduce
new products or variants, we recognise that consumer tastes cannot be predicted with certainty and can change
rapidly, and that there is no certainty that these will be commercially viable or effective or accepted by our
26
customers. If we are unable to foresee or respond effectively to the changes in market conditions, there may be a
decline in the demand for our products, thereby reducing our market share, which could have an adverse effect on
our business and results of operations.
We face intense competition which may lead us to increase expenditure on marketing and promotion which may
result in a decline in our profitability.
We operate in an intensely competitive environment, both in India and the international markets in which we
operate. In particular, the FMCG industry is characterised by the high volume of new product introductions by
multiple companies. We compete against a number of manufacturers and marketers, some of which are larger and
have substantially greater resources than us, including the ability to spend more on advertising and marketing. We
also face competition from new entrants who may have more flexibility in responding to changing business and
economic conditions than us. Competition in our industry is based on pricing of products, innovation, perceived
value, brand recognition, promotional activities, advertising, special events, new product introductions and other
activities. It is difficult for us to predict the timing and scale of our competitors‘ actions in these areas. In addition to
products sold in the mass retail channel, our products also compete with similar products sold through other
channels, including department stores, supermarkets and hypermarkets and other distribution outlets.
Maintaining or increasing our market share will depend on the effectiveness of our marketing initiatives, including
advertisements and our ability to anticipate and respond to various competitive factors, including our ability to
improve our manufacturing process, protect our manufacturing technique and intellectual property, introduce new
products and respond to pricing strategies by competitors, changes in technology and changes in customer
preferences. Due to the inherent risks associated with advertising and new product introductions, including
uncertainties about trade and consumer acceptance, increased expenditure may not prove successful in maintaining
or increasing our market share and could result in lower profitability.
We expect competition to continue to be intense as our existing competitors expand their operations and introduce
new products. Failure by us to compete effectively, including any delay in responding to changes in the industry and
market, together with increased spending on advertising, may affect the competitiveness of our products, which may
result in a decline in our revenues and profitability.
We are subject to unfair competition from counterfeit, cloned and pass-off products, which may reduce our sales
and harm our brands.
Companies in the Indian FMCG industry face pressures from various forms of unfair competition, such as the sale of
counterfeit, cloned and pass-off products. Counterfeit and cloned products are products manufactured and sold
illegally as our products, whereas pass-off products are manufactured and packaged to resemble our products. In the
past few years, the advancement of technology has contributed to the ease at which our products could be
counterfeited. We have encountered incidences of passing-off and the sale of counterfeit products from time to time.
Counterfeits, cloned and pass-off products are typically supplied by the manufacturers to wholesalers and retailers
for sale to unsuspecting consumers. This is exacerbated by the fact that such products are often cheaper than genuine
products. The sale of counterfeit, cloned and pass-off products have led and if left uncurbed, will continue to lead to
lower sales in our products. In addition, we may not be able to recover our initial development costs and such
products may be harmful to consumers or are less effective than genuine products, which could harm our brands and
reputation. The proliferation of unauthorized copies of our products, and the time lost in pursuing claims and
complaints about spurious products could have an adverse effect on our reputation, business, financial condition and
results of operations.
We depend heavily on sales of our key products in India, namely toilet soaps, household insecticides and hair
color. Any decrease in the sales volumes of these products will adversely affect our business and results of
operations.
For the financial year 2010, we derived a substantial portion of our revenues from the sales of our toilet soaps and
hair color products in India and these product categories contributed 40.4 % and 13.2% of our total net sales,
respectively. The income from the household insecticides products of our wholly-owned subsidiary, Godrej
Household accounted for over 85% of the total consolidated sales of Godrej Household. Our existing and potential
27
competitors may increase their focus in the markets for these products in India, which could lead to erosion of our
market share. For example, of our competitors may intensify their efforts to capture a larger market share by
incurring higher promotional expenses and launching aggressive promotional campaigns. Any drop in the sales or
any other factor that negatively affects the sales volumes of these products will adversely affect our business and
results of operation.
We are dependent on our third party services providers and our channel partners, such as carrying and
forwarding (“C&F”) agents and distributors to distribute and sell our products to our customers and any
disruption or inefficiencies in the supply chain or distribution network may adversely affect our business and
results of operations.
We depend on our supply chain and distribution network for the distribution and sale of our products to our
customers. This entails the transportation of our products from our various manufacturing facilities to retailers from
whom our customers purchase our products. Our main challenge is to keep optimum inventory at our C&F agents
and distributor locations and maintain high levels of coordination with our C&F agents and third party transporters
to ensure availability of our products in the markets. C&F agents provide services such as holding stocks and
handling collections, while transporters have physical custody of stocks in the process of transportation. Any delays
or inefficiencies by our C&F agents and transporters could adversely affect our operations and may lead to
disruption of supply chain, loss on account of cash and goods resulting in higher costs or lost sales.
As of March 31, 2010, our distribution network comprises of 33 C&F agents, 1,258 direct distributors, 263 super
stockists and 5,161 sub-stockists, on whom we are dependent for the distribution of our products. Godrej Household
had 32 C&F agents servicing approximately 1,100 distributors and sub-stockists across India. While our relationship
with these parties has been satisfactory, we have neither long-term nor exclusive contracts with such service
providers and channel partners. Most of these parties do not provide their service exclusively to us and may be
providing the same or similar service to other parties, including our competitors. We cannot assure you that we will
be successful in continuing to receive uninterrupted, high quality service from our supply chain service providers
and channel partners for all our current and future products. Any disruption or inefficiencies in the supply chain or
distribution network may adversely affect our business and results of operations.
The launch of new products that prove to be unsuccessful could impact our growth plans which could adversely
affect our business, prospects and results of operations.
We believe that new product introductions in our business categories are one of our avenues for growth. Each of the
elements of new product initiatives entails significant risks, as well as the possibility of unexpected consequences,
including:
acceptance of our product initiatives by our customers may not be as high as we anticipate;
our marketing strategies for the new products may be less effective than planned and may fail to effectively
reach the targeted consumer base;
we may incur costs exceeding our expectations as a result of the continued development and launch of the
new products or experience the desired consumption;
we may experience a decrease in sales of certain of our existing products as a result of the introduction of
related new products; or
any delays or other difficulties impacting our ability, or the ability of our third party manufacturers and
suppliers, to manufacture, distribute and ship products in a timely manner in connection with launching the
new product initiatives.
We expend considerable time and financial resources in the development and launch of a new product. Each of the
above risks could delay or impede our ability to achieve our growth objectives or we may not be successful in
achieving our growth objectives at all through these means. In addition, we would not be able to recover our costs of
28
developing the product. If any of our new product launches are unsuccessful, our business, prospects and results of
operations could be adversely affected.
We may not be able to successfully identify and conclude acquisitions, including the pending acquisition of
Argencos in Argentina, or manage the integration of our recently acquired businesses into our operations or the
performance of such acquired businesses may be below our expectations, any of which may adversely affect our
business, prospects, financial condition and results of operations.
We have identified strategic acquisitions as one of our avenues for growth. We have, beginning in 2005, acquired
companies in various jurisdictions, including Keyline in the United Kingdom, Rapidol and Kinky in South Africa
and Godrej Middle East the United Arab Emirates. In May and June 2010 we completed the acquisitions of the
Megasari Group in Indonesia and the Issue Group in Argentina, as well as the ‗Tura‘ brand in Nigeria. In addition,
in May 2010, we acquired the remaining 51.0% of Godrej Household, which has significant market presence in
India, Sri Lanka and Bangladesh. We have also entered into an agreement to acquire Argencos, which is a hair care
company in Argentina.
We may not be able to successfully integrate our new acquisitions into our existing businesses. The integration of
these companies into our existing businesses will require dedication of management and financial resources that may
temporarily require more management and financial resources that would otherwise be available for the
development of new products and other initiatives in our existing core markets. The integration of these businesses
involves other risks, including:
difficulties in integrating the financial, technological and management standards, processes, procedures and
controls of our newly acquired companies with our existing operations;
difficulties in managing varying geographies and product categories;
challenges in managing the increased scope and complexity of our operations;
adverse effects on existing business relationships with suppliers and customers;
entering distribution channels, categories or markets in which we have limited or no prior experience; and
increased administrative and operational costs.
The expected performance of such acquired businesses and anticipated benefits of, and synergies from, these
acquisitions may not be achieved within the anticipated timeframe, or at all. Any of these factors, including the
failure to achieve the anticipated benefits of these acquisitions, could have an adverse effect on our business,
prospects, financial condition and results of operations.
Additionally, on June 2, 2010, we entered into an agreement to acquire Argencos. The acquisition is subject to the
satisfaction of certain conditions, including receipt or waiver of regulatory and approvals, settlement of certain
government dues and certain other actions by the sellers with respect to the trademarks owned by them. We cannot
assure you that we or our counterparties will be able to satisfy these condition in a timely manner, or at all. Further,
we cannot assure you that we will be able to raise the necessary financing to complete the acquisition of Argencos
on acceptable terms and in a timely manner, or at all. Our failure to complete the acquisition of Argencos may
adversely affect our competitiveness and our growth prospects.
Acquisitions, particularly of overseas businesses, subject us to presently unknown risks, such as diligence
shortcomings, environmental liabilities or other retrospective regulatory or other liabilities. If these risks occur
our business and results of operations may be adversely affected.
Our strategy to undertake acquisitions, especially of businesses operating overseas, inherently entails risks which
may be presently unknown to us. As a result of such acquisitions, the businesses of our acquired companies may
materially affect our financial performance, and our results of operations in the future may differ materially from the
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historical financial data included in this Placement Document. For example, we may not be aware of (or have been
able to diligence) all of the risks associated with the acquisitions we have undertaken or may undertake in the future.
It is difficult for us to conduct a thorough independent due diligence review of non-public information about the
target company, particularly overseas, in complex matters such as environmental liabilities, tax and other
retrospective regulatory areas. We cannot assure you that our reviews, diligence or inspections (or the relevant
review, diligence or inspection reports on which we have relied) would have revealed all liabilities or other
problems with the business of our target companies. Further, following completion of these acquisitions, we will
need to make capital expenditures that may be significant to maintain the business we have acquired and to comply
with regulatory requirements. The costs and liabilities actually incurred in connection with the acquisitions and the
subsequent integration process may exceed those anticipated. If such risks or unknown liabilities were to materialise
or arise after the completion of the acquisitions, it could have an adverse effect on our business and results of
operations.
We are subject to risks associated with our international operations, which could negatively affect our sales to
customers in foreign countries as well as our operations and assets in such countries.
In the financial year 2010, we had international operations in the United Kingdom, South Africa and the United
Arab Emirates, which operate and distribute our products in various countries outside India. With the completion of
our recent acquisitions, we will also have operations in Bangladesh, Indonesia, Nigeria and Sri Lanka. We maintain
offices in over 18 countries and have key operational facilities located outside India that manufacture, warehouse or
distribute goods for sale throughout various regions. For the financial year 2010, our international operations
contributed Rs. 3,824.70 million, or 18.3%, of our consolidated total income.
Our international operations are subject to risks that are specific to each country and region in which we operate as
well as risks associated with international operations in general. Our international operations are subject to, among
other risks and uncertainties, the following:
Fluctuations in foreign currency exchange rates against the Indian Rupee, which can affect our results of
operations, the value of our foreign assets, the relative prices at which we and foreign competitors sell
products in the same markets and the cost of certain inventory and non-inventory items required in our
operations For instance, fluctuation of the U.S. Dollar against the British Pound and the Indian Rupee
would have an impact on the export revenues and profits of Keyline in the United Kingdom and ours as
such. Fluctuations of the South African Rand, Nigerian Naira and Indonesia Rupiah against the U.S. Dollar,
and therefore against the Indian Rupee, would impact our earnings from our businesses in South Africa,
Nigeria and Indonesia.
Local laws that may impose onerous obligations on our foreign subsidiaries. For example, our South
African subsidiary, Rapidol and Kinky may be subject to the Broad-Based Black Economic Empowerment
Act that regulates the position of companies that intend to do business in South Africa. This act regulates
the positions of multinationals and equity ownership in them and is aimed at promoting equity participation
in companies by black women and black designated groups and participation by black people at the top
management and senior management level. It also promotes training and skill development initiatives for
black people by companies and preferential procurement of goods and services from companies that are in
compliance with the Black Economic Empowerment Act. Any changes in the current law may oblige
Rapidol and Kinky to comply with these requirements, failing which it may face regulatory sanctions. If
we were subject to or are unable to comply with such laws, our business, financial condition and results of
operations could be adversely affected.
Changes in foreign laws, regulations and policies, including restrictions on trade, import and export license
requirements, and tariffs and taxes, as well as changes in policies relating to foreign trade and investment,
may affect our ability to operate and the way in which we manage our business in the countries in which
we operate.
Adverse weather conditions, social, economic and geopolitical conditions, such as natural disasters, civil
disturbance, terrorist attacks, war or other military action would affect our business and operations. For
30
instance, the Megasari Group is located in Indonesia, which is one of the most volcanically active regions
in the world. Because it is located in the convergence zone of three major lithospheric plates, it is subject to
significant seismic activity that can lead to destructive earthquakes and tsunamis. Godrej Household has
operations in Sri Lanka, which, until recently, experienced civil war that severely affected its population
and economy.
Unpredictable political and related social developments, such as changes in government and government
policies that have led to civil unrest. For example, until recently, Indonesia experienced political instability
that had led to the resignation and impeachment of its past presidents, during which many cities in
Indonesia experienced rioting, unrest and destruction of property. In Nigeria, the government and socio-
economic conditions has historically experienced instability, and our business in Nigeria may be adversely
impacted by unanticipated governmental action and social unrest. Similarly the Argentinean political
environment has been characterized by instability as a result of the government‘s inability to handle the
effects of the Argentinean economic crisis in the 1990s that led to its sovereign debt default in 2002.
Any of these risks could have an adverse effect on our business, prospects, results of operations and financial
condition.
Sale of some of our products are subject to seasonal variations and as a result, our quarterly results of operations
may fluctuate.
The sales volumes for some of our products are subject to seasonality. For example, a major portion of the sales of
our liquid detergent category occurs in the third quarter of each financial year during the winter season in India and,
as such, we register the maximum sales for liquid detergent during the period from November to January. The sales
for our toilet soap category also experiences seasonal fluctuations where we register more toilet soap sales in the
summer months as compared to the winter months.
As a result of these seasonal fluctuations, our sales and results of operations for the seasonal product categories in
different quarters within a single financial year vary, and the sales and results of operations may not be relied upon
as indicators of the sales or results of operations of other fiscal quarters or of our future performance.
We may not be able to adequately protect our intellectual property.
We are heavily dependent on our brands and their brand equity. We have trademarks registered in India and abroad
with respect to most of our brand names such as ‗Godrej No.1‘, ‗Cinthol‘ ‗Godrej Expert‘, ‗Ezee‘, ‗HIT‘ and
‗Goodknight‘. We rely on trademarks to protect our intellectual property, which is critical to our business. We also
rely on unpatented proprietary know-how, continuing technological innovation and other trade secrets to develop
and maintain our competitive position. We constantly seek to protect our trademarks against unauthorized use or
infringement, but any such precautions may not provide meaningful protection against competitors or protect the
value of our trademarks, which may have an adverse effect on our reputation, business and results of operations.
Product innovation and research and development activities are an integral part of our business model. If our
research and product development efforts are not successful or if we are not able to attract and retain skilled
scientists, our business may suffer.
Growth of our future operations depends upon our ability to successfully carry out research and development of new
processes and produce new and higher quality products. These processes must meet regulatory standards where
applicable and may require regulatory approvals. The development and commercialisation process would require
spending of both time and money. Our ongoing investments in research and development for new products and
processes may result in higher costs without a proportionate increase in revenues. Delays in any part of the process,
our inability to obtain necessary regulatory approvals for our products or failure of a product to be successful at any
stage could harm our business.
Our ability to successfully carry out research and development depends on our ability to attract and retain skilled
scientists. Our failure to attract and retain skilled manpower could adversely affect our growth strategy. While we
31
believe we have a strong technical and production team, we may not be able to continuously attract or retain such
personnel, or retain them on acceptable terms, given the demand for such personnel among competitors, universities
and non-profit research institutions. Our failure to attract and retain skilled personnel could have an adverse impact
on our growth.
Product liability claims and product recalls could harm our reputation, business, financial condition and
results of operations.
We face inherent business risks of exposure to product liability or recall claims in the event that our products fail to
meet the required quality standards, or are alleged to result, in harm to customers. We have not been required to
make any material sales recall of our products in the past. However, we face the risk of legal proceedings and
product liability claims being brought against us by various entities including consumers, distributors and
government agencies for various reasons including for defective products sold or services rendered. We cannot
assure you that we will not experience any product recalls or material product liability losses in the future or that we
will not incur significant costs to defend any such claims. Although we have product liability and product recall
insurance cover for our domestic and international markets, we cannot assure you that our insurance coverage is
adequate or that we will be adequately compensated by our insurers in the event of a product liability claim or a
product recall. See also ―—We may not be sufficiently protected or insured for certain losses that we may incur or
claims that we may face against us.‖ A product recall or a product liability claim may adversely affect our reputation
and brand image, as well as entail significant costs in excess of our available insurance coverage, may have
adversely effect our reputation, business, financial condition and results of operations.
Our business is dependent on our manufacturing facilities and the availability of consumables, spares and
utilities. The loss or shutdown of operations at our manufacturing facilities may have an adverse effect on our
business, financial condition and results of operations.
Our facilities are subject to operational risks, such as the breakdown or failure of equipment, power supply or
processes, performance below expected levels of output or efficiency, obsolescence, unavailability of consumables
and spare parts, labour disputes, natural disasters, breakout of fires, industrial accidents and the need to comply with
relevant government regulations. The occurrence of any of these risks could significantly affect our results of
operations. We may be required to carry out planned shutdowns of our plants for maintenance, statutory inspections
and testing. We may also shut down our plants for capacity expansion and equipment upgrades. Though we have
various manufacturing locations, some of our products are dependent on either one or two manufacturing facilities.
Although, we will continue to take precautions to minimise the risk of any significant operational problems at our
facilities, our business, financial condition and results of operations may be adversely affected by any disruption of
operations at our facilities, including due to any of the factors mentioned above.
We are dependent on third party manufacturers for certain products and disruption in their operations would
affect the availability of those products and our market position.
We are dependent on certain third party manufacturers to process some of our products, especially with respect to
our international operations. For certain of our products like talcum powder and certain hair color products, we are
dependent on third party manufacturers. The key brands of Keyline, including ‗Inecto‘, are manufactured by third
party manufacturers in the United Kingdom. Any increase in production costs of such products, termination or
adverse change in their manufacturing contracts or disruption in their availability or operations will affect the sales
of such products, our market position for those products and our results of operations.
We rely on our information technology systems in managing our supply chain, production process, logistics and
other integral parts of our business. Any failure in our information technology systems could adversely affect our
financial condition and result of operations.
Our information technology systems are of paramount importance to our business. We rely heavily on our
information technology systems in connection with sales accounting, procurement of raw materials, finance
accounting, production, distribution and the general running of our day-to-day business. Our Company has a central
database that links all our internal systems and also connects us with our key suppliers and distributors and software
for dealing with such parties. Any failure in our information technology systems could result in business
32
interruption, adversely impacting our reputation and weakening of our competitive position and could have an
adverse effect on our financial condition and results of operations.
We rely heavily on our existing brands and specifically the Godrej brand name and any dilution of the same
could adversely affect our business.
We believe the ―Godrej‖ brand commands strong brand recall among the populace in India due to its long presence
in the Indian market and the diversified businesses in which the group operates. Our success depends on our ability
to maintain the brand image of our existing products and effectively build up brand image for new products and
brand extensions. Decrease in product quality due to reasons beyond our control or allegations of product defects,
even when false or unfounded, could tarnish the image of the established brands and may cause consumers to choose
other products. In addition, owing to allegations of product defects or lack of consumer interest in certain products,
we may be required from time to time to recall products entirely or from specific markets which may have an
adverse effect on our brands. Further, there can be no assurance that this established brand name will not be
adversely affected in the future by events such as actions that are beyond our control. In the event that (i) we are
unable to leverage on the ―Godrej‖ brand name for any reason, (ii) our group companies‘ actions or incidences
adversely affect the ―Godrej‖ brand name, or (iii) customer complaints or adverse publicity from any other source,
our business, financial condition and results of operations may be adversely affected.
The success of our business depends substantially on management team and operational workforce. Our inability
to retain them could adversely affect our businesses.
Our key management personnel collectively have many years of experience in managing our various businesses and
are difficult to replace. They provide expertise which enables us to make well informed decisions in relation to our
businesses and our future prospects We cannot assure you that we will continue to retain any or all of the key
members of our management. We do not maintain ―key person‖ insurance for any of our Promoters, senior
managers of other key managerial personnel. The loss of one or more members of our senior management team
could impact our ability to obtain, retain and execute important engagements and our ability to maintain and grow
our revenues. Competition for senior management in our industry is intense, and we may not be able to recruit and
retain suitable persons to replace the loss of any of our senior managers in a timely manner. Any loss of our senior
managers or other key personnel or the inability to recruit further senior managers or other key personnel could
impair our future by impairing our day-to-day operations, hindering our development of new products and harming
our ability to develop, maintain and expand our operations.
Increase in attrition rates of our operational workforce could adversely affect our business.
A skilled and trained workforce is imperative for the successful continuation and growth of our business.
Competition in our industry is intense and over the past few years we have witnessed growing attrition rates. We
may not be able to attract, assimilate or retain qualified personnel in the future, and our failure to do so could
adversely affect our business. This risk may be exacerbated by the stresses associated with the implementation of
our strategic plan and other initiatives. Loss of our operational workforce could impair our future by impairing our
day-to-day operations, hindering our development of new products and harming our ability to develop, maintain and
expand our operations.
Our Promoters will continue to retain majority shareholding in us after this Issue, which will allow them to
exercise significant influence over us.
The majority of our issued and outstanding Equity Shares are currently beneficially owned by our Promoters. Upon
completion of this Issue, our Promoters will own 220.04 million Equity Shares, or 67.99 % of our post-Issue Equity
Share capital. Accordingly, our Promoters will continue to exercise significant influence over our business policies
and affairs and all matters requiring shareholders‘ approval, including the composition of our Board of Directors, the
adoption of amendments to our certificate of incorporation, the approval of mergers, strategic acquisitions or joint
ventures or the sales of substantially all of our assets, and the policies for dividends, lending, investments and capital
expenditures. This concentration of ownership also may delay, defer or even prevent a change in control of our
Company and may make some transactions more difficult or impossible without the support of these shareholders.
33
The interests of the Promoters as our controlling shareholders could conflict with our interests or the interests of our
other shareholders.
Our future operating results are difficult to predict and may differ from our past performance.
Our results of operations during any financial year and from period to period are difficult to predict. Our business,
results of operations and financial condition may be adversely affected by:
decreased demand for our products in the Indian and global markets;
a decrease in domestic and international prices for our products;
an increase in interest rates at which we can raise debt financing;
an increase in Indian import tariffs or in domestic duties;
increasing transportation costs, including freight to key export markets, or the non-availability of
transportation due to strikes, shortages or for any other reason;
strikes or work stoppages by our employees;
changes in government policies affecting the FMCG industry or sales in India or globally;
industrial accidents arising from improper handling of combustible or explosive materials, improper
operations of machines, human errors or other reasons at our manufacturing facilities or during
transportation; and
natural disasters, outbreaks of diseases or heavy rains.
Due to these factors, our past performance should not be relied upon to predict our future performance.
Our indebtedness and the conditions and restrictions imposed by the lenders under the financing arrangements
could adversely affect our ability to conduct our business and operations.
As of March 31, 2010, we had a total indebtedness of Rs. 368.74 million, on a consolidated basis. In addition, we
have availed of new borrowings, aggregating to approximately U.S. $350.0 million and Rs. 8,000 million after
March 31, 2010 in connection with our recent acquisitions. The agreements that we have entered into, and the
agreements we expect to enter into, with banks and financial institutions for term loans, short-term loans and
working capital loans, contain and are likely to contain restrictive covenants, including, but not limited to,
requirements that we obtain consent from the lenders prior to altering our capital structure, making a further issue of
any shares, effecting any scheme of amalgamation, restructuring or any scheme of expansion or new project,
declaring dividends, creating any charge or lien on the security, changing our core management team, alteration of
our memorandum and articles of association, investing in our share capital, entering into any new borrowing
arrangements or incurring additional debt, or appointing any nominee director on our Board. Moreover, some of the
loan agreements contain financial covenants that require us to maintain, among other things, specified financial
ratios. Such restrictions may adversely affect our ability to conduct our business and operations. There can be no
assurance that we will be able to comply with these financial or other covenants or that we will be able to obtain
consents necessary to take actions that we believe are required to operate and grow our business. Furthermore, a
default, including our inability to service our debt, on some of our loans may also trigger cross-defaults. An event of
default under any debt instrument, if not cured, or waived, could have a material adverse effect on us.
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Changes in technology may render the current technologies obsolete or require us to make substantial capital
investments.
Our business largely depends upon the technology adopted by us to innovate on our products. The manufacturing
and processing operations of our businesses are prone to technological and process changes and may render our
current processes obsolete. We may be required to make substantial capital investments to adopt advance
technologies and processes which may increase our costs and expenses.
If we are not able to manage our growth, our business and financial results could be adversely affected.
Our growth strategy involves substantial expansion through organic and inorganic methods of our current
businesses. Such a growth strategy will place significant demands on our management as well as our financial,
accounting and operating systems. Further, as we expand the scope of and diversify our operations, we may not be
able to manage our business efficiently, which could result in delays, increased costs and affect the quality of our
products, and may adversely affect our reputation. Such expansion also increases the challenges involved in
preserving a uniform culture, set of values and work environment across our businesses, developing and improving
our internal administrative infrastructure, particularly our financial, operational, communications, internal control
and other internal systems, recruiting, training and retaining management, technical and marketing personnel,
maintaining high levels of client satisfaction, and adhering to health, safety, and environmental standards. If we are
unable to manage our growth, it could have an adverse effect on our business, financial condition and results of
operations.
We may not be successful in implementing our business strategies.
The success of our business will depend greatly on our ability to effectively implement our business and strategies.
See ―Our Business—Our Business Strategy‖. Even if we have successfully executed our business strategies in the
past, there can be no assurance that we will be able to execute our strategies on time and within the estimated
budget, or that we will meet the expectations of targeted customers. We expect our strategies to place significant
demands on our management and other resources and require us to continue developing and improving our
operational, financial and other internal controls. Our inability to manage our business and strategies could have an
adverse effect on our business, financial condition and profitability.
We face risks and uncertainties associated with the implementation of our expansion plans.
We plan to continue to expand our brand and product portfolios and our production and distribution networks in
India and abroad in the near future. In taking these and any other such expansion initiatives, we face risks and
uncertainties, including:
we may not be able to develop, acquire and promote additional successful brands;
the sellers of our acquired brands could continue to sell products under the same brand;
we may not be able to source funds needed to operate an enlarged business and meet our debt service
obligations and guarantees;
funding anticipated to be deployed towards the cost of any expansion project will not become available in a
timely manner or at all;
cost overruns could adversely affect our operating results;
we may not be able to obtain or install production equipment on time or to our satisfaction due to
unforeseen and unavoidable circumstances;
we may not be able to source a constant supply of quality raw materials for our products;
35
we may face difficulties in recruiting, training and retaining sufficient skilled technical, marketing and
management personnel;
we may be unable to manage client and customer expectations in India and internationally; and
we may be unable to develop adequate internal administrative functions and systems and controls,
particularly the financial, operational, communications and other internal systems.
While we have successfully implemented expansion projects in the past, there can be no assurance that we will be
able to execute any current or future expansion strategies on time or within budget or that we will achieve our
objectives. Any failure to do so could materially adversely affect our business, results of operations and financial
condition.
We generate our income and incur expenses in multiple currencies and exchange rate movement may cause us to
incur losses when hedging on our exchange exposure is not sufficient.
Changes in currency exchange rates influence our results of operations. We report our consolidated financial results
in Indian Rupees, while portions of our total income and expenses are denominated, generated or incurred in
currencies other than Indian Rupees such as the U.S. Dollar, British Pound, South African Rand, Nigerian Naira,
Indonesian Rupiah and other currencies. In accordance with Accounting Standard 21 ― Consolidated Financial
Statement issued by Institute of Chartered Accountants of India, at the time of conversion of the financial statements
during the consolidation process, line items of the profit and loss account are converted using an average exchange
rate for the period or year under consideration except for opening and closing stock which are converted at the
opening and closing exchange rate respectively and depreciation which is converted using the exchange rate at the
date of purchase of the assets, where as items of the balance sheet are converted using the closing exchange rate for
the period or calendar year under consideration. Any expansion into new geographies such as the recent
international acquisitions and undertaking of new projects also exposes us to additional foreign currency risks
associated with such diversification.
We incur expenditures and also procure materials in the U.S. Dollar. As of March 31, 2010, we had forward
exchange purchase contracts for U.S$ 11.33 million and Euro 0.89 million. Our uncovered foreign exchange
exposure as of March 31, 2010 was U.S$ 6.03 million and Euro 0.53 million. To the extent that our income and
expenditures are not denominated in Indian Rupees, despite us entering into foreign exchange hedging contracts
from time to time, exchange rate fluctuations could affect the amount of income and expenditure we recognise.
Further, our future capital expenditures, including any imported equipment and machinery, may be denominated in
currencies other than Indian Rupees. We also have currency exposures related to our financing in currencies other
than the local currencies in which we operate. As of March 31, 2010, on a consolidated basis, we had significant
borrowings in currencies other than Indian Rupees. Our recent borrowings, aggregating to approximately US$ 350.0
million availed in connection with our recent acquisitions are denominated in U.S Dollars. Therefore, a decline in
the value of the Indian Rupee against such other currencies could increase the Indian Rupee cost of servicing our
debt or making such capital expenditures. The exchange rate between the Indian Rupee and the U.S. Dollar and the
Euro has varied substantially in recent years and may continue to fluctuate significantly in the future.
Although we closely follow our exposure to foreign currencies, including on a contract-by-contract basis, and
selectively enter into hedging transactions in an attempt to reduce the risks of currency fluctuations, these activities
are not always sufficient to protect us against incurring large losses if currencies fluctuate significantly. Fluctuations
in foreign exchange rates that adverse to us those are not sufficiently hedged could negatively affect our results of
operations.
We have substantial capital requirements and may require additional financing in the form of debt or equity to
meet our business requirements.
To meet our business requirements including to undertake growth, we may require loans from banks and financial
institutions or the sale or issue of equity or debt securities in private or public offerings. If we decide to incur more
36
debt, our interest payment obligations will increase, and we may be subject to additional conditions from lenders,
who could place restrictions on how we operate our business and result in reduced cash flows. If we decide to issue
equity, the ownership interest of our existing shareholders will be diluted.
We cannot give any assurance that we will be able to raise adequate financing on acceptable terms, in a timely
manner or at all. Our failure to obtain sufficient financing could result in a lack of cash flow to meet our operating
requirements and, therefore, have an adverse effect on our business, results of operations and financial condition.
Growing penetration of emerging retail formats such as supermarkets and hypermarkets in India may adversely
impact our sales and margins.
India has witnessed the emergence of new supermarket and hypermarket chains in the recent past. While the current
share of our revenues through these chains is not significant, it is expected that this may rise in the next few years,
especially in the larger cities. In general, the trade margins and discounts expected by supermarket and hypermarket
chains are higher than traditional retail outlets. Also modern trade outlets may not stock products of all varieties.
With the growth in these retail formats in India, we would have to increase the focus on marketing of our products
through this channel. Though we may be able to save on certain logistic costs, higher sales through these channels
may lead to lower trade margins, which may adversely impact our sales and margins and consequently our financial
performance.
Fiscal benefits, such as income tax and excise duty, currently enjoyed by us, may not be available in future which
could affect our profit after tax.
Under the Income Tax Act certain tax deductions are available to us in various states including the North-Eastern
states and Himachal Pradesh where some of our factories are situated. We are eligible for tax deductions under
section 80- IB/ 80- IC that provides for tax deductions for industrial undertakings set up in an industrially backward
state. For further details, see ―Statement of Tax Benefits‖ beginning. We also enjoy excise benefits in Himachal
Pradesh and North-Eastern states. There can be no assurance that similar tax benefits will be available to us in
future. When our tax benefits expire or terminate, our tax expense could materially increase, reducing our
profitability which may have an adverse impact on our results of operations.
Our operations are hazardous and could expose us to the risk of liabilities, lost revenues and increased expenses.
Our operations are subject to various hazards associated with the production of chemical products, such as the use,
handling, processing, storage and transportation of hazardous/explosive materials such as, as well as accidents such
as leakage or spillages of chemicals. Any mishandling of hazardous chemical and poisonous substances could also
lead to fatal accidents. In addition, our employees operate heavy machinery at our manufacturing facilities and
accidents may occur while operating such machinery.
These hazards can cause personal injury and loss of life, severe damage to and destruction of property and
equipment, environmental damage and may result in the suspension of operations and the imposition of civil and
criminal liabilities. As a result of past or future operations, there may be claims of injury by employees or members
of the public due to exposure, or alleged exposure, to the hazardous materials involved in our business. In addition,
we may be subject to claims of injury from indirect exposure to hazardous materials that are incorporated into our
products. Liabilities incurred as a result of these events have the potential to adversely impact our financial position.
Events like these could also adversely affect our perception with suppliers, customers, regulators, employees and the
public, which could in turn affect our financial condition and business performance. While we maintain general
insurance against these liabilities, the insurance proceeds may not be adequate to fully cover the substantial
liabilities, lost revenues or increased expenses that we might incur.
Our operations and our expansion plans have significant energy requirements and we may not be able to ensure
that adequate fuel will be available to meet our power generation requirements.
We require a substantial amount of energy to operate our businesses. Each of our plants purchases power from their
respective local utility company. If our power suppliers fail or are unable to deliver power to us as expected or
37
scheduled, or if the power supply to one or more of our manufacturing facilities is otherwise disrupted, we may not
be able to make alternative arrangements in a timely manner, if at all, and any such alternative arrangements may be
on terms that are more costly to us. Accordingly, any delay or failure by the power supplier to fulfil its obligations
under its supply agreement with us or any other disruption of our power supplies would disrupt the normal
operations of the affected manufacturing facility, reduce the economies of scale which we currently enjoy and would
have an adverse effect on our business and results of operations. The success of our operations will be dependent on,
among other things, our ability to ensure availability of power at competitive prices during the life-cycle of our
manufacturing facilities.
Contamination of our products and raw materials could hurt our reputation and decrease our sales.
Our business could be harmed in the event of actual or alleged contamination or deterioration of our products and
raw materials. A risk of contamination or deterioration exists at each stage of the production cycle, including the
production and delivery of raw materials, the manufacturing and packaging of our products, the stocking and
delivery of our products to distributors and retailers, and the storage and shelving of products at the points of final
sale. Moreover, any incidents of this kind, even those involving only products manufactured by others, could also
have a negative impact on our business, results of operations, financial condition and prospects.
The pesticides industry in India is highly regulated and our failure to obtain and renew regulatory approvals and
our inability to meet with the quality norms prescribed by the Government may be detrimental for our agri-inputs
and household insecticides business.
The pesticides industries in India and other countries in which we operate are highly regulated. The quality of
pesticides products manufactured is independently verified by government agencies by carrying out sample checks
on our products and facilities. In the event that the contents of the samples do not comply with the prescribed quality
norms, it could lead to the initiation of proceedings against us. Any deficiencies in quality could lead to suspension
of sales of those batches and/or product in that particular state or our products being banned for sales across the
country. In the past we have not faced any suspension or ban on sale of any products. However, there can be no
assurance that we would not be subject to suspensions or proceedings in the future. Any such event is likely to
adversely affect our household insecticides business and our results of operations.
In addition, we are required to maintain licences and approvals for the manufacture of our insecticide products that
are required to be periodically renewed. These renewals are required in the ordinary course of business and are
subject to our compliances with certain stipulated conditions. In the event that we are unable to get our licenses and
approvals renewed on a timely basis, our productions may be hampered, which could affect our results of operations
and financials.
Our ability to introduce new household insecticide products is dependent on obtaining approvals for
manufacturing and selling these new products under the Insecticides Act.
Under the Insecticides Act, persons importing or manufacturing any new insecticide product are required to apply to
a registration committee for registration of such new insecticide products and each of these new products require
separate registration. Our Indonesian operations also require a license from the Indonesian Ministry of Agriculture
and a production certificate from the Indonesian Ministry of Health with respect to our insecticide products.
Although we have been successful in obtaining registrations and licences, there can be no assurance that we will be
able to obtain these registrations in a timely manner in the future, or at all.
Our current insecticide and hand hygiene products may not continue to be effective in the long term.
Tests and data have indicated that over a period of time insects, pests and bacteria develop immunity to the
chemicals and the products that are constantly used to counter insect and bacteria proliferation. Therefore, we are
required to develop new, improved and additional products and formulas on a regular basis in order to keep our
products effective in the market. This constant development and modification of our existing and new products
incurs significant capital expenditure, time and effort and expenses towards marketing the products. There can be no
38
assurance that these new products will be effective or well received in the market, which may adversely affect our
business and the viability of some of our products in the long term.
A substantial portion of our indebtedness is subject to floating interest, which exposes us to interest rate risks,
which could adversely affect our planned expenditures, results of operations and cash flows.
Certain of our debt facilities, both secured and unsecured, carry interest at floating rates or at a fixed rate that is
subject to adjustment at specified intervals. A substantial portion of such indebtedness is linked to LIBOR. Post
March 31, 2010, we have availed of new borrowings aggregating to approximately US$ 350.0 million after March
31, 2010 in connection with our recent acquisitions, which are linked to the LIBOR. As a result, we are exposed to
interest rate risk as we do not currently enter into any swap or interest rate hedging transactions in connection with
our loan agreements. Any increase interest rates, particularly LIBOR would result in an increase in our interest
expense, which may have an adverse effect on our business, financial condition and results of operations. If we
decide to enter into agreements to hedge our interest rate risk, there can be no assurance that we will be able to do so
on commercially viable terms, that our counterparties will perform their obligations, or that these agreements, if
entered into, will protect us fully against our interest rate risk. If the interest rates of our existing or future
borrowings increase significantly, our cost of funds will increase. This may adversely affect our planned
expenditures, results of operations and cash flows.
We may not be sufficiently protected or insured for certain losses that we may incur or claims that we may face
against us.
We face the risk of loss resulting from product liability, intellectual property, antitrust, contractual, warranty,
environmental, fraud and other lawsuits, whether or not such claims are valid. In addition, our insurance may not be
adequate to cover such claims or may not be available to the extent we expect. A successful claim that exceeds or is
not covered by our policies could require us to pay substantial sums.
We maintain insurance for a variety of risks, including, among others, risks relating to fire, burglary and certain
other losses and damages for our offices and manufacturing facilities. Although, we attempt to obtain coverage for
and mitigate our liability for damages arising from negligent acts, errors or omissions through insurance policies,
our liability may sometimes not be covered as a result of the limitations of liability set forth in our insurance
policies. In such event, our insurance policies may not protect us from liability for damages. These may lead to
financial liability and other adverse consequences.
Further, while we believe that insurance coverage will be available in the future, we cannot assure you that such
coverage will be available at costs and terms acceptable to us or that such coverage will be adequate with respect to
future claims that may arise. If we are not able to adequately insure against the risks we face, or the insurance
coverage we have taken is inadequate to cover our losses, our business, financial condition and results of operations
could be adversely affected.
We have contingent liabilities in our financial statements, which, if materialized, may adversely affect our
financial condition.
As of March 31, 2010, details of our contingent liabilities are as follows:
Particulars (Rs. in millions)
Claims for excise duties, taxes and other matters 296.66
Guarantees 277.05
Claims by various parties on account of fraudulent / illegal acts by an employee 242.42
Share in Jointly Controlled Entity 112.67
As at March 31, 2010, Godrej Household had total contingent liabilities of Rs. 229.95 million. For more detail on
our contingent liabilities and that of Godrej Household as at March 31, 2010, see ―Financial Statements‖.
39
If any of these contingent liabilities were to materialize, our results of operations may be adversely affected.
We require certain approvals and licenses in the ordinary course of business, and the failure to obtain or retain
them in a timely manner all may adversely affect our operations.
We require certain approvals, licenses, registrations and permissions for operating our business, some of which may
have expired and for which we may have either made or are in the process of making an application for obtaining
the approval or its renewal. If we fail to obtain or retain any of these approvals or licenses, or renewals thereof, in a
timely manner, our business may be adversely affected. Furthermore, our government approvals and licenses are
subject to numerous conditions, some of which are onerous and require us to make substantial expenditure. If we fail
to comply or a regulator claims we have not complied with these conditions, our business, prospects, financial
condition and results of operations may be materially adversely affected.
Environmental, health, employee and safety laws and regulations may expose us to liability and result in an
increase of our costs and a decrease in our profits.
We are subject to significant national and state environmental laws and regulations in our businesses. These laws
govern the discharge of pollutants into the air and water and establish standards for the treatment, storage and
disposal of solid and hazardous substances and waste and the extent of employee exposure to hazardous substances
that may be used in or result from our businesses. Compliance with these laws and regulations require significant
capital and other expenditures that we have incurred in the past and will continue to incur in the future. In addition,
we may discover currently unknown environmental problems or conditions.
The environmental laws in India and other jurisdictions we operate in have been increasing in stringency and it is
possible that they will become significantly more stringent in the future. Operating facilities such as ours that
manufacture home care, hair care and personal care products entails an inherent risk of environmental damage and
we may incur liabilities in the future arising from the discharge of pollutants into the environment or our waste
disposal or hazardous material handling practices. If any of our facilities are shut down, we will continue to incur
costs in complying with environmental regulations, appealing any decision to close our facilities, increasing
production levels at our operational facilities and paying labour and other costs, while not generating any revenues
or products from such facilities. As a result, our overall operation expenses will increase and our profits will
decrease.
We are also subject to laws and regulations governing relationships with employees for minimum wage and
maximum working hours, overtime, working conditions, hiring and terminating of employees, contract labour and
work permits. Furthermore, the success of our business is contingent upon, among other things, receipt of all
required licenses, permits and authorisations, including local land use permits, building and zoning permits and
environmental, health and safety permits. Changes or concessions required by regulatory authorities could also
involve significant costs and delay or prevent completion of the construction or opening or operations of a plant or
research centre or could result in the loss of an existing license.
We may face labour disruptions that would interfere with our operations.
Our success depends upon maintaining good relations with our workforce. The workers of some of our
manufacturing units are members of labour unions. For example, the workers of our Malanpur factory are members
of a labour union. There is a labour agreement every three years and is currently under discussion. If our relationship
with our employees suffers from labour unrest resulting in a work stoppage, slowdown or a strike, our production
facilities may not be able to continue operations at the normal level, or at all. While we believe that we maintain
good relationship with our employees, there can be no assurance that we will not experience future disruptions to
our operations due to disputes or other problems with our work force which may adversely affect our business. Also,
we cannot guarantee that significant suppliers or transportation providers which we use will not experience any
strikes, work stoppages or other industrial action in the future. Any such event could disrupt our operations,
possibly for a significant period of time, result in increased wages and other costs and have an adverse effect on our
business, results of operations or financial condition.
40
International market risks and trade barriers may affect our business.
Any developments in tariff and non-tariff barriers, quotas and other trade barriers by countries to which we export
our products will have an effect on our profitability. There can be no assurance that the United Kingdom, the United
Arab Emirates, South Africa, Nigeria, Indonesia or any other jurisdiction in which we operate will not impose trade
restrictions on us in the future. Any such imposition of trade barriers may have an adverse effect on our results of
operations and financial condition.
Any recurrence of severe acute respiratory syndrome, or SARS, pandemic avian influenza (avian flu) or an
increase in the severity of H1N1 influenza (swine flu) or another widespread public health problem could
adversely affect our business and results of operations.
Our business could be adversely affected by the effects of SARS, pandemic avian flu, swine flu or other epidemics
or outbreaks. Any prolonged recurrence of SARS, avian flu, swine flu or other adverse public health developments
in India may have an adverse effect on our business operations, because such incidents could result in quarantines or
closures of our manufacturing facilities, travel and transportation restrictions, import and export restrictions and a
general slowdown in the Indian economy. Any of the foregoing events or other unforeseen consequences of public
health problems could adversely affect our business, financial condition and results of operations.
There are various legal proceedings and disputes against us.
We are party to various legal proceedings before judicial, tax, statutory and quasi-judicial authorities. Some of these
proceedings involve potential substantial liability for us. Such legal proceedings could divert management time and
attention, and consume financial resources in their defence or prosecution. Further, an adverse judgment in any of
these legal proceedings could have an adverse impact on our financial condition, results of operations and ability to
meet our obligations in respect of this Issue. For further details concerning the legal proceedings which could have
an adverse effect on our business, see ―Legal Proceedings‖.
Our Promoters and our Promoter group entities have pledged certain of their shareholding in our Company; we
cannot assure you that they will satisfy their debt service obligations and continue to be Promoters of our
Company.
Our Promoters and our Promoter group entities have publicly disclosed that as on March 31, 2010 3.16%,
respectively, of the total outstanding shareholding of our Company has been pledged by them to banks, financial
institutions and other lenders to secure loans of our Company and the Promoters. Pursuant to the terms of the
agreements, deeds or other documents entered into by the Promoters and our Promoter group entities in connection
with such pledge of shares, in the event of a decline in the market price of our Equity Shares, the Promoters and our
Promoter group entities have an obligation to pledge such number of additional Equity Shares as may be required to
meet any shortfall resulting from the decline in the market price of the Equity Shares. As a result, any default under
the financing documents may result in banks and financial institutions selling the Equity Shares pledged to such
banks and financial institutions in the open market, thereby diluting the shareholding of our Promoters and our
Promoter group entities or our Promoters and our Promoter group entities may not continue to be Promoters of our
Company or our Promoter group entities. Such sale of Equity Shares may also result in the price of the Equity
Shares being adversely affected. Further, any action initiated by a lender may result in the price of the Equity Shares
being adversely affected along with our ability to obtain further funding from other banks and financial institutions.
We may face conflicts of interest in transactions with related parties.
Certain decisions concerning our operations or financial structure may present conflicts of interest among our
Promoters, controlling shareholders, other shareholders, Directors, executive officers and the holders of our Equity
Shares. Commercial transactions in the future between our Company and related parties could result in conflicting
interests. Our Promoters, shareholders, Directors and executive officers may have an interest in pursuing
transactions which, in their judgment, enhance the value of their equity investment, even though such transactions
may involve risks to the holders of the Equity Shares. There can be no assurance that our Directors and executive
officers will be able to address these conflicts of interests or others in an impartial manner.
41
A majority of our manufacturing and warehousing operations are being conducted on premises that have been
taken on lease. Our inability to seek renewal or extension of such lease terms may cause disruption in our
operations.
A majority of our manufacturing and warehousing premises on which we operate are taken on lease or leave and
licence agreements with various third parties. We may enter into such transactions with third parties in future too.
Any adverse impact on the title, ownership rights, development rights of the owners from whose premises we
operate or breach of the contractual terms of such leave and license agreements or any inability to renew the said
leases / leave and license agreements on terms acceptable to us may impede our business operations.
Future issuances or sales of our Equity Shares could significantly affect the trading price of our Equity Shares.
Any future issuance of equity shares by us, the disposal of our equity shares by any of our Promoters could dilute
your shareholding, adversely affect the trading price of our Equity Shares or impact our ability to raise capital
through another offering of securities. In addition, any perception by investors that such issuance or sales of the
equity shares by our major shareholders may occur may significantly affect the trading price of our Equity Shares.
We cannot guarantee the accuracy of certain market and industry data contained in this Placement Document.
Certain statistical data relating to the Indian economy and the Indian FMCG industry have been extracted from
reports prepared by independent third parties. Neither we nor the Book Running Lead Managers have independently
verified the accuracy of the data derived from such reports. In addition, we have compiled certain industry
information, including our information with respect to our market-position, especially with respect to markets
outside India based on our internal studies and based on information provided to us by third-party service providers
engaged by us or by our counter-parties with respect to our recent acquisitions. We make no representation as to the
accuracy of such data and you should not place undue reliance on such data as a basis for making an investment in
our Equity Shares.
Risk Related to Investments in Indian Companies
Political instability could adversely affect business and economic conditions in India and other jurisdictions we
operate in and our business, results of operations and financial condition in particular.
During the past decade, the Indian Government has generally pursued policies of economic liberalization, including
significantly relaxing restrictions on the private sector. There can be no assurance that these liberalization policies
will continue in the future. Moreover, the role of the Indian central and state governments in the Indian economy as
producers, consumers and regulators has remained significant. Government corruption, scandals, delays,
irregularities and protests against privatization could slow down the pace of liberalization and deregulation in the
jurisdictions we operate in. The rate of economic liberalization could change, and specific laws and policies
affecting foreign investment, currency exchange rates and other matters affecting investment in our Equity Shares
could change as well. A significant change in economic liberalization and deregulation policies could adversely
affect business and economic conditions in the jurisdictions we operate in and our business, results of operations and
financial condition in particular.
Terrorist attacks and other acts of violence or war involving India and other countries could adversely affect the
financial markets, result in a loss of business confidence and adversely affect our business, prospects, financial
condition and results of operations.
There has been an increase in the frequency and scale of terrorism in India and globally. In November 2008,
terrorists attacked two hotels, a railway station, restaurant, hospital, and other locations in Mumbai causing over 100
fatalities. In July 2006, a series of seven explosions were launched by extremists on commuter trains and stations in
India which killed at least 174 people. The seas east and west of India are prone to piracy. Each of our businesses is
vulnerable to terrorism, whether due to physical damage, reduced usage or increased fuel, insurance or other costs.
Some parts of India have experienced communal disturbances and riots during recent years. If such events recur, our
operational and marketing activities may be adversely affected, resulting in a decline in our income.
42
The South Asian region has from time to time experienced instances of civil unrest and hostilities among
neighbouring countries. Hostilities and tensions may occur in the future and on a wider scale. Also, there have been
military hostilities and continuing civil unrest and instability in Afghanistan and other countries in the Indian sub-
continent. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could
influence the Indian economy and could have a material adverse effect on the market for securities of Indian
companies, including our Equity Shares. Terrorist attacks as well as other acts of violence or war, including those
involving India, the United States or other countries, may adversely affect Indian and worldwide financial markets.
These acts may also result in a loss of business confidence and have other consequences that could adversely affect
our business, prospects, financial condition and results of operations. Increased volatility in the financial markets
can have an adverse impact on the economies of India and other countries, including leading to an economic
recession.
Disruption of operations at our manufacturing facilities, including that caused by natural disasters, could have a
material adverse effect on our operations.
India has experienced natural calamities including earthquakes, floods and drought in the past few years, including
the tsunami that struck the southern coast of India and other Asian countries on December 26, 2004 and the floods
that affected regions in south western India in the summer of 2005. Indonesia, South Africa and Argentina have also
experienced similar natural calamities in the recent past. Further, Himachal Pradesh, Assam and Sikkim are located
on the seismic belt with heightened risks for earthquakes. In the event of an earthquake of a significant scale, we
could suffer losses arising from damages to our manufacturing facilities. Our operations could be interrupted during
the time needed for repair and replacement of our facilities damaged by earthquakes. Such interruption could cause
delays in the delivery of our products. In addition, certain of our manufacturing locations are also located in the
farming belt in India. In the event of water and power shortage, water and power used for agricultural purposes
could be prioritized over water and power used for industrial purposes. If this occurs, our operations could be
disrupted, which could cause delays in the delivery of our products. The extent and severity of these natural disasters
determines their impact on the Indian economy. Prolonged spells of abnormal rainfall and other natural calamities
may result in a loss of business confidence, damage to our production facilities and/or material shortage in the
supply of raw materials, which may adversely affect our business.
You may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares.
Under current Indian tax laws and regulations, capital gains arising from the sale of shares in an Indian company are
generally taxable in India. Any gain realized on the sale of listed equity shares on a stock exchange held for more
than 12 months will not be subject to capital gains tax in India if the Securities Transaction Tax (―STT‖) has been
paid on the transaction. As a result, the STT will be levied on and collected by a domestic stock exchange on which
the Equity Shares are sold. Any gain realized on the sale of the Equity Shares held for more than 12 months to an
Indian resident, which are sold other than on a recognized stock exchange and as a result of which no STT has been
paid, will be subject to capital gains tax in India. Further, any gain realized on the sale of listed equity shares held
for a period of 12 months or less will be subject to capital gains tax in India.
Capital gains arising from the sale of the Equity Shares will be exempt from tax in India in cases where such
exemption is provided under the tax treaty between India and the country of which the seller is a resident. Generally,
Indian tax treaties, including those with the United States, do not limit India‘s ability to impose tax on capital gains.
As a result, residents of countries such as the United States may be liable for tax in India, as well as in their own
jurisdictions on gain upon a sale of the Equity Shares. Investors are advised to consult their own tax advisors and to
consider carefully the potential tax consequences of an investment in the Equity Shares under the laws of India or
any other applicable jurisdiction.
Our ability to acquire companies located outside India depends on the approval of the RBI and other statutory
authorities, and a failure to obtain such approvals could negatively impact our business and financial prospects.
Foreign exchange laws in India presently permit Indian companies to acquire or invest in foreign companies without
any prior governmental approval if the transaction amount does not exceed 400% of the net worth of the Indian
company as on the date of its most recent audited balance sheet. Acquisitions in excess of the 400% net worth
threshold require prior RBI approval. The requirement to obtain approvals for acquisitions of companies located
43
outside India in the future from the RBI and other statutory authorities may restrict our international growth, which
could adversely affect our business and financial prospects.
The ability to sell the Equity Shares to a resident of India may be subject to certain pricing restrictions.
A person resident outside India (including a non-resident Indian) is generally permitted to transfer by way of sale the
Equity Shares held by him to any other person resident in India without the prior approval of the RBI or the Foreign
Investment Promotion Board (the ―FIPB‖). However, it should be noted that the price at which the aforesaid transfer
takes place must comply with the pricing guidelines prescribed by the RBI. Currently, where the shares of an Indian
company are listed on a recognised stock exchange, then the price shall not be less than the price at which a
preferential allotment of Equity Shares can be made in accordance with the applicable SEBI guidelines.
There may be less information available on companies trading in the Indian securities markets than in securities
markets in developed countries.
There is a difference between the level of regulation and monitoring of the Indian securities markets and the
activities of investors, brokers and other participants and that of markets in the European Union, the United States
and certain other economies. The Securities and Exchange Board of India, the Indian stock market regulator, has
issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however,
be less publicly available information about Indian companies than is made available by public companies in certain
other economies. Consequently, an investment in an Indian company, such as Godrej Consumer Products Limited,
may be riskier than an investment in a European or U.S. company if investors assume that Indian markets are subject
to the same level of regulation and make available the same level of information as Western markets.
Volatile conditions in the Indian securities market may affect the price or liquidity of the Equity Shares.
The Indian securities markets are smaller and can be more volatile than securities markets in more- developed
economies. The Indian Stock Exchanges have in the past experienced substantial fluctuations in the prices of listed
securities and the price of our shares has been volatile. For example, our stock price on the BSE ranged from a low
of Rs. 125 to a high of Rs. 304 in the financial year 2010. As of June 25, 2010, the trading day immediately
preceding the day on which the resolution of the Finance Committee of the Board to launch the Issue was adopted,
the closing price of the Equity Shares on the BSE and the NSE was Rs. 342.2 and Rs. 341.8, respectively.
In addition, the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities,
limitations on price movements and margin requirements. Further, from time to time, disputes have occurred
between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had an
adverse effect on market sentiment. Similar problems could happen in the future and, if they do, they could affect
the market price and liquidity of the Equity Shares.
Any downgrading of India‟s debt rating by an international rating agency could have a negative impact on our
business.
Any adverse revisions to India‘s credit ratings for domestic and international debt by international rating agencies
may adversely impact our ability to raise additional external financing, and the interest rates and other commercial
terms at which such additional financing is available. This could have an adverse effect on our business and future
financial performance, our ability to obtain financing for capital expenditures and the trading price of the Equity
Shares.
You may not be able to enforce a judgment of a foreign court against us.
Our Company is a limited liability company incorporated under the laws of India. All of the Directors and the
executive officers of our Company are residents of India and nearly all of the assets of our Company are located in
India.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments;
44
however, Section 44A of the Civil Procedure Code provides for execution of decrees passed by courts in
reciprocating territories, such territories having been declared by the Government by notification in the Indian
Official Gazette. However, Section 44A of the Code of Civil Procedure, 1908 is applicable only to decrees or
judgments under which sums of money are payable, not being of the nature of a sum payable in respect of taxes,
other charges of a similar nature or in respect of a fine or other penalties. If a decree is passed by a court of a non-
reciprocating country, then that foreign judgment if conclusive under Section 13 of the Civil Procedure Code can
only be enforced by filing a suit upon that judgment. Section 13 of the Civil Procedure Code governs the recognition
and enforcement of foreign judgments. Section 13 lists certain exceptions where foreign judgment cannot be held to
be conclusive.
This provision provides that foreign judgments shall be conclusive regarding any matter directly adjudicated upon
except where:
the judgment has not been pronounced by a court of competent jurisdiction;
the judgment has not been given on the merits of the case;
it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal
to recognize the law of India in cases where such law is applicable;
the proceedings in which the judgment was obtained were opposed to natural justice;
the judgment has been obtained by fraud; or
the judgment sustains a claim founded on a breach of any law in force in India.
The suit must be brought in India within three years from the date of the judgment in the same manner as any other
suit filed to enforce a civil liability in India. Generally, there are considerable delays in the disposal of suits by
Indian courts. It is unlikely that a court in India would award damages on the same basis as a foreign court if an
action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it
viewed the amount of damages awarded as excessive or inconsistent with Indian practice. A party seeking to enforce
a foreign judgment in India is required to obtain prior approval of the RBI to repatriate any amount recovered and
any such amount may be subject to income tax in accordance with applicable laws and regulations.
Significant differences exist between Indian GAAP and other accounting principles, such as U.S. GAAP and
IFRS, which may be material to investors‟ assessment of our financial condition and results of operations. Our
failure to successfully adopt IFRS required effective April 2011 could have a material adverse effect on our stock
price.
Our audited financial statements included in this Placement Document are prepared in accordance with Indian
GAAP. We have not attempted to explain in a quantitative manner the impact of the International Financial
Reporting Standards, or IFRS, or U.S. GAAP on the financial data included in this Placement Document, nor do we
provide a reconciliation of our financial statements to those of U.S. GAAP or IFRS. U.S. GAAP and IFRS differ in
significant respects from Indian GAAP. We have also made no attempt to explain in a qualitative manner the effect
of any of those differences. Accordingly, the degree to which the Indian GAAP financial statements included in this
Placement Document will provide meaningful information is entirely dependent on the reader‘s level of familiarity
with Indian accounting practices. Any reliance by persons not familiar with Indian accounting practices on the
financial disclosures presented in this Placement Document should accordingly be limited. In making an investment
decision, investors must rely upon their own examination of us, the terms of this Issue and the financial information
contained in this Placement Document.
The Ministry of Corporate Affairs has announced a road map for the convergence of the Indian Accounting
Standards with IFRS. As a result, certain companies in India, including our Company, will be required to convert
their opening balance sheet as of April 1, 2013 in compliance with IFRS. There is currently a significant lack of
clarity on the convergence of the Indian Accounting Standards with IFRS. We also do not have a set of established
45
practices on which to draw in forming judgments regarding the convergence of IFRS with India GAAP. As such, we
have not determined with any degree of certainty the impact that implementation of IFRS will have on our financial
reporting. There can be no assurance that our financial condition, results of operations, cash flows or changes in
shareholders' equity will not appear materially different under IFRS than under Indian GAAP. As we transition to
IFRS reporting, we may encounter difficulties in the ongoing process of implementing and enhancing our
management information systems. Moreover, there is increasing competition for the small number of IFRS
experienced accounting personnel available as more Indian companies begin to prepare IFRS financial statements.
There can be no assurance that our adoption of IFRS will not adversely affect our reported results of operations or
financial condition and any failure to successfully adopt IFRS by April 2013 could have a material adverse effect on
our stock price.
If inflation were to rise in India, we may not be able to increase the prices of our products in order to pass costs
on to our customers and our profits might decline.
India has experienced very high levels of inflation during the period between 2008 and 2009, with inflation peaking
at 12.91% in August 2008. The inflation rate was 9.7% in May 2010. In the event of a high rate of inflation, our
costs, such as salaries, price of transportation, wages, raw materials or any other of our expenses may increase.
Further, we will not be able to adjust our costs or pass our costs which have been fixed during periods of lower
inflation to our customers. Accordingly, high rates of inflation in India could increase our costs, which could have
an adverse effect on our profitability and, if significant, on our financial condition.
Our business and activities will be regulated by the Competition Act, 2002, as amended (the “Competition Act”).
The Indian Parliament has enacted the Competition Act, 2002, as amended (the ―Competition Act‖) for the purpose
of preventing business practices that have an appreciable adverse effect on competition in India under the auspices
of the Competition Commission of India, which (other than for certain provisions relating to the regulation of
combinations) has recently become effective. Under the Competition Act, any arrangement, understanding or action
in concert between enterprises or persons, whether or not formal or informal, which causes or is likely to cause an
appreciable adverse effect on competition in India is void and attracts substantial monetary penalties. Any
agreement which directly or indirectly determines purchase or sale prices, limits or controls production, shares the
market by way of geographical area or market or number of customers in the market is presumed to have an
appreciable adverse effect on competition. The effect of the Competition Act and the Competition Commission of
India on the business environment in India is as yet unclear. Any application of the Competition Act to us may be
unfavourable and may have a material adverse effect on our business, financial condition and results of operations.
Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.
The Companies Act and related regulations, the Company's Articles of Association and the Equity Listing
Agreements govern the corporate affairs of our Company. Legal principles relating to these matters and the validity
of corporate procedures, directors' fiduciary duties and liabilities, and shareholders' rights may differ from those that
would apply to a company in another jurisdiction. Shareholders' rights under Indian law may not be as extensive as
shareholders' rights under the laws of other countries or jurisdictions. Investors may have more difficulty in
asserting their rights as a shareholder than as a shareholder of a corporation in another jurisdiction.
A third party could be prevented from acquiring control of us because of the takeover regulations under Indian
law.
Indian takeover regulations contain certain provisions that may delay, deter or prevent a future takeover or change in
control of us. These provisions may discourage or prevent a third party from attempting to take control of us, even if
a change in control would result in the purchase of the Equity Shares at a premium to the market price or would
otherwise be beneficial to the holders of the Equity Shares. For more information, see ―Indian Securities Market —
Takeover Code‖.
46
You may be restricted in your ability to exercise pre-emptive rights under Indian law and be diluted in your
ownership position.
Under the Companies Act, 1956, a company incorporated in India must offer holders of its equity shares pre-
emptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership
percentages before the issuance of any new equity shares, unless the pre-emptive rights have been waived by
adoption of a special resolution by holders of three-fourths of the equity shares which would be affected, unless the
company has obtained government approval to issue without such rights. If the law of the jurisdiction you are in
does not permit you to exercise your pre-emptive rights without us filing an offering document or registration
statement with the applicable authority of such jurisdiction, you will be unable to exercise your pre-emptive rights
unless we make such a filing. To the extent that you are unable to exercise pre-emptive rights granted in respect of
the Equity Shares, your proportional interest in us may be reduced.
Foreign investors are subject to foreign investment restrictions under Indian law that limit our ability to attract
foreign investors, which may adversely impact the market price of the Equity Shares.
Under the foreign exchange regulations currently in force in India, transfers of shares between non-residents and
residents are freely permitted (subject to certain exceptions) if they comply with the pricing guidelines and reporting
requirements specified by the RBI. If the transfer of shares, which are sought to be transferred, is not in compliance
with such pricing guidelines or reporting requirements or fall under any of the exceptions referred to above, then the
prior approval of the RBI will be required. Additionally, shareholders who seek to convert the Rupee proceeds from
a sale of shares in India into foreign currency and repatriate that foreign currency from India will require a no
objection/ tax clearance certificate from the income tax authority. There can be no assurance that any approval
required from the RBI or any other government agency can be obtained on any particular terms or at all.
Risks Related to the Equity Shares and Our Trading Market
An investor will not be able to sell any of the Equity Shares subscribed in this Issue other than on a recognized
Indian stock exchange for a period of 12 months from the date of this Issue of the Equity Shares.
Pursuant to the ICDR Regulations, for a period of 12 months from the date of this Issue, investors subscribing to the
Equity Shares in this Issue may only sell their Equity Shares on the NSE or the BSE and may not enter into any off-
market trading in respect of these Equity Shares. There can be no assurance that these restrictions will not have an
impact on the price or liquidity of the Equity Shares.
Economic developments and volatility in securities markets in the global market, including emerging markets,
may cause the price of the Equity Shares to decline.
The global financial crisis and economic downturn that occurred in 2008 or similar financial crisis in the future may
materially adversely impact our business, financial condition, results of operations and prospects in a number of
ways, including:
decreased demand for our export of FMCG products to overseas markets during the global financial crisis
and economic downturn;
an economic slowdown or recession, or the risk of potential economic slowdown or recession, may cause
our distributors to delay, defer or cancel their purchases from us;
under difficult economic conditions, consumers may seek to reduce discretionary spending by foregoing
purchases of FMCG products;
government actions to control the rate of economic recovery and curb inflation by raising interest rates,
statutory-liquidity ratio of financial institutions or by other fiscal or monetary policies;
47
financing and other sources of liquidity may not be available on reasonable terms or at all; and
fall in price of the Equity Shares.
These risks may be exacerbated in the event of any prolonged economic downturn or financial crisis.
The Indian economy and its securities markets are influenced by economic developments and volatility in securities
markets in other countries. Investors‘ reactions to developments in one country may have adverse effects on the
market price of securities of companies located in other countries, including India. For instance, the economic
downturn globally has adversely affected market prices in the world‘s securities markets, including the Indian
securities markets. Negative economic developments, such as rising fiscal or trade deficits, or a default on sovereign
debt, in other emerging market countries may affect investor confidence and cause increased volatility in Indian
securities markets and indirectly affect the Indian economy in general.
In addition, the markets bearing emerging market risks, such as risks relating to India, are, to varying degrees,
influenced by economic and securities market conditions in other emerging market countries. Although economic
conditions differ in each country, investors‘ reactions to developments in one country may affect securities of issuers
in other countries, including India. Accordingly, the price and liquidity of the Equity Shares may be subject to
significant fluctuations, which may not necessarily be directly or indirectly related to our financial performance.
There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect a
shareholder‟s ability to sell, or the price at which it can sell, the Equity Shares at a particular point in time.
We are subject to a daily ―circuit breaker‖ imposed by all stock exchanges in India, which does not allow
transactions beyond specified increases or decreases in the price of the Equity Shares. This circuit breaker operates
independently of the index/based market/wide circuit breakers generally imposed by SEBI on Indian stock
exchanges. The percentage limit on our circuit breakers is set by the stock exchanges based on the historical
volatility in the price and trading volume of our shares. The stock exchanges do not inform us of the percentage limit
of the circuit breaker in effect from time to time and may change without our knowledge. This circuit breaker limits
the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker, there is
no assurance regarding your ability to sell, or the price at which you can sell, the Equity Shares at any particular
point in time.
There is no guarantee that the Equity Shares will be listed on the BSE and the NSE, in a timely manner or at all,
and any trading closures at the BSE and the NSE may adversely affect the trading price of our Equity Shares or
a shareholder‟s ability to transfer its Equity Shares.
In accordance with Indian law and practice, permission for listing of the Equity Shares will not be granted until after
the Equity Shares offered in this Issue have been issued and allotted. Approval will require all other relevant
documents authorizing the issuing of the Equity Shares to be submitted. There could be a failure or delay in listing
the Equity Shares on the BSE and the NSE. Any failure or delay in obtaining the approval would restrict your ability
to dispose of your Equity Shares.
The regulation and monitoring of Indian securities markets and the activities of investors, brokers and other
participants differ, in some cases significantly, from those in Europe and the U.S. The BSE and the NSE have in the
past experienced problems, including temporary exchange closures, broker defaults, settlements delays and strikes
by brokerage firm employees, which, if continuing or recurring, could affect the market price and liquidity of the
securities of Indian companies, including the Equity Shares, in both domestic and international markets. For
example, on May 18, 2009, following an unprecedented rise of over 17% in the Sensex and Nifty as a reaction to the
success of the new coalition government, the Indian Stock Exchange closed at noon and resumed trading the next
day. A closure of, or trading stoppage on, either of the BSE and the NSE could adversely affect the trading price of
the Equity Shares or a shareholder‘s ability to transfer its Equity Shares. Historical trading prices, therefore, may not
be indicative of the prices at which the Equity Shares will trade in the future.
48
Future dividend declaration and distribution is subject to the discretion of our Directors and consideration of
other related factors.
Any future dividend declaration and distribution by us will be at the discretion of our Directors and will depend on
our future operations and earnings, capital requirements and surplus, general financial condition, contractual
restrictions and other factors that our Directors deem relevant. Any declaration and payment as well as the amount
of dividends will also be subject to our constitutional documents and applicable laws and regulations in India,
including, in the case of final dividends, the approval of shareholders.
49
USE OF PROCEEDS
The total proceeds of the Issue will be Rs. 5,313.03 million. After deducting the Issue expenses of approximately Rs.
85.00 million, the net proceeds of the Issue will be approximately Rs. 5,228.03 million.
Our Company has raised Rs. 7,000 million through:
a. the issuance of 1,400 unsecured redeemable non-convertible debentures of face value Rs. 1 million each
amounting to Rs. 1,400 million; and
b. the issuance of 5,600 unsecured redeemable non-convertible debentures of face value Rs. 1 million each
amounting to Rs. 5,600 million.
For further details on the abovementioned non-convertible debentures, see ―Recent Developments‖.
Subject to compliance with applicable laws and regulations, we intend to use the net proceeds of the Issue, towards
redeeming the abovementioned non-convertible debentures and for general corporate purposes.
In accordance with the policies approved by the Board of Directors and as permissible under applicable laws and
government policies, the management will have flexibility in deploying the proceeds received by our Company from
the Issue. Pending utilization for the purposes described above, our Company intends to temporarily invest the funds
in interest bearing liquid instruments including investments in mutual funds and other financial products, such as
principal protected funds, derivative linked debt instruments, other fixed and variable return instruments, listed debt
instruments, rated debentures or deposits with banks as may be approved by the Board/Committee of the Board.
Such investments would be in accordance with the investment policies approved by the Board of Directors from
time to time.
50
CAPITALISATION
The following table sets forth:
our actual capitalization as on March 31, 2010 on a consolidated basis;
our capitalization as on March 31, 2010 as adjusted to give effect to the acquisitions of the Megasari
Group, the Issue Group, the ―Tura‖ brand and assets and the acquisition of 51.0% stake in Godrej
Household, including the borrowings incurred to pay the purchase price for such acquisitions;
our pro forma as on March 31, 2010 as adjusted capitalization to reflect (a) the acquisitions of Megasari
Group, the Issue Group, the ―Tura‖ brand and assets and the acquisition of 51.0% stake in Godrej
Household, including the borrowings incurred to pay the purchase price for such acquisitions and (b) to
give effect to the Issue pursuant to this Placement Document.
(Rs. in million)
Particulars Actual As adjusted for the
recent acquisitions
As adjusted for the
recent acquisitions
and the Issue
Indebtedness
- Secured Borrowings
368.74 16,691.53 16,691.53
- Unsecured Borrowings (1)
- 8,000.00 2,780.00
Total Indebtedness 368.74 24,691.53 19,471.53
Shareholders‟ Funds
- Share capital 308.19 308.19 323.59
- Reserves and Surplus 9,238.70 9,238.70 14,536.33
Total Shareholders‟ Funds 9,546.89 9,546.89 14,859.92
Total Capitalization 9,915.63 34,238.42 34,331.45 (1) Our Company will apply the estimated Rs. 5,220 million from the net proceeds of this Issue to redeem the outstanding non-
convertible debentures amounting to Rs. 7,000 million.
51
MARKET PRICE AND OTHER INFORMATION
CONCERNING THE EQUITY SHARES
308,190,044 Equity Shares of our Company were issued and outstanding as at June 18, 2010. The Equity Shares of
our Company have been listed on the BSE since June 18, 2001 and on the NSE since June 20, 2001.
On June 18, 2010 the closing price of the Equity Shares of our Company on BSE and NSE was Rs. 344.80 and Rs.
345.80 per Equity Share, respectively.
The tables below provide certain market price and other information of the Equity Shares of our Company,
including the high and low prices and the trading volume for the specified periods. Because the Equity Shares are
actively traded on the BSE and NSE, the market price and other information for each of the BSE and NSE has been
given separately.
Bombay Stock Exchange(1)
High Closing Price(2)
Low Closing Price(2)
Date Closing
Price
(Rs.)
Volume
on Date of
High (No.
of Equity
Shares)(3)
Date Closing
Price
(Rs.)
Volume on
Date of
Low (No.
of Equity
Shares) (3)
Average (4)
(Rs.)
Financial
Year:
2008 April 23, 2007 168.10 24,175 January 22,
2008
102.10 39,536 133.49
2009 December 26,
2008
143.85 84,779 October 29,
2008
98.60 1,655 125.98
2010 December 10,
2009
297.40 66,946 April 2, 2009 126.65 10,051 229.59
Month:
April 2010 April 19, 2010 320.60 162,084 April 1, 2010 260.75 3,323 292.99
May2010 May 14, 2010 346.20 1,024,978 May 4, 2010 282.15 586,047 316.97
(1) Source: www.bseindia.com.
(2) High and low closing prices are based on the daily closing prices.
(3) In case of two days with the same closing price, the date with the higher volume has been chosen.
(4) In the case of a year, represents the average of the closing prices on the last day of each month of each year presented.
In the case of a month, represents the average of the closing prices of each day of each month presented
National Stock Exchange(1)
High Closing Price(2)
Low Closing Price(2)
Date Closing
Price
(Rs.)
Volume on
Date of
High (No.
of Equity
Shares) (3)
Date Closing
Price
(Rs.)
Volume
on Date
of Low
(No. of
Equity
Shares) (3)
Average
(4) (Rs.)
Financial Year:
2008 April 24,
2007
168.25 31,383 January
22,
2008
102.70 48,422 133.82
2009 December
26, 2008
144.10 110,126 October
3, 2008
100.00 166,962 126.19
52
National Stock Exchange(1)
High Closing Price(2)
Low Closing Price(2)
Date Closing
Price
(Rs.)
Volume on
Date of
High (No.
of Equity
Shares) (3)
Date Closing
Price
(Rs.)
Volume
on Date
of Low
(No. of
Equity
Shares) (3)
Average
(4) (Rs.)
2010 November
11, 2009
297.95 64,117 April 2,
2009
127.25 337,414 229.77
Month:
April 2010 April 19,
2010
316.35 423,787 April 1,
2010
260.85 38,517 292.91
May 2010 May 14,
2010
346.35 2,383,278 May 4,
2010
280.65 178,928 317.36
(1) Source: www.nseindia.com.
(2) High and low prices are based on the daily closing prices.
(3) In case of two days with the same closing price, the date with the higher volume has been chosen.
(4) In the case of a year, represents the average of the closing prices on the last day of each month of each year presented.
In the case of a month, represents the average of the closing prices of each day of each month presented.
The following table provides the aggregate volume of the Equity Shares transacted during each month presented.
Volume (No. of Equity Shares)
Bombay Stock Exchange(1)
National Stock Exchange of
India(2)
Month:
December, 2009 1,368,659 2,684,799
January, 2010 321,422 1,165,731
February, 2010 2,430,048 3,465,239
March, 2010 1,621,548 1,334,367
April, 2010 2,659,276 6,190,955
May, 2010 4,128,978 9,989,035
(1) Source: www.bseindia.com.
(2) Source: www.nseindia.com.
The following table provides certain market price and other information of the Equity Shares for December 16,
2009, the first working day immediately following the Board meeting approving the Issue.
Bombay Stock Exchange(1)
National Stock Exchange of India(2)
Open
(Rs.)
High
(Rs.)
Low
(Rs.)
Close
(Rs.) Volume
Open
(Rs.)
High
(Rs.)
Low
(Rs.)
Close
(Rs.) Volume
December 16,
2009
270.00 273.90 263.05 265.20 15,262 271.95 274.85 262.00 264.15 83,202
(1) Source: www.bseindia.com.
(2) Source: www.nseindia.com.
53
DIVIDEND
Our Articles of Association grant discretion to our Board of Directors to declare and pay interim dividends from our
profits as appear to it to be justified.
Equity Shares
The Equity Shares to be issued in this Issue shall qualify for any dividend that is declared in respect of the financial
year in which they have been allotted. Dividends declared by us on the Equity Shares during the last three financial
years have been presented below.
Financial Year
2010 2009 2008
Face value of Equity Shares (Rs. Per Share) 1.00 1.00 1.00
First Interim dividend on Equity Shares (Rs. Per Share) 1.00 0.75 0.75
Second Interim dividend on Equity Shares (Rs. Per Share) 1.00 0.75 0.75
Third Interim dividend on Equity Shares (Rs. Per Share) 1.00 1.00 1.00
Fourth Interim dividend on Equity Shares (Rs. Per Share) 1.25 0.75 0.75
Final dividend on Equity Shares (Rs. Per Share) Nil 0.75 0.75
Total dividend on Equity Shares (Rs. million) 1,258.57 1,029.83 927.57
Residual dividend paid (Rs. million)*
Nil Nil Nil
Dividend tax (Rs. million) 230.98 175.02 157.64 * Residual dividend represents dividend on Equity Shares issued (entitled to previous period dividend) between the date of
proposed dividend and record date.
The amounts paid as dividends in the past are not necessarily indicative of our dividend policy or dividend amounts,
if any, in the future.
The current rate of dividend distribution tax is 16.60875% with effect from the beginning of Financial Year 2011.
54
RECENT DEVELOPMENTS
We have recently undertaken several acquisitions and have incurred significant indebtedness in connection with
such acquisitions, the details of which are set out below.
Recent Acquisitions
Acquisition of the Megasari Group in Indonesia
On April 6, 2010, we, through our subsidiaries, Godrej Consumer Holding Netherlands B.V. and Godrej Consumer
Products Netherlands B.V., entered into a master framework agreement and seven sale and purchase agreements to
acquire the entire equity interest of PT Ekamas Sarijaya, PT Megasari Makmur, PT Indomas Susemi Jaya, PT Simba
Indosnack, PT Intrasari Raya, PT Sarico Indah and Indovest Capital Limited (the ―Megasari Group‖). These
acquisitions were completed on May 17, 2010. For more details on the Megasari Group, see ―Our Business—
International Operations—Asia—Megasari Group.
Acquisition of 51.0 % of Godrej Household
On May 12, 2010, our Company entered into a share sale agreement with Sara Lee Mauritius Holding Private
Limited (―Sara Lee Mauritius‖) and Godrej Sara Lee Limited (the name of this company is in the process of being
changed to Godrej Household Products Limited), for the acquisition of 51.0% of the equity share capital of Godrej
Household. This acquisition was completed on May 28, 2010, upon which Godrej Household became our
Company‘s wholly-owned subsidiary. The shareholders agreement between our Company and Sara Lee Mauritius
with respect to Godrej Household was terminated. Under the terms of the share sale agreement, each of our
Company and Godrej Household has agreed, after the acquisition, not to present itself as being associated with, or
use the name of, Sara Lee. On the completion of our acquisition of Godrej Household, Godrej Household also
entered into a number of agreements with various Sara Lee Corporation group entities to amend the terms of
licensing arrangements that Godrej Household has with respect to Sara Lee‘s brands. We have, among other
agreements, agreed to the termination of the licensing arrangement with respect to products sold under the brand
‗Ambi Pur‘. For more details on Godrej Household, see ―Our Business‖.
Acquisition of the „Tura‟ Brand and Certain Other Assets in Nigeria
On March 13, 2010, our Company entered into an asset sale agreement with Lunt Holdings Limited (―Lunt
Holdings‖) to acquire the trademarks and applications for registration of trademarks listed in that agreement,
including ‗Tura‘ trademarks which are registered worldwide (the ‗Tura Brand‖). This acquisition was completed on
June 16, 2010. As part of this acquisition, we, through our wholly-owned subsidiary, Godrej Nigeria Limited, also
agreed to purchase certain assets and inventory relating to the manufacture, production and distribution of the ‗Tura‘
Brand products. For more details on the ‗Tura‘ Brand, see ―Our Business—International Operations—Africa—
‗Tura‘ Brand‖.
Acquisition of the Issue Group in Argentina
On May 23, 2010, our wholly-owned subsidiary, Godrej Netherlands Argentina B.V. (―Godrej Argentina‖), agreed
to purchase the entire equity interest in each of Laboratorio S.A. (―Laboratorio‖) and Consell S.A. (―Consell‖)
(collectively, the ―Issue Group‖) upon the terms and conditions under a proposal dated May 21, 2010, from two
individuals (the ―LC Sellers‖). Laboratorio also owns the entire equity interests of Issue Uruguay, Deciral Uruguay
and Issue Brazil. This acquisition was completed on June 1, 2010. For more details on the Issue Group, see ―Our
Business—International Operations—South America— Issue Group.‖
Acquisition of Argencos in Argentina
On June 2, 2010, Godrej Netherlands Argentina B.V. agreed to purchase Argencos S.A. (―Argencos‖) through the
acquisition of the entire equity interest its holding company and Panamar Producciones S.A. (―Panamar‖), upon the
terms and conditions under a proposal dated June 1, 2010, from ten individuals (the ―AC Sellers‖). Argencos is a
medium-sized hair care company in Argentina. This acquisition is expected to be completed in late June or early
55
July 2010, upon the fulfillment of certain conditions. For more details on Argencos, see ―Our Business—
International Operations—South America—Argencos.‖
Incurrence of Indebtedness for Recent Acquisitions
To finance our recent acquisitions, we incurred an aggregate of U.S.$350.00 million in indebtedness at interest rates
of LIBOR plus between 150 basis point to 175 basis points under three loan facilities and Rs. 7,000.00 million in
indebtedness under an unsecured redeemable convertible debentures programme. Each of these indebtedness is
described below.
Loan Facility for the Acquisition of the Megasari Group
On May 11, 2010, Godrej Consumer Products Holding (Mauritius) Limited (―GCPHML‖), a wholly-owned
subsidiary of our Company, as borrower, our Company, as original guarantor, Bank of India, Bank of Baroda, State
Bank of India and The Hongkong and Shanghai Banking Corporation Limited (―HSBC‖), as arrangers and original
lenders, and HSBC as agent and security agent, entered into a facility agreement for the acquisition of the Megasari
Group (the ―Megasari Loan‖). Subsequent to the completion of the acquisition of the Megasari Group, each of the
Megasari Group Companies became additional guarantors under the Megasari Loan. The Megasari Loan is secured
by pledges over the shares of each of the Megasari Group Company and security over all the assets of Indovest
Capital Limited. The Megasari Loan contains restrictions on the ability of our Company, GCPHML and their
subsidiaries to take certain actions. For example, our Company is required to comply with specified financial ratios
and tests including a minimum debt service cover, maximum leverage ratios, a minimum interest cover, a minimum
net worth and maximum book leverages. In addition, subject to certain exceptions, none of GCPHML and the
Megasari Group Companies is permitted incur indebtedness, pledge assets, make certain investments or enter into
certain transactions such as mergers, acquisition and sale of assets.
Issuance of unsecured redeemable non-convertible debentures for the Acquisition of Godrej Household
On May 25, 2010, we issued 7,000 unsecured redeemable non-convertible debentures (the ―NCDs‖) with a face
value of Rs. 1.00 million under the NCD Programme, comprising 5,600 NCDs with a redemption premium of 5.2%
(the ―5.2% NCDs‖) and 1,400 NCDs with a redemption premium of 5.9% (the ―5.9% NCDs‖). This was to fund our
Company‘s acquisition of a 51.0% stake in Godrej Household from Sara Lee Mauritius. The NCDs are unsecured
and do not carry any interest, but must be redeemed at their respective redemption premium rates. The 5.2% NCDs
and 5.9% NCDs will mature on September 22, 2010 and August 20, 2010, respectively. The NCDs are listed on the
Wholesale Debt Segment of the NSE. As of the date of this Placement Document, all of the issued NCDs are
outstanding. We propose to use the proceeds of this Issue for the redemption of the NCDs. For further details, see
―Use of Proceeds‖.
Loan Facility for the Acquisitions of the Issue Group and Argencos
On May 28, 2010, Godrej Consumer Products Mauritius Limited (―GCPML‖), a wholly-owned subsidiary of our
Company, as borrower, our Company, as original guarantor, and HSBC, as arranger, original lender, agent and
security agent, entered into a loan facility agreement for the acquisitions of the Issue Group and Argencos (the
―Argentinean Loan‖). This loan agreement was amended by an amendment agreement dated June 7, 2010. Each of
the Issue Group and its subsidiaries that we acquired became, and Argencos and its subsidiaries to be acquired will
become, additional guarantors to the Argentinean Loan. The Argentinean Loan is secured by pledges over shares of
each member of the Issue Group and the Argencos and its subsidiaries. The Argentinean Loan contains restrictions
on the ability of our Company, GCPML and their subsidiaries to take certain actions that are similar to those
contained in the Megasari Loan.
Loan Facility for the Acquisitions of „Tura‟
On June 7, 2010, GCPML, as borrower, our Company, as original guarantor, and HSBC, as arranger, original
lender, agent and security agent, entered into a loan facility agreement for the acquisition of the ‗Tura‘ Brand (the
―Nigerian Loan‖). The HSBC Nigerian Loan is secured by pledges over shares of each of Godrej Nigeria Limited
and its holding company, Godrej Nigeria Holdings Limited. The Nigerian Loan contains restrictions on the ability of
56
our Company, GCPML and their subsidiaries to take certain actions that are similar to those contained in the
Megasari Loan.
57
EXCHANGE RATE INFORMATION
Fluctuations in the exchange rate between the Rupee and the U.S. Dollar will affect the U.S. Dollar equivalent of the
Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the conversion into
U.S. Dollars of any cash dividends paid in Rupees on the Equity Shares.
The following table sets forth information concerning exchange rates between the Rupee and the U.S. dollar for the
periods indicated. Exchange rates are based on the reference rates released by the Reserve Bank of India. No
representation is made that any Rupee amounts could have been, or could be, converted into U.S. dollars at any
particular rate, the rates stated below, or at all. On May 31, 2010, the exchange rate was Rs. 46.45 to US$1.00.
Period End Average(1)
High Low
Financial Year: (Rs. Per US$1.00)
2008 39.97 40.14 43.15 39.27
2009 50.95 46.46 52.06 39.89
2010 45.14 47.36 50.53 44.94
Quarter Ended:
September 30, 2009 48.04 48.36 49.40 47.54
December 31, 2009 46.68 46.71 47.86 45.91
March 31, 2010 45.14 45.91 46.81 44.94
(1) Represents the average of the reference rates released by the Reserve Bank of India on the last day of each month
during the period for each year and quarter presented.
58
MANAGEMENT‟S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together
with our consolidated financial statements and the notes to those statements included in this Placement Document.
This discussion contains forward-looking statements and reflects our current views with respect to future events and
financial performance. Actual results may differ materially from those anticipated in these forward looking
statements as a result of certain factors such as those set forth in the sections “Risk Factors” and “Forward
Looking Statements” included in this Placement Document. Unless otherwise stated, the following discussion and
analysis of our financial condition and results of operations is based on our audited consolidated financial
statements as of and for the years ended March 31, 2010, 2009 and 2008. Our audited consolidated financial
statements are prepared in accordance with Indian GAAP, the accounting standards prescribed by the ICAI and the
relevant provisions of the Companies Act. Indian GAAP is substantially different from IFRS. Accordingly, the
degree to which the financial statements included in this Placement Document will provide meaningful information
to a prospective investor outside India is entirely dependent on the reader‟s level of familiarity with Indian
accounting practices. Our financial year ends on March 31 of each year, so all references to a particular financial
year are to the 12 months ending March 31 of that year.
Overview
We are one of India‘s leading FMCG companies, with significant presence in other developing markets in Asia,
Africa and South America, such as Indonesia, South Africa, Nigeria and Argentina. We manufacture and sell a wide
range of personal wash, hair care and home care products. Our total income and net profit for the financial year 2010
was Rs. 20,885.02 million and Rs. 3,395.86 million, respectively. Our international operations contributed Rs.
3,824.70 million, or 18.3%, of our total income for the financial year 2010. With our recently completed
acquisitions, we expect our international operations to contribute more significantly to our total income going
forward.
Our product range in India includes toilet soaps, hair colorants, household insecticides, toiletries, hand sanitizers,
hand wipes, washes and liquid detergents. For the financial year 2010, we had the second largest value market share
of 10.3% in India in the toilet soap category and the largest hair value market share of 33.9% in India in the hair
colorant category. We were also the market leader in liquid detergents in India, with a 76.5% value market share for
the same period. Our Company‘s leading brands include ‗Godrej No.1‘, ‗Cinthol‘ and ‗Godrej FairGlow‘ in toilet
soaps, ‗Godrej Expert‘, ‗Renew‘ and ‗Godrej Nupur‘ in hair colorants, ‗Godrej Protekt‘ in hand hygiene, ‗Cinthol‘
deodorants and talcum powder in toiletries and ‗Ezee‘ in liquid detergent, many of which we believe have become
household names in India. For the financial year 2010, our subsidiary, Godrej Household (we are in the process of
changing the name of this company from Godrej Sara Lee Limited to Godrej Household Products Limited), with
leading brands such as ‗Goodknight‘, ‗HIT‘ and ‗Jet‘, had the largest value market share of 33.1% in India in the
household insecticides category. It also has significant presence in the shoe care and male hair care markets through
leading brands such as ‗Kiwi‘ and ‗Brylcreem‘ and has operations in Sri Lanka and Bangladesh as well.
Our Company has five manufacturing facilities in India at Malanpur (Madhya Pradesh), Guwahati (Assam), Baddi-
Thana (Himachal Pradesh), Baddi-Katha (Himachal Pradesh) and Sikkim. In addition, Godrej Household has
manufacturing facilities in Pondicherry, Chennai, Guwahati, Meghalaya, Jammu, Goa and Sri Lanka. As of March
31, 2010, our Company‘s distribution network in India comprised 33 carrying and forwarding (―C&F‖) agents
servicing 1,258 direct distributors, 263 super stockists and 5,161 sub-stockists. Our Company‘s distributors and sub-
stockists cover approximately 3,700,000 retailers in India. The distribution network of Godrej Household comprises
32 C&F agents servicing approximately 1,100 distributors and sub-stockists across India. Its distributors and sub-
stockists cover approximately 1,600,000 retailers across India.
During the past few years, we completed a number of acquisitions in India and overseas to increase our market share
in selected product categories and expand our geographical reach. In India, we sought to achieve market leadership
in household insecticides and increase our market share in personal care products by acquiring 49.0% of Godrej
Household on June 1, 2009. On May 28, 2010, our Company acquired the remaining 51.0% stake in Godrej
Household from our joint venture partner, Sara Lee Corporation. For the year ended March 31, 2010, Godrej
Household had total income and profit after tax of Rs. 9,425.89 million and Rs. 1,371.80 million, respectively.
59
As part of our expansion plans to establish our international presence, we have completed the following acquisitions:
United Kingdom. In October 2005, we acquired the business of Keyline, which markets and distributes
cosmetics and toiletries.
South Africa. In September 2006, we acquired Rapidol through which we gained an entry into the hair color
market for black hair in South Africa.
United Arab Emirates. In October 2007, we acquired Godrej Middle East which has a widespread
distribution network in the Middle East countries such as the United Arab Emirates, Oman, Saudi Arabia,
Kuwait and Bahrain.
South Africa. In April 2008, we acquired Kinky, which is one of the leading hair products manufacturing,
marketing and distribution companies in South Africa.
We have also undertaken several acquisitions and have incurred significant indebtedness in connection with such
acquisitions, subsequent to March 31, 2010. For more details, see ―Recent Developments‖.
Factors Affecting Our Results of Operations
A number of factors affect our results of operations such as:
Evolving Industry Trends and Demand for our Products
The markets in which we operate are characterised by regular changes in customer preferences and industry trends
and frequent introduction of new products and variants. The sales of personal wash, home care and hair care
products are influenced by frequent changes in customers‘ preferences with respect to product, form, color, smell,
usage and packaging. Over the years, we have endeavoured to anticipate consumer requirements and cater to the
changing preferences and needs of the markets through new product launches or enhancement of existing product
portfolio. We have also taken initiatives such as value-for-money packaging and product offerings aimed at building
a larger consumer base and expanding our market share through ongoing communication with our dealers with the
view of gaining a better understanding of the market realities and testing the market for new product categories.
While we try to introduce new products or variants, there is no certainty that these will be commercially viable or
effective or accepted by our customers. Our results of operations will continue to be linked to the success of such
initiatives. Inability to innovate or respond effectively to such changes could put our products at a competitive
disadvantage, thereby adversely affecting our sales and results of operations.
Our Ability to Handle Competition
We operate in an extremely competitive market environment. Flexibility in responding to changing business and
economic conditions is an important element towards maintaining a competitive position in the FMCG industry. We
need to respond effectively to competitive factors such as improving our manufacturing processes and responding to
pricing strategies by competitors, protecting our manufacturing techniques, introduction of new products and
changes in technology. In addition, the success of advertising initiatives in one of the most important factors
affecting results of operations in the FMCG sector. We compete against a number of manufacturers and marketers,
some of which are larger and may have substantially greater resources than us, including the ability to spend more
aggressively on advertising and marketing.
To maintain our competitive position, we will need to be able to anticipate and respond to pricing pressures and
market changes in the industry. Similar to other FMCG manufacturers, we face various forms of unfair competition,
such as the sale of counterfeit, clones or passed-off products in the markets and we encounter such incidences from
time to time. Our ability respond to competitive factors, including our reaction to unfair competition, significantly
affects our revenues and profitability.
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Price and Availability of Raw Materials and Packaging Materials
We depend on the adequate and timely availability of raw materials and packaging materials. Any significant change
in the cost structure or disruption in supply may affect the pricing and supply of our products and could affect our
ability to reach our customers with a successful value proposition and satisfy existing demand. Our raw materials
cost comprised 59.1% of our total expenditure and 47.2% of our total income for the financial year 2010 as
compared to 62.1% and 53.1% for the financial year 2009, respectively. During the financial year 2009, there was a
significant increase in the price of palm oil, which is one of the key ingredients for our toilet soaps. While we
strategically chose not to pass on this increase in palm oil prices in its entirety to our customers to increase sales, we
may not be able to do so in the future. We also enter into purchase contracts for future deliveries from time to time
to protect ourselves against adverse movements in the palm oil prices. If we are not able to increase our product
prices to significantly offset increased raw material costs, if unit volume sales are significantly reduced or if we are
not able to successfully enter into purchase contracts for future deliveries to protect against increases in palm oil or
other material prices, it could have a negative impact on our revenues and profitability.
Our Ability to Maintain our Brand Image
Our ability to continue to develop and promote our existing brands and any newly acquired or launched brands is
critical to our continued success. Such ability is dependent on:
whether we are able to spot growth opportunities for FMCG products of a particular category or at a
particular price range;
whether we are able to plan our production resources to manufacture a mix of existing and new products
that would maximise our sales; and
whether we are able to successfully market our existing and new brands through our distribution channels
and other creative marketing initiatives.
The introduction of new brands requires significant management efforts and resources in the markets where the new
products will be sold and to increase awareness and popularity among consumers. We seek to continue to develop
new brands and develop our existing brands to increase our sales and foster brand loyalty among our customers.
Further, product quality issues, real or imagined, or allegations of product defects, even when false or unfounded,
could tarnish the image of the established brands and may cause consumers to choose other products. To address
such concerns, we have implemented quality management systems and our key manufacturing facilities have
received ISO certifications, which we believe enables us to offer consistent and reliable product offerings. If we are
not able to maintain our brand image in the markets we operate, our results of operations may be adversely affected.
Our Inorganic Growth Initiatives
In the past few years, we have sought to increase our presence and market share in India and abroad through several
acquisitions including, Keyline in 2005, Rapidol in 2006, Godrej Middle East in 2007 and Kinky in 2008. Further,
we recently completed the acquisition of the Megasari Group in Indonesia, the remaining 51.0% of Godrej
Household, the Issue Group in Argentina and the ‗Tura‘ brand in Nigeria. We have also recently entered into an
agreement to acquire 100% equity stake in Argencos, Argentina. Our consolidated financial statements included in
this Placement Document do not include the financial results of the entities acquired after March 31, 2010 or the
indebtedness incurred in connection with such acquisitions. For more information on these acquisitions, see ―Recent
Developments‖.
As part of our growth strategy, we will continue to look for newer inorganic opportunities. The completion and
integration of these companies into our existing businesses will require dedication of management and financial
resources that would otherwise be available for the development of new products and other initiatives in our existing
markets. Our results of operations will be affected by our ability to successfully complete acquisitions and integrate
such new businesses with our existing operations. Further, our results of operations would also be linked to our
ability to realize the benefits of the expected performance of such acquired businesses in a timely manner, or at all.
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In addition, as a result of such acquisitions, our results of operations are not directly comparable with our results of
operations for prior periods.
General Economic and Market Conditions
Our success, to a significant extent, depends on consumer confidence and spending, which is influenced by general
economic conditions and discretionary income level. Many factors affect the level of consumer confidence and
spending in our industry, including inflation, deflation, political uncertainty, availability of consumer credit,
taxation, stock market performance and unemployment. Our performance may decline during recessionary periods
or in other periods where one or more macro-economic factors, or potential macro-economic factors negatively
affect the level of consumer confidence and spending including the amount that consumers spend on personal wash,
home care and hair care products.
Government Regulations and Policies, including Taxes and Duties
Government regulations, policies and incentives, especially fiscal changes and changes relating to consumer and
products laws in India and overseas, directly affect our affect our business and results of operations. A number of
our products are subject to indirect taxes such as sales tax, value added tax, excise duty and service tax. Our current
indirect tax profile is based on current tariff classifications and rates, which could change at anytime. If any such
change is adverse to our business, our results of operations may be adversely affected.
Additionally, certain tax deductions under the Income Tax Act are also available to us in various states including the
North-Eastern states and Himachal Pradesh where some of our factories are situated. We are eligible for tax
deductions under section 80- IB/ 80- IC that provides for tax deductions for industrial undertakings set up in an
industrially backward state. For further details, see ―Taxation‖. We also enjoy excise benefits in Himachal Pradesh
and North Eastern states. There can be no assurance that similar tax benefits will be available to us in future. When
our tax benefits expire or terminate, our tax expense could materially increase, reducing our profitability.
Foreign Currency and Interest Rate Fluctuations
As we operate in India, Indonesia, South Africa, Argentina, Nigeria, the United Arab Emirates and the United
Kingdom, we recognize revenues and incur expenses in a number of currencies. Our results of operations will be
affected by the foreign exchange movements in the currencies of the countries in which we operate against the
Indian Rupee. In addition, some of our existing debt is and our borrowings in future may be, incurred in foreign
currencies, such as the U.S. Dollar, and at floating interest rates. Consequently, we are also exposed to foreign
exchange movements of the U.S. Dollar against the Indian Rupee, and the interest cost with respect to our floating
interest rate debt will be subject to fluctuations in interest rates. In addition, we are, and may in future be, subject to
market disruption clauses contained in our loan agreements with banks. Such clauses generally provide that to the
extent that the banks face difficulties in raising funds in the interbank market, or are paying materially more for
interbank deposits than the displayed screen rates, they may pass the higher cost of funds to us. Although we have
entered into hedging transactions in the past and may do so in the future to mitigate the risk of foreign currency and
interest rate fluctuations, such hedging or our hedging policy may not adequately cover our exposure to such
fluctuations. As a result, our business or results of operations could potentially be adversely affected by foreign
currency and interest rate fluctuations.
Preparation of Consolidated Financial Statements
Our consolidated financial statements for the financial year 2010 include the financial statements of our Company
and the following subsidiaries and joint venture:
Our Subsidiaries
Godrej Netherlands B.V.;
Godrej Consumer Products (UK) Limited;
62
Keyline Brands Limited;
Inecto Manufacturing Limited;
Rapidol (Proprietary) Limited;
Godrej Global Mideast FZE;
Godrej Consumer Products Mauritius Limited;
Godrej Kinky Holdings Limited;
Kinky Group (Proprietary) Limited;
Godrej Hygiene Product Limited (earlier known as Godrej SCA Hygiene Limited, which was a joint
venture up to March 31, 2009);
Godrej Consumer Products Holding (Mauritius) Limited;
Godrej Nigeria Holdings Limited;
Godrej Nigeria Limited;
Godrej Consumer Products Dutch Cooperatief U.A.;
Godrej Consumer Products (Netherlands) B.V.; and
Godrej Consumer Holdings (Netherlands) B.V.
Our Joint Venture
Godrej Household Limited (a 49.0% equity interest was held by us for the ten month period ended March
31, 2010) – which became a wholly owned subsidiary of our Company on May 28, 2010.
Our consolidated financial statements have been prepared in accordance with Accounting Standard (―AS‖) 21 -
Consolidated Financial Statements. The financial statements of our Company and our subsidiaries have been
consolidated on a line by line basis and intra group balances, intra group transactions and unrealised profits or losses
have been eliminated. The consolidation of our Company‘s interest in our joint venture was undertaken in
accordance with AS 27 - Financial Reporting of Interests in Joint Ventures. We have followed the proportionate
consolidation method for reporting our interest in the assets, liabilities, income and expenses of the jointly controlled
entity. Separate line items have been included to disclose our share in the assets, liabilities, income and expenses of
the jointly controlled entity.
Pursuant to an order dated October 8, 2009 passed by the High Court of Judicature at Bombay, our Company
entered into a scheme of amalgamation for the merger of Godrej ConsumerBiz Limited (―GCBL‖), a wholly-owned
subsidiary of one of our group entities, Godrej & Boyce Manufacturing Company Limited, with Godrej Hygiene
Care Private Limited (―GHCL‖), a wholly-owned subsidiary of Godrej Industries Limited, our promoter, with effect
from June 1, 2009. GCBL and GHCL held 29% and 20%, respectively, of the equity share capital of Godrej
Household, which was a 49:51 unlisted joint venture company between the Godrej group and Sara Lee Corporation.
As a result of this scheme of amalgamation, Godrej Household became a joint venture company between our
Company and Sara Lee Corporation. We purchased all of Sara Lee‘s equity interest in Godrej Household on May
28, 2010.
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Our consolidated financial statements for the financial year 2010 do not include the financial statements of the
Megasari Group, Issue Group and of the assets relating to the Tura brand and reflect the financial statements of
Godrej Household as a jointly-controlled entity only to the extent of our shareholding of 49.0%. For more details,
see ― – Recent Developments‖.
Significant Accounting Policies
Our financial statements are prepared in accordance with generally accepted accounting principles in India, the
applicable accounting standards issued by the Institute of Chartered Accountants of India (―ICAI‖) and the relevant
provisions of the Companies Act. Critical accounting policies involve subjective assumptions and estimates, as well
as complex judgments relating to accounting items such as revenue recognition and cost. In each case, the
determination of these items requires management's judgment based on information and financial data that may
change in future periods. Our management believes that the estimates used in the preparation of financial statements
are prudent and reasonable. Actual results could differ from the estimates.
Set out below are our significant accounting policies, which we believe involve the most significant estimates and
judgments used in the preparation of our financial statements.
Accounting Convention
We prepare our financial statements under the historical cost convention and on accrual basis, in accordance with
the generally accepted accounting principles in India, the Accounting Standards issued by the ICAI and the
provisions of the Companies Act.
Fixed Assets
We state fixed assets at the cost of acquisition or construction decreased by accumulated depreciation. Cost includes
all expenses related to acquisition and installation of the concerned assets. We capitalize direct financing cost
incurred during the construction period. We capitalize fixed assets acquired under finance leases at the lower of their
fair value and the present value of the minimum lease payments.
Asset Impairment
We periodically assess using, external and internal sources, whether there is an indication that an asset may be
impaired. An impairment occurs where the carrying value exceeds its recoverable amount. We recognize an
impairment loss, if any, in the period in which such impairment takes place.
Intangible Assets
We amortize the cost of acquisition of trademarks equally over the best estimate of its useful life not exceeding a
period of 10 years, except in case of the ‗Kinky‘ brand, which is amortized equally over a period of 20 years.
Investments
We classify investments into current and long-term investments. We carry long-term investments at cost. Cost of
acquisition of the investment includes all costs directly incurred on the acquisition. We make a provision for
diminution, if any, in the value of long-term investments to recognize a decline, other than that of a temporary
nature. We state current investments at lower of cost of such investment and its net realizable value.
Inventories
We value inventories at lower of their cost and their net realizable value. We compute the cost on a weighted
average basis and after deducting CENVAT. Finished goods and work-in-progress include cost of conversion and
other costs incurred in bringing the inventories to their present location and condition. The value of finished goods
also includes excise duty. We make provision for cost of obsolescence and other anticipated losses whenever
64
considered necessary.
Provisions and Contingent Liabilities
We make provisions when we have a present obligation as a result of a past event and when it is probable that an
outflow of resources involving economic benefits will be required to settle the obligation and when a reliable
estimate of the amount of such obligation can be made.
We make no provisions for:
any possible obligation that arises from past events and the existence of which is expected to be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within our
control; or
any present obligation that arises from past events but cannot be recognized because:
o it is not probable that an outflow of resources involving economic benefits will be required to
settle the obligation; or
o a reliable estimate of the amount of obligation cannot be made.
We record such obligations as contingent liabilities. We assess these periodically and only that part of the obligation
for which an outflow of resources involving economic benefits is probable, is provided for, except in the rare
circumstances where no reliable estimate can be made.
We do not recognize contingent assets in the financial statements since this may result in the recognition of income
that may never be realized.
Revenue Recognition
We recognize our revenues in the following manner:
we recognize sales when goods are supplied, and record such sales after deducting returns, trade discounts,
rebates, sales taxes and excise duties;
we recognize income from processing operations on completion of production and dispatch of the goods in
accordance with the terms of contract entered into with the customers;
we account for export incentives on accrual basis and include the estimated value of export incentives
receivable under the Duty Entitlement Pass Book Scheme;
we recognize dividend income when the right to receive such income is established;
we recognize interest income on a time-proportion basis; and
we account for insurance claims and transport and power subsidies from the Government on a cash basis
when received.
Borrowing Costs
We capitalize borrowing costs that are directly attributable to the acquisition of an asset that necessarily takes a
substantial period of time to get ready for its intended use as part of the cost of that asset till the date that it is put to
use. We recognize other borrowing costs as expenses in the period in which they are incurred.
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Foreign Currency Transactions
We record transactions in foreign currency at the exchange rates prevailing on the date of the transaction.
We translate monetary assets and liabilities denominated in foreign currency remaining unsettled at the
period at the period-end exchange rates. We recognize the difference in translation of monetary assets and
liabilities and realized gains and losses on foreign currency transactions in our profit and loss account.
We translate forward exchange contracts remaining unsettled at the period-end and backed by underlying
assets or liabilities at the period-end exchange rates. We amortize the premium or discount on forward
foreign exchange contracts over the period of the contract and recognize such premium as income or
expense for the period, as the case may be. We recognize the realized gain or losses on cancellation of
forward exchange contracts in our profit and loss account of the period in which they are cancelled.
We carry non-monetary foreign currency items such as investments in foreign subsidiaries at cost and
expressed in Indian currency at the rate of exchange prevailing at the time of making the original
investment.
For the purpose of consolidation of non-integral foreign operations, we translate all assets and liabilities,
monetary and non-monetary, at the closing rate. We translate items of income and expenditure at exchange
rates at the date of the relevant transaction. We accumulate all resulting exchange differences in a foreign
currency translation reserve until disposal of the net investment.
Research and Development Expenditure
We charge expenditures (other than capital expenditures) on research and development to our profit and loss account
of the year in which it is incurred. We state capital expenditures incurred during the year on research and
development as additions to fixed assets.
Employee Benefits
Short-term Employee Benefits
We classify all employee benefits payable wholly within twelve months of rendering the service as short-term
employee benefits. We recognize benefits such as salaries and performance incentives as expenses at the
undiscounted amount in our profit and loss account of the year in which the employee renders the related service.
Post-employment Benefits
Defined Contribution Plans
We charge the payments made to a defined contribution plan such as provident fund as expenses in our profit and
loss account when they fall due.
Defined Benefit Plans
We determine liability towards gratuity to past employees using the projected unit-credit method which considers
each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to
build up the final obligation. We recognize past services on a straight-line basis over the average period until the
amended benefits become vested. We recognize actuarial gain and losses immediately in our profit and loss account
as income or expense. We measure our obligations at the present value of estimated future cash flows using a
discounted rate that is determined by reference to market yields on Government securities at the balance sheet date.
We use the value of such Government securities where the currency and terms of the Government securities are
consistent with the currency and estimate terms of our defined benefit obligations.
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Other Long-Term Employee Benefits
We recognize other long-term employee benefits such as leave encashment and long-service bonus as expenses in
our profit and loss account as and when they accrue. We determine the liability using the projected unit-credit
method with the actuarial valuation carried out as of the balance sheet date. We charge the actuarial gains and losses
in respect of such benefits to our profit and loss account.
Incentive Plans
We have a scheme of performance linked variable remuneration (―PLVR‖) which rewards our employees based on
economic value addition (―EVA‖). The PLVR amount is related to the actual improvements made in EVA over the
previous year when compared with expected improvements. Up to the previous financial year, the EVA awards
would flow into a notional bank whereby only the prescribed portion of the bank is distributed each year and the
balance is carried forward. The amount distributed out of the notional bank is charged to our profit and loss account.
The notional bank is held at risk and charged to EVA of future years and was payable at that time, if future
performance so warranted. The opening notional bank balance accumulated till March 31, 2009 shall be paid at the
rate of 33% every year. During the financial year 2010, we charged the entire EVA award for the year to our profit
and loss account and it was not routed through the notional bank.
Depreciation
We amortize leasehold land equally over the lease period. We depreciate leasehold improvements over the shorter of
the unexpired period of the lease and the estimated useful life of the assets. We provide for depreciation pro-rata to
the period of use under the straight-line method at the rates specified in Schedule XIV to the Companies Act, except
for computer hardware, which is depreciated over four years. We depreciate 100% of the assets costing less than Rs.
5,000 in the year of acquisition. Our overseas subsidiaries provide for depreciation under the straight-line method
over the expected useful lives of the respective assets which ranged between three years to ten years, except in the
case of ‗Kinky‘ brand where the brand is amortized equally over a period of 20 years. We estimate that the impact
on depreciation of the difference in expected useful lives between our Company and our overseas subsidiaries is not
material.
Taxes on Income
Current tax is the amount of tax payable on the taxable income for the year determined in accordance with the
provisions of the Income-tax Act, 1961. We recognize deferred tax based on timing differences, which is the
difference between taxable and accounting income that originate in one period and are capable of reversal in one or
more subsequent periods. We recognize deferred tax assets on unabsorbed tax losses and tax depreciation only when
there is a virtual certainty of their realization and on other items when there is reasonable certainty of realization.
We calculate the tax effect on the accumulated timing differences at the year-end based on the tax rates and laws
enacted or substantially enacted as of the balance sheet date.
Segment Reporting
We operate in one segment, namely, household and personal care. Certain geographic information for the last three
financial years are set out below:
Rs. in Millions Within India Outside India Total
Financial Year Financial Year Financial Year
2010 2009 2008 2010 2009 2008 2010 2009 2008
Sales by
geographical
segments
15,674.58 10,605.75 8,828.40 4,630.99 3,323.88 2,197.29 20,305.57 13,929.64 11,025.69
Carrying amount
of segment assets
11,353.46 8,047.51 5,096.82 4,156.12 3,737.65 669.40 15,509.58 11,785.16 5,766.22
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Results of Operations
The following table sets forth for the periods indicated, certain items derived from our consolidated financial
statements, in each case stated in absolute terms and as a percentage of total income. Amounts have been rounded-
off to ensure percentages total to 100% as appropriate.
(Audited)
For the Financial Year
2010 2009 2008
(Rs. in
Millions)
% of
Total
Income
(Rs. in
Millions)
% of
Total
Income
(Rs. in
Millions)
% of
Total
Income
Income:
Sales (Gross) 20,817.75 99.7% 14,352.25 100.1% 11,330.20 102.2%
Less: Excise Duty (405.77) (1.9%) (422.62) (2.9%) (304.50) (2.7%)
Sales (Net) 20,411.98 97.7% 13,929.64 97.2% 11,025.69 99.5%
Processing Income 24.95 0.1% 36.74 0.3% 14.11 0.1%
Other Income 448.09 2.1% 365.01 2.5% 45.87 0.4%
Total Income 20,885.02 100.0% 14,331.39 100.0% 11,085.67 100.0%
Expenditure:
Material Consumed and
Purchase of Goods 9,867.54 47.2% 7,606.27 53.1% 5,414.01 48.8%
Other Expenses 6,875.74 32.9% 4,162.85 29.0% 3,700.98 33.4%
Interest and Finance
Charges 110.99 0.5% 188.59 1.3% 148.33 1.3%
Depreciation 236.04 1.1% 192.27 1.3% 181.70 1.6%
Inventory Change (404.50) (1.9%) 89.14 0.6% (234.25) (2.1%)
Total Expenditure 16,685.82 79.9% 12,239.12 85.4% 9,210.76 83.1%
Profit Before Tax 4,199.21 20.1% 2,092.27 14.6% 1,874.92 16.9%
Provision for Taxes:
- Current Tax 795.51 3.8% 324.24 2.3% 265.99 2.4%
- Deferred Tax 7.83 0.0% 34.31 0.2% 9.25 0.1%
- Fringe Benefits Tax 0 0.0% 7.51 0.1% 7.32 0.1%
Tax Adjustments in Respect
of Prior Years - - 6.37 - - -
Net Profit after Tax 3,395.86 16.3% 1,732.58 12.1% 1,592.36 14.4%
Total Income
Our total income comprises:
income from sale of finished goods;
processing income; and
other income
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Sale of Finished Goods
Our product range includes toilet soaps, hair colorants, toiletries, liquid detergents, hand-hygiene gel, sun-care
products, hair products, air fresheners and wet tissues. Sale of goods is recognized on dispatch to our customers.
Sales include excise duty and is recorded after deducting returns, sales tax and turnover discounts. Most of our
goods are manufactured at our in-house facilities with a small portion processed at third-party locations.
Processing Income
Our processing income relates to charges for goods processed by us for other FMCG companies on a contractual
basis. We carry out such processing activities from time to time based on availability of excess manufacturing
capacity at our factories.
Other Income
Our other income primarily comprises interest income, profit on sale of investments, miscellaneous income and our
share of other income of Godrej Household.
Expenditure
Our total expenditure comprises materials consumed and purchase of goods, other expenses, interest and financial
charges, depreciation and amortization and inventory changes.
Materials Consumed and Purchase of Goods: Material consumed and purchase of goods comprises costs incurred
in purchase and procurement of raw materials. Our most important raw material is palm oil and other raw materials
include perfumes and color. We source our palm oil requirement from India as well outside of India.
Purchases of material are accounted after deducting any reimbursement of taxes obtained by us. We enter into
purchase contracts for future deliveries with respect to purchase of palm oil and purchases are accounted after
adjusting the rate differences received or paid on such purchase contracts and premium, if any, for non-fulfillment of
material delivery and roll-over of such contracts.
Other Expenses: Other expenses comprises salaries, wages and bonus, contribution to provident and other funds,
workmen and staff welfare expenses, stores and spare consumed, processing charges and other manufacturing
charges, excise duty provision on inventory, power and fuel, repairs and maintenance expenses, establishment
expenses, miscellaneous expenses, rent, rates and taxes, traveling and conveyance, legal and professional charges,
insurance, donations, selling and distribution expenses, sales promotion, freight, advertising and publicity,
commission, discount, loss on sale of assets, bad debts written off and provision for doubtful debts and advances.
Interest and Financial Charges: The finance charges incurred by us include interest charges payable by us on
short-term and long-term loans, including working capital loans, and financial charges, such as processing fees for
loans and bank guarantees.
Depreciation and Amortization: This includes depreciation of building, plant and machinery, furniture, fixtures,
motor vehicles, computers, intangibles and certain other items used in factory, offices, retail stores.
Inventories
We value raw-materials, stores, spares and packing materials at lower of the cost of such materials and their
net realizable value.
We value the work-in-progress at the weighted average cost of direct material, direct labour and factory
overheads.
We value finished goods at lower of cost of such goods and their net realizable value.
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Taxation
Taxes comprise current tax, deferred tax and fringe benefit tax. We measure deferred taxes using the tax rates and
laws that have been enacted as of the date of financial statements in which they are recorded and are accounted for
in accordance with AS-22 issued by the ICAI on ―Accounting for Taxes on Income‖.
Financial Year 2010 Compared to Financial Year 2009
Godrej Hygiene Product Limited became our wholly-owned subsidiary with effect from April 1, 2009. It was a joint
venture in the financial year 2009 in which we held 50.0% of the equity share capital. Further, with effect from June
1, 2009, our Company acquired a 49.0% equity interest in Godrej Household, pursuant to a scheme of amalgamation
between our Company, Godrej ConsumerBiz Limited and Godrej Hygiene Care Private Limited. Consequently, the
consolidated financial statements for the financial year 2010 are not directly comparable to those of the financial
year 2009.
Total Income. Our total income increased by 45.7% to Rs. 20,885.02 million for the financial year 2010 from Rs.
14,331.39 million for the financial year 2009.
Gross Sales. Our gross sales increased by 45.0% to Rs. 20,817.75 million for the financial year 2010 from Rs.
14,352.25 million for the financial year 2009. This increase was attributable to our proportionate share in the sales of
Godrej Household and an overall increase in the selling prices and sales volume across our product categories during
the financial year 2010.
Excise Duty. Excise duty paid by us decreased by 4.0% to Rs. 405.77 million for the financial year 2010 from Rs.
422.62 million for the financial year 2009, primarily due to the decrease in the rate of excise duty payable in respect
of most of our products, especially toilet soaps, under the fiscal stimulus package offered by the Government during
the financial year 2010.
Net Sales. Our net sales increased by 46.5% to Rs. 20,411.98 million for the financial year 2010 from Rs. 13,929.64
million for the financial year 2009.
Processing Income. Our processing income decreased by 32.1% to Rs. 24.95 million for the financial year 2010
from Rs. 36.74 million for the financial year 2009 due to unavailability of excess capacity as a result of increase in
our production and sales and additional manufacturing capacities developed by other FMCG companies. As a
percentage of our total income, our processing income decreased to 0.1% for the financial year 2010 from 0.3% for
the financial year 2009.
Other Income. Our other income increased by 22.8% to Rs. 448.09 million for the financial year 2010 from Rs.
365.01 million for the financial year 2009, primarily due to an increase in miscellaneous income to Rs. 90.54 million
in the financial year 2010 from Rs. 27.11 million in the financial year 2009 and an income of Rs. 49.52 million in
the financial year 2010 from Godrej Household. This increase was partially offset by a decrease in our interest
income to Rs. 270.42 million for the financial year 2010 from Rs. 360.73 million for the financial year 2009, as a
result of decrease in the interest rate with respect to the fixed deposits of the net proceeds from the rights offering
completed by us in May 2008, a portion of which was utilized during the financial year 2010. As a percentage of our
total income, our other income decreased to 2.1% for the financial year 2010 from 2.5% for the financial year 2009.
Total Expenditure. Our total expenditure increased by 36.3% to Rs. 16,685.82 million for the financial year 2010
from Rs. 12,239.12 million for the financial year 2009.
Material Consumed and Purchase of Goods. Our expenses on material consumed and purchase of goods increased
by 29.7% to Rs. 9,867.54 million for the financial year 2010 from Rs. 7,606.27 million for the financial year 2009,
primarily due to the raw material costs of Rs. 2,133.51 million attributable to our equity interest in Godrej
Household. As a percentage of our total income, our expenses on material consumed and purchase of goods
decreased to 47.2% for the financial year 2010 from 53.1% for the financial year 2009.
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Other Expenses. Our other expenses increased by 65.2% to Rs. 6,875.74 million for the financial year 2010 from Rs.
4,162.85 million for the financial year 2009 primarily due to the other expenses of Rs. 1,245.84 million attributable
to our equity interest in Godrej Household. During this period, our salaries, wages and bonus expenses increased to
Rs. 1,437.37 million from Rs. 792.82 million as a result of increase in performance-linked variable compensation
payments to employees, our sales promotion expenses increased to Rs. 686.82 million from Rs. 411.79 million, our
freight expenses increased to Rs. 504.29 million from Rs. 367.37 million and our advertising and publicity expenses
increased to Rs. 1,327.99 million from Rs. 966.85 million as a result of as a result of increase in our sales. As a
percentage of our total income, our expenses increased to 32.9% for the financial year 2010 from 29.0% for the
financial year 2009.
Interest and Finance Charges. Our interest and finance charges decreased by 41.1% to Rs. 110.99 million for the
financial year 2010 from Rs. 188.59 million for the financial year 2009, primarily due to a decrease in interest
expense to Rs. 68.06 million for the financial year 2010 from Rs. 163.16 million for the financial year 2009 as a
result of the repayment of a portion of our outstanding indebtedness during the financial year 2010 from operating
income and the net proceeds from the May 2008 rights offering . As a percentage of our total income, our interest
and finance charges decreased to 0.5% for the financial year 2010 from 1.3% for the financial year 2009.
Depreciation. Our depreciation expenses increased by 22.8% to Rs. 236.04 million for the financial year 2010 from
Rs. 192.27 million for the financial year 2009, primarily due to an increase in gross block to Rs. 4,148.74 million for
the financial year 2010 from Rs. 3,369.56 million for the financial year 2009, which was primarily attributable to
our equity interest in Godrej Household. As a percentage of our total income, our depreciation expenses decreased to
1.1% for the financial year 2010 from 1.3% for the financial year 2009.
Inventory Change. We recorded an increase in inventory of Rs. 404.50 million for the financial year 2010 as
compared to a decrease of Rs. 89.14 million for the financial year 2009. During this period, the closing balance of
our finished goods increased by 59.4% to Rs. 1,085.00 million from Rs. 679.89 million and that of our work-in-
progress increased by 36.8% to Rs. 232.21 million from Rs. 169.77 million reflecting the overall growth in our
business during the financial year 2010.
Provision for Taxes. Our provision for taxes increased to Rs. 803.35 million for the financial year 2010 from Rs.
366.06 million for the financial year 2009, primarily due to an increase in provision for current taxes to Rs. 795.51
million for the financial year 2010 from Rs. 324.24 million for the financial year 2009 as a result of an increase in
taxable income and an increase in the rate of minimum alternate tax to 15.0% for the financial year 2010 from
10.0% for the financial year 2009. Our effective tax rate increased to 19.13% for the financial year 2010 from
17.50% for the financial year 2009. As a percentage of our total income, our provision for taxes increased to 3.8%
for the financial year 2010 from 2.6% for the financial year 2009.
Net Profit After Tax. Our net profit after tax increased by 96.0% to Rs. 3,395.86 million for the financial year 2010
from Rs. 1,732.58 million for the financial year 2009.
Financial Year 2009 Compared to Financial Year 2008
During the financial year 2009, our Company acquired all of the outstanding equity interest of Kinky, through our
wholly-owned subsidiary, Godrej Kinky Holdings Limited, Mauritius. Consequently, the consolidated financial
statements for the financial year 2009 are not directly comparable to those of the financial year 2008.
Total Income. Our total income increased by 29.3% to Rs. 14,331.39 million for the financial year 2009 from Rs.
11,085.67 million for the financial year 2008.
Gross Sales. Our gross sales increased by 26.7% to Rs. 14,352.25 million for the financial year 2009 from Rs.
11,330.19 million for the financial year 2008. This increase was attributable to the increase in sales of our toilet
soaps and hair color products and sales of Kinky, which was acquired during the financial year 2009.
Excise Duty. The excise duty paid by us increased by 38.8% to Rs. 422.62 million for the financial year 2009 from
Rs. 304.50 million for the financial year 2008, primarily due to increase in sale of products manufactured at our
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plants which do not enjoy excise duty related fiscal benefits.
Net Sales. Our net sales increased by 26.3% to Rs. 13,929.64 million for the financial year 2009 from Rs. 11,025.69
million for the financial year 2008.
Processing Income. Our processing income increased to Rs. 36.73 million for the financial year 2009 from Rs. 14.11
million for the financial year 2008, primarily due to contracts for processing of goods entered into with other FMCG
companies. As a percentage of our total income, our processing income increased to 0.3% for the financial year
2009 from 0.1% for the financial year 2008.
Other Income. We recorded other income of Rs. 365.01 million for the financial year 2009 as compared to other
expense of Rs. 45.87 million for the financial year 2008, primarily due to an increase in our interest income to Rs.
360.74 million for the financial year 2009 from Rs. 22.54 million for the financial year 2008, as a result of the
interest earned on fixed deposits consisting of the funds available out of the proceeds from the May 2008 rights
offering.
Total Expenditure. Our total expenditure increased by 32.9% to Rs. 12,239.12 million for the financial year 2009
from Rs. 9,210.76 million for the financial year 2008.
Material Consumed and Purchase of Goods. Our expenses on material consumed and purchase of goods increased
by 40.5% to Rs. 7,606.27 million for the financial year 2009 from Rs. 5,414.01 million for the financial year 2008,
primarily due to an increase in the raw materials consumed to Rs. 6,256.70 million for the financial year 2009 from
Rs. 4,468.64 million for the financial year 2008 as a result of an increase in production and sales, an increase in
palm oil prices and an increase in the purchase of goods for resale to Rs. 1,311.43 million for the financial year 2009
from Rs. 892.39 million for the financial year 2008 as a result of the increase in volume of goods manufactured by
third-parties in line with the increase in our sales, which were partially offset by a decrease in the share in jointly
controlled entity to Rs. 38.14 million for the financial year 2009 from Rs. 52.98 million for the financial year 2008
attributable to our equity interest in Godrej Hygiene Product Limited. As a percentage of our total income, our
expenses on material consumed and purchase of goods increased to 53.1% for the financial year 2009 from 48.8%
for the financial year 2008.
Other Expenses. Our other expenses increased by 12.5% to Rs. 4,162.85 million for the financial year 2009 from Rs.
3,700.98 million for the financial year 2008. During this period, our salaries, wages and bonus expenses increased to
Rs. 792.82 million from Rs. 671.46 million reflecting the increase in salaries and number of employees in the
normal course of our business. In addition, our power and fuel expenses increased to Rs. 356.15 million from Rs.
250.28 million as a result of increase in production volume. As a percentage of our total income, our expenses
decreased to 29.0% for the financial year 2009 from 33.4% for the financial year 2008.
Interest and Finance Charges. Our interest and finance charges increased by 27.1% to Rs. 188.59 million for the
financial year 2009 from Rs. 148.33 million for the financial year 2008, primarily due to an increase in interest
expense to Rs. 163.16 million for the financial year 2009 from Rs. 122.96 million for the financial year 2008 as a
result of indebtedness incurred in connection with the acquisition of Kinky and increase in interest rates . As a
percentage of our total income, our interest and finance charges were 1.3% in both of the financial years 2009 and
2008.
Depreciation. Our depreciation expenses increased by 5.8% to Rs. 192.27 million for the financial year 2009 from
Rs. 181.70 million for the financial year 2008, primarily due to an increase in the gross block to Rs. 3,369.56 million
for the financial year 2009 from Rs. 2,936.82 million for the financial year 2008. As a percentage of our total
income, our depreciation expenses decreased to 1.3% for the financial year 2009 from 1.6% for the financial year
2008.
Inventory Change. We recorded a decrease in inventory of Rs. 89.14 million for the financial year 2009 as compared
to an increase of Rs. 234.25 million for the financial year 2008. During this period, the closing balance of our
finished goods decreased by 3.8% to Rs. 679.89 million from Rs. 706.74 million, that of our traded goods decreased
by 13.4% to Rs. 206.36 million from Rs. 238.30 million, that of our work-in-progress decreased by 18.7% to Rs.
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169.77 million from Rs. 208.79 million and that of the inventory attributable to our equity interest in Godrej
Hygiene Product Limited increased to Rs. 21.11 million from Rs. 12.43 million.
Provision for Taxes. Our provision for taxes increased by 29.6% to Rs. 366.06 million for the financial year 2009
from Rs. 282.55 million for the financial year 2008, primarily due to an increase in provision for current taxes to Rs.
324.24 million for the financial year 2009 from Rs. 265.99 million for the financial year 2008 and an increase in
provision for deferred taxes to Rs. 34.31 million for the financial year 2009 from Rs. 9.25 million for the financial
year 2008. Our effective tax rate increased to 17.5% for the financial year 2009 from 15.1% for the financial year
2008. As a percentage of our total income, our provision for taxes increased to 2.6% for the financial year 2009 from
2.5% for the financial year 2008.
Net Profit After Tax. Our net profit after tax increased by 8.8% to Rs. 1,732.58 million for the financial year 2009
from Rs. 1,592.37 million for the financial year 2008.
Financial Condition, Liquidity and Capital Resources
Liquidity
We have historically financed our capital requirements primarily through funds generated from our operations and
financing from banks and financial institutions in the form of term loans, credit and overdraft facilities and deposits.
Our primary capital requirements have been to finance our inorganic growth initiatives, as well as our capital
expenditure and working capital requirements. We believe that we will have sufficient capital resources from our
operations and other financing from banks, financial institutions and other companies to meet our working capital
requirements for the next 12 months.
Cash Flows
The table below summarizes our consolidated cash flows for the financial years 2010, 2009 and 2008:
For the Financial Year
2010 2009 2008
(Audited)
(Rs. in millions)
Net cash generated from / (used in) operating activities 3,405.32 1,432.70 1,622.41
Net cash generated from / (used in) investing activities (265.22) (1,415.16) (637.79)
Net cash generated from / (used in) financing activities (3,608.63) 3,339.80 (1,033.68)
Net increase/decrease in cash and cash equivalent (468.52) 3,357.34 (49.06)
Operating Activities
Net cash generated from our operating activities for the financial year 2010 was Rs. 3,405.30 million, consisting of
our profit before tax after prior period adjustments of Rs. 4,199.21 million, as adjusted by non-cash items, primarily
(i) depreciation of Rs. 236.04 million, which increased as a result of acquisition of 49.0% of the equity share capital
of Godrej Household; and (ii) interest expense of Rs. 110.99 million which decreased as compared to the financial
year 2009 as a result of decrease in our average outstanding indebtedness during the financial year 2010 due to the
repayment of indebtedness from the net proceeds from the May 2008 rights offering, which was partially offset by
items such as interest income of Rs. 270.42 million which reflected the interest earned on fixed deposits consisting
of the funds available out of the net proceeds from the rights offering. Our operating profit before working capital
changes was Rs. 4,317.91 million. Working capital changes consisted of an increase in trade and other receivables of
Rs. 941.91 million and an increase in inventories of Rs. 969.60 million which was partially offset by an increase in
trade payables of Rs. 1,778.48 million. The increases in our trade receivables and inventories related to increase in
our sales. Our trade payables also increased significantly during the financial year 2010 as result of increased sales,
increase in performance-linked variable compensation payments to employees and increase in our advertising and
publicity expenses consistent with the increase in our sales. Direct taxes paid was Rs. 779.56 million.
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Net cash generated from our operating activities for the financial year 2009 was Rs. 1,432.70 million, consisting of
our profit before tax after prior period adjustments of Rs. 2,092.27 million, as adjusted by non-cash items, primarily
(i) depreciation of Rs. 192.27 million; and (ii) interest expenses of Rs. 188.59 million which increased as compared
to financial year 2008 as result of indebtedness incurred in connection with the acquisition of Kinky, which was
partially offset by items such as interest income of Rs. 360.74 million which reflected the interest earned on fixed
deposits consisting of the funds available out of the net proceeds from the rights offering. Our operating profit
before working capital changes was Rs. 2,110.91 million. Working capital changes consisted of an increase in trade
and other receivables of Rs. 629.86 million reflecting the growth in our sales, which was partially offset by a
decrease in inventories of Rs. 240.85 million reflecting better management of our stocks and an increase in trade
payables of Rs. 36.29 million. Direct taxes paid was Rs. 325.49 million.
Net cash generated from operating activities for the financial year 2008 was Rs. 1,622.41 million, consisting of our
profit before tax after prior period adjustments of Rs. 1,874.92 million, as adjusted by non-cash items, primarily (i)
depreciation of Rs. 181.70 million; and (ii) interest expenses of Rs. 148.33 million; which were partially offset by
(a) interest income of Rs. 22.54 million; and (b) foreign exchange gain of Rs. 11.80 million. Our operating profit
before working capital changes was Rs. 2,172.71 million. Working capital changes consisted of an increase in
inventories of Rs. 563.23 million and an increase in trade and other receivables of Rs. 229.84 million, which were
partially offset by an increase in trade payables of Rs. 515.00 million. Direct taxes paid was Rs. 272.22 million.
Investment Activities
Net cash used in investing activities for the financial year 2010 was Rs. 265.22 million, primarily consisting of
additions to fixed assets of Rs. 745.90 million which related to our equity interest in Godrej Household, and net loan
to ESOP trust of Rs. 205.08 million, which were partially offset by sale of investments of Rs. 574.22 million
adjustment for goodwill on consolidation of Rs. 909.46 million, interest received of Rs. 270.42 million and
adjustments to fixed assets of Rs. 175.99 million.
Net cash used in investing activities for the financial year 2009 was Rs. 1,415.16 million, primarily consisting of
adjustment for goodwill on consolidation of Rs. 1,129.72 million , additions to fixed assets of Rs. 444.99 million,
which were partially offset by interest received of Rs. 270.67 million.
Net cash used in investing activities for the financial year 2008 was Rs. 637.79 million, primarily consisting of
additions to fixed assets of Rs. 647.81 million.
Financing Activities
Net cash used in financing activities for the financial year 2010 was Rs. 3,608.63 million, primarily consisting of a
decrease in net borrowings from bank of Rs. 2,339.66 million, dividend paid of Rs. 873.33 million, tax on
distributed profits of Rs. 165.51 million, net cash credits of Rs. 119.13 million and interest paid of Rs. 110.99
million.
Net cash generated from financing activities for the financial year 2009 was Rs. 3,339.80 million, primarily
consisting of proceeds from the rights issue of Rs. 3,964.58 million, which was partially offset by dividend paid of
Rs. 1,002.37 million, interest paid of Rs. 186.37 million, tax on distributed profits of Rs. 171.20 million and
buyback of equity share capital of Rs. 149.00 million.
Net cash used in financing activities for the financial year 2008 was Rs. 1,033.68 million, primarily consisting of
dividend paid of Rs. 840.73 million, interest paid of Rs. 155.27 million, tax on distributed profits of Rs. 143.93
million and rights issue expense written-off amounting to Rs. 28.65 million, which were partially offset by net
proceeds from borrowings of Rs. 134.90 million.
Contractual Obligations
As of March 31, 2010, the estimated amount of contracts remaining to be executed on our capital account and not
provided for was Rs. 4.26 million. The following table summarizes our significant contractual obligations, on a
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consolidated basis, as of March 31, 2010:
Contractual Obligations As of March 31,
2010
Less than 1
year
1-5 years More than
5 years
(Rs. in millions)
Finance lease obligations 0.39 0.39 - -
Operating lease obligations 26.55 11.57 1.12 13.86
Operating lease obligations from share in
jointly controlled entity
8.73 5.01 3.72 -
Indebtedness
The following table provides our outstanding indebtedness as of March 31, 2010, 2009 and 2008:
Particulars As of March 31,
2010 2009 2008
(Audited)
(Rs. in millions)
Secured Loans
Term loans from banks 106.89 2,104.00 759.69
Cash credits from banks 118.95 186.26 100.54
Working capital demand loans from banks 137.87 0.75 55.38
Sales tax deferment loan 5.03 4.71 5.39
Unsecured Loans
Term loans and advances from banks - 480.00 940.00
Share in jointly controlled entity - - 10.00
Total Indebtedness 368.74 2,775.72 1,871.00
As of March 31, 2010, we had Rs. 368.74 million of indebtedness outstanding. However, we have incurred
significant indebtedness after March 31, 2010. For more details, see ―Recent Developments‖.
Contingent Liabilities
From time to time, we grant security over certain of our assets as collateral guarantees as well as issue corporate
guarantees in respect of debt incurred by us. In addition, we also provide bank guarantees in respect of our
obligations under various contracts. Details about our contingent liabilities as of March 31, 2010, 2009 and 2008 are
set out below:
Particulars As of March 31,
2010 2009 2008
(Audited)
(Rs. in millions)
Claims for excise duties, taxes and other
matters
296.66 227.82 186.97
Guarantees 277.05 2,289.05 1,902.03
Claims by various parties on account of
fraudulent / illegal acts by an employee
242.42 - -
Share in Jointly Controlled Entity 112.67 - -
We do not have any off-balance sheet arrangements, derivative instruments or other relationships with
unconsolidated entities or financial partnerships that would have been established for the purpose of facilitating off-
balance sheet arrangements.
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Hedging Contracts
We use forward exchange contracts to hedge our foreign exchange exposure relating to the underlying transactions
and firm commitments. As of March 31, 2010, we had 18 outstanding forward exchange contracts to purchase
foreign currency aggregating to US$ 11.33 million at an average rate of Rs. 46.43 per US$ and Euro 0.69 million at
an average rate of Rs 60.19 per Euro. Our uncovered foreign exchange exposure as of March 31, 2010 is set out
below:
(In Millions)
Details Currency As of March 31,
2010 2009 2008
Payables US$ 8.25 10.58 24.59
Euro 0.20 - -
Receivables US$ 1.52 0.03 -
Euro 0.33 - -
Advance against Investments US$ 0.06 - -
Cash & Cash Equivalent US$ 0.20 0.96 -
Bank Borrowings US$ - 34.93 -
Redeemable Convertible Pref. Shares US$ (4.00) - -
Related Party Transactions
We have engaged in the past, and may engage in the future, in transactions with related parties, including with, our
affiliates and certain key management members on an arm‘s lengths basis. Details of our material related party
transactions for the financial year 2010 are set out below:
Particulars Financial Year
2010 2009 2008
(Rs. in millions)
Sale of Goods 79.34 93.49 129.82
Purchase of Materials, Spares and Capital Equipment 125.45 241.60 221.22
Establishment and Other Expenses Paid / (Received) 74.26 109.11 107.11
Loan Given 40.50 - -
Loan Repaid 40.50 - -
Interest Received on Loan 0.61 - -
Subscription towards Rights Issue - 3,168.93 -
Issue of Equity Shares 51.24 - -
Dividend Remitted 723.04 591.11 475.52
Managerial Remuneration 151.26 43.37 42.60
Lease Rentals paid 12.91 12.91 12.91
Outstanding balances as at year-end Receivable 5.50 15.23 0.25
Payable 6.14 18.55 25.90
Employee Stock Options Plan
We have instituted an employee stock option plan (―GCPL ESOP‖) which is administered through an independent
trust called the Godrej Consumer Products Limited Employee Stock Option Trust (the ―Trust‖). Our Company
grants loans to the Trust from time to time to purchase the Equity Shares from the secondary market and hold the
Equity Shares till the time of exercise of stock options by the eligible employees in accordance with the GCPL
ESOP. As of March 31, 2010, the Trust has acquired 3,609,000 equity shares for a total consideration of Rs. 555.15
million and our Company has granted loans aggregating to Rs. 443.08 million to the Trust (being the maximum
amount of loan outstanding during the year). This loan is repayable at the end of five years from the date of the loan
agreement, March 21, 2008. Such repayment of the loan by the Trust is dependant on the exercise of stock options
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by the employees and / or the market price of the underlying Equity Shares of the unexercised options at the end of
the exercise period.
We have accounted for GCPL ESOP based on the intrinsic value method and have not recognized any compensation
expenses since the market price of the underlying share at the grant date is the same or less than the exercise price of
the option and therefore, the intrinsic value of such options is Nil. If we had used the fair value method of
accounting, our employee compensation cost would have been higher by Rs. 44.28 million. For more details on
GCPL ESOP, see ―Description of the Equity Shares – Employee Stock Option Plans‖.
Further, under our PLVR scheme for employees, we carried forward an amount of Rs. 52.50 million for the financial
year 2010 in the notional bank . We have not made provisions for this amount in our financial statements and such
amount may be payable in future depending upon the performance of the company.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk and
commodities risk. We are exposed to commodity risk, interest rate risk, foreign exchange risk and credit risk in the
normal course of our business.
Seasonality
Some of our products such as liquid detergents exhibit seasonality. This is as a result of increased consumption of
such products or derivatives of such products in winter months in India. However, overall, our results of operations
do not exhibit any significant seasonality.
Inflation
Although India has experienced minor fluctuation in inflation rates in recent years, inflation has not had a material
impact on our business and results of operations.
Interest Rate Risk
Our financial results are subject to changes in interest rates, which may affect our debt service obligations and our
access to funds. We currently have floating rate indebtedness and also maintain deposits of cash and cash
equivalents with banks and other financial institutions and thus are exposed to market risk as a result of changes in
interest rates. As of March 31, 2010, all of our indebtedness consisted of floating rate indebtedness. We have also
incurred significant indebtedness after March 31, 2010, all of which are floating rate indebtedness. For more details,
see ―Recent Developments‖. Since we do not have any forward contracts currently, to hedge against interest rate
risk, any upward fluctuations in interest rates may increase the cost of both existing and new debts.
Commodity Risk
In the normal course of business, we purchase our raw materials either on a purchase order basis or pursuant to
supply agreements. As a result, we are exposed to market risk with respect to the prices of these raw materials. We
enter into purchase contracts for future deliveries to hedge against price fluctuations.
Foreign Exchange Risk
Changes in currency exchange rates influence our results of operations. We report our financial results in Indian
rupees, while portions of our total income and expenses are denominated, generated or incurred in currencies other
than Indian rupees, such as U.S. Dollars. For details on our uncovered foreign exchange exposure, see ―– Hedging
Contracts‖. To the extent that our income and expenditures are not denominated in Indian rupees, and even though
we enter into foreign exchange hedging contracts from time to time, exchange rate fluctuations could affect the
amount of income and expenditure we record. Although we closely follow our exposure to foreign currencies and
selectively enter into hedging transactions in an attempt to reduce the risks of currency fluctuations of U.S. Dollars
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and Euros, these activities are not always sufficient to protect us against incurring potentially large losses if
currencies fluctuate significantly.
Credit Risk
We are exposed to credit risk on monies owed to us by our customers. If our customers do not pay us promptly, or at
all, we may have to make provisions for or write-off such amounts. Debts which are outstanding for periods more
than six months and are considered doubtful are fully provided for. For the financial year 2010, Rs. 0.14 million was
provided for doubtful debt and advances.
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INDUSTRY OVERVIEW
The information in this section has been extracted from various government publications and industry sources. It
has not been independently verified by us, the Book Running Lead Managers, and no representation is made as to
the accuracy of this information, which may be inconsistent with information available or compiled from other
sources. Industry sources and publications generally state that the information contained therein has been obtained
from sources generally believed to be reliable, but that their accuracy, completeness and underlying assumptions
are not guaranteed and their reliability cannot be assured and, accordingly, investment decisions should not be
based on such information. The information from the external sources may have been re-classified by us for the
purpose of presentation.
Information from The Nielsen Company reflects estimates of market condition based on samples, and is prepared
primarily as a marketing research tool for consumer packaged goods manufactures and others in the consumer
goods industry. This information should not be viewed as a basis for investments and references to Nielsen should
not be considered as Nielsen‟s opinion as to the value of any security or the advisability of investing in the company.
Overview of the Indian Economy
India is one of the fastest growing economies in the world, with an average real GDP growth rate of 7.0% per annum
during the last two years. India is also the world‘s largest democracy by population size. According to CIA World
Factbook, India‘s estimated population was 1.17 billion people in July 2009. India had an estimated GDP of
approximately U.S.$ 3.56 trillion in 2009, which makes it the fourth largest economy in the world after the United
States, China and Japan, in terms of purchasing power parity. The following table presents a comparison of India's
real GDP growth rate with the real GDP growth rate of certain other countries for the periods indicated:
Countries* 2008 2009
Australia 2.2% 1.0%
Brazil 5.1% (0.2%)
China 9.0% 8.7%
Germany 1.3% (5.0%)
India 7.4% 6.5%
Indonesia 6.1% 4.5%
Japan (1.2%) (5.3%)
South Korea 2.2% 0.2%
Malaysia 4.6% (2.2%)
Russia 5.6% (7.9%)
Thailand 2.5% (2.8%)
United Kingdom 0.5% (4.8%)
United States 0.4% (2.4%) * Represents calendar year growth rates
(Source: CIA World Factbook, website: www.cia.gov/library/publications/the-world-factbook/index.html, accessed
on June 7, 2010)
Overview of the Indian Consumer Market
With rising incomes, the creation of a massive middle class and a growing population, India is expected to become
one of the world‘s largest consumer markets by 2025, just behind the United States, Japan, China and the United
Kingdom. Consumption is expected to increase at an aggregate annual rate of 7.3% from 2005 to 2025 to reach more
than Rs. 69.5 trillion, or U.S.$ 1.5 trillion by 2025. In terms of purchasing power parity, India‘s consumer market is
expected to grow to a size of $8.2 trillion by 2025, surpassing the size of the present United States market of $7.8
trillion. In addition, the proportion of people dwelling in urban areas in India is expected to increase from 29.0% in
2005 to 37.0% in 2025. (Source: McKinsey Global Institute, „The Bird of Gold: The Rise of India‟s Consumer
Market‟, May 2007)
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Rural areas currently hold 70.0% of India‘s population and have historically accounted for more than half of India‘s
consumption. Despite increasing urbanisation and migration, it is estimated that 63.0% of India‘s population will
still live in rural areas in 2025, as a result of which the rural market has been, and will remain, very important to the
Indian economy. It is expected that by 2025 rural consumption will create a potential market worth over Rs. 26.0
trillion. Incomes in rural areas are expected to rise over a forecast period between 2005 and 2025 due to government
investment, the diversification of the rural economy and improvements in the agricultural sector. (Source: McKinsey
Global Institute, “The Bird of Gold: The Rise of India‟s Consumer Market”, May 2007)
The Indian FMCG sector has a strong presence of multinational companies and is characterised by a well-
established distribution network, intense competition between the organised and unorganised segments and low
operational costs. Availability of key raw materials, cheap labour costs and presence across the entire value chain
give India a competitive advantage. The growing Indian population particularly the middle class and the rural
segments present an opportunity to makers of branded products to convert consumers to branded products.
Spending on household non-durables is expected to grow at a compound annual growth rate (―CAGR‖) of 5.8% to
Rs. 536.0 billion in 2025 from Rs. 174.0 billion in 2005, while the spending on personal non-durables is expected to
grow at a CAGR of 10.4% to Rs. 1,848.0 billion in 2025 from Rs. 256.0 billion in 2005. (Source: McKinsey Global
Institute, “The Bird of Gold: The Rise of India‟s Consumer Market”, May 2007)
The following chart sets forth the annual spending on personal non-durables from 1985 to 2025:
(Rs. in billion, in real 2000 rupees)
16 67 96
298
987
30 13 160
376
861
1985 1995 2005E 2015F 2025F
Urban Rural
(Source: McKinsey Global Institute, „The Bird of Gold: The Rise of India‟s Consumer Market‟, May 2007) _________ Note: E: Estimated
F: Forecast
Constituent Categories of the FMCG Sector
The main categories of the FMCG sector comprise:
• Personal Care: This category includes oral care, hair care, skin care, cosmetics and toiletries and paper
products.
• Home Care: The category includes household cleaners, air fresheners, insecticides and metal polish.
• Packaged Food and Beverages: This category includes health beverages, soft drinks, staples, cereals,
bakery products, snack foods and dairy products.
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Several selected constituents of the above categories in which we have a presence are discussed below:
Personal Care
Soaps
Sales of soap products in India grew by 7.7% to Rs. 85.8 billion in the financial year 2010 from Rs. 79.7 billion in
the financial year 2009. (Source: AC Nielsen, June 2010) Soap products constitute the largest sub-category in bath
and shower products. In 2008, growth in this category of product slowed down marginally on account of price hikes
and the high levels of market penetration. However, in spite of the high levels of market penetration, soaps will
continue to do reasonably well owing to increases in retail selling prices. However, volume growth is expected to be
subdued. Although urban consumers are expected to shift away from this product type to body wash and shower
gels, lower income consumers, especially in the rural areas, are expected to enter the markets for mass products and
basic products, including, among others, soaps. In addition, as soaps are considered essential products for regular
usage, economic slowdown has not affected and is not expected to affect, the consumption of this product type.
Lower income and rural consumers who are not exposed directly to the vagaries of the housing and stock markets
are expected to support overall growth in the sales volume of basic items, including soaps. (Source: © Euromonitor
International 2010, “Bath and Shower Products in India”, June 2009)
The following table sets forth the value market share of the top soap companies in India for the financial years
indicated:
Company Financial Year
2009 2010
(%)
Hindustan Unilever Ltd 50.2 45.0
Godrej Consumer Products Ltd 9.5 10.3
Wipro Ltd 8.5 8.8
Reckitt Benckiser (India) Ltd 6.2 7.3
Nirma Ltd 5.1 4.4
Johnson & Johnson Ltd 3.0 3.4
ITC 1.9 3.0
Anchor Health and Beauty Care Private Ltd. 1.6 2.1
Others 14.0 15.8
Total 100.0 100.0
(Source: AC Nielsen, June 2010)
Hair Colour
Sales of hair colorants in India grew by 14.8% to Rs. 11.31 billion in the financial year 2010 from Rs. 9.9 billion in
the financial year 2009. (Source: AC Nielsen, June 2010) Indian consumers are becoming increasingly sophisticated
in their purchase and usage of hair care products. Rising awareness of various product types and income levels have
led to increasing sales in the Indian hair colorant sector. Many high income upper-class urban consumers are
expected to upgrade from mass brands to premium brands. At the same time, with increasing awareness, consumers
are expected to demand products that offer specific benefits, such as, in the case of colorants, novel colours and
styles in addition to nourishment. In addition, with rising income levels, rural consumers are expect to enter the
markets for non-basic hair products including, among others, hair colorants, although most of their purchases are
expected to be in the mass market range. (Source: © Euromonitor International 2010, “Hair Care in India”, June
2009)
Sales growth of products like hair colorants may be dampened by an economic downturn that is more serious and
widespread, since these products are not considered daily necessities and consumers might be forced to cut down on
purchases if their incomes are affected. Growth in colorants will be affected by competition from the traditional
―kali mehendi‖ (a natural hair colorant), which is still widely used in India. (Source: © Euromonitor International
2010, “Hair Care in India”, June 2009)
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The following table sets forth the value market share of the top hair colorants companies in India for the financial
years indicated:
Company Financial Year
2009 2010
(%)
Godrej Consumer Products Ltd 33.2 33.9
L'Oréal India Private Ltd 19.3 21.4
Hygienic Research Institute 19.8 19.6
Heena Export Corporation 12.1 12.4
Cavinkare Private Ltd 4.5 4.6
Izuk Chemical & Herbals 1.6 2.4
Others 9.4 5.7
Total 100.0 100.0
(Source: AC Nielsen, June 2010)
Home Care
Liquid Detergents
Sales of liquid detergents in India grew by 25.0% to Rs. 0.71 billion in the financial year 2010 from Rs. 0.57 billion
in the financial year 2009. (Source: AC Nielsen, June 2010) With the rising popularity of washing machines in India,
demand for liquid detergents is expected to increase. Also, as Indian consumers, in particular urban consumers, start
to spend more on their clothing, demand for products that help them to maintain their clothes is expected to increase
therefore leading to growth in the demands for laundry-aids and fine fabric detergents. (Source: © Euromonitor
International 2010, “Laundry Care – India”, May 2010)
The following table sets forth the value market share of the top liquid detergents companies in India for the financial
years indicated:
Company Financial Year
2009 2010
(%)
Godrej Consumer Products Ltd 77.9 76.5
Wipro Ltd 8.2 10.5
Swastik Surfactants 12.2 9.6
Hindustan Unilever Ltd 0.5 2.0
Others 1.2 1.4
Total 100.0 100.0
(Source: AC Nielsen, June 2010)
Household Insecticides
Sales of household insecticides in India grew by 9.9% to Rs. 21.80 billion in the financial year 2010 from Rs. 19.83
billion in the financial year 2009. (Source: AC Nielsen, June 2010) Mosquitoes pose one of the biggest threats to
consumer welfare in India as they carry life-threatening diseases such as malaria and dengue fever. In India,
insecticide coils constitute the largest segment and dominated this sub-category of products in 2009 in terms of retail
value and retail volume share. There was strong demand among both rural and semi-urban consumers, as a result of
the low prices of insecticide coils. As insecticide coils and other insecticide types have high penetration levels in
India, growth in the insecticide category is expected to slow down. However, electrical insecticides format is
expected to continue to increase in popularity, especially among urban consumers. Electric insecticides and spray
and aerosol insecticides are expected to be the main drivers of growth of insecticides. With consumers becoming
more health conscious and more willing to invest in products that are convenient, these product formats are expected
to benefit from increased demand. Consumers are expected to switch to electric insecticides, especially in areas with
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regular supply of electricity. On the other hand, in locations where the supply of electricity is unreliable, consumers
are expected to opt for products in spray and aerosol formats. (Source: © Euromonitor International 2010,
“Insecticides – India”, May 2010)
The following table sets forth the market share sales of the top household insecticides companies in India for the
financial years indicated:
Company Financial Year
2009 2010
(%)
Godrej Household 33.0 33.1
Reckitt Benckiser (India) Ltd 23.2 22.3
S C Johnson Products Private Ltd. 17.1 15.9
Jyothy Laboratories Ltd 11.4 11.5
Dabur India Ltd 2.2 1.6
Others 13.1 15.6
Total 100.0 100.0
(Source: AC Nielsen, June 2010)
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BUSINESS
Overview
We are a part of the Godrej group of companies, which is one of the oldest corporate houses in India. The Godrej
group was established in 1897. It had a total turnover of Rs. 118 billion (US$ 2.62 billion) for the financial year
2010. With five listed companies with an aggregate market capitalisation of Rs. 165 billion as of March 31 2010, 58
manufacturing locations in India and overseas, and operations in 18 countries, it has a significant presence in the fast
moving consumer goods (―FMCG‖), real estate, industrial engineering, appliances, chemicals, furniture, security
and agri care sectors.
We are one of India‘s leading FMCG companies, with significant presence in other developing markets in Asia,
Africa and South America, such as Indonesia, South Africa, Nigeria and Argentina. We manufacture and sell a wide
range of personal wash, hair care and home care products. Our total income and net profit for the financial year 2010
was Rs. 20,885.02 million and Rs. 3,395.86 million, respectively. Our international operations contributed Rs.
3,824.70 million, or 18.3%, of our total income for the financial year 2010. With our recently completed
acquisitions, we expect our international operations to contribute more significantly to our total income going
forward.
Our product range in India includes toilet soaps, hair colorants, household insecticides, toiletries, hand sanitizers,
hand wipes, hand washes and liquid detergents. For the financial year 2010, we had the second largest value market
share of 10.3% in India in the toilet soap category and the largest hair value market share of 33.9% in India in the
hair colorant category. We were also the market leader in liquid detergents in India, with a 76.5% value market
share for the same period. Our Company‘s leading brands include ‗Godrej No.1‘, ‗Cinthol‘ and ‗Godrej FairGlow‘
in toilet soaps, ‗Godrej Expert‘, ‗Renew‘ and ‗Godrej Nupur‘ in hair colorants, ‗Godrej Protekt‘ in hand hygiene,
‗Cinthol‘ deodorants and talcum powder in toiletries and ‗Ezee‘ in liquid detergent, many of which we believe have
become household names in India. For the financial year 2010, our subsidiary, Godrej Household (we are in the
process of changing the name of this company from Godrej Sara Lee Limited to Godrej Household Products
Limited), with leading brands such as ‗Goodknight‘, ‗HIT‘ and ‗Jet‘, had the largest value market share of 33.1% in
India in the household insecticides category. It also has significant presence in the shoe care and male hair care
markets through leading brands such as ‗Kiwi‘ and ‗Brylcreem‘ and has operations in Sri Lanka and Bangladesh as
well.
Our Company has five manufacturing facilities in India at Malanpur (Madhya Pradesh), Guwahati (Assam), Baddi-
Thana (Himachal Pradesh), Baddi-Katha (Himachal Pradesh) and Sikkim. In addition, Godrej Household has
manufacturing facilities in Pondicherry, Chennai, Guwahati, Meghalaya, Jammu, Goa and Sri Lanka. As of March
31, 2010, our Company‘s distribution network in India comprised 33 carrying and forwarding (―C&F‖) agents
servicing 1,258 direct distributors, 263 super stockists and 5,161 sub-stockists. Our Company‘s distributors and sub-
stockists cover approximately 3,700,000 retailers in India. The distribution network of Godrej Household comprises
32 C&F agents servicing approximately 1,100 distributors and sub-stockists across India. Its distributors and sub-
stockists cover approximately 1,600,000 retailers across India.
During the past few years, we completed a number of acquisitions in India and overseas to increase our market share
in selected product categories and expand our geographical reach. In India, we sought to achieve market leadership
in household insecticides and increase our market share in personal care products by acquiring 49.0% of Godrej
Household on June 1, 2009. On May 28, 2010, our Company acquired the remaining 51.0% stake in Godrej
Household from our joint venture partner, Sara Lee Corporation. For the year ended March 31, 2010, Godrej
Household had total income and profit after tax of Rs. 9,425.89 million and Rs. 1,371.80 million, respectively.
As part of our expansion plans to establish our international presence, we have completed the following acquisitions:
United Kingdom. In October 2005, we acquired the business of Keyline Brands Limited (―Keyline‖) which
markets and distributes cosmetics and toiletries. Keyline‘s brands include, among others, ‗Cuticura‘ a hand-
hygiene product, ‗Bio Oil‘, a specialist skincare product line and P20, a popular sun-care brand, in the
United Kingdom. Keyline had total income of £29.05 million (Rs. 2,213.56 million) for the financial year
2010.
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South Africa. In September 2006, we acquired the Rapidol (Pty) Limited and its wholly-owned subsidiary
Rapidol International Limited (together, ―Rapidol‖). Through this acquisition, we gained entry into the hair
color market for black hair in South Africa and acquired ownership of the ‗Inecto‘ brand, which is one of
the leading ethnic hair color brands in South Africa. Rapidol had total income of ZAR 115.29 million (Rs.
706.14 million) for the financial year 2010.
United Arab Emirates. In October 2007, we acquired Godrej Global Mid East FZE (―Godrej Middle East‖)
from Godrej International Limited. Godrej Mid East was established in Sharjah as the Godrej group‘s
FMCG distributor in the Middle East. It has a widespread distribution network in the Middle East countries
such as the United Arab Emirates, Oman, Saudi Arabia, Kuwait and Bahrain. Godrej Mid East had total
income of AED 13.67 million (Rs. 177.75 million) for the financial year 2010.
South Africa. In April 2008, we acquired Kinky Group (Pty.) Limited (―Kinky‖), which is one of the
leading hair products manufacturing, marketing and distribution companies in South Africa. Kinky markets
and sells its products through its own retail outlets in South Africa, as well as wholesalers and ‗cash n
carry‘ stores in various African countries. It currently owns 24 retails stores in South Africa. Kinky‘s
products include hair braids, hair pieces, wigs, and hair accessories. Kinky had total income of ZAR 118.24
million (Rs. 725.99 million) for the financial year 2010.
Indonesia. On May 17, 2010, we acquired the Megasari group of companies, which comprises PT Megasari
Makmur, PT Ekamas Sarijaya, PT Indomas Susemi Jaya, PT Simba Indosnack, PT Intrasari Raya, PT
Sarico Indah in Indonesia and Indovest Capital Limited (Labuan) (collectively, the ―Megasari Group‖). The
Megasari Group has a presence across a wide range of FMCG categories, including household insecticides,
air fresheners, wet tissues, baby care, car and motorcycle products, food wrappers, drain openers, bleach,
metal polishers and fly and rat glue. It is one of the leading companies in the Indonesia household products
market holding many popular brands such as ‗HIT‘, ‗Stella‘, ‗Mitu‘ and ‗Simba‘, with six manufacturing
facilities in Indonesia and an extensive distribution network across Indonesia. The Megasari Group had a
total net income (proforma) of Rp. 101.18 billion (Rs. 472.00 million) for the calendar year 2009.
Latin America, including Argentina. On June 1, 2010, we completed the acquisition of the Issue group,
comprising Laboratoria Cuenca and its subsidiaries, Consell SA, Issue Uruguay, Deciral Uruguay and Issue
Brazil (collectively, the ―Issue Group‖). The Issue Group is one of the leading mass market hair color
companies in Latin America with presence in Argentina, Paraguay, Peru and Uruguay and an emerging
presence in Brazil.
Nigeria. On June 16, 2010, we acquired the ‗Tura‘ brand from the Tura group. The ‗Tura‘ brand is a
household name in many West African countries and is the only super brand in Nigeria in the personal care
category. With this acquisition, we own the worldwide rights to manufacture and distribute the ‗Tura‘
brand products, which includes products such as soap, moisturizing lotion and skin toning cream.
Further, on June 2, 2010, we entered into an agreement to acquire Argencos SA (―Argencos‖), a medium-sized hair
care company in Argentina, which we believe will complement the operations of Issue Group. Argencos is one of
the largest businesses in the niche market of hair colors in kit format, with a significant market share and its product
portfolio includes popular hair-spray brands such as ‗Roby‘ and ‗919‘.
Our Strengths
We believe our principal competitive strengths include:
Well-established Brand Name and Market Leadership
We are a part of the Godrej group of companies, which is one of the oldest and leading corporate houses in India.
We believe that we have established a well-recognised brand and a strong customer base in the FMCG industry with
our ability to produce superior quality products. Our brands such as ‗Godrej No. 1‘, ‗Cinthol‘, ‗Ezee‘, ‗Godrej
Expert‘, ‗Renew‘ and ‗Goodknight‘ enjoy leadership positions in their respective categories and have established
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substantial brand equity amongst the Indian population. ‗Cinthol‘, ‗Godrej Expert‘ and ‗Ezee‘ were recognised as
Superbrands in 2009 by Superbrands Inc. For the financial year 2010, we had the second largest value market share
of 10.3% in India in the toilet soap category and the largest value market share of 33.9% in India in the hair colorant
category. We were also the market leader in the liquid detergent category for the financial year 2010, with a value
market share of 76.5%. For the same period, our wholly-owned subsidiary, Godrej Household was the market leader
in the household insecticides category in India, with a value market share of 33.1%. In addition, ‗Goodknight‘ and
‗Brylcreem‘ were recognized as Superbrands in each of 2008 and 2009 by Superbrands Inc. Goodknight was also
featured as the No. 1 household care brand in ‗Brand Equity‘ survey in 2009 and the 14th
most trusted brand in
‗Brand Equity‘ survey for the FMCG industry in 2009 conducted by The Economic Times.
Our international operations also own leading brands and enjoy leading market share in their respective markets. In
the United Kingdom, Keyline‘s ‗Cuticura‘ and ‗P20‘ products enjoys leadership positions and ‗Bio Oil‘ is one of the
signature brands in one of the large retail chain stores in the United Kingdom. The Megasari Group is the largest
company in air care and wipes market of Indonesia with a value market share of 45% and 80%, respectively, one of
the largest manufacturers of household insecticides in Indonesia with a value market share of 35% and owns leading
brands, such as ‗HIT‘ ‗Stella‘ and ‗Mitu‘. Our South African subsidiary, Rapidol, is one of the largest manufacturers
of ethnic hair color in South Africa with a market share of over 85%. Our other South African subsidiary, Kinky, is
one of the market leaders in hair braids, hair prices, wigs and hair accessories. Tura is the only Superbrand across
personal care category in Nigeria, while the Issue Group enjoys a leadership position in Argentina with over 20%
volume market share.
Strong Presence in Emerging Markets Outside India
We have expanded our presence in the FMCG markets of emerging economies in the past few years through a
number of acquisitions:
We believe that we are currently one of the largest FMCG companies in Asia (excluding Japan). Through
our acquisition of the Megasari Group in Indonesia, we gained significant presence in the second most
populous country in Southeast Asia, whose FMCG market we believe has strong growth potential. Godrej
Household, which recently became our wholly-owned subsidiary, has a presence in Bangladesh and Sri
Lanka as well.
The acquisitions of Kinky and Rapidol have given us a strong foothold in the hair products market in South
Africa and its neighbouring countries. Our recent acquisition of the ‗Tura‘ brand will strengthen our
footprint in the African continent and give us access to Nigeria and other West African countries.
We also gained entry into Latin America with the acquisitions of the Issue Group and Argencos (pending
closure).
As our business is driven by consumer spending, we believe that strong presence in some of the world‘s emerging
markets with large populations that are growing in affluence and brand-consciousness, will put us in a strong
position to grow our income and extend our worldwide FMCG market share. For the financial year 2010, our
international operations contributed 18.3% of our total income on a consolidated basis. Our international businesses
demonstrated growth in revenues over the last two financial years despite the tough economic conditions as a result
of the global downturn. With our recently completed acquisitions, we expect our international operations to
contribute more significantly to our total income going forward.
Widespread Sales and Distribution Network in India and Our Key International Markets
We maintain an extensive distribution network to market our products in India. We have a presence in both the
urban and rural markets, enabling us to benefit from the opportunities in both markets. Our Company has a sales
team which comprises over 290 employees across India, while Godrej Household has a sales team of 214 employees
in India. As of March 31, 2010, our distribution network in India comprised 33 carrying and forwarding (―C&F‖)
agents servicing 1,258 direct distributors, 263 super stockists and 5,161 sub-stockists. Our distributors and sub-
stockists cover around 3,700,000 retailers in India. The distribution network of Godrej Household comprised 32
C&F agents servicing approximately 1,100 distributors and sub-stockists across India and operations in Bangladesh
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and Sri Lanka, as of March 31, 2010. Its distributors and sub-stockists cover around 1,600,000 retailers across India.
In addition, Godrej Household exports its products to over 50 countries, particularly to markets in South Asia and
Southeast Asia. We also have extensive sales and distribution network in the international markets in which we
operate. For example, the Megasari Group had 11 branches, approximately 75 regional distributors, approximately
620 salesmen and presence through approximately 90,000 retail stores throughout Indonesia as of December 31,
2009.
Strong Research and Product Development Capabilities and Ability to Launch New Products
We believe that we have established a reputation as a manufacturer of superior quality products. In order to cater to
the changing needs of our customers, we have set up an in-house research and development facility in India to
develop products at competitive prices for the domestic and international market. The Godrej Research and
Development Centre is located in Vikhroli, Mumbai and is recognised by the Department of Science and
Technology, New Delhi. The research and development facility of Godrej Household dedicated to research in the
field of household and public health pest control, is also located in Vikhroli, Mumbai. It has also been recognised by
the Ministry of Science and Technology, Government of India.
Our research and development activities broadly comprises various processes for developing new products,
standardizing new analytical methods and identifying substitutes for key raw materials. Through our research and
development centre, we continuously interact with consumers to obtain feedback on our existing as well as new
products to complement our new product development activities. We believe that with our strong research and
development and technical capabilities, we will be able to further expand our product offerings and improve our
product quality and sales.
Our desire to meet the ever-changing needs of our customers can be illustrated by the wide range of new products or
variants of existing products that we launch regularly. We create new products through our innovative design and
ingredients and our ability to identify needs in a particular category. In the past financial year, our Company
introduced a range of new variants of products, including ‗Godrej No. 1 – Moisturizing Soap‘ and ‗Godrej No. 1 –
Lime and Aloe Vera‘, new color shades, ‗plum crazy‘ and ‗wine red‘ for our ‗Renew‘ hair colorant, as well as a
range of hand hygiene products under the ‗Godrej Protekt‘ brand. Through its research and development initiatives,
Godrej Household successfully launched its ‗Goodknight Naturals Mosquito Repellent Cream‘, which was
developed as a product suitable for use by children.
Advanced Information Technology Systems
Our operations are enhanced by our information technology platform, which provides improved connectivity and
facilitates data-based decision-making. We have recently entered into a strategic IT transformation services contract
with Hewlett Packard (―HP‖) to implement a business intelligence system and enhance our MIS systems to ensure
availability and timely delivery of information within our organisation. Our major distributors in India are linked
through an information technology system called ‗Sampark‘, a collaborative planning, forecasting and
replenishment system. This system, along with our enterprise resource planning (―ERP‖) system, enables us to track
the availability of stock with our distributors, warehouses and factories and has stock management, billing,
accounting and report generation capabilities. This system has enabled us to structure our production and shipments
to our distributors in an efficient manner as well as help our distributors to operate effectively with reduced
inventory levels.
Experienced Employee Base and Management Team
We are led by a management team and staffed with employees who have significant experience in the domestic and
international FMCG industry. Through their commitment and experience, our management has grown our business
in India and overseas, nurtured our brands and has demonstrated an ability in successfully integrating acquired
foreign businesses into our corporate set-up.
We believe that a motivated employee base is key to our competitive advantage. The skills and diversity of our
employees gives us the flexibility to adapt to the challenging needs of our diverse businesses. Our personnel policies
are aimed towards recruiting talented employees and facilitating their integration into our organization and
87
encouraging the development of their skills and expertise. Our Company was ranked as one of the 25 Best
Employers in Asia in a study conducted by Hewitt India. Our Company was also ranked No. 11 in the Best
Employers in India 2008 survey conducted by Hewitt Associate and ranked 6th in the ‗Best Companies to Work for
in India‘ Survey 2008 conducted by Business Today and Mercer Human Resource Consulting.
Manufacturing Facilities Located Domestically and Internationally
Our manufacturing facilities enjoy the following strengths:
The manufacturing facilities, owned by our Company and Godrej Household are located in India. Our
widespread manufacturing base in India helps us to manufacture quality products at a low cost.
We have adopted the Total Quality Management (―TQM‖) philosophy for our manufacturing facilities,
which is focused on improving product quality and manufacturing processes. Our Malanpur facility
obtained the QMS and EMS certifications in 1995 and 1998, respectively, while our Baddi-Thana and
Baddi-Katha facilities received the QMS, EMS and OHSAS certifications in 2004 and 2008, respectively.
Our Guwahati and Sikkim facilities also received the QMS certification in 2009.
Four out of our five manufacturing facilities are located in areas which enjoy fiscal benefits, such as
income tax and excise benefits for setting up industrial undertakings in industrially backward states. These
fiscal benefits provide us with substantial cost-advantages.
Internationally, we manufacture a majority of our products in-house, with manufacturing facilities in South
Africa, Indonesia and Argentina which provides us the ability to respond to domestic demands in these
markets swiftly and efficiently.
Our Business Strategy
We are driven by our mission to continuously enhance the quality of life of our consumers in high-growth markets
with superior quality and affordable personal wash, home care and hair care products. We aim to enhance our
leadership position in the FMCG industry in India, while at the same time pursuing growth opportunities in both the
domestic and select international markets. The key elements of our business strategy include:
Focus on Our Core Brands to Grow and Expand Our Market Share
We will continue to focus on growing our market share in the toilet soaps category in India. We will also continue
to focus on maintaining our market leadership and increasing the market penetration of our hair colorant and
household insecticide products.
We intend to grow our core categories through the following steps:
Toilet Soaps
Introducing additional new variants; and
Strategically marketing our product range to cater to the needs and preference of each regional market,
such as focusing on ‗Cinthol Original‘ in South India and ‗Cinthol Deo‘ and ‗Cinthol Fresh‘ in the rest of
India.
Hair Color
Focusing on ‗Godrej Expert‘ to increase market penetration through value for money offerings; Establish
greater presence in the premium hair color category through ‗Godrej Renew‘;
Strengthen ‗Nupur‘ further as a natural hair color; and
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Strengthen and expand our distribution network.
Household Insecticides
Launch new variants to increase market penetration;
Continue to focus on all three sub-categories – electric, non-electric and aerosol; and
Renew rural focus.
Towards these ends, we also intend to focus on:
Increasing brand awareness, improving the image of our brands, new product development and innovation;
and
Marketing initiatives, including advertisements such as the ―buy and win‖ offer for ‗Cinthol‘ during the
India Premier League cricket tournament.
Consolidate and Further Expand our Presence in Emerging Economies in Asia, Africa and Latin America in
Personal Wash, Home Care and Hair Care Categories
Over the past few years, we have successfully expanded our operations in emerging economies through the
acquisitions of Rapidol, Godrej Global Middle East and Kinky. We recently acquired the Megasari Group, Issue
Group, Argencos and the ‗Tura‘ brand. We will focus on integrating and strengthening the operations of our newly
acquired companies through market-specific steps and synergies with our Indian presence. As we seek to maintain
the growth momentum in our current operations, we intend to continue to explore expansion into existing and other
emerging markets, where we believe we have competitive advantages. We believe that strategic acquisitions are
effective catalysts for business growth. We have developed an internal set of investment criteria which include
selecting investments of a strategic nature which are complementary to our existing operations, particularly those
which include expanding our presence in Asia, Africa, Latin America across the personal wash, home care and hair
care categories.
Expand our Distribution Reach especially in Rural Markets in India
We focus on strengthening our network of distributors in almost every major town in India. We believe that this
helps us to increase the visibility of our products, improves awareness for our brands and improves the acceptance of
our products. We have created a network of super-stockists and sub-stockists to tap the market opportunity in
smaller towns and villages.
India is witnessing the creation of many new markets and an expansion of the existing ones, as a result of socio-
economic changes. With the National Rural Employment Guarantee Act and an increasing farm income, estimates
indicate that over 300 million people will move up from the category of rural poor to rural lower middle class
between 2005 and 2025. With this change, rural consumption levels are expected to rise to current urban levels by
2017. Such developments in India‘s markets are expected to create major opportunities for Indian FMCG
companies. In order to take advantage of such changes, we will continue to strengthen our position as one of the
leading FMCG companies in the rural market by increasing market penetration through the expansion of our
existing distribution and retail network. We will also continue to increase the number of distributors, super-stockists
and sub-stockists in the rural areas to assist us in the expansion of our network coverage, particularly in regions that
we do not currently cover. We expanded our network of super stockists and sub-stockists which increased to 263
and 5,161 as of March 31, 2010, from 169 and 3,557, as of March 31, 2009, respectively. Furthermore, we will
continue to invest additional resources toward rural marketing to increase consumer recognition of our brand and
purchase of our products in such areas. For example, in the financial year 2010, we advertised our products on
channels that could reach rural India. In addition, we will continue to offer product variants to enhance our brand
popularity into the rural markets.
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Continue to Focus on Our Plants and Processes to Manufacture and Supply Products at a Low Cost
We currently operate manufacturing facilities in 11 locations in India and have manufacturing facilities located
abroad in South Africa, Nigeria, Argentina Indonesia and Sri Lanka, that produce a range of personal care products,
hair color products and home care products. To enhance our operating margins and profitability, we will seek to
continuously improve efficiencies and costs across the value chain from sourcing of the raw materials to the supply
of products to consumers. We initiated a cost reduction initiative in the financial year 2010 to reduce our cost of
operations and have formed teams to look at various methods of reducing expenditures for our key manufacturing
and supply activities. We have formed such teams to look at specific areas of supply chain, marketing cost and fixed
costs to achieve better efficiencies. Certain other key areas which we have identified for cost reduction projects
include packaging design, raw material management, improving yields, tax structuring and structuring of financial
transactions.
Leverage and Enhance the Godrej Brand Name and Our Brands
One of our key strengths is being part of the Godrej group of companies and the strong brand equity generated by
the ―Godrej‖ brand name. We believe that the Godrej brand commands a strong brand recall among consumers in
India due to its image and goodwill established over the years. The Godrej group was awarded the ―Corporate
Citizen of the Year‖ award by the Economic Times in 2003 and the Godrej brand was selected as the fourth best
brand in India in The Week magazine‘s ‗Mood of the Nation @ 60‘ survey published on August 19, 2007. We
believe that we have carried forward this brand name and reputation for quality in our products. We intend to
leverage the brand equity that we enjoy as part of the Godrej group of companies.
DESCRIPTION OF BUSINESS
Our Operations
We have operating subsidiaries in Argentina, Bangladesh, Indonesia, South Africa, Sri Lanka, the United Kingdom,
Nigeria, and the United Arab Emirates. The following table shows our operating companies by jurisdiction of
operation:
INDIA ASIA (EXCLUDING
INDIA)
AFRICA LATIN AMERICA
Godrej Household
Products Ltd
Godrej Hygiene Products
Ltd
Indonesia
PT Megasari Makmur
PT Ekamas Sarijaya
PT Sarico Indah
PT Simba Indosnack
PT Indomas Susemi Jaya
PT Intrasari Raya
Sri Lanka
Godrej Sara Lee Lanka Pvt
Ltd
Bangladesh
Godrej Consumer Products
Bangladesh Limited
Godrej Sara Lee
Bangladesh Pvt Ltd
United Arab Emirates
Godrej Global Middle East
FZE
South Africa
Kinky Group (Pty) Ltd
Nigeria
Godrej Nigeria Ltd
Argentina
Laboratorie Cuenca
Consell Argentina
Deciral Uruguay
EUROPE
United Kingdom
Keyline Brands Limited
(UK)
Inecto Manufacturing
Limited (UK)
Brazil
Issue Brazil
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INDIA ASIA (EXCLUDING
INDIA)
AFRICA LATIN AMERICA
Malaysia
Indovest Capital Ltd.
(Labuan)
The following table shows our total sales by product categories for the financial years 2010, 2009 and 2008:
(Rs. In Million)
Particulars For the Financial Year
2010 2009 2008
Net Sales % of
Total Net
Sales
Net Sales % of
Total Net
Sales
Net Sales % of
Total Net
Sales
Domestic
Toilet Soaps 8,244.88 40.4% 7,050.61 50.6% 5,666.17 51.4%
Hair Colorants 2,688.08 13.2% 2,271.72 16.3% 2,046.63 18.6%
Others 1,608.25 7.9% 1,477.46 10.6% 1,112.70 10.1%
Godrej Household * 4,088.49 20.0% - 0.0% - 0.0%
International Business
United Kingdom – Keyline 2,189.20 10.7% 2,006.12 14.4% 1,680.02 15.2%
South Africa – Rapidol 694.19 3.4% 488.13 3.5% 471.33 4.3%
South Africa – Kinky 721.66 3.5% 513.38 3.7% - 0.0%
Middle East – Godrej Middle
East 177.43 0.9% 122.23 0.9% 48.87 0.4%
Consolidated Total Net Sales 20,412.18 100.0% 13,929.65 100.0% 11,025.72 100.0% * This includes the proportionate sales attributable to our 49.0% ownership in Godrej Household for the ten months ended
March 31, 2010. On May 28, 2010, we increased our shareholding in Godrej Household to 100%.
Indian Market
Our operations in India comprise the businesses of our Company and Godrej Household with presence in the
following product categories:
Our Company‟s Products
Toilet Soaps
In the toilet soaps category in India, we had a value market share of 10.3% in the financial year 2010 as compared to
9.4% in the previous financial year. Sales from our domestic toilet soaps business accounted for Rs. 8,244.88
million as compared to Rs. 7,050.61 million for the financial year 2009. The following are our main brands in the
toilet soaps category:
‗Godrej No.1‘;
‗Cinthol‘;
‗Godrej FairGlow‘; and
‗Godrej No. 1‘ is one of the largest selling Grade 1 toilet soap brands in India, and has a significant market
share in the toilet soaps category in the states of Punjab, Haryana, Uttaranchal and Uttar Pradesh. This
brand provides a Grade 1 product at an affordable value caters to a large portion of the Indian populace.
The ‗Godrej No. 1‘ toilet soap is available in eight variants, two of which, ‗Godrej No. 1 Lime and Aloe
Vera‘ and ‗Godrej No. 1 Moisturising‘ were launched in the financial year 2010. In April 2010, we re-
launched this brand with new shape, packaging and greater natural oils ingredients.
‗Cinthol‘, our flagship brand, was launched in 1952 and is one of the oldest toilet soap brands in India. We re-
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launched the ‗Cinthol‘ brand in the financial year 2008. Our ‗Cinthol‘ toilet soap is available in seven variants.
‗Cinthol‘ was recognised as a Superbrand in 2009.
We launched ‗Godrej FairGlow‘ brand of toilet soap in the financial year 2000. This toilet soap contains a special
natural ingredient, a bio-extract ‗Natural Oxy-G‘, which offers a fairness benefits in addition to cleansing properties.
We launched three new variants of this brand, ‗Floral Essence‘, ‗Rose Wonder‘ and ‗Lily Sensation‘ during the
financial years 2009 and 2010.
Hair Colorants
In the hair colorants category in India, we had a value market share of 33.9% for the financial year 2010 as
compared to 33.7% in the previous financial year. We have a variety of offerings ranging across powders, liquids
and creams, and have priced our products at various price points to satisfy various categories of customers. Sales
from our domestic hair colorant business accounted for Rs. 2,688.08 million for the financial year 2010, as
compared to Rs. 2,271.72 million for the financial year 2009, respectively.
We offer hair colorant products in the premium and mass market ranges, which are sold under the following brands:
Premium Range
‗Godrej Renew‘ (cream based) is a cream-based hair color targeted at the middle income customers. It is
offered in eight color shares, two of which, ‗plum crazy‘ and ‗wine red‘ were introduced in the financial
year 2010. The cream now contains ‗aloe‘ and ‗protein‘ conditioners that protect and revitalise hair while
coloring. Under this brand, we also offer ‗Renew Highlights‘, which is a home use kit for permanent,
highlights in blonde and red colors.
‗ColourSoft‘ is our ammonia-free, premium hair color brand. We market this product as a long-lasting and
ultra-gentle hair colorant and it is offered in various color shades.
Mass Market Range
‗Godrej Expert‘ is one of our fastest growing brand with four variants, namely ‗Expert Powder Hair Dye‘,
‗Expert Liquid Hair Dye‘, ‗Expert Power Hair Colour‘ and ‗Expert Liquid Hair Colour‘. One of these
variants, ‗Expert Power Hair Dye‘ was awarded the Gold prize in the Hair Dye category by Readers Digest
in the ‗Trusted Brand – Asia 2009‘ awards. ‗Expert Power Hair Colour‘ is offered in four color shades and
is marketed based on five characteristics, namely color balance technology, shampoo-based color,
ammonia-free, nourishing conditioner and perfume. It is also available in size of three-gram sachets to
strengthen its distribution in smaller wholesale outlets across India. In the financial year 2010, we launched
the ‗Big B Programme‘ to market ‗Godrej Expert‘ to approximately 50,000 barbers across India. We also
recently changed the packaging of ‗Expert Powder Hair Dye‘ to enable retailers to buy smaller pack size
(cartons with 30 cartons of ‗Expert Powder Hair Dye‘), which are available in smaller wholesale outlets
across India.
‗Godrej Renew Powder Hair Dye‘ is a product targeted at the general Indian populace. ‗Godrej Powder
Hair Dye‘ is one of the largest selling hair colorant in its price range. In order to attract a larger consumer
base with lower purchasing power and consumers who use the product in smaller proportions, we
introduced this product in three-gram sachets in 1996.
‗Godrej Kesh Kala‘ is a ‗ready for application‘ oil based hair dye with coconut and plant-based natural
extracts of amla, bhringaraj, mehendi and shikakai that is available in two variants.
‗Godrej Nupur Mehendi‘ is a blend which offers natural hair treatment using natural extracts of nine herbs,
namely aloe vera, amla, bhringraj, brahmi, hibiscus, jatamansi, methi, neem and shikakai. This hair
colorant brand was re-launched in May 2009.
‗Godrej Kali Mehendi‘ is a colorant with natural extracts of aitha, amla, bhringraj and shikakai which
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provides nourishment to hair.
‗Godrej Anoop Hair Oil‘ is an ayurvedic herbal hair oil, which helps arrest hair fall and tone up scalp and
hair.
Toiletries
Our toiletries portfolio comprises shaving cream, talcum powder and deodorant spray. In the financial year 2010,
we also introduced a range of hand hygiene products in this category. Sales from our domestic toiletries business
accounted for Rs. 620.30 million for the financial year 2010, as compared to Rs. 832.40 million for the financial
year 2009.
Shaving Creams
‗Godrej Shaving Cream‘ is among the oldest brands in our toiletries category.
The ‗Godrej Shaving Cream‘ comprises four variants, namely:
‗Godrej Shaving Cream Rich Foam‘;
‗Godrej Shaving Cream Menthol Mist‘;
‗Godrej Shaving Cream Lime Fresh‘; and
‗Godrej Shaving Cream Deluxe Lather‘.
Talcum Powder
Our talcum powder is primarily sold under the brand ‗Cinthol Deo‘, which is available in five variants and has been
developed with a deodorant formula to protect against body odour. We launched the brand ‗Cinthol Regular‘
recently in this category. We also introduced smaller packaged units of our talcum powder range to address both
rural and urban requirements.
Deodorant Spray
Our deodorant spray is sold under the brand ‗Cinthol Deo Spray‘, which is available in six variants, two of which,
‗unleash‘ and ‗rainstorm‘, were launched in the financial year 2010.
Hand Hygiene
In the financial year 2010, we forayed into the hand hygiene category with the launch of our ‗Godrej Protekt‘ brand,
which comprises hand sanitizer, hand wash and hand hygiene wipes. It is available in three variants – ‗Original‘,
‗Citros‘ and ‗Blossom‘.
Liquid Detergent
Our liquid detergent brand, ‗Ezee‘ was launched in 1983 and is currently the largest selling liquid detergents in India
with a value market share of 76.5% for the financial year 2010. ‗Ezee‘ is designed for special and delicate garments,
including silk and woollen materials. We have obtained a ‗Woolmark‘ authentication that indicates ‗Ezee‘ is suitable
to wash woollen materials. Sales from this product category accounted for Rs. 428.50 million for the financial year
2010 as compared to Rs. 532.60 million for the financial year 2009.
Godrej Liquid Dishwash, our liquid dish wash is a concentrated formulation for washing and cleaning utensils.
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Godrej Household‟s Products
Household Insecticides
Godrej Household is the market leader and offers household insecticides in all formats, including mat, coil, aerosol
spray, liquid vaporiser and lotion. For the financial year 2010, Godrej Household‘s household insecticides business
accounted for a substantial portion of consolidated total income of Godrej Household. For the financial year 2010,
Godrej Household‘s share of the Indian household insecticides market was 33.1%. It sells household insecticides
under the following brand names:
‗Goodknight‘;
‗HIT‘; and
‗Jet‘.
‗Goodknight‘ is sold under three ranges, namely ‗Goodknight Care‘, ‗Goodknight Advanced‘ and ‗Goodknight
Naturals‘. ‗Goodknight Care‘ is the base range offering repellent mats and coils. The ‗Goodknight Advanced‘ range
offers variants such as the ‗Goodknight Advanced Activ+ System‘ electrical repellent and ‗Goodknight Advanced
Low Smoke‘ coil and ‗pleasant experience‘ aerosol. In April 2009, ‗Goodknight Advanced Activ+ System‘ was
voted as the Indian Product of the Year, which is one of the most coveted consumer recognitions in India that
recognises innovative consumer product in various categories. ‗Goodknight Naturals‘ is a mosquito repellent cream
marketed to address safety concerns as it contains a blend of active and exotic natural ingredients.
‗HIT‘ is available in a variety of insecticide aerosol sprays including ‗HIT Flying Insect Killer‘ for insects such as
mosquitoes and flies, ‗HIT Crawling Insect Killer‘, for insects such as cockroaches and ‗HIT Chalk‘ and ‗HIT Rat‘
for other household pests. ‗HIT Crawling Insect Killer‘ is one of the leading anti-cockroach insecticide in India.
The ‗Jet‘ brand includes coils, mats and refills and it has market leadership in certain regions in India , such as
Andhra Pradesh, in the 12-hour mosquito coil category.
Shoe Care
Godrej Household‘s shoe care brand, ‗Kiwi‘ is one of the most popular shoe care brands in the world. In India,
‗Kiwi‘ products are available in various forms such as pastes, liquids and express finish sponges. The Kiwi range
also includes specialty shoe care products like suede and nubuck renovators, canvas cleaners and shoe shampoos.
Male Hair Grooming
‗Brylcreem‘ is one of the world‘s oldest and recognised male hair grooming products with origins in the United
Kingdom and has been in India since the late 1960s. It offers a wide range of products in gel form, which is
available in two variants, ‗wetlook‘ and ‗upstrong hold‘ and cream form, which is available in three variants,
‗protein plus‘, ‗naturals‘ and ‗dandruff control‘.
Godrej Household‘s shoe care and male hair grooming brands, ‗Kiwi‘, ‗Kiwi Kleen‘ and ‗Brylcreem‘ are sold under
a licensing arrangement with Sara Lee Corporation, which owns these brands. Godrej Household has the exclusive
license to manufacture, market and sell these brands in specific jurisdictions, including India, Bangladesh and Sri
Lanka for periods ranging from six months to two years.
International Operations
We have expanded our business into the international markets through acquisitions in the United Kingdom, South
Africa, the United Arab Emirates, Indonesia, Argentina and Nigeria. For the financial year 2010, our international
operations contributed Rs. 3,824.70 million to our consolidated total income, an increase of 20.9% from the
financial year 2009. Going forward, we intend to grow our international operations in line with our ‗3 by 3‘ strategy
– to grow our presence in three continents, Asia, Africa and Latin America, in three core product categories, home
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care, personal wash and hair care.
United Kingdom
Keyline Brands Limited
In October 2005, we acquired Keyline, a company engaged in the marketing and distribution of personal care
products. Keyline‘s key market is the United Kingdom, which contributes approximately 90.0% of its total sales of
Keyline and its brands also have presence in Europe, Australia, Canada and the Middle East. Through Keyline, we
market, sell and distribute cosmetics, toiletries and male grooming products and we have developed a customer base
in numerous supermarket chains and discount stores.
Keyline possesses its own integrated functions, including sales, marketing, finance, IT, logistics services and a
customer service department. Some of Keyline‘s proprietary brands were manufactured by its wholly- owned
subsidiary Inecto Manufacturing Limited until February 29, 2008, after which we decided to outsource
manufacturing activities to low-cost third party manufacturers in the United Kingdom.
A list of the various key brands offered by Keyline is as follows:
Brand Description
―AAPRI‖ Skin care
―CUTICURA‖ Medicated talcum powder and hand hygiene
―ERASMIC‖ Shaving products
―INECTO Hair Care‖ Diverse range of hair colorants and specialist shampoos and conditioners
―NULON‖ Hand creams and lotions
―Bio-oil‖ Skin care
―P20‖ Sun care
For the financial year 2010, sales for the ‗Cuticura‘ hand hygiene range increased significantly due to the H1N1
influenza epidemic. The sales of product range increased significantly during this period and for the financial year
2010 it was one of leading brands in the United Kingdom, in terms of sales volumes. In addition, ‗Bio Oil‘ is one of
the signature brands of a large retail chain store and ‗P20‘ is one of the biggest selling sun care product range in the
United Kingdom. For the financial year 2010, Keyline had total income of £29.05 million (Rs. 2,213.56 million) and
profit after tax of £2.77 million (Rs. 211.05 million), as compared to £24.99 million (Rs. 1,977.34 million) and
£2.24 million (Rs. 177.26 million), respectively, for the financial year 2009.
Africa
We currently have significant presence in the African continent in the hair and hair care product category, through
our acquisition of Rapidol and Kinky in 2006 and 2008, respectively. We recently acquired the Tura brand, and
expect to gain foothold in Nigeria and other West African countries. We intend to integrate our operations in Africa,
on a ‗One Africa‘ platform and we intend to combine the operations of Rapidol and Kinky to create operational
synergies, particularly in distribution and sales networking and achieve cost efficiencies.
Rapidol (Pty) Limited
In September 2006, we acquired the South African business of Rapidol, as well as its subsidiary, Rapidol
International Limited. This acquisition gives us an entry to the hair color market for black hair and ownership of
ethnic hair color brands like ‗Inecto‘, which is one of the leading ethnic hair color brands in South Africa. Rapidol‘s
distribution network is spread across South Africa and other African nations such as Zambia, Mozambique,
Tanzania, Swaziland, Ghana, Namibia, Zimbabwe, Mauritius, Seychelles and Madagascar.
Rapidol began operations in South Africa in 1952 and has since been involved in the manufacturing and marketing
of permanent hair colorants. It has developed a range of hair colorants and hair care products particularly designed
for color treated hair in the climatic conditions of Africa. Currently, the Inecto brand comprises ‗Famous Originals‘,
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‗Color Range‘, ‗Plus‘ ‗Plus Highlights‘, ‗Henna‘, ‗Powder Hair Color‘ and ‗Semi Permanent‘ variants.
For the financial year 2010, Rapidol had total income of ZAR 115.29 million (Rs. 706.14 million) and profit after
tax of ZAR 20.59 million (Rs. 126.21 million), as compared to ZAR 93.98 million (Rs. 497.74 million) and ZAR
12.20 million (Rs. 64.64 million), respectively, for the financial year 2009.
Kinky Group (Proprietary) Limited
In April 2008, we acquired Kinky, which is one of the leading hair products manufacturing, marketing and
distribution companies in South Africa. The ‗Kinky‘ brand is a market leader in the South African hair business and
has existed for over 30 years in that country. The product portfolio of ‗Kinky‘ includes hair braids, hair pieces, wigs
and hair accessories. Kinky also offers hair accessories like styling gels, hair sprays, oil free shampoo, bonding glue
and bonding glue remover under the ‗Kinky‘ brand. Such products are manufactured at plants located in Durban,
South Africa. The raw materials and inputs for Kinky‘s products are sourced both from within and outside South
Africa. The final products are sold through wholesalers, ‗cash n carry‘ outlets stores in various African countries and
24 owned stores in South Africa, two of which were opened in the financial year 2010. Kinky currently exports its
products to Swaziland, Mozambique, Botswana and Lesotho.
For the financial year 2010, Kinky had total income of ZAR 118.24 million (Rs. 725.99 million) and net profit of
ZAR 7.70 million (Rs. 47.25 million), as compared to ZAR 96.59 million (Rs. 517.07 million) and ZAR 10.62
million (Rs. 56.82 million), respectively, for the financial year 2009.
„Tura‟ Brand
On June 16, 2010, we completed the acquisition of the ‗Tura‘ brand from the Tura Group. The ‗Tura‘ brand is a
household name in many West African countries, and in 2007, it became the only super brand in Nigeria in the
personal care category. The ‗Tura‘ brand was launched in 1986 and now enjoys a leading market share in a range of
products including toiletsoap, moisturising lotion and skin-toning cream, with a distribution network across Nigeria.
The ‗Tura‘ medicated bar soap is among the top three in its category in Nigeria. We believe this acquisition will
serve as a strong platform for introducing our products portfolio into Nigeria and other Western African countries,
such as Ghana, Congo and Cameroon.
Asia
Middle East - Godrej Global Mid East FZE
We acquired Godrej Middle East, which was a subsidiary of Godrej International Limited, in October 2007. Godrej
Middle East was established in Sharjah to distribute our products in Middle East. It currently has a distribution
network in the United Arab Emirates, Oman, Saudi Arabia, Kuwait, Qatar and Bahrain, with over 10 years‘
experience in these markets, particularly in the distribution of soap, hair colorant and toiletries. Through Godrej
Middle East we have launched our ‗Expert‘ and ‗Nupur Mehendi‘ hair color products in the Middle East, which
continues to be a lucrative market for us. It has also introduced the ‗Cuticura‘ hand hygiene product range in
Lebanon. Godrej Middle East‘s products are available in large trade channels and in pharmacies which help to
rapidly introduce new products and new brands.
For the financial year 2010, Godrej Global Mid East had total income of AED 13.67 million (Rs. 177.75 million)
and net profit of AED 0.72 million (Rs. 9.34 million), as compared to AED 9.67 million (Rs. 122.41 million) and
AED 0.26 million (Rs. 3.31 million), respectively, for the financial year 2009.
Indonesia - The Megasari Group
In May 2010, we acquired the Megasari group, which comprises PT Megasari Makmur, PT Ekamas Sarijaya, PT
Indomas Susemi Jaya, PT Simba Indosnack, PT Intrasari Raya, PT Sarico Indah in Indonesia and Indovest Capital
Limited (Labuan) in Malaysia.
The Megasari Group was established in 1986 and currently manufactures a wide range of products in various FMCG
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categories, including household insecticides, air fresheners, wet tissues, baby care, car and motorcycle products,
food wrappings, drain openers, bleach, metal polishers and fly and rat glue. It is one of the leading companies in the
Indonesia household products market, with six manufacturing facilities in West Java, Indonesia and an extensive
distribution network across Indonesia comprising 11 branches, over 90,000 outlets and 74 regional distributors, with
over 600 salesmen as of December 31, 2009. In the household products category, the Megasari Group holds the
rights to manufacture, distribute and sell, leading brands such as ‗HIT‘ - anti-mosquito, fly, and cockroach
insecticide; ‗Stella‘ and ‗Fogo‘ - air fresheners; and ‗Mitu‘ - baby products in Indonesia.
For the calendar year 2009, the Megasari Group had total net income (proforma) of Rp. 101.18 billion (Rs. 472.00
million).
South America
Issue Group
On June 1, 2010, we completed the acquisition of the Issue Group, comprising Laboratoria Cuenca and its
subsidiaries, Consell SA, Issue Uruguay, Deciral Uruguay and Issue Brazil. The Issue Group is one of the leading
mass market hair color companies in Latin America, with presence in Argentina, Paraguay, Peru and Uruguay and
an emerging presence in Brazil. Issue Group has a market share of over 20% in the hair colorant market in
Argentina, in terms of sales volumes. We intend to market and distribute our product portfolio in Latin America
through the distribution network of Issue Group.
Argencos SA
On June 2, 2010, we entered into an agreement to acquire Argencos, a medium size hair care company in Argentina,
which we believe will complement the operations of the Issue Group. Argencos is one of the largest player in
Argentina is the niche market of hair colors in kit format. Its leading brands are ‗Roby‘ and ‗919‘, which are leading
hair styling spray brands in Argentina.
Manufacturing
We have manufacturing facilities located in India and outside India. Our various manufacturing facilities and the
products manufactured at these facilities are set out below:
Domestic Manufacturing Units
Location Products Manufactured Year of Commencement
Malanpur, Madhya Pradesh Toilet Soaps and Toilet Soap Noodles July 1991
Guwahati, Assam Hair colors and toiletries November 2001
Baddi – Thana, Himachal Pradesh Toilet Soaps January 2004
Baddi – Katha, Himachal Pradesh Toilet Soaps, Liquid Detergent and Shampoo December 2006
Sikkim Hair colors and toiletries March, 2007
Malanpur plant: Our Malanpur plant has an integrated complex for manufacturing of toilet soaps with facilities for
fat splitting and distillation, toilet soap manufacturing, finishing and packing lines. Since inception, this unit has
focused on the total quality management (―TQM‘) principles and it received the QMS and EMS certifications in
1995 and 1998, respectively. This plant has also won many awards such as:
Qimpro Award in 2004;
PM Excellence Awards - First Category by JIPM in 2006;
CII -Exim Bank Award for Excellence in 2007;
Indian Manufacturing Excellence award by Frost & Sullivan in 2006 and 2008; and
Awards in National Convention of Quality Circle –from 1999 onwards
Baddi-Thana plant: This unit has toilet soap finishing and packing lines facilities. It received the QMS, EMS and
OHSAS certifications in 2004. It has also received accolades in National Convention of Quality Circle.
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Baddi-Katha plant: This unit has toilet soap finishing, shampoo manufacturing and packing lines facilities. It
received the QMS, EMS and OHSAS certifications in 2008. It has also received accolades in National Convention
of Quality Circle.
Guwahati and Sikkim plants: These units have received QMS certifications in 2009.
Manufacturing Facilities of Godrej Household
The locations of Godrej Household‘s various manufacturing facilities and the products manufactured at these
facilities are set out below:
Location Products Manufactured
Pondicherry Coils, Mat and Refill Machines
Chennai, Tamil Naidu Shoe care and Surface Care Products
Guwahati, Assam Mats, Refills, Coils, Air Fresheners
Meghalaya Coils
Jammu Coils
Goa Aerosol
Sri Lanka Coils
International Manufacturing Units
We also have manufacturing locations abroad in South Africa, Indonesia, Nigeria and Argentina.
Sales and Marketing
Our sales and marketing strategy focuses on increasing sales, gaining market share and brand-building. Our
domestic sales force comprises over 290 employees across the country. A two tier distribution network of super
stockists and sub-stockists allows for deeper penetration into the Indian market. As of March 31, 2010, we had 33
C&F agents and 1,258 direct distributors, 263 super stockists and 5,161 sub-stockists to support our sales force.
Through our distributors and sub-stockist, we cover close to 3,700,000 retailers in India. The distribution network of
Godrej Household comprised 32 C&F agents servicing approximately 1,100 distributors and sub-stockists across
India, as of March 31, 2010. As of December 31, 2009, the Megasari Group had a distribution network comprising
11 branches, over 90,000 outlets and 74 regional distributors, with over 600 salesmen in Indonesia. Certain key
features of our sales and marketing strategy are set out below:
Value-For-Money Focus. We aim to ensure that all our products possess distinct ‗value for money‘ propositions,
offering quality products at competitive prices and with professional tools and education leaflets. According to
specifications by the Bureau of Indian Standards, all the key brands of our Company in the toilet soaps category,
such as ‗Godrej No. 1‘ and ‗Cinthol‘ continue to be of Grade-1 quality. In order to access the rural markets, we have
introduced some of our products in smaller stock-keeping-units.
Dedicated Brand Teams. We have appointed marketing managers for marketing and brand building initiatives for
each product as well as to pursue new market trends and variations. The brand team is responsible for marketing,
advertising, promotions, consumer research and other disciplines that are the key to developing a FMCG brand. One
of the initiatives undertaken in the financial year by this team was the ‗Big B Programme‘ to market our ‗Godrej
Expert‘ hair colorant and our shaving creams to approximately 50,000 barbers across India. We believe that barbers
have strong influence in the product choices of their customers, especially in rural areas.
Customised Product Offerings. In line with our objective of building long-term consumer relationships and adapting
to various customer needs, we introduce customised products based on specific market requirements. For example,
we introduced a special salon pack consisting of our shaving cream, hair color and talcum powder that is suitable for
use by barbers as part of our ‗Big B Programme‘.
Focused Communication Strategy. Our advertisements consist of a mix of electronic, print and online media, as well
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as through various competitions and partnerships to strengthen brand identity. In the financial year 2010, we spent
Rs. 1,327.99 million in advertising and publicity expenses as compared to Rs. 966.85 million in the financial year
2009.
Supply Chain Management
We believe we have an efficient supply chain management system. The objective of our supply chain is to ensure
that the required product is available in the right quantity at a specified place at the right time.
We implemented ‗Sampark‘, a collaborative planning, forecasting and replenishment system, which along with our
ERP system, provides information exchange between our Company, our C&F agents‘ warehouses and our dealers to
enable efficient planning, timely delivery and planned level of inventories. Such data is used to manage inventories
at an appropriate level based on actual sales. The primary objective of this process is to design a supply chain which
responds to actual demand instead of forecast numbers. As soon as a demand link dispatches goods, it triggers an
automatic order on the supply link to replenish the stocks at the demand link centre. The process also helps in
prioritising the dispatches from the supply site based on the stock positions of all the demand centres. Through our
‗Sampark‘ system we are able to communicate with raw material suppliers, third party manufacturers and C&F
agents to ensure optimal finished product inventory levels and adequate marketplace availability.
Raw Materials and Major Suppliers
The principal raw material for the manufacture of our products is palm oil and derivatives. Our other raw materials
include color and perfume. We maintain a diverse base of suppliers from which we source our raw materials. We do
not currently have any long-term supply contracts for our raw materials.
Utilities
Our operations at our facilities require significant amounts of electricity. In the financial years 2010 and 2009,
power and fuel cost constituted 2.0% and 2.9% of our consolidated total expenditures, respectively. Each of our
plants purchases power from their respective local utility companies.
Health, Safety and Environment
We have a SHE (safety, health and environment) policy to take care of safety, health and environment. The main
objectives of SHE is to ensure zero accidents, zero health hazards at work and clean and green environment. We
have implemented a number of precautionary measures for the safety of our manufacturing units and for the better
usage and conservation of the environment. In the event of any mishap, we have a mechanism in place to review and
improve the existing safety and training mechanisms. Our factories at Malanpur and Baddi-Thana are ISO certified.
We undertake periodic surveillance audits to ensure compliance with the various norms. All our factories are ‗no
tobacco no smoking‘ zones.
We comply with applicable health, safety and environmental legislation and other requirements in our operations.
We are currently not a party to any environmental proceedings which, if adversely determined, would reasonably be
expected to have a material adverse effect on our financial condition or results of operations. We believe that all
accidents and occupational health hazards can be prevented through systematic analysis and control of risks and by
providing appropriate training to employees, subcontractors and communities. We encourage our employees to work
constantly and proactively toward eliminating or minimizing the impact of hazards to people and the environment.
We encourage the adoption of occupational health and safety procedures as an integral part of our operations.
Research and Development
We believe that research and development (―R&D‖) activities are an integral component of our success and growth
strategy. Our R&D focus is to drive innovation in all areas of our business leading to improvements in product
quality, cost savings, higher efficiencies and quality packaging for our proprietary brands. In the recent past, our
Company‘s R&D team has focused on customer centricity, and packaging development with respect to hair care,
skin care, fabric care and hygiene products. We have integrated our R&D practices to operate in co-ordination with
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all our businesses and various product categories. Particularly, we endeavour to leverage our R&D activities to keep
up with changing consumer taste and trends, as well as capture new markets. Feedback from our consumer studies
on our existing and new products is relayed to our R&D team for suggestions of modifications to suit consumer taste
and improvements. Through our R&D activities, we continuously modify the variety and aesthetic aspects of our
products as well as improve the ancillaries of our products such as packaging with emphasis on enhanced safety and
improved imagery. Our R&D team also studies areas in our production that can be outsourced to lower costs and
improve efficiencies.
As a result of our R&D activities, we have managed to produce a variant of ammonia-free powder hair dye for our
‗Expert‘ brand. For the financial year 2010, products which have been introduced with features derived from our
R&D activities include new variants of our ‗Godrej No. 1‘ toilet soap, new shades of our ‗Renew‘ hair color, new
variants of ‗Cinthol‘ deodorant and the entire range of ‗Protekt‘ hand hygiene products. We have also been able to
replicate the fragrances of our entire range of ‗Cinthol‘ toilet soap into our range of ‗Cinthol‘ perfumed talcum
powder. Our Company‘s R&D team also conducts research for our international business, which is aligned with our
initiatives to cross sell our brands, with the necessary modifications, to suit consumer taste in different geographical
areas. We intend to continue working on minor changes to our products to increase exports to other African
countries. We have adopted a centralised R&D approach, where all research activities are conducted by our team in
India for our international operations, which we believe contribute to cost synergies. Our in-house R&D activities
are conducted in the Godrej Research and Development Centre, which is recognised by the Department of Science
and Technology, New Delhi.
R&D activities are also central to the product development and operations of Godrej Household. We acknowledge
that safe, effective and economic formulations are important aspects of household insecticides, each of which
require continuous improvement through scientific research. The R&D facility of Godrej Household is located in
Vikhroli, Mumbai and is dedicated to research in the field of household and public health pest control. The centre
has been designed by professional architects in collaboration with experienced scientists. Godrej Household
conducts research in five major areas, namely insect breeding and bionics of household pests, screening of new
insecticide formats such as mats, vaporizers, aerosols and baits, research on natural products and bio-insecticides;
insect resistance to insecticides and consumer friendly equipment and devices to effectively dispense insecticide
formulations. As a result of its R&D activities, Godrej Household successfully launched the ‗Goodknight Naturals
Mosquito Repellent Cream‘ in April 2010, which was developed as a product suitable for use by children. Godrej
Household‘s research scientists include entomologists, organic chemists, technologists and engineers. The centre
coordinates its efforts with leading national and international research agencies to globalise our products and
processes. The centre follows good international laboratory practices and is recognised by the Department of
Science and Technology New Delhi.
Human Resources
We place importance on developing our human resources. We reward our employees with the opportunity to work
abroad in our international subsidiaries for good performance. Our Company was ranked one of 25 Best Employers
in Asia in a study conducted by Hewitt India. Our Company was also ranked No. 11 in the Best Employers in India
2008 survey conducted by Hewitt Associate and ranked 6th in the ‗Best Companies to Work for in India‘ Survey
2008 conducted by Business Today and Mercer Human Resource Consulting. Some of the other key features of our
human resources policy include:
We have a performance linked variable remuneration approach in our compensation policies, facilitating a
performance linked pay system;
The total talent management process at our Company aims to build future strategic capabilities and
structure the development of critical talent for future business needs;
‗GOLD‘, the Godrej Organization for Learning and Development was set up for the purpose of energizing
and accelerating the learning process for employees of Godrej Industries Limited and its associate
companies. We believe this is a key step towards becoming a ―learning organization”, which is one of our
key values;
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We have adopted the Godrej Employee Management System (GEMS), an IT system to support ‗people-
processes‘, which has been optimized for our business needs. It helps us to improve the quality of people-
related decision making and provide timely and enhanced HR support for our businesses; and
Being part of the Godrej group, we have programmes across the group to facilitate knowledge sharing and
promote best practices across the group. In addition, management programmes are also conducted for key
managers in association with Symbiosis Institute of Business Management.
We have not experienced any major strikes since inception and we consider our relationship with our employees to
be satisfactory. As of March 31, 2010, we employed a total of 1,452 individuals, on a consolidated basis. The
breakdown of employees in different functionalities has been provided below:
Function Number of Employees
Domestic International
Managerial Staff
Manufacturing 102 11
Sales 291 16
Marketing and Purchase 49 14
Finance, human resources, R&D and Others 122 22
Sub-Total 564 63
Workers and Staff 712 113
Grand Total 1,276 176
Our recent global acquisitions have given us access to new markets and provided us with a global workforce. We are
focused on managing and integrating our global workforce and positioning our resources in the region and business
where they can perform at their optimal level. We are confident that exposure to different markets, cultures and
product lines, systems will enhanced the knowledge and skills of our management team.
Intellectual Property
We own or have the right to use the trademarks in respect of majority of our products, while we are in the process of
obtaining trademarks for the balance products, especially the recently launched products. We continuously monitor
the development in our various applications for registration of our trademarks. We rely on unpatented proprietary
know-how, continuing technological innovation and other trade secrets to develop and maintain our competitive
position. We constantly seek to protect our trademarks against unauthorised use or infringement, but any such
precautions may not provide meaningful protection against competitors or protect the value of our trademarks.
Information Technology
We have recently entered into a 10-year strategic IT transformation services contract with Hewlett Packard (―HP‖).
We have outsourced all our IT functions to HP which has enabled us access to the latest developments in
technology. New initiatives by us during the current financial year include the implementation of business
intelligence and enhanced MIS systems which ensure availability and timely delivery of right information to the
management team. We expect several synergies and cost savings from our investments in technology. Since the
implementation of our new information technology system, we have experienced considerable increase in efficiency
and turnaround time. We also employ technology in our supply chain management system. For further details, see
―—Supply Chain Management‖ above.
We are in the process of setting up a disaster recovery system which will help us to transition our key business
process in case of any man-made or natural disaster and ensure uninterrupted flow of business transactions.
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Competition
Competition in many of our product categories such as toilet soap, hair colorant, toiletries and liquid detergent is
intense. Flexibility to respond to changing business and economic conditions including advertising spend is an
important element towards maintaining a competitive position in our industry. We compete against a number of
manufacturers and marketers, some of which are larger and have substantially greater resources than us, including
the ability to spend more aggressively on advertising and marketing.
Corporate Social Responsibility
As our business is dependent on and focused on the needs of consumers comprising the general populace, we
acknowledge the importance of being more people-centric. Our Malanpur factory has adopted the nearby Singwari
village and has undertaken initiatives such as health and hygiene awareness programmes, free eye check-ups and
women awareness camps. We have also built a health centre and a school building for the residents of Singwari.
From time to time, we organise programmes to educate the public on the dangers of epidemics such as the H1N1
influenza, the usage of alcohol and tobacco and HIV/AIDS.
We provide scholarships to meritorious and needy students who attend school around our manufacturing facilities.
We occasionally organise donation drives to collect items such as winter clothing for the under privileged members
of society. We have also partnered with various government and non-government organisations to provide
entrepreneurship support, employment, trainings and other monetary and non-monetary assistance to under-
privileged sections of society.
Our South African subsidiary Kinky, undertook an awareness programme on HIV among its employees. With an
increasing presence in Africa and Latin America, we intend to conduct similar programmes and initiatives to raise
awareness with the view to improving the lives of the communities in which we operate.
Properties
Our Company‘s corporate office is situated at Pirojshanagar, Eastern Express Highway, Vikhroli (E), Mumbai.
Our Company‘s manufacturing facilities are also situated on land which has been leased from third parties, the
details of which are as follows:
Name of Factory Area Period
Malanpur (Madhya Pradesh) 281,499.58 square meters May 16, 1989 to May 15, 2088
Thana (Himachal Pradesh) 10,332 square meters June 4, 2003 to June 3, 2098
Baddi-Katha (Himachal Pradesh) 25,555 square meters January 12, 2006 to January 11, 2101
Guwahati (Assam) 22,174 square feet June 8, 2001 to November 30, 2011
Sikkim 78,409 square feet November 27, 2006 to November 26, 2105
We also have also taken certain properties in Mumbai, Delhi, Kolkata and Chennai on lease for use by our sales and
marketing personnel.
Insurance
We maintain insurance coverage that we consider customary in our industry against with some of the leading
insurers in India. Some of the major risks covered for our business assets are against risk relating to fire, natural
calamities like earthquake, burglary and certain other losses and damage to buildings, plants, machinery, inventory
and office equipment, loss of cash in transit and loss or damage of incoming and outgoing materials and finished
goods by water, road and railway. We also maintain directors‘ and officers‘ liability, product liability and marine
cargo insurance.
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DIRECTORS AND SENIOR MANAGEMENT
Board of Directors
In accordance with our Articles of Association, our Company shall not have less than three Directors and not more
than 12 Directors. Currently, we have 11 Directors.
Pursuant to the Companies Act, not less than two-thirds of the total number of our Directors shall be persons whose
period of office is subject to retirement by rotation and one-third of such Directors, or if their number is not three or
a multiple of three, then the number nearest to one-third, shall retire from office at every Annual General Meeting.
The Directors to retire are those who have longest held their office since their last appointment. A retiring director is
eligible for re-election. Our Directors are not required to hold any qualification shares.
The following table sets forth details regarding the Board of Directors as of the date of this Placement Document.
Name, DIN,
Term and Nationality*
Age Designation
Mr. Adi Godrej
DIN: 00065964
Term: Three years with effect from April 1, 2010
Nationality: Indian
68 Chairman and Executive Director
Mr. Jamshyd Godrej
DIN: 00076250
Term: Liable to retire by rotation
Nationality: Indian
61 Non-Executive and Non-Independent
Director
Mr. Nadir Godrej
DIN: 00066195
Term: Liable to retire by rotation
Nationality: Indian
59 Non-Executive and Non-Independent
Director
Mr. Bala Balachandran
DIN: 00472998
Term: Liable to retire by rotation
Nationality: American
76 Independent Director
Ms. Rama Bijapurkar
DIN: 00001835
Term: Liable to retire by rotation
Nationality: Indian
53
Independent Director
Mr. Bharat Doshi
DIN: 00012541
Term: Liable to retire by rotation
Nationality: Indian
61 Independent Director
Dr. Omkar Goswami
DIN: 00004258
Term: Liable to retire by rotation
Nationality: Indian
54 Independent Director
Mr. A. Mahendran
DIN: 00242423
Term: Liable to retire by rotation
Nationality: Indian
55 Managing Director**
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Name, DIN,
Term and Nationality*
Age Designation
Mr. Aman Mehta
DIN: 00009364
Term: Liable to retire by rotation
Nationality: Indian
64 Independent Director
Mr. D. Shivakumar
DIN: 00203578
Term: Liable to retire by rotation
Nationality: Indian
51 Independent Director
* Mr. Dalip Sehgal ceased to be on the Board of our Company with effect from July 1, 2010.
**Mr. A. Mahendran has been appointed as the Managing Director of our Company with effect from July 1, 2010.
Brief Biographies of our Directors:
Mr. Adi Godrej
Mr. Adi Godrej has been a Director since inception and is currently the Chairman of our Company. He is also the
chairman of various companies in the Godrej Group such such as Godrej and Boyce Limited, Godrej Industries
Limited and Godrej Properties Limited.
He has also participated actively in the field of management education and was the former chairman of the
Governing Council of the Narsee Monjee Institute of Management Studies, a former member of the Dean‘s
Advisory Council of the MIT Sloan School of Management and was also a part of the Wharton Asian Executive
Board.
He holds a Bachelor and Masters degree in science from the Massachusetts Institute of Technology, U.S.A. He is
also a member of Tau Beta Pi (The Engineering Honor Society) and serves as a member of the governing board of
the Indian School of Business.
Mr. Adi Godrej is a recipient of several awards and recognitions including the Rajiv Gandhi Award.
Mr. Jamshyd Godrej
Mr. Jamshyd Godrej has been a Director since March 2001 and is currently a Non Executive Director of our
Company. He holds a Bachelor degree in science from the Illinois Institute of Technology, USA. Mr. Jamshyd
Godrej is a director of numerous companies and is also the President of World Wide Fund for Nature, India.
Mr. Nadir Godrej
Mr. Nadir Godrej has been a Director since inception and is currently a Non Executive Director of our Company. He
holds a Bachelors degree in science (chemical engineering) from the Massachusetts Institute of Technology, USA
and a Masters degree in (chemical engineering) from Stanford, USA. Mr. Nadir Godrej is the also the chairman of
Godrej Agrovet Limited and the managing director of Godrej Industries Limited.
Mr. Bala Balachandran
Mr. Bala Balachandran has been an Independent Director of our Company since April 2001. He holds a Bachelors
and Masters degree in science (mathematics/statistics) from Annamalai University. Mr. Bala Balachandran began
his teaching career in 1960. In 1967 he moved to the University of Dayton and in 1971 to Carnegie-Mellon to work
on his doctorate. In 1973 he joined the faculty of Kellogg Graduate School of Management.
104
Ms. Rama Bijapurkar
Ms. Rama Bijapurkar has been an Independent Director since April 2001. She holds a post graduate diploma in
management from the Indian Institute of Management, Ahmedabad. She has her own strategic marketing consulting
practice and works across a wide range of sectors, helping organizations develop market strategy as part of their
business strategy. In addition to her consulting practice, she teaches at Indian Institute of Management, Ahmedabad.
Mr. Bharat Doshi
Mr. Bharat Doshi has been an Independent Director of our Company since April 2001. He has completed his
Bachelors degree in Commerce and Masters in Law from the Bombay University and is also a qualified Chartered
Accountant and a Company Secretary. Mr. Bharat Doshi is presently the Executive Director and Group CFO of
Mahindra & Mahindra Limited.
Dr. Omkar Goswami
Dr. Omkar Goswami has been an Independent Director of our Company since June 2008. He has received a Ph.D in
Economics from the University of Oxford in 1982. Dr. Omkar Goswami is the founder and Chairman of the
Corporate and Economic Research Group. He has also acted as a consultant to the World Bank, the International
Monetary Funder and the Asian Development Bank. He serves on the board of directors of Dr. Reddy‘s Laboratories
Limited, Infosys Technologies Limited, Infrastructure Development Finance Company and Cairn India Limited.
Mr. A. Mahendran
Mr. A. Mahendran has been a Non Executive Director since June 2008. He has recently been appointed as the
Managing Director with effect from July 1, 2010. He is a Chartered Accountant and has a Bachelors Degree in
commerce. He is also a director in various companies of the Godrej Group such as Godrej Household Products
Limited and Godrej Hershey Limited.
Mr. Aman Mehta
Mr. Aman Mehta has been an Independent Director of our Company since 2006. Mr. Aman Mehta has a Bachelor's
degree in Economics from Delhi University. He has over 35 years of experience in various positions with The Hong
Kong and Shanghai Banking Corporation group. Mr. Aman Mehta is also an independent director of several public
companies.
Mr. D. Shivakumar
Mr. D. Shivakumar has been an Independent Director of our Company since April 2009. He is an engineer from the
Indian Institute of Technology, Chennai and is a postgraduate from the Indian Institute of Management, Kolkata. He
is currently the vice president and managing director of Nokia India Private Limited.
Mr. Dalip Sehgal ceased to be on the Board of our Company with effect from July 1, 2010.
Borrowing Powers of Our Board of Directors
Pursuant to a shareholders‘ resolution dated February 10, 2010, the Board has been authorised to borrow money
upon such terms and conditions as the Board may think fit, provided that the aggregate amount of our borrowings
shall not exceed, at any time, Rs. 30,000 million in excess of our Company‘s paid up capital and free reserves.
Interest of our Directors in the Company
All of our Directors may be deemed to be interested to the extent of fees payable to them for attending Board or
Board committee meetings as well as to the extent of other remuneration and reimbursement of expenses payable to
them. Our Executive Directors also may be deemed interested to the extent of remuneration paid to them for services
105
rendered as our officers or employees.
All of our Directors may also be regarded as interested in any Equity Shares and stock options held by them and also
to the extent of any dividend payable to them and other distributions in respect of the Equity Shares. All Directors
may also be regarded as interested in the Equity Shares held by, or subscribed by and allotted to, the companies,
firms and trust, in which they are interested as directors, members, partners, trustees.
All of our Directors may be deemed to be interested in the contracts, agreements or arrangements entered into or to
be entered into by us with any company in which they hold directorships or any partnership firm in which they are
partners. Except as otherwise stated in this Placement Document and our statutory registers, we have not entered
into any contracts, agreements or arrangements during the preceding two years from the date of this Placement
Document in which any of our Directors are interested directly or indirectly, and no payments have been made to
them in respect of any such contracts, agreements, arrangements which are proposed to be made with them. Our
Directors have not taken any loans from us.
Shareholding of Directors
The following table sets forth the shareholding of our Directors as on June 18, 2010.
Name Number of
Equity
Shares
Shareholding
Percentage
Outstanding
Options
Options
Granted and
Vested
Mr. Adi Godrej* 500 0.00 Nil Nil
Mr. Nadir Godrej ** 2,055,744 0.67% Nil Nil
Ms. Rama Bijapurkar 3,980 Nil Nil Nil
Mr. Bharat Doshi 13,714 0.00% Nil Nil
Total 2,073,938 0.67% Nil Nil
* This includes 400 Equity Shares held by Mr. Adi Godrej jointly with late Mr. S. P. Godrej, which have been transferred to a
third person, but the transfer has not registered pending receipt of satisfactory documentation in this regard.
** This includes 120 Equity shares registered in the name of Mr. Nadir Godrej, which have been transferred to a third person,
but the transfer has not registered pending receipt of satisfactory documentation in this regard. This also includes 1,028,724
shares held on behalf of minor son.
Executive Directors
Terms of Employment of our Executive Directors
Mr. Adi Godrej
Period of Appointment: Three years with effect from April 1, 2010
I. Remuneration
A) Fixed Compensation
Fixed compensation shall include basic salary and our Company‘s contribution to Provident Fund and
Gratuity. The basic salary shall be in the range of Rs. 550,000 to Rs. 850,000 per month. The annual
increments will be decided by the Board and will be merit based and take into account various factors.
Our Company‘s contribution to Provident Fund and Gratuity shall be according to the rules of the
Company, in force from time to time.
106
B) Performance Linked Variable Remuneration (PLVR)
PLVR shall be according to applicable schemes of our Company or as may be decided by the Board.
C) Flexible Compensation
In addition to the Fixed Compensation and PLVR, Mr. Adi Godrej will be entitled to the following
allowances, perquisites, benefits, facilities and amenities in accordance with rules of our Company and
subject to the relevant provisions of the Companies Act (collectively called ―perquisites and
allowances‖):
Furnished residential accommodation (including maintenance of such accommodation,
provision of or reimbursement of expenditure incurred on gas, water, power and furnishing) or
house rent allowance in lieu thereof as per rules of our Company;
Payment/reimbursement of medical/hospitalisation expenses for the Chairman and his family,
hospitalisation and accident insurance for self and family in accordance with the rules of our
Company;
Leave travel assistance for himself and his family in accordance with the rules of our
Company;
Payment/reimbursement of club fees;
Consolidated privilege leave, on full pay and allowance, not exceeding 30 days in a financial
year. Encashment/ accumulation of leave will be permissible in accordance with the rules of
our Company;
Sick leave as per the rules of our Company;
Provision of Company maintained car(s) with driver(s) for official use;
Provision of free telephone facilities or reimbursement of telephone expenses at residence
including payment of local calls and long distance official calls;
Such other perquisites and allowances as per the policy/rules of our Company in force and/or
as may be approved by the Board from time to time.
These perquisites and allowances may be granted to Mr. Adi Godrej in such form and manner as the Board
may decide.
II. Overall Remuneration
The aggregate of salary and perquisites and allowances as specified above or paid additionally in
accordance with the rules of our Company in any financial year, which the Board in its absolute discretion
may pay to the Chairman from time to time, shall not exceed the limits prescribed from time to time under
Sections 198, 309 and other applicable provisions of the Companies Act read with Schedule XIII to the
Companies Act, as amended.
III. Minimum Remuneration
Notwithstanding the foregoing, where in any Financial Year during the currency of his tenure of the
Chairman, our Company has no profits or its profits are inadequate, the remuneration will be subject to
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Schedule XIII to the Companies Act.
Remuneration of our Executive Directors
The following table sets forth all compensation paid to our Executive Directors for the financial year 2010.
Name Annual Base
Salary
Performance
Bonus/Incentive
Perquisites and
All Other
Allowances
Total
(in Rs. Million)
Mr. Adi Godrej 7.45 30.83 18.19 56.48
Mr. Hoshedar Press 13.58 35.01 1.41 50.01
Mr. Dalip Sehgal 13.98 28.77 1.99 44.75
Remuneration of our Non-Executive Directors
The following table sets forth all compensation paid to our Non-Executive Director and Independent Directors for
the financial year 2010.
Name Total Sitting Fees (Rs.) Commission (Rs.) Total (Rs.)
Mr. Jamshyd Godrej 100,000 1,000,000 1,100,000
Mr. Nadir Godrej 140,000 1,000,000 1,140,000
Mr. Bala Balachandran 110,000 1,000,000 1,110,000
Ms. Rama Bijapurkar 120,000 1,000,000 1,120,000
Mr. Bharat Doshi 180,000 1,000,000 1,180,000
Dr. Omkar Goswami 85,000 1,000,000 1,085,000
Mr. Aman Mehta 160,000 1,000,000 1,160,000
Mr. D. Shivakumar 125,000 1,000,000 1,125,000
Mr. A. Mahendran 140,000 1,000,000 1,140,000
Key Management Personnel
Name Designation Age Date of Joining Number of
Equity Shares
held as on
June 14, 2010
Options vested
and
outstanding on
June 14, 2010
Options
exercised on
June 14, 2010
Mr. Rakesh Sinha Chief Operating
Officer - Marketing
and Operations
52 July 1, 1981 1,736 110,000 Nil
Mr. P. Ganesh Executive Vice
President- (Finance
& Commercial) and
Company Secretary
39 August 1, 1995 Nil 10,000 40,000
Mr. Rajesh
Tiwari
Executive Vice
President-
Operations
51 November 2,
1988
Nil 85,000 15,000
Mr Sunder
Nurani
Executive Vice
President –
Research and
46 September 9,
2006
Nil 50,000 Nil
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Name Designation Age Date of Joining Number of
Equity Shares
held as on
June 14, 2010
Options vested
and
outstanding on
June 14, 2010
Options
exercised on
June 14, 2010
Development
Mr. Bhupinder
Singh Sodhi
Executive Vice
President – Sales
59 December
1,1973
150 85,000 15,000
Mr. Sumit Mitra Executive Vice
President – Human
Resources
37 June 1, 1997 Nil 10,000 90,000
Mr. Jimmy
Anklesaria
Executive Vice
President –
International
Operations
55 July 15, 2005 Nil 40,000 60,000
Transactions between our Company and its Directors and Key Management Personnel
There are no loans or guarantees provided and outstanding, other than those entered into in our Company‘s ordinary
course of business, to any of its Directors or Key Management Personnel. In addition, there have been no
transactions during the current or previous financial year between our Company and any of our Directors and our
key management personnel or the key management personnel of any of our subsidiaries, which, because of their
unusual nature or the circumstances in which they have been entered into, are or will be required to be disclosed in
our Company‘s accounts or approved by our shareholders and there are no such transactions during an earlier
financial year which remain in any respect outstanding or unperformed.
Corporate Governance
We comply with all applicable corporate governance requirements, including the listing agreement with the Stock
Exchanges and the SEBI Regulations, including constitution of the Board and committees thereof. Our corporate
governance framework is based on an effective independent Board, separation of the supervisory role of the Board
from the executive management team and proper constitution of committees of the Board. Our Board functions
either as a full Board or through various committees constituted to oversee specific operational areas. Our executive
management provides the Board with detailed reports on our performance periodically.
Currently, our Board consists of 11 Directors out of which six are Independent Directors.
Committees of the Board of Directors
We have five Board-level committees, which have been constituted and function in accordance with the relevant
provisions of the Companies Act and the Equity Listing Agreement: (i) Audit Committee, (ii) Shareholders‘
Committee, (iii) Compensation Committee, (iv) Human Resource Committee and (v) Nomination Committee.
Audit Committee
The Audit Committee consists of the following Directors:
Mr. Bharat Doshi, chairman (Independent Director);
Mr. Bala Balachandran (Independent Director);
Dr. Omkar Goswami (Independent Director);
Mr. Aman Mehta (Independent Director); and
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Mr. D. Shivakumar (Independent Director).
The responsibilities of the Audit Committee include:
Overseeing the financial reporting process and disclosure of financial information to ensure that the
financial statements are correct, sufficient and credible;
Recommending to the Board, the appointment, re-appointment and if required, the replacement or removal
of the statutory auditor and the fixation of audit fees;
Approval of payment to statutory auditors for any other services rendered by the statutory auditors;
Reviewing with management, quarterly and annual financial statements and ensuring their accuracy and
correctness before submission to the Board of Directors, with particular reference to:
a. Matters required to be included in the directors responsibility Statement to be included in the
Board‘s report in terms of clause (2AA) of Section 217 of the Companies Act.
b. Changes, if any, in the accounting policies and practices and reasons for the same.
c. Major accounting entries involving estimates based on the exercise of judgment by management.
d. Significant adjustments made in the financial statements arising out of audit findings.
e. Compliance with listing and other legal requirements relating to financial statements.
f. Disclosure of any related party transactions.
g. Qualifications in the audit report.
Reviewing with management the quarterly financial statements before submission to the Board for
approval;
Reviewing with the management the performance of statutory and internal auditors and adequacy of the
internal control systems;
Reviewing the adequacy of the internal audit function including the structure of the internal audit
department, staffing and seniority of the official heading the department, reporting structure, coverage and
frequency of internal audit;
Discussion with internal auditors any significant findings and follow up there on;
Reviewing the findings of any internal investigations by the internal auditors into matters where there is
suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the
matter to the Board;
Discussion with statutory auditors before the audit commences, about the nature and scope of the audit, as
well as post audit discussion to ascertain any area of concern;
To look into the reasons for substantial defaults in the payment to depositors, debenture holders,
shareholders (in case of non payment of declared dividends) and creditors; and
To review the functioning of the Whistle Blower mechanism.
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During the financial year 2010, the Audit Committee held four meetings.
Human Resources and Compensation Committee
The Human Resources and Compensation Committee consists of the following Directors:
Ms. Rama Bijapurkar, chairperson (Independent Director);
Mr. Bala Balachandran (Independent Director);
Mr. Bharat Doshi (Independent Director);
Dr. Omkar Goswami (Independent Director);
Mr. Aman Mehta (Independent Director); and
Mr. D. Shivakumar (Independent Director).
The responsibilities of the Human Resources and Compensation Committee include:
Review of human resource policies and practices of the Company and in particular, policies regarding
remuneration of whole-time directors and senior managers;
Inductions of new people and attrition;
The quantum of Employee Stock Options to be granted under the GCPL ESOP Scheme per employee and
in aggregate;
To determine the eligibility criteria for receiving ESOPs;
The conditions under which the employee stock options vested in employees may lapse in case of
termination of the employment for misconduct;
The exercise period within which the employee shall exercise the vested options in the event of termination
or resignation of an employee;
The procedure for making a fair and reasonable adjustment to the number of options and to the exercise
price in case of corporate action such as rights issues, bonus issues, merger, sale of division and other;
The grant, vest and exercise of the employee stock options in case of employees who are on long leave;
The procedure for cashless exercise of options, if required;
Frame suitable policies and systems to ensure that there is no violation of (a) Securities and Exchange
Board of India (Insider Trading) Regulations, 1992, and (b) Securities and Exchange Board of India
(Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003
by an employee;
Fixing the exercise price;
Approve forms, writings and/or agreements for use in pursuance of an employee stock option plan; and
To form a trust and appoint trustees.
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During the financial year 2010, the Human Resources and Compensation Committee held two meetings.
Shareholders‟ Committee
The Shareholders‘ Committee consists of the following Directors:
Mr. Nadir Godrej, chairman (Non Executive Director);
Mr. Jamshyd Godrej (Non Executive Director);
Mr. Adi Godrej (Chairman and Executive Director);
Mr. A. Mahendran (appointed as the Managing Director with effect from July 1, 2010); and
The responsibilities of the Shareholders‘/Investors‘ Grievances Committee is in accordance with Clause 49 of the
listing agreement. One of the primary functions carried out by Shareholders‘ Committee is to redress shareholder
complaints like transfer of shares, non- receipt of balance sheet and non-receipt of declared dividend.
During the financial year 2010, the Shareholder‘s Committee held 15 meetings.
Nomination Committee
The Nomination Committee consists of the following Directors:
Ms. Rama Bijapurkar, chairperson (Independent Director);
Mr. Bala Balachandran (Independent Director);
Mr. Bharat Doshi (Independent Director);
Dr. Omkar Goswami (Independent Director);
Mr. Aman Mehta (Independent Director); and
Mr. D. Shivakumar (Independent Director).
The responsibilities of the Nomination Committee include:
Identifying and nominating for the Boards approval, suitable candidates to fill Board vacancies as and
when they arise;
Drawing up selection criteria and appointment procedures for Directors;
Periodically review the structure, size and composition of the Board and make recommendation to the
Board of any changes; and
Board evaluation.
The Nomination Committee did not meet during the last financial year.
Policy on Disclosures and Internal Procedure for Prevention of Insider Trading
Regulation 12(1) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992,
as amended (the ―Insider Trading Regulations‖), applies to our Company and its employees and requires our
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Company to implement a code of internal procedures and conduct for the prevention of insider trading. Our
Company has implemented an employee insider trading - code of conduct in accordance with the Insider Trading
Regulations. Mr. P. Ganesh, Executive Vice President (Finance and Commercial) and Company Secretary of our
Company, acts as the Compliance Officer of our Company.
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PRINCIPAL SHAREHOLDERS
Our Company had a total of 86,725 shareholders as of June 18, 2010
Shareholding Pattern
The following table sets forth our shareholding pattern as of June 18, 2010.
Category
Code
Category of
Shareholder
Number of
Equity
Shareholders
Total
Number of
Equity
Shares
Number of
Equity Shares
held in
Dematerialized
Form
Total Equity
Shareholding as a
Percentage of Total
Number of Equity Shares
Equity Shares pledged
or otherwise
encumbered
As a
Percentage
of (A+B)1
As a
Percentage
of (A+B+C)
Number
of Equity
Shares
As a
Percentage
(A) Shareholding
of Promoter
and Promoter
Group2
(1) Indian
(a) Individuals/
Hindu
Undivided Family
21 20,565,952 20,565,332 6.67% 6.67% 0 0.00%
(b) Central
Government/
State Government(s)
0 0 0 0.00% 0.00% 0 0.00%
(c) Bodies
Corporate
17 199,471,435 199,471,435 64.72% 64.72% 9,750,000 4.89%
(d) Financial Institutions/
Banks
0 0 0 0.00% 0.00% 0 0.00%
(e) Any Other (specify)
0 0 0 0.00% 0.00% 0 0.00%
Sub-Total
(A)(1)
38 220,037,387 220,036,767 71.40% 71.40% 9,750,000 4.43%
(2) Foreign
(a) Individuals
(Non-Resident Individuals/
Foreign
Individuals)
0 0 0 0.00% 0.00% 0 0.00%
(b) Bodies Corporate
0 0 0 0.00% 0.00% 0 0.00%
(c) Institutions 0 0 0 0.00% 0.00% 0 0.00%
(d) Any Other
(specify)
0 0 0 0.00% 0.00% 0 0.00%
Sub-Total
(A)(2)
0 0 0 0.00% 0.00% 0 0.00%
Total
Shareholding
of Promoter
and Promoter
Group (A)=
(A)(1)+(A)(2)
38 220,037,387 220,036,767 71.40% 71.40% 9,750,000 4.43%
(B) Public
shareholding3
(1) Institutions
(a) Mutual Funds /
UTI
41 1,657,739 1,580,315 0.54% 0.54% 0 0.00%
(b) Financial
Institutions/ Banks
14 12,760 8,980 0.00% 0.00% 0 0.00%
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Category
Code
Category of
Shareholder
Number of
Equity
Shareholders
Total
Number of
Equity
Shares
Number of
Equity Shares
held in
Dematerialized
Form
Total Equity
Shareholding as a
Percentage of Total
Number of Equity Shares
Equity Shares pledged
or otherwise
encumbered
As a
Percentage
of (A+B)1
As a
Percentage
of (A+B+C)
Number
of Equity
Shares
As a
Percentage
(c) Central
Government/ State
Government(s)
0 0 0 0.00% 0.00% 0 0.00%
(d) Venture Capital Funds
0 0 0 0.00% 0.00% 0 0.00%
(e) Insurance
Companies
6 940,729 940,729 0.31% 0.31% 0 0.00%
(f) Foreign Institutional
Investors
87 58,229,505 58,205,105 18.89% 18.89% 0 0.00%
(g) Foreign Venture
Capital
Investors
0 0 0 0.00% 0.00% 0 0.00%
(h) Any Other
(specify)
0 0 0 0.00% 0.00% 0 0.00%
Sub-Total
(B)(1)
148 60,840,733 60,735,129 19.74% 19.74% 0 0.00%
(2) Non-
institutions
(a) Bodies
Corporate
702 6,692,107 6,602,965 2.17% 2.17% 0 0.00%
(b)
Individuals -
i. Individual
shareholders
holding nominal share capital up
to Rs. 1 lakh.
85,835 20,078,113 12,633,182 6.51% 6.51% 0 0.00%
ii. Individual shareholders
holding nominal
share capital in excess of Rs. 1
lakh.
2 541,704 541,704 0.18% 0.18% 0 0.00%
(c) Any Other 0 0 0 0.00% 0.00% 0 0.00%
Sub-Total
(B)(2)
86,539 27,311,924 19,777,851 8.86% 8.86% 0 0.00%
Total Public
Shareholding
(B)=
(B)(1)+(B)(2)
86,687 88,152,657 80,512,980 28.60% 28.60% 0 0.00%
TOTAL
(A)+(B)
86,725 308,190,044 300,549,747 100.00% 100.00% 9,750,000 3.16%
(C) Shares held by
Custodians and
against which
Depository
Receipts have
been issued
0 0 0 0.00% 0.00% 0 0.00%
GRAND
TOTAL
(A)+(B)+(C)
86,725 308,190,044 300,549,747 100.00% 100.00% 9,750,000 3.16%
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The following table sets forth the shareholding of the ―Promoter and Promoter Group‖ as of June 18, 2010.
Sr.
No.
Name of the
Equity
Shareholder
Number of
Equity
Shares
Equity Shares as
a Percentage of
Total Number of
Equity Shares
{i.e., Grand Total
(A)+(B)+(C)
indicated in
Statement at
paragraph (l)(a)
above}
Number of
Equity Shares
pledged or
otherwise
encumbered
As a
Percentage
Equity Shares as
a Percentage of
total number of
Equity Shares
{i.e., Grand Total
(A)+(B)+(C)
indicated in
Statement at
paragraph (l)(a)
above}
1 Mr. Adi
Godrej*
500 0.00% 0 0.00% 0.00%
2 Mr. Freyan
Crishna
1,909,744 0.62% 0 0.00% 0.00%
3 Godrej and
Boyce
Manufacturing
Company
Limited
127,426,815 41.35% 0 0.00% 0.00%
4 Godrej
Industries
Limited
72,044,620 23.38% 9,750,000 13.53% 3.16%
5 Mr. Hormazd
Godrej
1,028,728 0.33% 0 0.00% 0.00%
6 Mr. Nadir
Godrej**
2,055,744 0.67% 0 0.00% 0.00%
7 Mr. Navroze
Godrej
2,048,736 0.66% 0 0.00% 0.00%
8 Ms. Nisaba
Godrej
1,370,999 0.44% 0 0.00% 0.00%
9 Ms. Nyrika
Crishna
1,909,740 0.62% 0 0.00% 0.00%
10 Ms.
Parmeshwar
Godrej
4 0.00% 0 0.00% 0.00%
11 Ms. Pheroza
Godrej
15,604 0.01% 0 0.00% 0.00%
12 Ms. Pirojsha
Godrej
1,371,011 0.44% 0 0.00% 0.00%
13 Ms. Raika
Godrej
2,048,736 0.66% 0 0.00% 0.00%
14 Ms. Rati Godrej 1,028,728 0.33% 0 0.00% 0.00%
15 Mr. Rishad
Naoroji
4,113,088 1.33% 0 0.00% 0.00%
16 Ms. Smita
Crishna
146,800 0.05% 0 0.00% 0.00%
17 Ms. Tanya
Dubash
1,370,990 0.44% 0 0.00% 0.00%
18 Mr. Vijay
Crishna
146,800 0.05% 0 0.00% 0.00%
TOTAL 220,037,387 71.40% 9,750,000 4.43% 3.16% * This includes 400 Equity Shares held by Mr. Adi Godrej jointly with late Mr. S. P. Godrej, which have been transferred to a third person, but
the transfer has not registered pending receipt of satisfactory documentation in this regard.
** This includes 120 Equity shares registered in the name of Mr. Nadir Godrej, which have been transferred to a third person, but the transfer has not registered pending receipt of satisfactory documentation in this regard. This also includes 1,028,724 shares held on behalf of minor son.
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The following table sets forth the shareholding of those shareholders, other than those belonging to the ―Promoters
and Promoter Group‖, holding more than 1% of our paid-up capital as of June 18, 2010.
Sr.
No.
Name of the Equity Shareholder Number of Equity
Shares
Equity Shares as a Percentage of Total
Number of Equity Shares (i.e., Grand Total
(A)+(B)+(C) indicated in Statement at
paragraph (l)(a) above)
1 Aberdeen Asset Managers
Limited A/c
Aberdeeninternational India
Opportunities Fund
(Mauritius)Limited
16,697,000 5.42%
2 Arisaig Partners (Asia) PTE
Limited A/c Arisaig India Fund
Limited
7,756,470 2.52%
3 IL and FS Trust Company Limited 3,339,000 1.08%
4 Smallcap World Fund Inc 3,978,150 1.29%
TOTAL 31,770,620 10.31%
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ISSUE PROCEDURE
Below is a general outline of the procedure bidding, application, payment, Allocation and Allotment of the Equity
Shares to be issued pursuant to the Issue. The procedure followed in the Issue may differ from the one mentioned
below, and investors are presumed to have apprised themselves of the same from us or the Book Running Lead
Managers. Investors are advised to inform themselves of any restrictions or limitations that may be applicable to
them. See ―Distribution Restrictions‖ and ―Transfer Restrictions‖.
Qualified Institutions Placement
The Issue is being made to QIBs in reliance upon chapter VIII of the SEBI Regulations through the mechanism of a
QIP. Under chapter VIII of the SEBI Regulations, an issuer which is a listed company in India may issue equity
shares provided that:
a special resolution approving the qualified institutions placement has been passed by its shareholders;
the equity shares of the same class of such issuer have been listed on a recognised stock exchange in India
that has nationwide trading terminals for a period of at least one year prior to the date of issuance of notice
to its shareholders for convening the meeting to pass the special resolution; and
such issuer complies with the minimum public shareholding requirements set out in the listing agreement
with the stock exchange referred to above.
Additionally, there is a minimum pricing requirement under the SEBI Regulations. The issue price of the securities
shall not be less than the average of the weekly high and low of the closing prices of the equity shares of the same
class quoted on the stock exchange during the two weeks preceding the relevant date.
The ―relevant date‖ refers to the date of the meeting on which the board of directors or the committee of directors
duly authorised by the board of the issuer decides to open the proposed issue and ―stock exchange‖ means any of the
recognized stock exchanges in Indian in which the equity shares of the issuer of the same class of the issuer are
listed and on which the highest trading volume in such shares has been recorded during the two weeks immediately
preceding the relevant date.
Securities must be allotted within 12 months from the date of the shareholders resolution approving the QIP. The
securities issued pursuant to the QIP must be issued on the basis of a placement document that shall contain all
material information including the information specified in Schedule XVIII of the SEBI Regulations. The placement
document is a private document provided to not more than 49 investors through serially numbered copies and is
required to be placed on the website of the concerned stock exchange and of the issuer with a disclaimer to the effect
that it is in connection with an issue to QIBs and no offer is being made to the public or to any other category of
investors. A copy of the placement document is required to be delivered to SEBI for record purposes within 30 days
of the allotment of the equity shares.
The aggregate of the proposed QIP and all previous QIPs made in the same financial year shall not exceed five times
the net worth of the issuer as per its audited balance sheet of the previous financial year. The issuer shall furnish a
copy of the placement document to each stock exchange on which its equity shares are listed.
Securities allotted to a QIB pursuant to a QIP shall not be sold for a period of one year from the date of allotment
except on a recognised stock exchange in India.
We have applied for and received the in-principle approval of the Stock Exchanges under Clause 24(a) of the Equity
Listing Agreements. The Company has also filed a copy of the Preliminary Placement Document with the Stock
Exchanges.
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Issue Procedure
We and the Book Running Lead Managers shall circulate serially numbered copies of the Preliminary Placement
Document and the Application Form, either in electronic or physical form, to not more than 49 QIBs.
The list of QIBs to whom the Application Form is delivered shall be determined by the Book Running Lead
Managers in consultation with us. Unless a serially numbered Preliminary Placement Document along with the
Application Form is addressed to a particular QIB, no invitation to subscribe shall be deemed to have been
made to such QIB. Even if such documentation were to come into the possession of any person other than the
intended recipient, no offer or invitation to offer shall be deemed to have been made to such person.
QIBs may submit an Application Form, including any revisions thereof, during the Bidding Period to the Book
Running Lead Managers.
Each QIB will be required to indicate the following in the Application Form:
name of the QIB to whom Equity Shares are to be Allotted;
number of Equity Shares Bid for;
price at which the QIB is agreeable to subscribe for the Equity Shares, provided that the QIB may also
indicate that it is agreeable to submit an Application Form at a ―Cut-off Price‖; and
the details of the dematerialised account(s) to which the Equity Shares should be credited.
Note: Each sub-account of an FII will be considered as an individual QIB and separate Application Forms would be
required from each such sub-account.
Once a duly completed Application Form is submitted by a QIB, such Application Form constitutes an irrevocable
offer and cannot be withdrawn after the Bid Closing Date. The Bid Closing Date shall be notified to the Stock
Exchanges and the QIBs shall be deemed to have been given notice of such date after receipt of the Application
Form.
Upon receipt of the Application Form, we shall determine the Issue Price and the number of Equity Shares to be
issued in consultation with the Book Running Lead Managers. Upon determination of the Issue Price and the QIBs
to whom Allocation shall be made, the Book Running Lead Managers will send the CAN to the QIBs who have
been Allocated the Equity Shares. The dispatch of the CAN shall be deemed a valid, binding and irrevocable
contract for the QIBs to pay the entire Issue Price for all the Equity Shares Allocated to such QIB. The CAN shall
contain details such as the number of Equity Shares Allocated to the QIB and payment instructions including the
details of the amounts payable by the QIB for Allotment of the Equity Shares in its name and the Pay-In Date as
applicable to the respective QIB.
Pursuant to receiving a CAN, each QIB shall be required to make the payment of the entire application monies for
the Equity Shares indicated in the CAN at the Issue Price, only through electronic transfer to our designated bank
account by the Pay-In Date as specified in the CAN sent to the respective QIBs.
Upon receipt of the application monies from the QIBs, we shall Allot Equity Shares as per the details in the CAN to
the QIBs. We shall not Allot Equity Shares to more than 49 QIBs. We will intimate to the Stock Exchanges the
details of the Allotment.
After receipt of the listing approval from the Stock Exchanges, we shall credit the Equity Shares into the Depository
Participant accounts of the respective QIBs. We shall then apply for the trading permissions from the Stock
Exchanges.
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The Equity Shares that have been credited to the Depository Participant accounts of the QIBs shall be eligible for
trading on the Stock Exchanges only upon the receipt of final trading and listing approvals from the Stock
Exchanges.
Upon receipt of intimation of final trading and listing approval from the Stock Exchanges, we shall inform the QIBs
who have received an Allotment of the receipt of such approval. We and the Book Running Lead Managers shall not
be responsible for any delay or non-receipt of the communication of the final trading and listing permissions from
the Stock Exchanges or any loss arising from such delay or non-receipt. Final listing and trading approvals granted
by the Stock Exchanges are also placed on their respective websites. QIBs are advised to apprise themselves of the
status of the receipt of the permissions from the Stock Exchanges or us.
Qualified Institutional Buyers
Only QIBs as defined in regulation 2(1)(zd) of the SEBI Regulations and not otherwise excluded pursuant to
Regulation 86 of the SEBI Regulations are eligible to invest. Currently a QIB means:
a mutual fund, venture capital fund and foreign venture capital investor registered with SEBI;
a foreign institutional investor and sub-account registered with the SEBI, other than a sub-account which is
a foreign corporate or foreign individual;
a public financial institution as defined in section 4A of the Companies Act;
a scheduled commercial bank;
a multilateral and bilateral development financial institution;
a state industrial development corporation;
an insurance company registered with the Insurance Regulatory and Development Authority;
a provident fund with minimum corpus of Rs. 250 million;
a pension funds with minimum corpus of Rs. 250 million;
National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the
Government of India published in the Gazette of India.
Insurance funds set up and managed by army, navy or air force of the Union of India.
FIIs are permitted to participate in the QIP through the portfolio investment scheme in this Issue. FIIs are
permitted to participate in the QIP subject to compliance with all applicable laws and the shareholding of the
FIIs does not exceed specified limits as prescribed under applicable laws in this regard.
Our shareholders have passed a special resolution dated July 22, 2004 increasing the investment limits by FIIs up to
35% of our share capital.
The issue of Equity Shares to a single FII should not exceed 10% of our post-Issue, issued capital. In respect of an
FII investing in the Equity Shares on behalf of its sub-accounts, the investment on behalf of each sub-account shall
not exceed 10% of our total issued capital, or 5% of our total issued capital in case such sub-account is a foreign
corporate or an individual.
No Allotment shall be made pursuant to the Issue, either directly or indirectly, to any QIB being a Promoter or any
person related to a Promoter. QIBs which have all or any of the following rights shall be deemed to be persons
120
related to a Promoter:
rights under a shareholders agreement or voting agreement entered into with a Promoter or persons related
to a Promoter;
veto rights; or
a right to appoint any nominee director on our Board;
provided, however, a QIB which does not hold any of our Equity Shares and which has acquired the aforesaid rights
in the capacity of a lender shall not be deemed to be related to a Promoter.
We and the Book Running Lead Managers are not liable for any amendment or modification or change to
applicable laws or regulations, which may occur after the date of this Placement Document. QIBs are advised
to make their independent investigations and satisfy themselves that they are eligible to apply. QIBs are
advised to ensure that any single application from them does not exceed the investment limits or maximum
number of Equity Shares that can be held by them under applicable law or regulation or as specified in this
Placement Document. Further, QIBs are required to satisfy themselves that their Bids would not eventually
result in triggering a tender offer under the Takeover Code.
A minimum of 10% of the Equity Shares in this Issue shall be Allotted to Mutual Funds. If no Mutual Fund is
agreeable to take up the minimum portion as specified above, such minimum portion or part thereof may be
Allotted to other QIBs.
Note: Affiliates or associates of the Book Running Lead Managers who are QIBs may participate in this Issue in
compliance with applicable laws.
Application Process
Application Form
QIBs shall only use the serially numbered Application Forms supplied by the Book Running Lead Managers in
either electronic form or by physical delivery for the purpose of making a Bid (including revision of a Bid).
By making a Bid (including any revision thereof), the QIB will be deemed to have made the representations and
warranties and agreements made under ―Representations by Investors‖ and ―Transfer Restrictions‖.
QIBS MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR DEPOSITORY
PARTICIPANT‟S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBS MUST ENSURE THAT
THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN
WHICH THE DEPOSITORY ACCOUNT IS HELD.
Details such as address and bank account will be obtained from the Depositories as per the Depository Participant
account details given above.
The submission of an Application Form by a QIB shall be deemed a valid, binding and irrevocable offer for the QIB
to pay the entire Issue Price for its share of the Allotment (as indicated by the CAN) and becomes a binding contract
on the QIB upon our issuance of the CAN in favour of the QIB.
Submission of Application Form
All Application Forms must be duly completed with information including the name of the QIB, the price and the
number of Equity Shares applied. The Application Form shall be submitted to the Book Running Lead Managers
either through electronic form or through physical delivery at the following address:
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Name: Kotak Mahindra Capital Company Limited
Address: 1st Floor Bakhtawar
229, Nariman Point
Mumbai 400 021
Contact Person: Mr. Karl Sahukar
Email: [email protected]
Phone: (91 22) 6634 1100
Fax: (91 22) 6632 5129
Name: HSBC Securities and Capital Markets (India) Private Limited
Address: 52/60
Mahatma Gandhi Road, Fort
Mumbai 400 001
Contact Person: Mr. Mangesh Ghogre
Email: [email protected]
Phone: (91 22) 2268 1285
Fax: (91 22) 2263 1984
The Book Running Lead Managers shall not be required to provide any written acknowledgement of the same.
Pricing and Allocation
Book Building
The QIBs shall submit their Bids (including any revision thereof) within the Bidding Period to the Book Running
Lead Managers.
Price Discovery
In consultation with the Book Running Lead Managers, we shall determine the Issue Price for the Equity Shares,
which shall be at or above the Floor Price.
Method of Allocation
We shall determine the Allocation in consultation with the Book Running Lead Managers on a discretionary basis
and in compliance with chapter VIII of the SEBI Regulations.
Application Forms received from the QIBs at or above the Issue Price shall be grouped together to determine the
total demand. The Allocation to all such QIBs will be made at the Issue Price. Allocation to Mutual Funds for up to
a minimum of 10% of the Issue Size shall be undertaken subject to valid Bids being received at or above the Issue
Price.
OUR DECISION IN CONSULTATION WITH THE BOOK RUNNING LEAD MANAGERS IN RESPECT
OF ALLOCATION SHALL BE BINDING ON ALL QIBS. QIBS MAY NOTE THAT ALLOCATION OF
EQUITY SHARES IS AT OUR SOLE AND ABSOLUTE DISCRETION, AND QIBS MAY NOT RECEIVE
ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION FORMS AT OR
ABOVE THE ISSUE PRICE. NEITHER WE NOR THE BOOK RUNNING LEAD MANAGERS ARE
OBLIGED TO ASSIGN ANY REASON FOR ANY NON-ALLOCATION.
All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment letter
shall be submitted to Book Running Lead Managers as per the details provided in the respective CAN.
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Number of Allottees
The minimum number of Allottees in the Issue shall not be less than:
two, where the issue size is less than or equal to Rs. 2,500 million; or
five, where the issue size is greater than Rs. 2,500 million.
Provided that no single Allottee shall be Allotted more than 50% of the aggregate amount of the Issue Size.
Provided further that QIBs belonging to the same group or those who are under common control shall be deemed to
be a single Allottee for the purpose of this clause. For details of what constitutes ―same group‖ or ―common control‖
see ―—Application Process—Application Form‖.
The maximum number of Allottees of Equity Shares shall not be greater than 49 Allottees. Further the Equity
Shares will be Allotted within 12 months from the date of the shareholders resolution approving the Issue.
CAN
Based on the Application Forms received, we in consultation with the Book Running Lead Managers, in our sole
and absolute discretion, decide the QIBs to whom the serially numbered CAN shall be sent, pursuant to which the
details of the Equity Shares Allocated to them and the amounts payable for Allotment of such Equity Shares by the
Pay-in Date in their respective names shall be notified to such QIBs. Additionally, the CAN will include details of
the bank account(s) for transfer of funds if done electronically, address where the application money needs to be
sent, Pay-In Date as well as the probable designated date, being the date of credit of the Equity Shares to the
respective QIB‘s account.
The eligible QIBs would also be sent a serially numbered Placement Document either in electronic form or by
physical delivery along with the serially numbered CAN.
The dispatch of the serially numbered Placement Document and the CAN by the QIB shall be deemed a valid,
binding and irrevocable contract for the QIB to furnish all details that may be required by the Book Running Lead
Managers and to pay the entire Issue Price for all the Equity Shares Allocated to such QIB.
Company Account for Payment of Application Money
We have opened Escrow Bank Accounts with Kotak Mahindra Bank and the Hongkong and Shanghai Banking
Corporation Limited as escrow banks in terms of the arrangement between us, the Book Running Lead Managers,
Kotak Mahindra Bank and the Hongkong and Shanghai Banking Corporation Limited. The eligible QIBs will be
required to deposit the entire amount payable for the Equity Shares allocated to it by the Pay-In Date as mentioned
in the respective CAN.
If the payment is not made favouring the Escrow Bank Accounts within the time stipulated in the CAN, the
Application Form and the CAN of the QIB are liable to be cancelled.
In case of cancellations or default by the QIBs, we and the Book Running Lead Managers have the right to
reallocate the Equity Shares at the Issue Price among existing or new QIBs at their sole and absolute discretion,
subject to the compliance with the requirement of ensuring that the Application Forms are sent to not more than 49
QIBs.
Payment Instructions
The payment of application money shall be made by the QIBs in the name of ―Godrej Consumer Products
Limited Escrow Account‖ as per the payment instructions provided in the CAN.
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QIBs should make payment only through electronic fund transfer.
Note: Payment of the amounts through cheques will be rejected.
Allotment of Equity Shares
The Equity Shares will not be Allotted unless the QIBs pay the entire Issue Price to the Escrow Bank Accounts as
stated above.
In accordance with the SEBI Regulations, Equity Shares will be issued and Allotment shall be made only in
dematerialised form to the Allottees. Allottees will have the option to materialise the Equity Shares as per the
provisions of the Companies Act and the Depositories Act.
We, at our sole discretion, reserve the right to cancel the Issue at any time up to Allotment without any reason
whatsoever.
Following the Allotment and credit of Equity Shares into the QIBs Depository Participant account, we will apply for
final trading and listing approvals from the Stock Exchanges. In the event of any delay in the Allotment or credit of
Equity Shares, or receipt of trading or listing approvals or cancellation of the Issue, no interest or penalty would be
payable by us.
The Escrow Banks shall not release the monies lying to the credit of the Escrow Bank Accounts to us until such time
as we deliver to the Escrow Banks documentation regarding the final approval of the Stock Exchanges for the listing
and trading of the Equity Shares issued pursuant to the Issue.
After finalization of the Issue Price, we shall update the Preliminary Placement Document with the Issue details and
file the same with the Stock Exchanges as the Placement Document. Pursuant to a circular dated March 5, 2010
issued by the SEBI, Stock Exchanges are required to make available on their websites the details of those allottees in
Issue who have been allotted more than 5% of the securities offered, viz. names of the allottees and number of
securities allotted to each of them, pre and post Issue shareholding pattern of the Company in the format specified in
clause 35 of the Listing Agreement along with the Placement Document.
We shall also submit the Placement Document to SEBI within 30 days of the date of Allotment for record purposes.
Other Instructions
Permanent Account Number or PAN
Each QIB should mention its PAN allotted under the I.T. Act. The copy of the PAN card or PAN allotment letter
is required to be submitted with the Application Form. Applications without this information will be considered
incomplete and are liable to be rejected. It is to be specifically noted that applicants should not submit the GIR
number instead of the PAN, as the Application Form is liable to be rejected on this ground.
Right to Reject Applications
We, in consultation with the Book Running Lead Managers, may reject Bids, in part or in full, without assigning any
reasons whatsoever. Our and the Book Running Lead Managers‘ decision in relation to the rejection of Bids shall be
final and binding.
Shares in Dematerialised form with NSDL or CDSL
The Allotment of the Equity Shares in this Issue shall be only in dematerialised form (i.e., not in physical certificates
but shall be fungible and be represented by the statement issued through electronic mode).
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A QIB applying for Equity Shares must have at least one beneficiary account with a Depository Participant of either
NSDL or CDSL prior to making the Bid. Allotment to a successful QIB will be credited in electronic form directly
to the beneficiary account with the Depository Participant of the QIB.
Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity with
NSDL and CDSL. The Stock Exchanges have electronic connectivity with CDSL and NSDL.
The trading of the Equity Shares would be in dematerialised form only for all QIBs in the demat segment of the
respective Stock Exchanges.
We will not be responsible or liable for the delay in the credit of Equity Shares due to errors in the Application Form
or otherwise on part of the QIBs.
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PLACEMENT
Placement Agreement
The Book Running Lead Managers have entered into a placement agreement dated June 28, 2010 as amended by the
agreement dated June 30, 2010, with us (the ―Placement Agreement‖), pursuant to which the Book Running Lead
Managers have agreed severally and not jointly to place, on a best efforts basis, up to such number of the Equity
Shares, the aggregate subscription amount of which shall be up to Rs. 5,313.03 million, to Qualified Institutional
Buyers, pursuant to chapter VIII of the SEBI Regulations, outside the United States, in offshore transactions in
reliance upon Regulation S under the Securities Act.
The Placement Agreement contains customary representations and warranties, as well as indemnities from us and is
subject to termination in accordance with the terms contained therein.
Applications shall be made to list the Equity Shares issued pursuant to the Issue and admit them to trading on the
Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading market for such
Equity Shares, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which holders of
the Equity Shares will be able to sell their Equity Shares.
This Placement Document has not been, and will not be, registered as a prospectus with the Registrar of Companies
and, no Equity Shares will be offered in India or overseas to the public or any members of the public in India or any
other class of investors, other than QIBs.
In connection with the Issue, the Book Running Lead Managers (or their affiliates) may, for their own accounts,
enter into asset swaps, credit derivatives or other derivative transactions relating to the Equity Shares at the same
time as the offer and sale of the Equity Shares, or in secondary market transactions. As a result of such transactions,
the Book Running Lead Managers may hold long or short positions in such Equity Shares. These transactions may
comprise a substantial portion of the Issue and no specific disclosure will be made of such positions. Affiliates of the
Book Running Lead Managers may purchase Equity Shares and be allocated Equity Shares for proprietary purposes
and not with a view to distribution. FII affiliates of the Book Running Lead Managers who are registered as foreign
institutional investors as defined under the SEBI Regulations may purchase, to the extent permissible under law,
Equity Shares in the Issue, and may issue P-Notes in respect thereof. See ―Offshore Derivative Instruments‖.
The Book Running Lead Managers and their affiliates may engage in transactions with and perform services for, our
Company and our Subsidiaries, group companies or affiliates in the ordinary course of business and have engaged,
or may in the future engage, in commercial banking and investment banking transactions with our Company and our
Subsidiaries, group companies or affiliates, for which they have received and may in the future receive,
compensation.
Lock-Up
Company Lock-up
Our Company has undertaken that it will not for a period of 180 days after the date of allotment of Equity Shares
under the Issue, without the prior written consent of the Book Running Lead Managers (a) directly or indirectly,
offer, lend, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any Equity Shares or any
securities convertible into or exercisable for Equity Shares (including, without limitation, securities convertible into
or exercisable or exchangeable for Equity Shares which may be deemed to be beneficially owned), or file any
registration statement under the U.S. Securities Act of 1933, as amended, with respect to any of the foregoing or (b)
enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly,
any of the economic consequences associated with the ownership of any of the Equity Shares or any securities
convertible into or exercisable or exchangeable for Equity Shares (regardless of whether any of the transactions
described in clause (a) or (b) is to be settled by the delivery of Equity Shares or such other securities, in cash or
otherwise), or (c) deposit Equity Shares with any other depositary in connection with a depositary receipt facility or
enter into any transaction (including a transaction involving derivatives) having an economic effect similar to that of
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a sale or deposit of Equity Shares in any depositary receipt facility or publicly announce any intention to enter into
any transaction falling within (a) to (c) above; provided, however, that the foregoing restrictions do not apply to any
sale, transfer or disposition of Equity Shares by our Company to the extent such sale, transfer or disposition is
required by Indian law.
Promoter Lock-up
Godrej & Boyce Manufacturing Company Limited and Godrej Industries Limited hold 199,471,435 Equity Shares
of our Company aggregating 64.73 % of the Equity Share capital of our Company. To induce the investors that may
participate in the Issue and to assist the efforts of the Book Running Lead Managers in connection with the Issue,
Godrej & Boyce Manufacturing Company Limited and Godrej Industries Limited, during the period commencing on
the date hereof and ending 60 days after the date of allotment of Equity Shares under the Issue agrees not to, (a)
directly or indirectly, offer, lend, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any
Equity Shares or any securities convertible into or exercisable for Equity Shares (including, without limitation,
securities convertible into or exercisable or exchangeable for Equity Shares which may be deemed to be beneficially
owned by Godrej & Boyce Manufacturing Company Limited and Godrej Industries Limited), or file any registration
statement under the U.S. Securities Act of 1933, as amended, with respect to any of the foregoing or (b) enter into
any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the
economic consequences associated with the ownership of any of the Equity Shares or any securities convertible into
or exercisable or exchangeable for Equity Shares (regardless of whether any of the transactions described in clause
(a) or (b) is to be settled by the delivery of Equity Shares or such other securities, in cash or otherwise), or (c)
deposit Equity Shares with any other depositary in connection with a depositary receipt facility or enter into any
transaction (including a transaction involving derivatives) having an economic effect similar to that of a sale or
deposit of Equity Shares in any depositary receipt facility or publicly announce any intention to enter into any
transaction falling within (a) to (c) above; provided, however, that the foregoing restrictions do not apply to (i) any
sale, transfer or disposition of Equity Shares by Godrej & Boyce Manufacturing Company Limited and Godrej
Industries Limited to the extent such sale, transfer or disposition is required by Indian law; and (ii) any sale, transfer
or disposition of Equity Shares by Godrej Industries Limited, pursuant to the creation or enforcement of any pledge
that has been or may be created by Godrej Industries Limited in respect of the Equity Shares.
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DISTRIBUTION RESTRICTIONS
The distribution of this Placement Document and the offer, sale or delivery of the Equity Shares in this Issue is
restricted by law in certain jurisdictions. Persons who come into possession of this Placement Document are
advised so take legal advice with regard to any restrictions that may be applicable to them and to observe such
restrictions. This Placement Document may not be used for the purpose of an offer or sale in any circumstances in
which such offer or sale is not authorised or permitted.
General
No action has been or will be taken in any jurisdiction by the Company or the Book Running Lead Managers that
would permit a public offering of the Equity Shares or the possession, circulation or distribution of this Placement
Document or any other material relating to the Company or the Equity Shares in this Issue in any jurisdiction where
action for such purpose is required. Accordingly, the Equity Shares in this Issue may not be offered or sold, directly
or indirectly and neither this Placement Document nor any other offering material or advertisements in connection
with the Equity Shares issued pursuant to this Issue may be distributed or published, in or from any country or
jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of
any such country or jurisdiction and will not impose any obligations on the Company or the Book Running Lead
Managers. The Issue will be made in compliance with the SEBI ICDR Regulations. Each subscriber of the Equity
Shares in the Issue will be required to make, or will be deemed to have made, as applicable, the acknowledgments
and agreements as described under ―Transfer Restrictions‖.
Australia
This Placement Document is not a disclosure document under Chapter 6D of the Corporations Act 2001 (Cth) (the
―Australian Corporations Act‖), has not been lodged with the Australian Securities & Investments Commission and
does not purport to include the information required of a disclosure document under the Australian Corporations
Act. (i) The offer of Securities under the Placement Document is only made to persons to whom it is lawful to offer
Securities without disclosure to investors under Chapter 6D of the Australian Corporations Act under one or more
exemptions set out in Section 708 of the Australian Corporations Act; (ii) the Placement Document is made
available in Australia to persons as set forth in clause (i) above; and (iii) by accepting this offer, the offeree
represents that the offeree is such a person as set forth in clause (ii) above and agrees not to sell or offer for sale
within Australia any Securities sold to the offeree within 12 months after their transfer to the offeree under the
Placement Document.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented Prospectus Directive
2003/71/EC (each, a ―Relevant Member State‖), the Book Running Lead Managers have represented, warranted and
agreed that they have not made and will not make an offer of any Equity Shares in this Issue to the public in that
Relevant Member State prior to the publication of this Placement Document in relation to the Equity Shares in this
Issue which has been approved by the competent authority in that Relevant Member State or, where appropriate,
approved in another Relevant Member State and notified to the competent authority in the Relevant Member State,
all in accordance with the Prospectus Directive, other than the offers contemplated in this Placement Document in a
Relevant Member State after the date of such publication or notification, and except that they may make an offer of
any Equity Shares to the public in that Relevant Member State at any time under the following exemptions under the
Prospectus Directive, if they have been implemented in that Relevant Member State:
a. to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised
or regulated, whose corporate purpose in solely to invest in securities;
b. to any legal entity which has two or more of (i) an average of at least 250 employees during the last
financial year; (ii) a total balance sheet of more than €43,000,000; and (iii) an annual turnover of more than
€50,000,000, as shown in its last annual or consolidated account; and
c. to fewer than 100 natural or legal persons (other than qualified investors as defined below); or
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d. in any other circumstances falling within Article 3(2) of the Prospectus Directive, subject to obtaining the
prior consent of the Book Running Lead Managers for any such offer, provided that no such offer of Equity
Shares issued pursuant to this Issue shall result in a requirement for the publication by the Company or the
Book Running Lead Managers of a prospectus pursuant to Article 3 of the Prospectus Directive.
Each purchaser of Equity Shares described in this Placement Document located within a Relevant Member State
will be deemed to have represented, acknowledged and agreed that it is a ―qualified investor‖ within the meaning of
Article 2(1)(e) of the Prospectus Directive.
For the purposes of this provision, the expression ―an offer of any Equity Shares to the public‖ in relation to any
Equity Shares in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the Issue and any Equity Shares to be issued pursuant to the Issue so as to enable an
investor to decide to acquire any such Equity Shares, as the same may be varied in that Relevant Member State by
any measure implementing the Prospectus Directive in that Relevant Member State, and the expression ―Prospectus
Directive‖ means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member
State.
In the case of any Equity Shares in this Issue being offered to a financial intermediary as that term is used in Article
3(2) of the Prospectus Directive, the Book Running Lead Managers will use their reasonable endeavours, by the
inclusion of appropriate language in the Placement Document, to procure that such financial intermediary will be
deemed to have represented, acknowledged and agreed that the Equity Shares acquired by it in the Issue have not
been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or
resale to, persons in circumstances which may give rise to an offer of any Equity Shares in this Issue to the public
other than their offer or resale in a Relevant Member State to qualified investors as so defined who are not financial
intermediaries or in circumstances in which the prior consent of the Book Running Lead Managers has been
obtained to each such proposed offer or resale.
Hong Kong
This Placement Document has not been registered as a prospectus in Hong Kong and its contents have not been
reviewed by any regulatory authority in Hong Kong. Accordingly: (i) the Equity Shares may not be offered or sold
in Hong Kong by means of any document other than to persons who are "professional investors" within the meaning
of the Securities and Futures Ordinance (Cap. 571, The Laws of Hong Kong) (―SFO‖) and any rules made
thereunder or in other circumstances which do not result in the document being a "prospectus" within the meaning
of the Companies Ordinance (Cap. 32, The Laws of Hong Kong) or which do not constitute an offer to the public
within the meaning of the Companies Ordinance; and (ii) no person may issue any invitation, advertisement or other
document relating to the Equity Shares whether in Hong Kong or elsewhere, which is directed at, or the contents of
which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities
laws of Hong Kong) other than with respect to the Equity Shares which are or are intended to be disposed of only to
persons outside Hong Kong or only to "professional investors" within the meaning of the SFO and any rules made
thereunder.
The Book Running Lead Managers have not issued, or had in its possession for the purposes of issue, and will not
issue, or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,
invitation or document relating to the Equity Shares, which is directed at, or the contents of which are likely to be
accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong)
other than with respect to Equity Shares which are or are intended to be disposed of only to persons outside Hong
Kong or only to ―professional investors‖ as defined in the SFO and any rules made under the SFO.
Kuwait
The Equity Shares have not been authorized or licensed for offering, marketing or sale in the State of Kuwait. The
distribution of the Placement Document and the offering and sale of the Equity Shares in the State of Kuwait is
restricted by law unless a license is obtained from the Kuwaiti Ministry of Commerce and Industry in accordance
with Law 31 of 1990.
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Qatar
The Equity Shares have not been offered, sold or delivered, and will not be offered, sold or delivered at any time,
directly or indirectly, in the state of Qatar in a manner that would constitute a public offering. This Placement
Document has not been reviewed or registered with Qatari Government Authorities, whether under Law No. 25
(2002) concerning investment funds, central bank resolution No. 15 (1997), as amended, or any associated
regulations. Therefore, this Placement Document is strictly private and confidential, and is being issued to a limited
number of sophisticated investors, and may not be reproduced or used for any other purposes, nor provided to any
person other than recipient thereof.
Singapore
The Book Running Lead Managers have acknowledged that this Placement Document has not been registered as a
prospectus with the Monetary Authority of Singapore. Accordingly, the Book Running Lead Managers have
represented and agreed that they have not offered or sold any Equity Shares issued pursuant to this Issue or caused
such Equity Shares to be made the subject of an invitation for subscription or purchase and will not offer or sell such
Equity Shares issued pursuant to this Issue or cause such Equity Shares to be made the subject of an invitation for
subscription or purchase, and have not circulated or distributed, nor will they circulate or distribute, this Placement
Document or any other document or material in connection with the offer or sale, or invitation for subscription or
purchase, of such Equity Shares issued pursuant to this Issue, whether directly or indirectly, to persons in Singapore
other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of
Singapore (―SFA‖), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A),
and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in
accordance with the conditions of, any other applicable provision of the SFA.
Note:
Where Equity Shares in this Issue are subscribed or purchased under Section 275 by a relevant person which is:
(a) a corporation (which is not an accredited investor) (as defined in Section 4A of the SFA) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries‘ rights and interest
(howsoever described) in that trust shall not be transferred within 6 months after that corporation or that trust has
acquired the Equity Shares pursuant to an offer made under Section 275 except:
(i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person
arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(ii) where no consideration is or will be given for the transfer;
(iii) where the transfer is by operation of law; or
(iv) as specified in Section 276(7) of the SFA.
United Arab Emirates
This Placement Document is not intended to constitute an offer, sale or delivery of shares or other securities under
the laws of the United Arab Emirates (the ―UAE‖). The Equity Shares have not been and will not be registered
under Federal Law No. 4 of 2000 Concerning the Emirates Securities and Commodities Authority and the Emirates
Security and Commodity Exchange, or with the UAE Central Bank, the Dubai Financial Market, the Abu Dhabi
Securities market or with any other UAE exchange. The Issue, the Equity Shares and interests therein do not
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constitute a public offer of securities in the UAE in accordance with the Commercial Companies Law, Federal Law
No. 8 of 1984 (as amended) or otherwise. This Placement Document is strictly private and confidential and is being
distributed to a limited number of investors and must not be provided to any person other than the original recipient,
and may not be reproduced or used for any other purpose. The interests in the Equity Shares may not be offered or
sold directly or indirectly to the public in the UAE.
United Kingdom
The Book Running Lead Managers:
(a) have not offered or sold, and prior to the expiry of a period of six months from the issue date of any Equity
Shares, will not offer or sell any securities of the Company to persons in the United Kingdom except to
―qualified investors‖ as defined in section 86(7) of the Financial Services and Markets Act 2000 (―FSMA‖)
or otherwise in circumstances which have not resulted in an offer to the public in the United Kingdom;
(b) have complied and will comply with all applicable provisions of FSMA with respect to anything done by
it in relation to the Equity Shares in, from or otherwise involving the United Kingdom; and
(c) in the United Kingdom, will only communicate or cause to be communicated an invitation or inducement
to engage in investment activity (within the meaning of section 21 of the FSMA) to persons that are
qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive who (i) have
professional experience in matters relating to investments falling within Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ―Order‖); and/or (ii)
are high net worth entities falling within Article 49(2)(a) to (d) of the Order; and (iii) other persons to
whom it may otherwise lawfully be communicated (all such persons together being referred to as ―relevant
persons‖). This Placement Document and its contents are confidential and should not be distributed,
published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United
Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this
document or any of its contents.
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TRANSFER RESTRICTIONS
Purchasers of the Equity Shares in this Issue are not permitted to sell the Equity Shares for a period of one
year from the date of allotment except through the Stock Exchanges. Investors are advised to consult their
legal advisors prior to making any resale, pledge or transfer of the Equity Shares and also to refer to the
section “Distribution and Solicitation Restrictions”
Subject to the foregoing, each purchaser of the Equity Shares issued pursuant to this Issue, by accepting delivery of
this document, will be deemed to have represented and agreed as follows:
You have received a copy of the Placement Document and such other information as you deem necessary
to make an informed decision and that you are not relying on any other information or the representation
concerning the Company or the Equity Shares and neither the Company nor any other person responsible
for this document or any part of it or the Book Running Lead Managers will have any liability for any such
other information or representation;
You are purchasing the Equity Shares in an offshore transaction meeting the requirements of Rule 903 or
904 of Regulation S and you agree that you will not offer, sell, pledge or otherwise transfer such Equity
Shares, except in an offshore transaction complying with Regulation S or pursuant to any other available
exemption from registration under the U.S. Securities Act and in accordance with all applicable securities
laws of the states of the United States and any other jurisdiction, including India;
You are authorised to consummate the purchase of the Equity Shares in compliance with all applicable
laws and regulations;
You acknowledge (or if you are a broker-dealer acting on behalf of a customer, your customer has
confirmed to you that such customer acknowledges) that such Equity Shares have not been and will not be
registered under the U.S. Securities Act;
You certify that either (A) you are, or at the time the Equity Shares are purchased will be, the beneficial
owner of the Equity Shares and are located outside the United States (within the meaning of Regulation S)
or (B) you are a broker-dealer acting on behalf of your customer and your customer has confirmed to you
that (i) such customer is, or at the time the Equity Shares are purchased will be, the beneficial owner of the
Equity Shares, and (ii) such customer is located outside the United States (within the meaning of
Regulation S); and
You acknowledge that the Company and the Book Running Lead Managers, their respective affiliates and
others will rely upon the truth and accuracy of your representations, warranties, acknowledgements and
undertakings set out in this document, each of which is given to (a) the Book Running Lead Managers on
its own behalf and on behalf of the Company, and (b) to the Company, and each of which is irrevocable
and, if any of such representations, warranties, acknowledgements or undertakings deemed to have been
made by virtue of your purchase of the Equity Shares are no longer accurate, you will promptly notify the
Company.
Any resale or other transfer or attempted resale or other transfer, made other than in compliance with the above
stated restrictions will not be recognised by the Company.
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THE SECURITIES MARKET OF INDIA
The information in this section has been extracted from publicly available documents from various sources,
including officially prepared materials from the SEBI, the BSE and the NSE, and has not been prepared or
independently verified by the Company or the Book Running Lead Managers or any of their respective affiliates or
advisors.
India has a long history of organized securities trading. In 1875, the first stock exchange was established in Mumbai.
Indian Stock Exchanges
Indian Stock Exchanges are regulated primarily by SEBI, as well as by the Government of India acting through the
Ministry of Finance, Stock Exchange Division, under the SCRA and SCRR. Various rules, bye-laws and regulations
of the respective stock exchanges regulate the recognition of stock exchanges, the qualifications for membership
thereof and the manner in which contracts are entered into, settled and enforced between members.
SEBI is empowered to regulate the Indian securities markets, including stock exchanges and other intermediaries,
promote and monitor self-regulatory organizations and prohibit fraudulent and unfair trade practices. Guidelines
concerning minimum disclosure requirements by public companies, rules and regulations concerning investor
protection, insider trading, substantial acquisitions of shares and takeovers of companies, buybacks of securities,
employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds, foreign institutional
investors, credit rating agencies and other capital market participants have been notified by the relevant regulatory
authority.
There are currently 19 recognized stock exchanges in India. Most of the stock exchanges have their own governing
board for self regulation. The BSE and the NSE together hold a dominant position among the stock exchanges in
terms of the number of listed companies, market capitalization, and trading activity.
With effect from April 1, 2003, the stock exchanges in India operate on a trading day plus two, or T+2, rolling
settlement system. At the end of the T+2 period, obligations are settled with buyers of securities paying for and
receiving securities, while sellers transfer and receive payment for securities. For example, trades executed on a
Monday would typically be settled on a Wednesday. In order to contain the risk arising out of the transactions
entered into by the members of various stock exchanges either on their own account or on behalf of their clients, the
stock exchanges have designed risk management procedures, which include compulsory prescribed margins on the
individual broker members, based on their outstanding exposure in the market, as well as stock-specific margins
from the members.
Listing
The listing of securities on a recognised Indian stock exchange is regulated by the applicable Indian laws including
Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines issued by SEBI and the listing
agreements of the respective stock exchanges. The governing body of each stock exchange is empowered to suspend
trading of or dealing in a listed security for breach of an issuer‘s obligations under such listing agreement or for any
other reason, subject to the issuer receiving prior written notice of the intent of the exchange and upon granting of a
hearing in the matter. SEBI has the power to vary or set aside the decision of stock exchange decisions in this
regard. SEBI also has the power to amend such listing agreements and the bye-laws of the stock exchanges in India.
SEBI has notified the SEBI (Delisting of Equity Shares) Regulations, 2009 (―Delisting Regulations‖) in relation to
the delisting of securities from the stock exchanges.
Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges to apply
daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The index-based
market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement, at
10%, 15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated trading halt in all equity and
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equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the
SENSEX of the BSE or NIFTY of the NSE, whichever is breached earlier.
In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise price
bands of 20% movements either up or down. However, no price bands are applicable on scrips on which derivative
products are available or scrips included in indices on which derivative products are available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.
Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
Established in 1875, it is the oldest stock exchange in India. In 1956, it became the first stock exchange in India to
obtain permanent recognition from the Government of India under the SCRA. It has evolved over the years into its
present status as one of the premier stock exchange of India.
As at May 31, 2010, the BSE had 1,029 members, comprising 173 individual members, 833 Indian companies and
23 FIIs. Only a member of the BSE has the right to trade in the stocks listed on the BSE. As at May 31, 2010, there
were 4,978 listed companies trading on the BSE and the estimated market capitalisation of stocks trading on the
BSE was Rs. 60,896 billion. In May 2010, the average daily turnover on the BSE was Rs. 39,400 million. As at
May 31, 2010, the BSE had 15,547 trader work stations spread over 318 cities.
NSE
The NSE was established by financial institutions and banks to serve as a national exchange and provide nationwide
on-line satellite-linked screen-based trading facilities with electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. It has evolved over the years into its present status
as one of the premier stock exchange of India. The NSE was recognised as a stock exchange in April 1993 and
commenced operations in the wholesale debt market segment in June 1994.
In May 2010, the average daily traded value of the capital market segment was Rs. 129,375 million. The NSE
launched the NSE 50 index, now known as S&P CNX NIFTY, on April 22, 1996 and the Mid-cap Index on January
1, 1996. As of April 30, 2010, the market capitalisation of the capital market segment of the NSE was approximately
Rs. 61,179 billion. NSE has a wide network in major metropolitan cities, screen based trading and a central
monitoring system.
Internet-based Securities Trading and Services
Internet trading takes place through order routing systems, which route client orders to exchange trading systems for
execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant stock
exchange and also have to comply with certain minimum conditions stipulated under applicable law. The NSE
became the first exchange to grant approval to its members for providing internet-based trading services. Internet
trading is possible on both the ―equities‖ as well as the ―derivatives‖ segments of the NSE.
Trading Hours
Trading on both the BSE and the NSE occurs from Monday through Friday, from 9.00 a.m. to 3.30 p.m. The BSE
and the NSE are closed on public holidays. Recently, the stock exchanges have been permitted to set their trading
own hours (in cash and derivative segments) subject to the condition that (i) the trading hours are between 9 a.m.
and 5 p.m.; and (ii) the stock exchange has in place risk management system and infrastructure commensurate to the
trading hours.
Trading Procedure
In order to facilitate smooth transactions, in 1995, BSE replaced its open outcry system with BOLT facility in 1995.
This totally automated screen based trading in securities was put into practice nation-wide. This has enhanced
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transparency in dealings and has assisted considerably in smoothening settlement cycles and improving efficiency in
back-office work.
Takeover Code
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the specific
regulations in relation to substantial acquisition of shares and takeover. Since the Company is an Indian listed
company, the provisions of the Takeover Code apply to the Company.
Insider Trading Regulations
Specific regulations have been notified by SEBI to prohibit and penalize insider trading in India.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership details
and effect transfers in book-entry form. Further, SEBI framed regulations in relation to the registration of such
depositories, the registration of participants as well as the rights and obligations of the depositories, participants,
companies and beneficial owners. The depository system has significantly improved the operation of the Indian
securities markets.
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DESCRIPTION OF THE EQUITY SHARES
Set forth below is certain information relating to the share capital of the Company including a brief summary of
some of the provisions of the Memorandum and Articles of Association of the Company and the Companies Act
relating to the rights attached to its Shares.
General
The authorized share capital of the Company is Rs. 420,000,000 comprising of 410,000,000 Equity Shares of Re. 1
each and 10,000,000 unclassified shares of Re. 1 each.
Articles of Association
The Company is governed by its Articles of Association.
Description of the Shares
Dividends
Under the Companies Act, an Indian company pays dividend upon a recommendation by its board of directors and
subject to approval by a majority of the members, who have the right to decrease but not to increase the amount of
the dividend recommended by the board of directors. However, the board of directors is not obligated to recommend
a dividend. The decision of the board of directors and shareholders of the Company may depend on a number of
factors, including but not limited to the Company‘s profits, capital requirements and overall financial condition.
No unpaid or unclaimed dividend shall be forfeited unless the claim thereto becomes barred by law. The Company
shall comply with the provisions of sections 205A, 205B and 205 C of the Companies Act in respect of unpaid or
unclaimed dividend.
Subject to applicable provisions of the Foreign Exchange Management Act, 1999 and the rules and regulations
issued thereunder, as amended, all dividends and other distributions declared and payable on the Shares may be paid
by the Company to the holder thereof in Indian Rupees and may be converted into foreign currency and freely
transferred out of the Republic of India without the necessity of obtaining any governmental or regulatory
authorisation or approval in the Republic of India or any political subdivision or taxing authority thereof.
Capitalization of Profits
The Company may resolve in a general meeting to capitalise the whole or part of the amount for the time being
standing in credit of any of the Company‘s reserve account or available for distribution.
Alteration of Share Capital
The Articles of the Company provide that the Company may in general meeting alter the conditions of its
Memorandum of Association as follows:
consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;
sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum so,
however, that in the sub-division the proportion between the amount paid and the amount if any, unpaid on
each reduced share shall be the same as it was in the case of the Share from which the reduced share is
derived; and
cancel any shares which, at the date of passing of the resolution, have not been taken or agreed to be taken
by any person and diminish the amount of its share capital by the amount of share so cancelled.
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General Meetings of Shareholders
A company must hold its annual general meeting each year within 15 months of the previous annual general meeting
or within six months after the end of each accounting year, whichever is earlier, unless extended by the Registrar of
Companies at the request of the company for any special reason.
Written notices convening a meeting setting out the date, place and agenda of the meeting must be given to members
at least 21 days prior to the date of the proposed meeting in accordance with section 171 of the Companies Act. A
general meeting may be called after giving shorter notice if consent is received from all shareholders at an Annual
General Meeting, or from shareholders holding not less than 95% of the paid-up capital of the company, at any other
general meeting.
Voting Rights
Every member present in person shall have one vote and on poll, the voting rights shall be as laid down in section 87
of the Companies Act, subject to any rights or restrictions for the time being attached to any class or classes of
shares.
In accordance with the provisions of the Articles of the Company, votes may be given either personally or by proxy.
The instrument appointing a proxy is required to be lodged with the company at least 48 hours before the time of the
meeting.
Register of Members
The Company is required to maintain a register of members wherein the particulars of the members of the Company
are entered. For the purpose of determining the shareholders the register may be closed for such period not
exceeding 45 days in any one year or 30 days at any one time at such times, as the board of directors may deem
expedient
Annual Report and Financial Results
The annual report must be laid before the annual general meeting of the shareholders of a company. This includes
financial information about the company such as the audited financial statements as of the date of closing of the
financial year, directors‘ report, management‘s discussion and analysis and a corporate governance section, and is
sent to the shareholders of the company.
Transfer of shares
Shares held through depositories are transferred in the form of book entries or in electronic form in accordance with
the regulations laid down by SEBI. These regulations provide the regime for the functioning of the depositories and
the participants and set out the manner in which the records are to be kept and maintained and the safeguards to be
followed in this system. Transfers of beneficial ownership of shares held through a depository are exempt from
stamp duty. The Company has entered into an agreement for such depository services with the National Securities
Depository Limited and the Central Depository Services India Limited.
GCPL ESOP
Our company has through a special resolution of the shareholders dated March 14, 2007 instituted the Godrej
Consumer Products Limited Employee Stock Option Plan (―GCPL ESOP‖). The GCPL ESOP is administered by
the Compensation Committee of our Board of Directors.
The Compensation Committee has constituted an independent trust, namely, the Godrej Consumer Products Limited
Employee Stock Option Trust (the ―Trust‖). The Company from time to time grants loans to the Trust to purchase
the Equity Shares of the Company from the secondary market and hold the Equity Shares till the time of exercise of
options by the eligible employees in accordance with the GCPL ESOP. For more details see ―Management‘s
Discussion and Analysis of Financial Condition and Results of Operation- Employee Stock Option Plan‖
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Brief details of the GCPL ESOP are as follows:
Vesting Schedule: The options shall vest in the eligible employees within such period as may be
prescribed by the Compensation Committee, which period shall be not less than one year and may extend
upto three years from the date of grant of options. The options are exercisable within two years after
vesting.
Grants: 2,565,000 options.
Ungranted Options: 279,000 options.
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TAXATION
I. SPECIAL TAX BENEFITS
A. SPECIAL TAX BENEFITS AVAILABLE TO THE COMPANY
There are no special tax benefits available to the Company.
B. SPECIAL TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY
There are no special tax benefits available to the shareholders of the Company.
II. GENERAL TAX BENEFITS
The Income Tax Act, 1961 (provisions of Finance Act, 2010), Wealth Tax Act, 1957 and the Gift Tax Act,
1958, presently in force in India, make available the following general tax benefits to companies and to
their shareholders. Several of these benefits are dependant on the companies or their shareholders fulfilling
the conditions prescribed under the relevant provisions of the statute.
A. BENEFITS TO THE COMPANY UNDER THE INCOME TAX ACT, 1961 (“THE ACT”):
The Company will be entitled to deduction under the sections mentioned hereunder from its total income
chargeable to Income Tax.
(a) Dividends Exempt Under section 10 (34)/10(35)
Under section 10(34) of the Act, the Company will be eligible for exemption of income by way of dividend
(interim or final) on shares held in a domestic Company referred to in section 115-O of the Act or from
units of mutual funds specified under section 10(23D) of the Act, income received in respect of units from
the Administrator of the specified undertaking and income received in respect of units from the specified
company in accordance with and subject to the provisions of section 10(35) of the Act.
However, in view of the provisions of Section 14A of Act, no deduction is allowed in respect of any
expenditure incurred in relation to earning such dividend income. The quantum of such expenditure liable
for disallowance is to be computed in accordance with the provisions contained therein.
Also, Section 94(7) of the Act provides that losses arising from the sale/transfer of shares or units
purchased within a period of three months prior to the record date and sold/transferred within three months
or nine months respectively after such date, will be disallowed to the extent dividend income on such
shares or units is claimed as tax exempt.
(b) Computation of Capital Gains
Capital assets may be categorized into short term capital assets and long term capital assets based on the
period of holding. Shares in a Company, listed securities or units of UTI or units of Mutual Fund specified
under section 10 (23D) or zero coupon bonds will be considered as long term capital assets if they are held
for period exceeding 12 months. Consequently, capital gains arising on sale of these assets held for more
than 12 months are considered as ―Long Term Capital Gains‖. Capital gains arising on sale of these assets
held for 12 months or less are considered as ―Short Term Capital Gains‖.
Section 48 of the Act, which prescribes the mode of computation of Capital Gains, provides for deduction
of cost of acquisition/improvement and expenses incurred in connection with the transfer of a capital asset,
from the sale consideration to arrive at the amount of Capital Gains. However, in respect of long term
capital gains, it offers a benefit by permitting substitution of cost of acquisition/improvement with the
indexed cost of acquisition/improvement, which adjusts the cost of acquisition/ improvement by a cost
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inflation index as prescribed from time to time.
As per the provisions of section 112(1)(b) of the Act, long term capital gains as computed above that are
not exempt under section 10(38) of the Act, would be subject to tax at a rate of 20 percent (plus applicable
surcharge, education cess and secondary higher education cess). However, as per the proviso to section
112(1), if the tax on long term capital gains resulting on transfer of listed securities or units or zero coupon
bonds, calculated at the rate of 20 percent with indexation benefit exceeds the tax on long term capital gains
computed at the rate of 10 percent without indexation benefit, then such gains are chargeable to tax at
consessional rate of 10 percent (plus applicable surcharge, education cess and secondary higher education
cess).
Gains arising on transfer of short term capital assets are currently chargeable to tax at the rate of 30 percent
(plus applicable surcharge, education cess and secondary higher education cess). However, as per the
provisions of section 111A of the Act, short-term capital gains on sale of equity shares or units of an equity
oriented fund on or after 1st October, 2004, where the transaction of sale is subject to Securities
Transaction Tax (―STT‖) shall be chargeable to tax at a rate of 15 percent (plus applicable surcharge,
education cess and secondary higher education cess).
Further the tax benefits related to capital gains are subjected to the CBDT Circular No. 4/2007 dated 15th
June 2007, and on fulfillment of criteria laid down in the circular, the Company will be able to enjoy the
concessional benefits of taxation on capital gains.
As per section 74, Short term capital loss suffered during the year is allowed to be set-off against short-term
as well as long term capital gain of the said year. Balance loss, if any, could be carry forward for eight
years for claiming set-off against subsequent years‘ short-term as well as long-term capital gains. Long
term capital loss suffered during the year is allowed to be set-off against long term capital gains. Balance
loss, if any, could be carried forward for eight years for claiming set-off against subsequent years‘ Long
term capital gains.
(c) Exemption of capital gain from income tax
(i) Under section 10(38) of the Act, any long term capital gains arising out of sale of equity shares or
units of an equity oriented fund on or after 1st October, 2004, will be exempt from tax provided
that the transaction of sale of such shares or units is chargeable to STT. However, such income
shall be taken into account in computing the book profits under section 115JB.
(ii) According to the provisions of section 54EC of the Act and subject to the conditions specified
therein, long term capital gains not exempt under section 10 (38) shall not be chargeable to tax to
the extent such capital gains are invested in certain notified bonds within six month from the date
of transfer. If only part of the capital gain is so reinvested, the exemption shall be allowed
proportionately. However, if the said bonds are transferred or converted into money within a
period of three years from the date of their acquisition, the amount of capital gains exempted
earlier would become chargeable to tax as long term capital gains in the year in which the bonds
are transferred or converted into money. Provided that investments made on or after 1st April
2007, in the said bonds should not exceed Rupees fifty lakh.
(d) COMPUTATION OF BUSINESS INCOME:
Subject to the fulfillment of conditions prescribed, the company will be eligible, inter-alia, for the
following specified deductions in computing its business income:-
(i) Subject to conditions specified, Section 10AA of the Act provides for deduction in respect of
profits derived from exports of a newly established unit set-up in Special Economic Zones, which
begins to manufacture or produce articles or things or provide any services. The deduction
available is 100 percent of profits derived from exports of the unit which is deductible for 5 years
commencing from the initial assessment year in which the unit begins production or provides
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services and 50% of such profits for further 5 years and thereafter for the next consecutive 5 year,
so much of the amount not exceeding 50% of the profit debited to the Profit & Loss Account and
credited to the ―Special Economic Zone Re-investment Reserve Account‖.
(ii) Under Section 35 (1) (i) and (iv) of the Act, in respect of any revenue or capital expenditure
incurred, other than expenditure on the acquisition of any land, on scientific research related to the
business of the Company.
(iii) Under Section 35 (1) (ii) of the Act, any sum paid to a research association which has as its object,
the undertaking of scientific research or to a university, college or other institution to be used for
scientific research is eligible for weighted deduction to the extent of one and three fourth times
(175%) of the sum so paid. This weighted deduction is available to amounts paid to approved
research association, university, college or institution.
(iv) Under Section 35(1)(iia) of the Act any sum paid to a company registered in India which has as its
main object the conduct of scientific research and development and is approved by the prescribed
authority and fulfils such conditions as may be prescribed shall be liable to deduction at one and
one fourth times (125%) of the amount so paid.
(v) Under section 35(1)(iii) any sum paid to a research association, university, college or other
institution to be used for research in social science or statistical research is eligible for deduction
to the extent of one and one fourth times (125%) of the sum so paid. This weighted deduction is
available to amounts paid to approved research association, university, college or institution.
(vi) Similarly, payments to a National Laboratory, university or Indian Institute of Technology in
respect of approved programmes of scientific research are also eligible for weighted deduction of
175% under section 35(2AA).
(vii) Under Section 35(2AB) a weighted deduction of 200% in respect of expenditure incurred on
scientific research (excluding cost of land or building) in an approved in-house research and
development facility is allowable to Companies engaged in the business of bio-technology or in
the business of manufacturing articles or things, not being items mentioned in the Eleventh
Schedule.
(viii) Subject to certain conditions, Section 35D of the Act provides for deduction of specified
preliminary expenditure incurred before the commencement of the business or after the
commencement of business in connection with the extension of the undertaking or in connection
with the setting up a new unit. The deduction allowable is equal to one-fifth of such expenditure
incurred for each of the five successive previous years beginning with the previous year in which
the business commences.
(ix) Under Section 36(1)(xv) of the Act, the amount of Securities Transaction Tax paid by an assessee
in respect of taxable securities transactions offered to tax as ―Profits and gains of Business or
profession‖ shall be allowable as a deduction against such Business Income.
(x) Subject to compliance with certain conditions laid down in section 32 of the Act, the Company
will be entitled to deduction for depreciation in respect of tangible assets (being buildings,
machinery, plant or furniture) and intangible assets (being know-how, patents, copyrights,
trademarks, licenses, franchises or any other business or commercial rights of similar nature
acquired on or after 1st day of April, 1998) at the rates prescribed under the Income Tax
Rules,1962.
(xi) The corporate tax rate presently is 30% (plus surcharge of 7.5%, education cess and secondary &
higher education cess of 3%).
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(xii) Under Section 72 of the Act, where the loss under the head ‗profits and gains of business or
profession‘ could not be set off in the same assessment year because either the company had no
income under any other head or the income was less than the loss, such loss which could not be set
off in the same assessment year, can be carried forward to the following assessment years and it
shall be set off against the profit and gains of business or profession for eight successive
assessment years subject to the conditions setout in the said section.
(xiii) Subject to conditions specified, Section 80IB(4) of the Act provides for deduction in respect of
profits of a new industrial undertaking set-up in the state of Jammu and Kashmir, which begins to
manufacture or produce specified articles or things or to operate a cold storage plant or plants,
provided the undertaking begins production or commences operation of its cold storage plant on or
before March 31, 2012. The deduction available is 100 percent of profits of the undertaking which
is deductible for 5 years commencing from the initial assessment year and thereafter 30% of
profits of the undertaking for the consecutive 5 years.
(xiv) Subject to conditions specified, Section 80IC(2) of the Act provides for deduction in respect of
profits of a new industrial undertaking or enterprise set-up in the state of Sikkim, Himachal
Pradesh or Uttaranchal, in notified areas which begins to manufacture or produce specified articles
or things provided the undertaking or enterprise begins production on or before March 31, 2012.
The deduction available is 100 percent of profits of the undertaking or enterprise which is
deductible for 5 years commencing from the initial assessment year and thereafter 30% of profits
of the undertaking or enterprise for the consecutive 5 years.
(xv) Under Section 80-GGB, in computing total income of a Company, any sum contributed by it to
any political party or an electoral trust is deductible.
COMPUTATION OF TAX ON BOOK PROFITS:
As provided under section 115JB of the Act, the company is liable to pay income tax at the rate of 18%
(plus applicable surcharge, education cess and secondary & higher education cess) on the Book Profit as
computed in accordance with the provisions of section 115JB of the Act, if the total tax payable as
computed under the Act is less than 18% of the Book Profit as computed under the said section.
Under section 115JAA(1A) of the Act, tax credit shall be allowed of any tax paid under section 115JB of
the Act (MAT). Credit eligible for carry forward is the difference between MAT paid and the tax computed
as per the normal provisions of the Act. Such MAT credit shall not be available for set-off beyond 10 years
succeeding the year in which the MAT becomes allowable. The company shall be eligible to set-off the
MAT credit, thus carried forward, in the year in which it is required to pay the tax under the regular
provisions of the Income-tax Act. The amount which can be set-off is restricted to the difference between
the tax payable under the regular provisions of the Act and tax payable under the provisions of section
115JB in that year.
TAX REBATES (TAX CREDITS):
As per the provisions of section 90, for taxes on income paid in Foreign Countries with which India has
entered into Double Taxation Avoidance Agreements (Tax Treaties from projects/activities undertaken
thereat), the Company will be entitled to the deduction from the India Income-tax of a sum calculated on
such doubly taxed income to the extent of taxes paid in Foreign Countries. Further, the company as a tax
resident of India would be entitled to the benefits of such Tax Treaties in respect of income derived by it in
foreign countries. In such cases the provisions of the Income tax Act shall apply to the extent they are more
beneficial to the company. Section 91 provides for unilateral relief in respect of taxes paid in foreign
countries.
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Deduction of dividend received from subsidiary company while computing Dividend Distribution
Tax liability of the Ultimate Holding Company
Every domestic company is liable to pay Dividend Distribution Tax (DDT) on the amount of dividend
distributed by it whether interim or final, @15% (plus applicable surcharge and education cess). However,
while computing the DDT liability of a domestic company which is the ultimate holding company, the
dividend so paid or distributed amount shall be reduced by the dividend received from its subsidiary
company where the subsidiary company has paid DDT on such dividend.
Thus, ultimate holding company is eligible to take credit for the dividend distributed by its subsidiary
company while computing the amount of Dividend Distribution Tax payable by itself on the dividend
distributed.
B. BENEFITS AVAILABLE TO RESIDENT SHAREHOLDERS:
(a) Dividends exempt under section 10 (34)
Under section 10 (34) of the Act, income earned by way of dividend (Interim or final) from domestic
Company referred to in section 115-O of the Act is exempt from income tax in the hands of the
shareholders.
However, in view of the provisions of Section 14A of Act, no deduction is allowed in respect of any
expenditure incurred in relation to earning such dividend income. The quantum of such expenditure liable
for disallowance is to be computed in accordance with the provisions contained therein.
Also, Section 94(7) of the Act provides that losses arising from the sale/transfer of shares or units
purchased within a period of three months prior to the record date and sold/transferred within three months
or nine months respectively after such date, will be disallowed to the extent dividend income on such
shares or units is claimed as tax exempt.
(b) Computation of capital gains
Capital assets may be categorized into short term capital asset and long term capital assets based on the
period of holding. Shares in a Company, listed securities or units of UTI or units of mutual fund specified
under section 10 (23D) of the Act or zero coupon bonds will be considered as long term capital assets if
they are held for a period exceeding 12 months. Consequently, capital gains arising on sale of these assets
held for more than 12 months are considered as ―long term capital gains‖. Capital gains arising on sales of
these assets held for 12 months or less are considered as ―short term capital gains‖.
Section 48 of the Act, which prescribes the mode of computation of capital gains, provides for deduction of
cost of acquisition/improvement and expenses incurred in connection with the transfer of a capital asset,
from the sale consideration to arrive at the amount of capital gains. However, in respect of long term capital
gains, it offers a benefit by permitting substitution of cost of acquisition/improvement with the indexed cost
of acquisition/ improvement, which adjusts the cost of acquisition/ improvement by a cost inflation index
as prescribed from time to time.
As per provisions of section 112 (1) (a) of the Act, long term gains as computed above that are not exempt
under section 10 (38) of the Act would be subject to tax at a rate of 20 percent (plus education cess and
secondary higher education cess). However, as per the proviso to the said section 112 (1), if the tax on long
term capital gains resulting on transfer of listed securities or units or zero coupon bond, calculated at the
rate of 20 percent with indexation benefit exceeds the tax on long term capital gains computed @ 10
percent without indexation benefit, then such gains are chargeable to tax a consessional rate of 10 percent
(plus applicable education cess and secondary higher education cess).
Gains arising on transfer of short term capital assets are currently chargeable to tax at the rate of 30 percent
(plus applicable education cess and secondary higher education cess). However, as per the provisions of
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section 111A of the Act, short-term capital gains on sale of equity shares or units of mutual funds on or
after 1st October, 2004, where the transaction of sale is chargeable to Securities Transaction Tax (―STT‖)
shall be subject to tax at a rate of 15 percent (plus applicable education cess and secondary higher
education cess).
Further the tax benefits related to capital gains are subjected to the CBDT Circular No. 4/2007 dated 15th
June 2007, and on fulfillment of criteria laid down in the circular, the individual will be able to enjoy the
consessional benefits of taxation on capital gains.
As per section 74 Short term capital loss suffered during the year is allowed to be set-off against short-term
as well as long term capital gain of the said year. Balance loss, if any, can be carried forward for eight years
for claiming set-off against subsequent years‘ short-term as well as long-term capital gains. Long term
capital loss suffered during the year is allowed to be set-off against long term capital gains. Balance loss, if
any, can be carried forward for eight years for claiming set-off against subsequent years‘ Long term capital
gains.
Exemption of capital gain from income tax
Under section 10 (38) of the Act, long term capital gains arising out of sale of equity shares or a
unit of equity oriented fund will be exempt from tax provided that the transaction of sale of such
equity shares or unit is chargeable to Securities Transaction Tax (―STT‖).
According to the provisions of sections 54EC of the Act and subject to the conditions specified
therein, long term capital gains not exempt under section 10 (38) shall not be chargeable to tax to
the extent such capital gains are invested in certain notified bonds within six months from the date
of transfer. If only the part of capital gain is so reinvested, the exemption shall be allowed
proportionately. In such a case, the cost of such long term specified assets will not qualify for
deduction under section 80C of the Act. However, if the said bonds are transferred or converted
into money within a period of three years from the date of their acquisition the amount of capital
gain exempted earlier would become chargeable to tax as long term capital gains in the year in
which the bonds are transferred or converted into money. Provided that investments made on or
after 1st April 2007, in the said bonds should not exceed Rupees fifty lakh.
(c) Deduction in respect of Securities Transaction Tax paid against Business Income
Under Section 36 (1) (xv) of the Act, the amount of Securities Transaction Tax paid by an assessee in
respect of taxable securities transactions offered to tax as ―Profits and gains of Business or profession‖
shall be allowable as a deduction against such Business Income.
(d) Deduction of dividend received from subsidiary company while computing Dividend Distribution
Tax liability of the Ultimate Holding Company
Every domestic company is liable to pay Dividend Distribution Tax (DDT) on the amount of dividend
distributed by it whether interim or final, @15% (plus applicable surcharge and education cess). However,
while computing the DDT liability of a domestic company which is the ultimate holding company, the
dividend so paid or distributed amount shall be reduced by the dividend received from its subsidiary
company where the subsidiary company has paid DDT on such dividend.
Thus, ultimate holding company is eligible to take credit for the dividend distributed by its subsidiary
company while computing the amount of Dividend Distribution Tax payable by itself on the dividend
distributed.
144
C. BENEFITS AVAILABLE TO FOREIGN INSTITUTIONAL INVESTORS („FII‟s‟):
(a) Dividends exempt under section 10 (34)
Under section 10 (34) of the Act, income earned by way of dividend (Interim or final) from domestic
Company referred to in section 115-O of the Act is exempt from income tax in the hands of the
shareholders.
However, in view of the provisions of Section 14A of Act, no deduction is allowed in respect of any
expenditure incurred in relation to earning such dividend income. The quantum of such expenditure liable
for disallowance is to be computed in accordance with the provisions contained therein.
Also, Section 94(7) of the Act provides that losses arising from the sale/transfer of shares or units
purchased within a period of three months prior to the record date and sold/transferred within three months
or nine months respectively after such date, will be disallowed to the extent dividend income on such
shares or units is claimed as tax exempt.
(b) Taxability of capital gains
Under section 10 (38) of the Act, long term capital gains arising out of sale of equity shares or units of
equity oriented fund will be exempt from tax provided that the transaction of sale of such equity shares or
units is chargeable to STT. However, such income shall be taken into account in computing the book
profits under section 115JB.
The income by way of short term capital gains or long term capital gains [long term capital gains not
covered under section 10 (38) of the Act] realized by FII‘s on sale of the shares of the Company would be
taxed at the following rates as per section 115AD of the Act.
Short term capital gains, other than those referred to under section 111A of the Act shall be taxed
@ 30% (plus applicable surcharge, education cess and secondary higher education cess).
Short term capital gains, referred to under section 111A of the Act shall be taxed @ 15% (plus
applicable surcharge, education cess and secondary higher education cess).
Long term capital gains @10% (plus applicable surcharge, education cess and secondary higher
education cess) (without cost indexation).
It may be noted that the benefits of indexation and foreign currency fluctuation protection as provided by
section 48 of the Act are not applicable.
According to provisions of section 54EC of the Act and subject to the condition specified therein, long term
capital gains not exempt under section 10(38) shall not be chargeable to tax to the extent such capital gains
are invested in certain notified bonds within six months from the date of transfer. If only part of the capital
gain is so reinvested, the exemption shall be allowed proportionately. Provided that investments made on or
after 1st April 2007, in the said bonds should not exceed Rupees fifty lakh.
However, if the assessee transfers or converts the notified bonds into money within a period of three years
from the date of their acquisition, the amount of capital gains exempt earlier would become chargeable to
tax as long term capital gains in the year in which the bonds are transferred or converted into money.
Further the tax benefits related to capital gains are subjected to the CBDT Circular No. 4/2007 dated 15th
June 2007, and on fulfillment of criteria laid down in the circular, the institution will be able to enjoy the
consessional benefits of taxation on capital gains.
145
Provisions of the Act vis-à-vis provisions of the tax treaty
As per Section 90(2) of the Act, the provisions of the Act would prevail over the provisions of the relevant
tax treaty to the extent they are more beneficial to the non-resident.
D. BENEFITS AVAILABLE TO MUTUAL FUNDS
As per the provisions of section 10(23D) of the Act, any income of Mutual Funds registered under the
Securities and Exchange Board of India Act, 1992 or regulations made there under, Mutual Funds set up by
public sector banks or public financial institutions or authorized by the Reserve Bank of India, would be
exempt from income tax subject to the conditions as the Central Government may notify. However, the
mutual funds shall be liable to pay tax on distributed income to unit holders under section 115R of the Act.
E. BENEFITS AVAILABLE TO VENTURE CAPITAL COMPANIES/ FUNDS
As per the provisions of section 10(23FB) of the Act, any income of Venture Capital Companies/ Funds
(set up to raise funds for investment in a venture capital undertaking registered and notified in this behalf)
registered with the Securities and Exchange Board of India, would be exempt from income tax, subject to
the conditions specified therein. However, the exemption is restricted to the Venture Capital Company and
Venture Capital Fund set up to raise funds for investment in a Venture Capital Undertaking, which is
engaged in the business as specified under section 10(23FB)(c). However, the income distributed by the
Venture Capital Companies/ Funds to its investors would be taxable in the hands of the recipients.
F. BENEFITS AVAILABLE UNDER THE WEALTH-TAX ACT, 1957
The company shall be charged wealth-tax @ 1% on amount of which its net wealth determined on the basis
of nationality and residential status, on the corresponding valuation date relevant to the assessment year
exceeds thirty lakhs subject to section 2(ea) of the Wealth Tax Act, 1957.
Shares of the company held by the shareholder will not be treated as an asset within the meaning of section
2(ea) of Wealth Tax Act, 1957. Hence, no wealth tax will be payable on the market value of shares of the
company held by the shareholder of the company.
G. BENEFITS AVAILABLE UNDER THE GIFT-TAX ACT, 1958
Gift of shares of the Company made on or after 1st October, 1998, are not liable to Gift tax.
If a Firm or a Company, not being a Company in which the public are substantially interested, receives on
or after June 1, 2010 any property, being shares of a Company not being a Company in which the public
are substantially interested, without consideration, the aggregate fair market value of which exceeds
Rs.50,000, the whole of the fair market value of such property will be considered as income in the hands of
the recipient. Similarly, if a Firm or a Company, not being a Company in which the public are substantially
interested, receives on or after June 1, 2010 any property, being shares of a Company not being a Company
in which the public are substantially interested, for consideration which is less than the fair market value of
the property by an amount exceeding Rs.50,000, the fair market value of such property as exceeds the
consideration will be considered as income in the hands of the recipient.
Notes:
1. All the above benefits are as per the current tax law and will be available only to the sole/first named holder
in case the shares are held by the joint holders.
2. In respect of non-residents, the tax rates and the consequent taxation mentioned above will be further
subject to any benefits available under the relevant Double Taxation Avoidance Agreement (DTAA), if
any, between India and the country in which the non-resident has fiscal domicile.
146
3. In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax
advisor with respect to specific tax consequences of his/her participation in the scheme.
147
LEGAL PROCEEDINGS
We believe that we are not involved in any legal proceedings and in our opinion, no proceedings are threatened,
which may have, or have had during the 12 months preceding the date of this Placement Document, material adverse
effect on our business, financial position, profitability or results of operations.
From time to time, we are involved in other legal proceedings filed by and against us, arising in the ordinary course
of our business. These legal proceedings, which are pending adjudication, are primarily in the nature of (a) civil
cases, (b) labour cases, (c) arbitration proceedings, (d) direct and indirect tax proceedings, (c) criminal proceedings
and (d) consumer cases. We have also received notices from our consumers in relation to the products provided by
us.
148
INDEPENDENT ACCOUNTANTS
Our statutory auditors, M/s. Kalyaniwalla & Mistry, have audited the unconsolidated and consolidated financial
statements of our Company, in each case, as of and for the financial years ended March 31, 2010, 2009 and 2008.
149
GENERAL INFORMATION
We were incorporated on November 29, 2000 as ―Godrej Consumer Products Limited‖ under the
provisions of the Companies Act. Our registered office is located at Pirojshanagar, Eastern Express
Highway, Vikhroli, Mumbai 400079. We are registered with the Registrar of Companies, Mumbai,
Maharashtra, under CIN L24246MH2000PLC129806.
The Issue was authorised and approved by the Board of Directors on December 15, 2009 and approved by
the shareholders via postal ballot on February 10, 2010.
We have applied for in-principle approval to list the Equity Shares on the BSE and the NSE.
Copies of our Memorandum of Association and Articles of Association will be available for inspection
between 10.00 A.M. to 1.00 P.M. any weekday (except Saturdays and public holidays) at our registered
office.
We will obtain all consents, approvals and authorisations required in connection with this Issue.
There has been no material change in our financial or trading position since March 31, 2010, the date of the
latest financial statements prepared in accordance with Indian GAAP included in this Placement Document,
except as disclosed herein.
Except as disclosed herein, there are no litigation or arbitration proceedings against or affecting us, nor are
we aware of any pending or threatened litigation or arbitration proceedings, which are or might be material
in the context of this Issue.
Our current statutory auditors, M/s. Kalyaniwalla & Mistry have audited our unconsolidated financial
statements and consolidated financial statements, in each case, as of and for the financial years ended
March 31, 2010, 2009 and 2008.
We confirm that we are in compliance with the minimum public shareholding requirements as required
under the terms of the listing agreements with the Stock Exchanges.
The Floor Price for the Issue is Rs. 345.00 per Equity Share. The Floor Price has been calculated in
accordance with chapter VIII of the SEBI Regulations.
150
FINANCIAL STATEMENTS
Godrej Consumer Products Limited:
Sr. No. Content Page No.
1. Auditors report on and Audited Consolidated Financial
Statements of our Company for the financial year ended March
31, 2010, 2009 and 2008.
F -1
2. Audited report on and Audited Consolidated Financial
Statements of Godrej Household for the financial year ended
March 31, 2010.
F-49
F-1
THE BOARD OF DIRECTORS
GODREJ CONSUMER PRODUCTS LIMITED
AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS OF GODREJ
CONSUMER PRODUCTS LIMITED AND ITS SUBSIDIARIES
In terms of the appointment for the purpose of certification of the financial information of GODREJ CONSUMER
PRODUCTS LIMITED (the „Company‟) annexed to this report, which is required to be prepared in accordance
with Chapter VIII read with Schedule XVIII of the Securities and Exchange Board of India (Issue of Capital and
Disclosure Requirements) Regulations, 2009 (the „Guidelines‟), issued by Securities and Exchange Board of India
(„SEBI‟) on August 26, 2009, in pursuance of section 30 of the Securities and Exchange Board of India Act, 1992,
as amended from time to time, we state as follows:
1. The financial statements referred to in this report are proposed to be included in the Placement Document
of the Company in connection with the proposed issue of shares to Qualified Institutional Buyers (“QIBs”)
and have been extracted from the Consolidated Financial Statements for the years ended March 31, 2010,
March 31, 2009, and March 31, 2008.
2. We have audited the attached consolidated Balance Sheets of GODREJ CONSUMER PRODUCTS
LIMITED (the Company) and its subsidiaries (collectively referred to as the “Godrej Group”) as at March
31, 2010, March 31, 2009 and March 31, 2008, the Consolidated Profit and Loss Accounts and the
Consolidated Cash Flow Statements for the respective years then ended annexed thereto (Consolidated
Financial Statements). These Consolidated Financial Statements are the responsibility of the Company‟s
Management and have been prepared by the Management on the basis of separate financial statements and
other financial information regarding components. Our responsibility is to express an opinion on these
financial statements based on our audit.
3. We conducted our audit in accordance with the auditing standards generally accepted in India. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes, examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
4. We did not audit the financial statements of certain subsidiaries and joint ventures included in the
Consolidated Financial Statement whose financial statements reflect the Group‟s share of total assets of Rs.
4,132,043,423 as at March 31, 2010 (2008-09 – Rs. 2,791,776,073; 2007-08 - Rs. 1,401,381,445), the
Group‟s share of total revenues of Rs. 7,959,111,638 for the year 2009-10 (2008-09 – Rs. 3,151,606,148;
2007-08 - Rs. 2,510,111,367) and net cash inflows amounting to Rs. 852,694,170 for the year 2009-10
(2008-09 - Rs. 105,422,360; 2007-08 - Rs. 19,722,849). These financial statements have been audited by
other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts
included in respect of these subsidiaries, is based solely on the report of the other auditors.
5. As stated in Note 2(b) of Schedule 15 to the Consolidated Financial Statements, certain subsidiaries whose
financial statements reflect the Group‟s share of total assets of Rs. 457,042,700 as at March 31, 2010
(2008-09 - Rs. 397,556,790; 2007-08 - Rs. 665,270,647) and the Group‟s share of total revenues of Rs.
3,597,472 for the year 2009-10 (2008-09 - Rs. 2,408,010; 2007-08 - Rs. 2,666,536) and net cash outflows
amounting to Rs. 775,292 for the year 2009-10 (2008-09 - Rs. 2,922,524; 2007-08 - Rs. 19,183,747) have
not been audited and have been considered in the Consolidated Financial Statements based solely on the
unaudited separate financial statements certified by Management.
6. We draw attention to Note 15 i), Schedule 15: Notes to Consolidated Accounts, where it has been stated
that a Joint Venture company has given a loan of Rs. 594,000,000 to its ESOP trust to finance the purchase
of the equity shares of Godrej Industries Ltd., being the underlying equity shares for the stock option
F-2
scheme. As at March 31, 2010, the market value of the equity shares of Godrej Industries Ltd. are lower by
Rs. 223,969,000 as compared to the cost of acquisition of these equity shares. The repayment of the loan
granted to the ESOP trust is dependant on the exercise of the options by the employees and the market price
of the underlying shares of the unexercised options at the end of the exercise period. The fall in the value of
the underlying equity shares is on account of current market volatility and the loss, if any, can be
determined only at the end of the exercise period. In view of the aforesaid, provision for diminution of Rs.
223,969,000 has not been considered necessary in the accounts of the Joint Venture. The Group‟s 49%
share in the above diminution amounts to Rs. 109,744,810.
7. We report that the consolidated financial statements have been prepared by the Company‟s Management in
accordance with the requirements of Accounting Standard (AS) 21- Consolidated Financial Statements and
Accounting Standard (AS) 27- Financial Reporting of Interest in Joint Venture issued by the Institute of
Chartered Accountants of India.
8. In accordance with Chapter VIII read with Schedule XVIII of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009, we have examined the following:
a) The consolidated Balance Sheets of Godrej Consumer Products Limited and its subsidiaries as at
March 31, 2010, March 31, 2009 and March 31, 2008.
b) The consolidated Profit and Loss Accounts and consolidated Cash Flow Statements for the years
ended March 31, 2010, March 31, 2009 and March 31, 2008.
c) The accompanying Notes to Accounts along with accounting policies for the years ended March
31, 2010, March 31, 2009 and March 31, 2008.
d) Capitalisation Statement as at March 31, 2010 - Annexure I.
e) Dividends paid by the Company (consolidated) for the years ended March 31, 2010, March 31,
2009 and March 31, 2008 - Annexure II.
f) Consolidated Net Worth Statement as of March 31, 2010 - Annexure III.
9. This report is intended solely for your information and for the Company to comply with the provisions of
Chapter VIII read with Schedule XVIII of the Securities and Exchange Board of India (Issue of Capital and
Disclosure Requirements) Regulations, 2009 and may not be suitable for any other purpose. The report is
not to be used, referred to, or distributed for any other purpose without our prior written consent.
For and on behalf of
KALYANIWALLA & MISTRY
CHARTERED ACCOUNTANTS
Firm Regn. No.: 104607W
Daraius Z. Fraser
PARTNER
M. No.: 42454
Mumbai: June 9, 2010.
F-3
GODREJ CONSUMER PRODUCTS LIMITED – CONSOLIDATED
BALANCE SHEET AS AT MARCH 31, 2010
SCHEDULE 2009-10 2008-09 2007-08
Rs.
Million
Rs.
Million
Rs.
Million
SOURCES OF FUNDS:
1. SHAREHOLDERS' FUNDS
a) Share Capital 1 308.19 256.95 225.84
b) Reserves And Surplus 2 9238.70 5458.25 1536.54
9546.89 5715.20 1762.38
2. LOAN FUNDS
a) Secured Loans 3 368.74 2295.72 921.00
b) Unsecured Loans 4 - 480.00 950.00
368.74 2775.72 1871.00
3. DEFERRED TAX LIABILITY (NET) 5 65.89 42.10 89.05
TOTAL
9981.53 8533.03 3722.43
APPLICATION OF FUNDS:
4. FIXED ASSETS 6
a) Gross Block
4148.74 3369.56 2936.82
b) Less: Depreciation
1531.43 1097.63 1253.58
c) Net Block
2617.31 2271.93 1683.34
d) Capital Work-in-Progress
8.37 24.97 715.81
2625.68 2296.90 2399.14
5. GOODWILL ON CONSOLIDATION
3118.61 2132.48 1002.76
6. INVESTMENTS 7 670.00 75.05 0.06
7. CURRENT ASSETS, LOANS AND ADVANCES 8
a) Inventories
2644.33 1674.73 1915.58
b) Sundry Debtors
1152.58 601.90 509.57
c) Cash And Bank Balances
3051.59 3783.23 425.89
d) Other Current Assets
57.51 90.06 0.00
e) Loans And Advances
2189.28 1177.55 667.67
9095.29 7327.47 3518.71
8. Less: CURRENT LIABILITIES AND
PROVISIONS 9
a) Current Liabilities
5326.18 2918.57 2904.47
b) Provisions
201.87 380.29 322.42
5528.05 3298.87 3226.89
9. NET CURRENT ASSETS
3567.24 4028.60 291.82
1
0. MISCELLANEOUS EXPENDITURE
- - 28.65
(To the extent not written off or adjusted)
TOTAL
9981.53 8533.03 3722.43
F-4
GODREJ CONSUMER PRODUCTS LIMITED – CONSOLIDATED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2010
SCHEDULE 2009-10 2008-09 2007-08
Rs. Million Rs. Million Rs. Million
INCOME:
1. Sales (Gross)
20817.75 14352.25 11330.19
Less: Excise Duty
(405.77) (422.62) (304.50)
20411.98 13929.64 11025.69
2. Processing Income
24.95 36.73 14.11
3. Other Income 10 448.09 365.01 (45.87)
20885.02 14331.39 11085.67
EXPENDITURE:
4. Materials Consumed And Purchase Of Goods 11 9867.54 7606.27 5414.01
5. Expenses 12 6875.74 4162.85 3700.98
6. Interest And Financial Charges 13 110.99 188.59 148.33
7. Depreciation And Amortisation
236.04 192.27 181.70
17090.31 12149.98 9445.01
8. Inventory Change 14 (404.49) 89.14 (234.25)
16685.82 12239.12 9210.76
PROFIT BEFORE TAX:
4199.21 2092.27 1874.92
9. Provision For Taxes
- Current Taxes
795.51 324.24 265.99
- Deferred Taxes
7.83 34.31 9.25
- Fringe Benefits Tax
- 7.51 7.32
803.35 366.06 282.55
NET PROFIT AFTER TAX:
3395.86 1726.21 1592.36
10. Tax Adjustments in Respect of Prior Years
- 6.37 -
NET PROFIT AFTER TAX:
3395.86 1732.58 1592.36
11. Surplus Brought Forward
1376.24 1010.08 651.43
PROFIT AVAILABLE FOR APPROPRIATION:
4772.10 2742.66 2243.79
APPROPRIATIONS:
1. Dividend on Equity Shares
- Interim
1258.57 837.12 733.99
- Final (Proposed)
- 192.72 193.58
2. Tax On Distributed Profit
230.98 175.02 157.64
3. Transfer To General Reserve
312.98 161.56 148.50
4. Surplus Carried Forward
2969.57 1376.24 1010.08
TOTAL
4772.10 2742.66 2243.79
EARNINGS PER SHARE (in Rupees)
(Face Value Re.1)
F-5
SCHEDULE 2009-10 2008-09 2007-08
Rs. Million Rs. Million Rs. Million
Basic and Diluted 11.33 6.83 7.05
F-6
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2010
2009-10 2008-09 2007-08
Rs. Million Rs. Million Rs. Million
A. CASH FLOW FROM OPERATING ACTIVITIES:
Profit Before Tax: 4199.21 2092.27 1874.92
Adjustment for:
Depreciation 236.04 192.27 181.70
Foreign Exchange (Gain) / Loss 29.78 (28.49) (11.80)
(Profit) / Loss on Fixed Assets Sold / Discarded 5.09 1.66 0.83
Profit on Sale of Investment (20.73) (2.16) (2.03)
Discount on Prepayment of Deferred Sales Tax Loan - (0.15) -
Interest Expense 110.99 188.59 148.33
Interest Income (270.42) (360.73) (22.54)
Bad Debts Written off 9.13 6.15 0.16
Provision for Doubtful Debts and Advances 0.14 21.49 -
Provision for Non Moving Inventory 7.11 - -
Write in of Old Balances (3.95) - -
Other Income Outstanding 15.51 - 2.71
118.70 18.64 297.79
Operating Cash Flows Before Working Capital Changes 4317.91 2110.91 2172.71
Adjustments for:
Inventories (969.60) 240.85 (563.23)
Trade and Other Receivables (941.91) (629.86) (229.84)
Trade Payables 1778.478 36.29 515.00
(133.03) (352.72) (278.08)
Cash Generated from Operations 4184.88 1758.19 1894.64
Adjustment for:
Direct Taxes Paid (779.56) (325.49) (272.22)
Net Cash Flow from Operating Activities 3405.32 1432.70 1622.41
B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (745.90) (444.98) (647.81)
Sale / Adjustments to Fixed Assets 175.99 (38.28) 6.71
Investment Acquisition Expenses as per Scheme of Amalgamation (73.11) - -
Purchase of Investments (6679.75) (2861.50) (2474.69)
Sale of Investments 6105.54 2788.66 2418.53
Investment Expenses to be Capitalized (22.77) - -
Loan to ESOP Trust (net) (205.08) - -
Adjustment for Goodwill on Consolidation 909.46 (1129.72) 36.93
Interest Received 270.42 270.67 22.54
Net Cash Flow From Investing Activities (265.22) (1415.16) (637.79)
Balance Carried Forward 3140.10 17.54 984.62
F-7
GODREJ CONSUMER PRODUCTS LIMITED – CONSOLIDATED
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2010
2009-10 2008-09 2007-08
Rs.
Million
Rs.
Million
Rs.
Million
Balance brought forward 3140.10 17.54 984.62
C
. CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Issue of Share Capital - Rights Issue - 3964.57 -
Buyback of Equity Share Capital - (149.00) -
Borrowings (net) (2339.66) 819.15 134.90
Cash credits (net) (119.13) 85.73 -
Interest Paid (110.99) (186.37) (155.27)
Dividend Paid (873.33) (1002.37) (840.73)
Tax on Distributed Profits (165.51) (171.20) (143.93)
Rights Issue Expenses written off - (20.72) (28.65)
Net Cash Flow From Financing Activities (3608.63) 3339.80 (1033.68)
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS:
(468.52) 3357.34 (49.06)
CASH AND CASH EQUIVALENTS:
AS AT THE BEGINNING
Cash and Bank Balances 3783.23 425.89 474.95
Acquired Pursuant to the Scheme Of Amalgamation 1.64 - -
Acquisition of Balance 50% Share in Godrej Hygiene Products Ltd 7.28 - -
Acquisition of 49% Share in Godrej Sara Lee Ltd. 254.20 -
AS AT THE ENDING
Cash and Bank Balances 3051.59 3783.23 425.83
Unrealized Foreign Exchange Restatement in Cash and Cash
Equivalents
- - 0.06
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS:
(468.561) 3357.342 (49.06)
F-8
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
SCHEDULE 1: SHARE CAPITAL
1. AUTHORISED:
410,000,000
Equity shares (previous year equity
shares) of Re. 1/- each.
290,000,000
290,000,000 410.00 290.00 290.00
10,000,000
Preference shares (previous year
preference shares) of Re. 1/- each.
10,000,000
10,000,000 10.00 10.00 10.00
2. ISSUED:
308,221,168
Equity shares (previous year equity
shares) of Re. 1/- each fully paid up.
256,985,032
225,844,076 308.22 256.99 225.84
3. SUBSCRIBED AND PAID UP:
308,190,044
Equity shares of Re. 1/- each (previous
year equity shares of Re. 1/- each) fully
paid up.
256,953,908
225,844,076 308.19 256.95 225.84
TOTAL 308.19 256.95 225.84
Note:
a) Of the above, 51,236,136 equity shares of Rs. 1 each (previous year nil) have been issued for a
consideration other than cash pursuant to the Scheme of Amalgamation of Godrej Consumer Biz Limited
(GCBL) and Godrej Hygiene Care Limited (GHCL) with Godrej Consumer Products Limited.
F-9
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
SCHEDULE 2: RESERVES AND SURPLUS
1. CAPITAL INVESTMENT SUBSIDY RESERVE 1.50 1.50 1.50
2. CAPITAL REDEMPTION RESERVE
As per last Balance Sheet 14.59 13.47 13.47
Add: Transfer from General Reserve - 1.12 -
14.59 14.59 13.47
3. FOREIGN CURRENCY TRANSLATION RESERVE (18.99) (48.77) (20.28)
4. SHARE PREMIUM ACCOUNT
As per last Balance Sheet 3570.36 - -
Amount Received During the Year - 3,932.34 -
Less: Rights Issue Expenses and Trademarks Written off - (361.98) -
3,570.36 3,570.36 -
5. GENERAL RESERVE
As per last Balance Sheet 544.33 531.77 383.27
Add: Transfer from Profit and Loss Account 248.20 161.56 148.50
Add: Transfer Pursuant to Scheme of Amalgamation 1845.52 - -
Less: Premium on buy-back of shares - (147.88) -
Less: Transfer to Capital Redemption Reserve on buy-back of shares - (1.12) -
2,638.05 544.33 531.77
6. PROFIT & LOSS ACCOUNT
Balance as per Profit and Loss Account 2969.05 1,376.24 1,010.08
Less: Share in Jointly Controlled Entity 457.44 (99.40) -
2,512.14 1,475.64 1,010.08
7. SHARE IN JOINTLY CONTROLLED ENTITY 521.05 (99.40) -
TOTAL 9,238.70 5,458.25 1,536.54
F-10
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
SCHEDULE 3: SECURED LOANS
1. BORROWINGS FROM BANKS
a) Term Loans 106.89 2,104.00 759.69
b) Cash Credit 118.95 186.26 100.54
c) Working Capital Demand Loans 137.87 0.75 55.38
363.71 2,291.02 915.60
2. SALES TAX DEFERMENT LOAN 5.03 4.71 5.39
TOTAL 368.74 2,295.72 921.00
SCHEDULE 4: UNSECURED LOANS
1. TERM LOANS AND ADVANCES
a) From Banks - 480.00 940.00
2. SHARE IN JOINTLY CONTROLLED ENTITY - - 10.00
TOTAL - 480.00 950.00
SCHEDULE 5: DEFERRED TAX LIABILITY (NET)
1. Deferred Tax Liability
a) Depreciation 92.40 64.58 107.35
b) Others 0.91 0.47 -
93.31 65.05 107.35
2. Deferred Tax Asset
a) Expenditure Disallowable under section 43B (21.01) (21.83) (17.30)
b) Provision for Doubtful Debts (8.18) (1.12) (1.00)
(29.19) (22.95) (18.30)
3. Share In Jointly Controlled Entity 1.77 - -
TOTAL 65.89 42.10 89.05
F-11
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 6: FIXED ASSETS Rupees in Mio
ASSET Gross Block Accumulated Depreciation NET BLOCK
2009-10 2008-09 2007-08 2009-10 2008-09 2007-08 2009-10 2008-09 2007-08
Tangible Assets:
Freehold Land 88.00 76.86 30.72 - - - 88.00 76.86 30.72
Leasehold Land 115.69 85.48 77.61 14.87 12.48 11.29 100.82 73.00 66.32
Leasehold
Improvements
10.22 - - - - - 10.22 - -
Buildings 586.61 570.30 444.88 95.57 78.37 62.82 491.05 491.93 382.06
Plant and
Machinery
1,934.91 1,888.82 1,336.74 906.83 810.85 705.38 1,028.08 1,077.97 631.36
Furniture, Fixtures
and Fittings
76.87 52.51 22.28 21.48 14.20 10.33 55.40 38.31 11.95
Office Equipment 40.25 38.20 33.03 13.18 14.53 13.48 27.07 23.67 19.55
Computers 59.06 60.72 55.20 46.57 45.47 38.30 12.49 15.25 16.90
Vehicles 20.64 15.03 7.26 9.06 6.43 5.31 11.58 8.61 1.95
Intangibles:
Computer Software 46.93 43.45 40.17 30.69 25.01 20.15 16.24 18.44 20.02
Trade Marks and
Brands
559.63 519.73 869.46 122.57 88.42 384.87 437.07 431.30 484.59
Assets Under Finance
Lease:
Leased Vehicles 1.57 4.17 5.79 0.59 1.20 1.45 0.98 2.97 4.34
Share In Jointly
Controlled Entity
608.35 14.27 13.69 270.03 0.66 0.12 338.32 13.61 13.57
TOTAL 4,148.74 3,369.56 2,936.82 1,531.43 1,097.63 1,253.48 2,617.31 2,271.93 1,683.34
Capital Work-in-
Progress including
Capital Advances
8.37 24.97 715.81
TOTAL 2,625.68 2,296.90 2,399.15
F-12
GODREJ CONSUMER PRODUCTS LIMITED – CONSOLIDATED
SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31
SCHEDULE 7: INVESTMENTS
2007-08 2008-09 2009-10
FV 2009-10 2008-09 2007-08
Nos. Nos. Nos.
Rs. Rs. Mio Rs. Mio Rs. Mio
1.
IN EQUITY SHARES - Fully Paid
Quoted:
- 2,500 - Creightons plc
- 0.05 0.06
Current - At Cost
2.
IN UNITS OF MUTUAL FUNDS
Unquoted:
- 2,844,202 - Birla Sunlife Mutual Fund 10 - 40.00 -
- Liquid Scheme
BSL Cash Plus - Instl. Premium - Growth
57,651,312 90,991,617 128,355,243 - Purchased during the year
57,651,312 88,147,415 131,199,445 - Sold during the year
- 1,963,259 18,940,359 Kotak Liquid (Institutional Premium) Plan
- Growth Scheme 10 350.00 35.00 -
32,871,685 26,513,828 121,728,924 - Purchased during the year
32,871,685 24,550,569 104,751,824 - Sold during the year
- - 1,543,853 Prudential ICICI Institutional Liquid Plan
- Super Institutional Growth Scheme 100 210.00 - -
- - 6,568,298 - Purchased during the year 100
- - 5,024,445 - Sold during the year 100
105,172,962 94,897,726 91,672,580 - Purchased during the year 10
105,172,962 94,897,726 91,672,580 - Sold during the year 10
(During the year the face value of units was changed from Rs. 10 per unit to Rs. 100 per unit.
- - 5,965,196 HDFC Liquid Fund - Premium Plan 10 110.00 - -
- Growth Scheme
- - 23,902,997 - Purchased during the year
- - 17,937,801 - Sold during the year
- - -
Reliance Liquid Fund - Treasury Plan -
Institutional Option 10
- Daily Dividend Option
- - 3,859,831 - Purchased during the year
- - 3,859,831 - Sold during the year
670.00 75.00 -
TOTAL
670.00 75.05 0.06
Aggregate Book Value of Investments:
Quoted
- 0.05 0.06
Unquoted
670.00 75.00 -
TOTAL
670.00 75.05 0.06
F-13
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 8: CURRENT ASSETS, LOANS AND ADVANCES
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
1. INVENTORIES
(At lower of cost and net realisable value)
a) Raw Materials 794.64 548.09 708.26
b) Stores and Spares 40.41 41.21 33.94
c) Work-In-Progress 232.21 169.77 208.79
d) Finished Goods - Manufactured 1,085.00 679.89 706.74
- Trading 96.67 206.36 238.30
e) Share In Jointly Controlled Entity 395.41 29.42 19.54
2,644.33 1,674.73 1,915.58
2. SUNDRY DEBTORS
(Unsecured - Considered good, unless otherwise stated)
a) Debts outstanding for a period exceeding six months 12.18 34.73 7.70
(Including doubtful debts 2009-10 Rs. 11.11 mio;
- 2008-09 Rs. 25.48 mio; 2007-08 Rs. 3.99 mio)
b) Other Debts 962.70 587.56 498.12
974.89 622.29 505.82
c) Less: Provision For Doubtful Debts 11.12 25.48 3.99
963.77 596.80 501.83
d) Share In Jointly Controlled Entity 188.82 5.10 7.74
1,152.58 601.90 509.57
3. CASH AND BANK BALANCES
a) Cash in Hand 1.31 1.45 1.93
b) Cheques on Hand 73.42 97.51 32.35
c) Balances with Scheduled Banks
- In Current Accounts 144.06 138.16 374.57
- In Cash Credit Accounts - - -
- In Deposit Accounts 1,650.73 3,208.94 11.53
(Under Lien with the bank: 2009-10 Rs. 10.73 mio
2008-09 Rs. 10.54 mio; 2007-08 Rs. 11.53 mio;)
d) Balances with Non - Scheduled Banks 364.41 329.88 -
e) Share In Jointly Controlled Entity 817.66 7.28 5.50
3,051.59 3,783.23 425.89
4. OTHER CURRENT ASSETS
a) Accrued Interest 54.50 90.06 -
b) Share In Jointly Controlled Entity 3.00 - -
57.51 90.06 -
5. LOANS AND ADVANCES
(Unsecured - considered good, unless otherwise stated)
F-14
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
a) Advances Recoverable in Cash or in Kind
or for Value to be Received
734.03
622.32 241.84
b) Amount Due from ESOP Trust 637.88 385.14 227.50
c) Balances With Excise Authorities 187.51 137.88 128.83
d) Sundry Deposits 27.49 28.38 69.23
1,586.90 1,173.72 667.40
Less: Provision for Doubtful Loans & Advances 0.69 0.07 0.32
1,586.21 1,173.66 667.08
e) Share In Jointly Controlled Entity 603.06 3.89 0.59
2,189.28 1,177.55 667.67
TOTAL 9,095.29 7,327.47 3,518.71
F-15
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 9: CURRENT LIABILITIES AND PROVISIONS
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
1. CURRENT LIABILITIES
a) Sundry Creditors
- Dues of Micro and Small Enterprises 68.82 92.64 75.53
- Others 1,301.48 1,052.84 1415.95
b) Advances and Deposits 84.65 48.91 43.72
c) Unclaimed Dividends 43.32 40.83 35.82
d) Other Liabilities 2,469.20 1,417.78 1115.53
e) Interim Dividend Payable 385.24 192.72 169.38
f) Interest Accrued but not Due on Loans - 1.05 5.46
g) Share In Jointly Controlled Entity 973.48 71.82 43.08
5,326.18 2,918.57 2904.47
2. PROVISIONS
a) For Taxation (Net Of Advance Payment of Taxes) 51.56 61.40 16.23
b) For Proposed Dividend - 192.72 193.58
c) For Tax on Distributed Profits 65.47 65.50 61.69
d) For Leave Encashment 63.34 60.41 50.76
e) Share In Jointly Controlled Entity 21.51 0.27 0.16
201.87 380.29 322.42
TOTAL 5,528.05 3,298.87 3226.89
F-16
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 10: OTHER INCOME
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
1. Dividend - 0.04 -
2. Interest Income (Gross)
a) On Investments 16.82 13.09 2.80
b) On Advances and Deposits 16.53 2.59 19.73
c) On Rights Issue Proceeds 200.59 306.88 -
d) On ESOP Trust Loan 36.37 36.72 -
(Tax Deducted at Source 2009-10 Rs. 40.82 mio;
2008-09 Rs. 57,.36 mio, 2007-08 Rs. 3.41 mio)
e) On Income Tax Refund 0.10 1.45 0.01
270.42 360.73 22.54
3. Gain / (Loss) on Exchange Difference (Net) 9.40 (34.37) -
4. Profit on Sale of Investments (Net) 20.73 2.16 2.03
5. Royalty Income - 2.73 -
6. Claims Received 7.46 6.03 7.52
7. Miscellaneous Income 90.54 27.11 13.02
8. Share In Jointly Controlled Entity 49.52 0.59 0.76
TOTAL 448.09 365.01 45.87
F-17
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 11: MATERIALS CONSUMED AND PURCHASE OF GOODS
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
1. Raw Materials Consumed
Opening Inventory 548.09 708.26 381.86
Add: Purchases (Net) 6,430.06 6,096.52 4795.04
6,978.14 6,804.78 5176.90
Less: Sales of Raw Materials - - -
6,978.14 6,804.78 5176.90
Less: Closing Inventory 782.21 548.09 708.26
6,195.93 6,256.70 4468.64
2. Purchase Of Goods For Resale 1,538.10 1,311.43 892.39
3. Share In Jointly Controlled Entity 2,133.51 38.14 52.98
TOTAL 9,867.54 7,606.27 5414.01
F-18
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 12: EXPENSES
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
1. Salaries, Wages and Bonus 1,437.37 792.82 671.46
2. Contribution to Provident and Other Funds 64.49 54.07 39.60
3. Workmen and Staff Welfare Expenses 16.15 18.38 14.00
4. Stores and Spare Consumed 61.97 55.72 52.18
5. Processing Charges and Other Manufacturing Charges 225.84 163.82 142.98
6. Excise Duty Provision on Inventory 9.20 (27.61) 4.10
7. Power and Fuel 334.57 356.15 250.28
8. Repairs and Maintenance
a) Plant and Machinery 21.00 19.71 21.36
b) Buildings 5.00 6.07 5.11
c) Others 15.37 13.58 11.13
41.38 39.36 37.61
9. Establishment Expenses 30.28 74.00 72.40
10. Miscellaneous Expenses 191.48 123.63 114.86
11. Rent 120.84 109.07 68.09
12. Rates and Taxes 28.93 35.78 38.12
13. Travelling and Conveyance 125.16 101.99 98.10
14. Legal and Professional Charges 84.56 79.58 50.37
15. Insurance 24.14 21.01 19.66
16. Donations 0.57 1.61 1.63
17. Selling and Distribution Expenses 244.21 258.19 218.79
18. Sales Promotion 686.82 411.79 395.10
19. Freight 504.29 367.37 328.30
20. Advertising and Publicity 1,327.98 966.85 915.18
21. Commission 32.79 23.63 20.13
22. Discount 22.50 1.48 13.89
23. Loss on Sale of Assets (Net) 5.09 1.84 0.83
24. Loss on Exchange Difference (Net) - - 92.80
25. Bad Debts Written Off 9.13 6.15 0.45
26. Provision for Doubtful Debts and Advances 0.14 21.49 1.00
27. Share In Jointly Controlled Entity 1,245.84 104.67 39.09
TOTAL 6,875.74 4,162.85 3700.98
F-19
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 13: INTEREST AND FINANCIAL CHARGES
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
1. Interest Expense:
a) Interest on Bank Loans 64.32 143.00 115.33
b) Other Interest 3.74 20.16 7.64
68.06 163.16 122.96
2. Discounting and Other Finance Charges 39.91 24.35 25.06
3. Share In Jointly Controlled Entity 3.03 1.07 0.30
TOTAL 110.99 188.59 148.33
F-20
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 14: INVENTORY CHANGE
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
1. Opening Inventory
a) Finished Goods 679.89 706.74 569.45
b) Traded Goods 206.36 238.30 145.37
c) Work-In-Progress 169.77 208.79 217.20
d) Share In Jointly Controlled Entity 21.11 12.43 -
1,077.12 1,166.26 932.01
2. On Acquisition of Subsidiary / JV During the Year
a) Finished Goods 207.67 - -
3. Less: Closing Inventory
a) Finished Goods 1,085.00 679.89 706.74
b) Traded Goods 96.67 206.36 238.30
c) Work-In-Progress 232.21 169.77 208.79
d) Share In Jointly Controlled Entity 275.41 21.11 12.43
1,689.29 1,077.12 1,166.26
(Increase) / Decrease in Inventory (404.49) 89.14 (234.25)
F-21
GODREJ CONSUMER PRODUCTS LIMITED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 15: NOTES TO ACCOUNTS
1. SIGNIFICANT ACCOUNTING POLICIES
a) Accounting Convention:
The financial statements are prepared under the historical cost convention, on accrual basis, in
accordance with the generally accepted accounting principles in India, the Accounting Standards
issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act,
1956.
b) Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting
principles requires the management to make estimates and assumptions that affect the reported
balances of assets and liabilities as of the date of the financial statements and reported amounts of
income and expenses during the period. Management believes that the estimates used in the
preparation of financial statements are prudent and reasonable. Actual results could differ from the
estimates.
c) Fixed Assets:
Fixed Assets are stated at cost of acquisition or construction, less accumulated depreciation. Cost
includes all expenses related to acquisition and installation of the concerned assets.
Direct financing cost incurred during the construction period on major projects is also capitalised.
Fixed assets acquired under finance lease are capitalised at the lower of their fair value and the
present value of the minimum lease payments.
d) Asset Impairment:
Management periodically assesses using, external and internal sources, whether there is an
indication that an asset may be impaired. An impairment occurs where the carrying value exceeds
its recoverable amount. An impairment loss, if any, is recognized in the period in which the
impairment takes place.
e) Intangible Assets:
The cost of acquisition of trade marks is amortised equally over the best estimate of its useful life
not exceeding a period of ten years, except in case of the Kinky brand where the brand is
amortised equally over a period of twenty years.
f) Investments:
Investments are classified into current and long term investments. Long term investments are
carried at cost. Cost of acquisition includes all costs directly incurred on the acquisition of the
investment. Provision for diminution, if any, in the value of long term investments is made to
recognize a decline, other than of a temporary nature. Current investments are stated at lower of
cost and net realisable value.
F-22
g) Inventories:
Inventories are valued at lower of cost and net realisable value. Cost is computed on the weighted
average basis and is net of Cenvat. Finished goods and work in progress include cost of
conversion and other costs incurred in bringing the inventories to their present location and
condition. Finished goods valuation also includes excise duty. Provision is made for cost of
obsolescence and other anticipated losses, whenever considered necessary.
h) Provisions and Contingent Liabilities:
Provisions are recognized when the Company has a present obligation as a result of a past event, it
is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and when a reliable estimate of the amount of the obligation can be made.
No Provision is recognized for –
A. Any possible obligation that arises from past events and the existence of which will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Company; or
B. Any present obligation that arises from past events but is not recognized because-
a) It is not probable that an outflow of resources embodying economic benefits will
be required to settle the obligation; or
b) A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are assessed periodically and only
that part of the obligation for which an outflow of resources embodying economic benefits is
probable, is provided for, except in the extremely rare circumstances where no reliable estimate
can be made.
Contingent Assets are not recognized in the financial statements since this may result in the
recognition of income that may never be realized.
i) Revenue Recognition:
Sales are recognised when goods are supplied and are recorded net of returns, trade discounts,
rebates, sales taxes and excise duties.
Income from processing operations is recognised on completion of production / dispatch of the
goods, as per the terms of contract.
Export incentives are accounted on accrual basis and include the estimated value of export
incentives receivable under the Duty Entitlement Pass Book Scheme.
Dividend income is recognised when the right to receive the same is established.
Interest income is recognised on a time proportion basis.
Insurance claims and transport and power subsidies from the Government are accounted on cash
basis when received.
F-23
j) Borrowing Costs:
Borrowing costs that are directly attributable to the acquisition of an asset that necessarily takes a
substantial period of time to get ready for its intended use are capitalised as part of the cost of that
asset till the date it is put to use. Other borrowing costs are recognised as an expense in the period
in which they are incurred.
k) Foreign Currency Transactions:
i. Transactions in foreign currency are recorded at the exchange rates prevailing on the date
of the transaction. Monetary assets and liabilities denominated in foreign currency
remaining unsettled at the period end are translated at the period end exchange rates. The
difference in translation of monetary assets and liabilities and realised gains and losses on
foreign currency transactions are recognised in the Profit and Loss Account.
ii. Forward exchange contracts, remaining unsettled at the period end, backed by underlying
assets or liabilities are also translated at period end exchange rates. Premium or discount
on forward foreign exchange contracts is amortised over the period of the contract and
recognised as income or expense for the period. Realised gain or losses on cancellation of
forward exchange contracts are recognised in the Profit and Loss Account of the period in
which they are cancelled.
iii. Non Monetary foreign currency items like investments in foreign subsidiaries are carried
at cost and expressed in Indian currency at the rate of exchange prevailing at the time of
making the original investment.
iv. For the purpose of consolidation of non-integral foreign operations, all assets and
liabilities, both monetary and non-monetary are translated at the closing rate. Items of
income and expenditure are translated at exchange rates at the date of the relevant
transactions. All resulting exchange differences are accumulated in a Foreign Currency
Translation Reserve until disposal of the net investment.
l) Research and Development Expenditure:
Revenue expenditure on research and development is charged to the Profit and Loss Account of
the year in which it is incurred. Capital expenditure incurred during the year on research and
development is shown as addition to fixed assets.
m) Employee Benefits:
Short-term Employee benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified
as short term employee benefits. Benefits such as salaries, performance incentives, etc., are
recognized as an expense at the undiscounted amount in the Profit and Loss Account of the year in
which the employee renders the related service.
Post Employment Benefits:
Defined Contribution Plans:
Payments made to a defined contribution plan such as Provident Fund are charged as an expense
in the Profit and Loss Account as they fall due.
F-24
Defined Benefit Plans:
Company‟s liability towards gratuity to past employees is determined using the projected unit
credit method which considers each period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final obligation. Past services are
recognized on a straight line basis over the average period until the amended benefits become
vested. Actuarial gain and losses are recognized immediately in the statement of Profit and Loss
Account as income or expense. Obligation is measured at the present value of estimated future
cash flows using a discounted rate that is determined by reference to market yields at the Balance
Sheet date on Government Securities where the currency and terms of the Government Securities
are consistent with the currency and estimate terms of the defined benefit obligations.
Other Long Term Employee Benefits:
Other Long Term Employee Benefits viz., leave encashment and long service bonus are
recognised as an expense in the Profit and Loss Account as and when it accrues. The Company
determines the liability using the Projected Unit Credit Method, with the actuarial valuation
carried out as at the Balance Sheet date. Actuarial gains and losses in respect of such benefits are
charged to the Profit and Loss Account.
n) Incentive Plans:
The Company has a scheme of Performance Linked Variable Remuneration (PLVR) which
rewards its employees based on Economic Value Addition (EVA). The PLVR amount is related
to actual improvements made in EVA over the previous year when compared with expected
improvements.
Up to the previous year, the EVA awards would flow through a notional bank whereby only the
prescribed portion of the bank is distributed each year and the balance is carried forward. The
amount distributed out of the notional bank is charged to Profit and Loss Account. The notional
bank was held at risk and charged to EVA of future years and was payable at that time, if future
performance so warranted. The opening notional bank balance accumulated till March 31, 2009, is
being paid @ 33% every year.
During the year, the entire EVA award for the year has been charged to the Profit and Loss
Account and has not been routed through the notional bank.
o) Depreciation:
Leasehold land is amortised equally over the lease period.
Leasehold Improvements are depreciated over the shorter of the unexpired period of the lease and
the estimated useful life of the assets.
Depreciation is provided pro rata to the period of use, under the Straight Line Method at the rates
specified in Schedule XIV to the Companies Act, 1956, except for computer hardware which is
depreciated over 4 years.
Assets costing less than Rs. 5,000 are depreciated at 100% in the year of acquisition.
Depreciation in the subsidiary companies is provided under the Straight Line Method over the
expected useful lives of the respective assets ranging between 3 years to 10 years except in the
case of Kinky brand where the brand is amortised equally over a period of twenty years. It is
estimated that the impact on depreciation of the difference in expected useful lives between the
holding company and subsidiaries is not material.
F-25
p) Taxes on Income:
Current tax is the amount of tax payable on the taxable income for the year determined in
accordance with the provisions of the Income-tax Act, 1961.
Deferred tax is recognised on timing differences; being the difference between taxable income and
accounting income that originate in one period and are capable of reversal in one or more
subsequent periods. Deferred tax assets on unabsorbed tax losses and tax depreciation are
recognised only when there is a virtual certainty of their realisation and on other items when there
is reasonable certainty of realisation. The tax effect is calculated on the accumulated timing
differences at the year end based on the tax rates and laws enacted or substantially enacted on the
balance sheet date.
q) Hedging:
The Company uses forward exchange contracts to hedge it‟s foreign exchange exposures and
commodity futures contracts to hedge the exposure to oil price risks. Gains or losses on settled
contracts are recognized in the profit and loss account. Gains or losses on the commodity futures
contracts are recorded in the Profit and Loss Account under Cost of Materials Consumed.
r) Segment Reporting
The Company is considered to be a single segment company – engaged in the manufacture of
toilet soaps and other toiletries. The Company has identified geographic segments as its primary
segment. Geographic segments of the Company are „Within India‟ and „Outside India‟. Segment
revenues and assets have been identified to represent segments on the basis of their relationship to
the respective segment.
2. PRINCIPLES OF CONSOLIDATION
a) The consolidated financial statements relate to Godrej Consumer Products Limited, the Holding
Company, its wholly owned subsidiaries and it‟s interest in jointly controlled entities (collectively
referred to as the Group). The consolidation of accounts of the Company with its subsidiaries has
been prepared in accordance with Accounting Standard (AS) 21 - Consolidated Financial
Statements. The financial statements of the parent and its subsidiaries are combined on a line by
line basis and intra group balances, intra group transactions and unrealised profits or losses are
fully eliminated. The consolidation of its interest in joint ventures has been prepared in accordance
with Accounting Standard (AS) 27 „Financial Reporting of Interests in Joint Ventures”. The
Company uses the proportionate consolidation method for reporting its interest in the assets,
liabilities, income and expenses of the jointly controlled entities. Separate line items are included
to disclose its share in the assets, liabilities, income and expenses of the jointly controlled entity.
b) The financial statements of the subsidiaries and joint venture used in the consolidation are drawn
up to the same reporting date as of the Company i.e. up to March 31 2008, March 31 2009 and
March 2010 respectively.
The financial statements of following subsidiaries have been audited for the year ended March 31,
2010
Godrej Consumer Products (UK) Limited, U.K.
Keyline Brands Limited, U.K.
Inecto Manufacturing Limited, U.K.
Rapidol (Proprietary) Limited, South Africa.
Godrej Global Mid East FZE, UAE.
Godrej Consumer Products Mauritius Limited, Mauritius.
Godrej Kinky Holdings Limited, Mauritius.
F-26
Kinky Group (Proprietary) Limited, South Africa.
Godrej Hygiene Products Limited (formerly Godrej SCA Hygiene Limited – a Joint
Venture up to March 31, 2009).
Godrej Consumer Products Holding (Mauritius) Ltd, Mauritius.
Godrej Nigeria Holdings Limited, Mauritius.
The financial statements of Godrej Sara Lee Limited – a Joint Venture from June 1, 2009, have
also been audited.
The financial statements of the investment company- Godrej Netherlands, B.V. and the non-
operating companies - Godrej Consumer Products Dutch Cooperatief U.A., Netherlands, Godrej
Consumer Products (Netherlands) B.V., Netherlands, Godrej Consumer Holdings (Netherlands)
B.V., Netherlands and Godrej Nigeria Limited, Nigeria, for the year ended March 31, 2010, have
not been audited and have been consolidated on the basis of accounts certified by Management.
c) Accordingly, the consolidated financial statements include the results of the subsidiaries for the
year ended March 31, 2008, March 31, 2009 and March 31, 2010 respectively and their assets and
liabilities as on the Balance Sheet date and in the case of the joint venture, to the extent of it‟s
interest, for the year and its share in the assets and liabilities as on the Balance Sheet date.
d) In the consolidated financial statements, „Goodwill‟ represents the excess of the cost to the
Company of its investment in the subsidiaries and/or joint ventures over its share of equity, at the
respective dates on which the investments are made. Alternatively, where the share of equity as on
the date of investment is in excess of cost of investment, it is recognised as „Capital Reserve‟ in
the consolidated financial statements.
3. PARTICULARS OF SUBSIDIARIES AND JOINT VENTURES
a) The subsidiary companies / entities considered in the consolidated financial statements are:
Sr.
No.
Name of the Company Country of
Incorporation
Percentage of Holding
2009-10 2008-09 2007-08
1. Godrej Netherlands B.V. Netherlands 100% 100% 100%
2. Godrej Consumer Products (UK)
Limited
(100% subsidiary of Godrej
Netherlands B.V.)
UK 100% 100%
100%
3. Keyline Brands Limited
(100% subsidiary of Godrej
Consumer Products (UK) Limited)
UK 100%
100% 100%
4. Inecto Manufacturing Limited
(100% subsidiary of Keyline Brands
Limited)
UK 100% 100% 100%
5. Inecto Limited (100% subsidiary of
Keyline Brands Limited) UK - - 100%
6. Rapidol (Proprietary) Limited South Africa 100% 100% 100%
7. Godrej Global Mid East FZE UAE 100% 100% 100%
7. Godrej Consumer Products Mauritius
Limited Mauritius 100% 100% 100%
8. Godrej Kinky Holdings Limited
(100% subsidiary of Godrej
Consumer Products Mauritius
Limited)
Mauritius 100% 100% 100%
9. Kinky Group (Proprietary) Limited South Africa 100% 100% -
F-27
Sr.
No.
Name of the Company Country of
Incorporation
Percentage of Holding
2009-10 2008-09 2007-08
(100% subsidiary of Godrej Kinky
Holdings Limited)
10. Godrej Hygiene Product Limited
(formerly Godrej SCA Hygiene
Limited – A Joint Venture)
India 100%
- -
11. Godrej Consumer Products Holding
(Mauritius) Limited Mauritius 100%
- -
12. Godrej Nigeria Holdings Limited
(100% subsidiary of Godrej
Consumer Products Mauritius
Limited)
Mauritius 100%
- -
13. Godrej Nigeria Limited
(99.99% held by Godrej Nigeria
Holdings Limited, 0.1% held by
Godrej Consumer Products Mauritius
Limited)
Nigeria 100%
- -
14. Godrej Consumer Products Dutch
Cooperatief U.A., (99.99% held by
Godrej Consumer products Holding
(Mauritius) Limited, 0.1% held by
Godrej Consumer Products Mauritius
Limited)
Netherlands 100%
- -
15. Godrej Consumer Products
(Netherlands) B.V.
(100% subsidiary of Godrej
Consumer Products Dutch
Cooperatief U.A.,)
Netherlands 100%
- -
16. Godrej Consumer Holdings
(Netherlands) B.V.
(100% subsidiary of Godrej
Consumer Products Dutch
Cooperatief U.A.,)
Netherlands 100%
- -
Note: Godrej Hygiene Products Limited (formerly Godrej SCA Hygiene Limited) was a 50% joint venture in
the previous year which has become a subsidiary in the current year.
b) Interest in Joint Ventures:
Sr.
No.
Name of the Company Country of
Incorporation
Percentage of Ownership
2009-10 2008-09 2007-08
1. Godrej Sara Lee Limited (w.e.f. June
1, 2009)
India 49% - -
2. Godrej Hygiene Product Limited
(formerly Godrej SCA Hygiene
Limited – A Joint Venture)
India - 50% 50%
4. SCHEME OF AMALGAMATION
a) A Scheme of Amalgamation (“the Scheme”) for the amalgamation of Godrej ConsumerBiz Ltd.
(GCBL) (a 100% subsidiary of Godrej & Boyce Manufacturing Company Ltd. (G&B)) and
Godrej Hygiene Care Private Ltd. (GHCL) (a 100% subsidiary of Godrej Industries Limited
(GIL)) together called “the Transferor Companies”, with Godrej Consumer Products Limited (the
Transferee Company), with effect from June 1, 2009, (“the Appointed Date”) was sanctioned by
F-28
the Hon‟ble High Court of Judicature at Bombay (“the Court”), vide its Order dated October 8,
2009 and certified copies of the Order of the Court sanctioning the Scheme were filed with the
Registrar of Companies, Maharashtra on October 15, 2009 (the “Effective Date”).
b) The amalgamation has been accounted for under the “pooling of interests” method as prescribed
by Accounting Standard AS 14 - Accounting for Amalgamations and the specific provisions of the
Scheme. Accordingly, the Scheme has been given effect to in these accounts and all assets and
liabilities of the Transferor Companies stand transferred to and vested in the Transferee Company
with effect from the Appointed Date and are recorded by the Transferee Company at their book
values as appearing in the books of the Transferor Companies.
c) The value of Net Assets of the Transferor Companies taken over by the Transferee Company on
Amalgamation are as under:
(Rupees Mio)
Particulars GHCL GCBL Total
Investments in Godrej Sara Lee Limited 474.16 1,495.89 1,970.05
Cash and Bank Balances 0.13 1.50 1.64
Loans and Advances - 0.03 0.03
Advance Taxes Paid - 0.10 0.10
Current Liabilities and Provisions (0.29) (1.53) (1.82)
Provision for Taxes - (0.12) (0.12)
Net Assets 474.00 1,495.87 1,969.88
d) GCBL and GHCL held 29% and 20% respectively in Godrej Sara Lee Ltd., which is a 49:51
unlisted joint venture company between the Godrej Group and Saralee Corporation, USA. As a
result of the amalgamation Godrej Sara Lee Limited has become a Joint Venture between the
Company and Saralee Corporation USA.
e) In accordance with the Scheme of Amalgamation, the Company has issued and allotted
30,296,727 equity shares having a face value of Re. 1 each to G&B and 20,939,409 equity shares
having a face value of Re. 1 each to GIL, being 10 equity shares in the Transferee Company for
every 11 equity shares held by them in GCBL and GHCL respectively, as consideration for the
transfer. Consequently, the issued, subscribed and paid up equity share capital of the Company
stands increased to 308,190,044 equity shares having a face value of Re. 1 each aggregating Rs.
308.19 mio.
f) The excess of book value of the net assets of the Transferor Companies taken over, amounting to
Rs. 1,845.52 mio, after adjusting the expenses and cost of the Scheme which amounted to Rs.
73.11mio, over the face value of shares issued as consideration to the Members of the Transferor
Companies has been credited to the General Reserve as per the Scheme.
g) Had the Scheme not prescribed the above treatment, the balance in Security Premium Account
would have been higher by Rs. 1,916.57 mio, Investments would have been higher by Rs. 73.11
mio, Capital Reserve would have been higher by Rs. 5.12 mio, the Profit and Loss Account and
the General Reserve would have been lower by Rs. 3.05 mio and Rs. 1,845.52 mio respectively.
h) Since the aforesaid Scheme of amalgamation of GCBL and GHCL with the Company, which is
effective from June 1, 2009, has been given effect to in these accounts, the figures for the current
year to that extent are not comparable with those of the previous year.
F-29
5. CONTINGENT LIABILITIES
2009-10
Rupees
Mio
2008-09
Rupees
Mio
2007-08
Rupees
Mio
a) Claims for excise duties, taxes and other matters:
i) Excise duty demands aggregating Rs. 9.31 mio (2008-09 Rs.
7.81mio, 2007-08 Rs. 7.78 mio) against which the Company
has preferred appeals (net of tax).
6.14 5.15 5.14
ii) Excise duty demands and penalties in respect of toilet soaps
cleared from Malanpur Factory during the period of joint
venture with Procter & Gamble, confirmed by CESTAT vide
its order dated February 2002. The amount of duty and
penalty which is to be quantified by the Commissioner of
Excise in accordance with the findings of CESTAT is
estimated at Rs. Nil (previous year Rs. 121,282,000). The
Company has filed an appeal against the order of CESTAT
before the Supreme Court of India. By a subsequent
CESTAT order passed in September 2004, all the
assessments for the period April 1993 to March 1996 have
been held to be provisional, thus negating the earlier stand of
CESTAT (net of tax). During the year the Supreme Court of
India has passed an order remanding the Excise Authorities
to decide afresh on certain aspects of the case and has set
aside all penalties levied.
- - 100.67
iii) Excise duty claims in respect of non-payment of education
cess for the period January 2005 to March 2008 at the
Guwahati Factory amounting to Rs. 11.83 mio (2008-09 Rs.
11.83 mio, 2007-08 Rs. 11.83 mio) (net of tax).
7.81 7.81 7.81
iii) Special Value Addition Rate application for excise purpose
at Guwahati claimed at a rate higher than the normal rate as
per new notification is yet to be granted. The excess special
value addition claimed over and above the normal rate
amounting to Rs. 8.31 mio (2008-09 Rs. 45.36 mio) has been
accounted as recoverable and the same is contingent on the
higher rate (net of tax) being granted.
54.84 29.95 0.00
iv) Sales tax demands aggregating Rs. 16.86 mio (2008-09 Rs.
13.53 mio, 2007-08 Rs. 13.53 mio) against which the
Company has preferred appeals (net of tax).
11.13 8.93 8.93
v) Income-tax matters:
Demand notices issued by Income-tax Authorities. 216.30 175.54 63.98
vi) Other matters - Rs. 0.66 mio (2008-09 Rs.0.66 mio, 2007-08
Rs. 0.66 mio) (net of tax). 0.44 0.44 0.44
vii) Entry tax demand by the Government of Assam on materials
received at the Guwahati factory for the period December
2006 to May 2008 which is being disputed by the Company.
During the previous year, amount was not quantified. During
the current year, the Company has made a provision for the
same in the books of account.
- - -
b) Guarantees issued by banks (secured by bank deposits under lien
with the bank Rs. 10.69 mio (2008-09 – Rs. 10.50 mio, 2007-08
Rs. 11.53 mio)
26.27 23.47 43.28
c) Guarantees of GBP 3 mio (2008-09 GBP 3 mio, 2007-08 GBP 3
mio) given by the Company for securing loan availed by Godrej
Netherlands B.V., a wholly owned subsidiary of the Company.
203.61 217.47 238.74
F-30
2009-10
Rupees
Mio
2008-09
Rupees
Mio
2007-08
Rupees
Mio
d) Guarantee of USD NIL (2008-09 USD 40 mio, 2007-08 USD 40
mio) given by the Company for securing loan given by the Hong
Kong and Shanghai Banking Corporation to Godrej Consumer
Products Mauritius Limited – a wholly owned subsidiary of the
Company.
- 2,028.80 1604.80
e) Guarantee of AED 1.4 mio (2008-09 AED 1.4 mio, 2007-08 AED
1.4 mio) given by the Company to guarantee principal amount of
credit facilities extended by HSBC Bank Middle East Ltd. to
Godrej Global Mid East FZE – a wholly owned subsidiary of the
Company.
17.17 19.35 15.21
f) Guarantee given by the Company to guarantee principal amount
of credit facilities extended by ABN ABRO Bank to Godrej
Hygiene Products Limited – a wholly owned subsidiary of the
Company.
30.00 - -
g) Claims against the Company not acknowledged as debt:
Claims by various parties on account of fraudulent / illegal acts by
an employee. 242.42 - -
h) Share in Jointly Controlled Entity
i) Guarantees given to bank on behalf of subsidiary for their loan
and cash credit facility 37.06 - -
ii) Guarantees given by banks on behalf of the group for export
performance and to sales tax authorities 10.33 - -
iii) Claims against the group not acknowledged as debt – Claims by
various employees, distributors, transporters etc. 1.29 - -
iv) Demand raised by tax authorities against the group
Sales Tax
Excise Duty
Income Tax
Service Tax
59.77
2.73
0.70
0.79
-
-
-
-
-
-
-
-
6. CAPITAL COMMITMENTS
Estimated value of contracts remaining to be executed on capital account to the extent not provided for Rs.
4.26 mio (2008-09 Rs. 8.89 mio, 2007-08 Rs. 59.95 mio)
In respect of Share in Jointly Controlled entity, estimated amounts of contracts (net of capital advances)
remaining to be executed on capital account to the extent not provided for Rs. 2.82 mio (2008-09 – Rs. Nil,
2007-08 – Rs. Nil)
7. SECURED LOANS
a) The Sales Tax Deferment Loan is secured by :
(i) Malanpur location:
1. a first charge by way of equitable mortgage of the immovable properties at
Malanpur factory, and
2. hypothecation of movable assets at Malanpur factory, save and except, book
debts and subject to charges already created by the Company in favour of the
banks for working capital facilities.
F-31
(ii) Baddi Location:
Bank guarantee in favour of the sales tax authorities.
b) Bank cash credit, working capital demand loans and guarantees issued by banks are secured by
hypothecation of stocks and book debts.
c) In case of Godrej Global Mid East FZE, bank borrowings are secured by assignment of insurance
policies covering inventory, assets and corporate guarantee from parent company.
d) In case of Keyline Brands Limited, bank borrowings are secured by a charge on the fixed and
current assets of the Company and other group undertakings and also by pledge of shares of
subsidiary companies.
8. FIXED ASSETS
The Kinky brand is being amortised over a period of twenty years. The major influencing factors behind
amortising over a period of twenty years are that Kinky brand has been in existence since last fourty years
and ever growing. It witnessed a growth of 22% during the period under review.
9. INVESTMENTS
a) During the year the Company has acquired a 49% stake in Godrej Sara Lee Limited which is a
49:51 unlisted joint venture company between the Godrej Group and Saralee Corporation, USA,
through a Scheme of Amalgamation of Godrej ConsumerBiz Ltd. (GCBL) and Godrej Hygiene
Care Ltd. (GHCL) with the company.
b) During the year the Company completed the acquisition of the balance 50% stake in Godrej SCA
Hygiene Ltd. (subsequently renamed Godrej Hygeine Products Ltd.) from SCA Hygiene Products
AB, Sweden, in terms of the Share Purchase Agreement between the Company, SCA Hygiene
Products AB, Sweden and Godrej SCA Hygiene Ltd. Godrej Hygiene Products Ltd. has become a
wholly owned subsidiary of the Company with effect from April 1, 2009.
c) During the year, the Company has set up Godrej Consumer Products Holding (Mauritius) Limited
as a wholly owned subsidiary. Godrej Consumer Products Holding (Mauritius) Limited in turn has
set up Godrej Consumer Products Dutch Cooperatief U. A. Netherlands), Godrej Consumer
Products (Netherlands) B.V. and Godrej Consumer Holdings (Netherlands) B.V. as further
downstream subsidiaries. Subsequent to the year end, the Company has entered into an agreement
to acquire P. T. Megasari Makmur Group and its distribution company in Indonesia through
Godrej Consumer Products Holding (Mauritius) Limited and its subsidiaries.
d) The Company has also set up Godrej Nigeria Holdings Limited and its subsidiary Godrej Nigeria
Limited as subsidiaries of its 100% subsidiary Godrej Consumer Products Mauritius Limited
(Mauritius). The Company has entered into an agreement to acquire worldwide rights of Tura
Brand from the Tura Group in Nigeria through the Company‟s 100% subsidiary Godrej Nigeria
Holdings Limited, Mauritius.
10. RIGHTS ISSUE PROCEEDS
Out of the funds raised from the rights issue in the previous year amounting to Rs. 3,964.57 mio, the
Company has as of March 31, 2010, utilised an amount of Rs. 2324.57 mio for part of the objects
mentioned in the Rights Offer letter (as amended till date). The balance unutilized funds amounting to Rs.
164.00 mio have been temporarily invested in fixed deposits with banks pending their utilization.
F-32
11. LOANS AND ADVANCES
The Company has granted a loan amounting to Rs. 443.08 mio (2008-09 Rs. 348.00 mio, 2007-08 Rs.2275
mio) (being the maximum amount of loan outstanding during the year) to The Godrej Consumer Products
Limited ESOP Trust, a trust set up for administering the Employee Stock Option Plan of the Company set
up for the employees / Directors of the Company and / or of the Company‟s subsidiaries. The Trust has
acquired 3,609,000 (2008-09 2,550,000, 2007-08 1,642,420) equity shares amounting to Rs. 555.15 mio
(2008-09 Rs. 347.39 mio, 2007-08 Rs.228.45 mio) of the Company as at March 31, 2010, for granting
ESOPs for the benefit of its eligible employees. The aforesaid loan is repayable at the end of five years
from the date of the loan agreement viz. five years from March 21, 2008. The repayment of the loan by the
trust is dependant on the exercise of option by the employees and / or the market price of the underlying
equity shares of the unexercised options at the end of the exercise period.
12. LEASES
a) The Company has acquired a vehicle under a finance lease. The liability for minimum lease
payment is secured by hypothecation of the vehicle acquired under the lease. The minimum lease
payments outstanding as on March 31, 2010, in respect of vehicle leased are as under:
(Rupees Mio)
Maturity Profile Year Total Future
Minimum
Lease
Payments
Outstanding as
on March 31,
2010
Unmatured
Finance Charges
Present
Value of
Future
Minimum
Lease
Payments
Not later than one
year
2009-10
2008-09
2007-08
0.39
1.12
1.17
0.01
0.06
0.12
0.39
1.06
1.06
Later than one year
and not later than five
years
2009-10
2008-09
2007-08
-
0.39
1.51
-
0.01
0.06
-
0.39
1.44
Later than five years 2009-10
2008-09
2007-08
-
-
-
-
-
-
-
-
-
Total 2009-10
2008-09
2007-08
0.39
1.51
2.68
0.01
0.07
1.18
0.39
1.44
2.50
b) The Group has also acquired assets under non cancellable operating leases. The liability for
minimum lease payment is secured by hypothecation of the assets acquired under the lease. The
future minimum lease payments outstanding as on March 31, 2010, in respect of assets leased are
as under:
(Rupees Mio)
Maturity Profile Year Total Future
Minimum Lease
Payments
Outstanding as on
March 31, 2010
Unmatured
Finance
Charges
Present
Value of
Future
Minimum
Lease
Payments
Not later than one
year
2009-10
2008-09
2007-08
11.57
15.09
3.00
-
-
-
11.57
15.09
3.00
Later than one year 2009-10 1.12 - 1.12
F-33
Maturity Profile Year Total Future
Minimum Lease
Payments
Outstanding as on
March 31, 2010
Unmatured
Finance
Charges
Present
Value of
Future
Minimum
Lease
Payments
and not later than
five years
2008-09
2007-08
45.01
35.09
-
-
45.01
35.09
Later than five
years
2009-10
2008-09
2007-08
13.86
7.12
-
-
-
-
13.86
7.12
-
Total 2009-10
2008-09
2007-08
26.55
67.22
38.09
-
-
-
26.55
67.22
38.09
c) The details of operating lease in respect of the Share in Jointly Controlled Entity is as follows:
(Rupees Mio)
Maturity Profile Year Total Future
Minimum Lease
Payments
Outstanding as on
March 31, 2010
Unmatured
Finance
Charges
Present
Value of
Future
Minimum
Lease
Payments
Not later than one
year
2009-10
2008-09
2007-08
5.01
-
-
-
-
-
5.01
-
-
Later than one year
and not later than
five years
2009-10
2008-09
2007-08
3.72
-
-
-
-
-
3.72
-
-
Later than five
years
2009-10
2008-09
2007-08
-
-
-
-
-
-
-
-
-
Total 2009-10
2008-09
2007-08
8.73
-
-
-
-
-
8.73
-
-
d) The Company‟s significant leasing agreements are in respect of operating lease for premises
(office, godown etc.) and the aggregate lease rentals payable, are charged as rent.
13. HEDGING CONTRACTS
The Company uses forward exchange contracts to hedge its foreign exchange exposure relating to the
underlying transactions and firm commitment in accordance with its forex policy as determined by a Forex
Committee. As at March 31, 2010, the Company had 18 (2008-09 - 16, 2007-08 - 38) outstanding forward
exchange contracts to purchase foreign currency aggregating to US Dollars 11.33 mio (2008-09 US Dollars
9.36 mio, 2007-08 – US Dollars 22.14 mio) and EURO 0.69 mio at an average rate of Rs. 46.43 per US
Dollar (2008-09 Rs. 49.04 per US Dollar, 2007-08 Rs. 39.96 per UD Dollar) Rs 60.19 per EURO (2008-09
– Nil, 2007-08 – Nil). The uncovered foreign exchange exposure as at March 31, 2010 is as under:
(in Mio)
Details Currency 2009-10 2008-09 2007-08
Payables USD 8.25 10.58 24.59
EURO 0.20 - -
Receivables USD 1.52 0.03 -
F-34
Details Currency 2009-10 2008-09 2007-08
EURO 0.33 - -
Advance against Investments USD 0.06 - -
Cash & Cash Equivalent USD 0.20 0.96 -
Bank Borrowings USD - 34.93 -
Redeemable Convertible Pref. Shares USD (4.00) - -
14. PROFIT AND LOSS ACCOUNT
a) Exchange differences (net) recognised in the Profit and Loss Account for the year amounted to a
gain of Rs. 9.40 mio (2008-09 Rs. 34.37 mio loss, 2007-08 Rs. 92.80 mio loss). The premium in
respect of forward exchange contracts to be recognised in subsequent accounting periods is Rs.
3.83 mio (2008-09 Rs. 2.53 mio, 2007-08 Rs. 4.85 mio).
b) Research and Development Expenditure of revenue nature charged to the Profit and Loss Account
amounts to Rs. 71.57 mio (2008-09 Rs. 24.90 mio, 2007-08 Rs. 27.57 mio). This includes various
expenditure of Research and Development department such as Staff Cost, Light and power,
Depreciation and Other General charges.
c) Establishment expenses represent the Company's share of various expenses incurred by Godrej
Industries Ltd. and other companies under the same management for sharing of services and use of
common facilities.
d) Net borrowing cost capitalised under fixed assets amounts to Rs. Nil (2008-09 Rs. 2.18, 2007-08
Rs. 27.77 mio).
e) Entry tax demands by the Government of Assam on materials received at the Guwahati factory for
the period December 2006 to May 2008 amounting to Rs. 10.00 mio has been accounted for
during the year and charged to revenue.
15. EMPLOYEE STOCK OPTION PLAN
a) The shareholders of the Company have approved the setting up of the Godrej Consumer Products
Ltd. Employee Stock Option Plan (GCPL ESOP) for the benefit of its eligible employees where
by the Company can grant 45,00,000 stock options convertible into 45,00,000 equity shares of the
nominal value Re. 1 each to the eligible employees / Directors of the Company and of the
Company‟s subsidiaries.
b) The ESOP Scheme is administered by an independent ESOP trust created with IL&FS Trust
Company Limited which acquires by subscription / purchase or otherwise, the Company‟s shares
equivalent to the number of options proposed to be granted by the participating companies, as
approved by the Compensation Committee.
c) The ESOPS were issued as under:
(a) 2,000,000 options in the Extra-ordinary General Meeting on March 14, 2007.
(b) 2,500,000 options in the Extra-ordinary General Meeting on April 28, 2008.
d) The options granted shall vest in the eligible employees within such period as may be prescribed
by the Compensation Committee, which period shall not be less than one year and may extend up
to three years from the date of grant of the option. Vesting may occur in tranches subject to the
terms and conditions of vesting. The option is exercisable within two years after vesting.
e) Up to the previous year, the ESOP Scheme provided that in the case of retiring employees, all
Vested Options should be exercised by the Option Grantee immediately after, but in no event later
F-35
than six months from the date of such Option Grantee‟s Retirement and all Unvested Options will
lapse as on the date of such retirement, unless otherwise determined by the Compensation
Committee, which determination will be final and binding.
During this year, the Scheme has been modified to provide that all Unvested Options shall vest in
the employee on the date of retirement or at an earlier date as may be decided by the
Compensation Committee, subject to the requirement of minimum vesting period and all Vested
Options should be exercised by the Option Grantee immediately on retirement, but in no event
later than six months from the date of such Option Grantee‟s Retirement.
f) The price at which the Option Grantee would convert Options Granted into GCPL Shares (i.e. the
exercise price) shall be the market price prevailing on the day prior to the day of grant plus interest
at such rate not being less than the Bank Rate then prevailing compoundable on an annual basis
for the period commencing from the date of Granting of the Option and ending on the date of
intimating Exercise of the Option to the Company.
g) The status of the ESOP Scheme is as under:
2009-10 2008-09 2007-08
Options Granted 3,828,000 2,755,000
Options Vested 100,000 Nil
Options Exercised 100,000 Nil
Options Lapsed / Forfeited 619,000 205,000
Options Lapsed / Forfeited to be re-granted 275,000 45,000
Total Number of Options Outstanding 2,834,000 2,505,000
h) The employee share based payment plans have been accounted based on the intrinsic value
method and no compensation expense has been recognized since the market price of the
underlying share at the grant date is the same / less than the exercise price of the option, the
intrinsic value therefore is Nil.
Had the fair value method of accounting been used, the employee compensation cost would have
been higher by Rs. 44.28 mio (previous year Rs. 38.43 mio).
i) Stock options have been granted to eligible employees of the Joint Venture of the Company under
an ESOP scheme instituted by the Joint Venure company. The equity shares of Godrej Industries
Ltd. are the underlying equity shares for the stock option scheme. The ESOP Scheme is
administered by an independent ESOP trust created with IL&FS Trust Company Limited which
acquires by subscription / purchase or otherwise, the shares of Godrej Industries Ltd. equivalent to
the number of options proposed to be granted. The Joint Venture company has given a loan of Rs.
594,000,000 to the ESOP trust to finance the purchase of such equity shares. As at March 31,
2010, the market value of the equity shares of Godrej Industries Ltd. are lower by Rs. 223,969,000
as compared to the cost of acquisition of these equity shares. The repayment of the loan granted to
the ESOP trust is dependant on the exercise of the options by the employees and the market price
of the underlying shares of the unexercised options at the end of the exercise period. The fall in the
value of the underlying equity shares is on account of current market volatility and the loss, if any,
can be determined only at the end of the exercise period. In view of the aforesaid, provision for
diminution of Rs. 223,969,000 has not been considered necessary in the accounts of the Joint
Venture. The Group‟s 49% share in the above diminution amounts to Rs. 109,744,810.
16. INCENTIVE PLANS
The amount carried forward in notional bank after distribution of PLVR for the financial year 2009-10 is
Rs. 52.50 mio as on March 31, 2010 (2008-09 Rs. 81.94 mio, 2007-08 Rs. 177.70 mio). The said amount is
not provided in the books of account and is payable in future, if performance so warrants.
F-36
a) DEFINED CONTRIBUTION PLAN
Provident Fund:
The Company manages the Provident Fund plan through a Provident Fund Trust for its employees
which is permitted under The Employees‟ Provident Fund and Miscellaneous Provisions Act,
1952. The plan envisages contribution by the employer and employees and guarantees interest at
the rate notified by the Provident Fund authority. The contribution by employer and employee,
together with interest, are payable at the time of separation from service or retirement, whichever
is earlier.
b) DEFINED BENEFIT PLAN
Gratuity:
The Company participates in the Employees‟ Group Gratuity-cum-Life Assurance Scheme of
HDFC Standard Life Insurance Co. Ltd., a funded defined benefit plan for qualifying employees.
Gratuity is payable to all eligible employees on death or on separation / termination in terms of the
provisions of the Payment of Gratuity (Amendment) Act, 1997, or as per the Company‟s scheme
whichever is more beneficial to the employees.
c) Basis Used to Determine Expected Rate of Return on Assets:
The expected return on plan assets of 8% to 8.25% has been considered based on the current
investment pattern in Government securities.
F-37
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED MARCH 31
SCHEDULE 15: NOTES TO ACCOUNTS (Contd.)
16. EMPLOYEE BENEFITS (Contd.)
f) The amounts recognised in the Company's financial statements as at the year-end are as under:
Gratuity
2009-10 2008-09 2007-08
Year Year Year
Rs. in Mio Rs. in
Mio
Rs. in
Mio
i) Change in Present Value of Obligation
Present value of the obligation at the beginning of the
year 74.37 60.30 56.12
Acquisition of 49% Share in Godrej Sara Lee Ltd. 19.73 - -
Liability on transfer of employees from group
companies 0.40 - -
Current Service Cost 7.86 4.77 2.79
Past Service Cost (Vested Benefit) 5.27 - -
Interest Cost 7.44 4.82 4.49
Contribution by Plan Participants - - -
Actuarial (Gain) / Loss on Obligation 16.87 9.83 0.45
Benefits Paid (8.80) (5.36) (3.54)
Present value of the obligation at the end of the year 123.15 74.37 60.30
ii) Change in Plan Assets
Fair value of Plan Assets at the beginning of the year 74.80 60.93 56.80
Acquisition of 49% Share in Godrej Sara Lee Ltd. 19.94 - -
Expected return on Plan Assets 7.99 4.87 4.54
Actuarial Gain / (Loss) on Plan Assets 3.47 1.36 1.02
Contributions by the Employer 5.98 13.00 2.10
Benefits Paid (8.80) (5.36) (3.54)
Fair value of Plan Assets at the end of the year 103.38 74.80 60.93
iii) Amounts Recognised in the Balance Sheet:
Present value of Obligation at the end of the year 123.15 74.37 60.30
Fair value of Plan Assets at the end of the year 103.38 74.80 60.93
Net Obligation at the end of the year 19.77 (0.43) (0.62)
iv) Amounts Recognised in the statement of Profit &
Loss:
Current Service Cost 7.86 4.77 2.79
Interest Cost on Obligation 7.44 4.82 4.49
Expected return on Plan Assets (7.99) (4.87) (4.54)
Net Actuarial (Gain) / Loss recognised in the year 13.40 8.47 (0.57)
Past Service Cost 5.27 - -
Net Cost Included in Personnel Expenses 25.98 13.19 2.16
v) Actual Return on Plan Assets 11.46 6.23 5.56
vi) Estimated contribution to be made in next financial
year 14.35 13.37 9.99
vii)
Major categories of Plan Assets as a % of total Plan
Assets
i) Insurer Managed Funds 100% 100% 100%
viii
)
Actuarial Assumptions
i) Discount Rate 7.75% to 8.25%
P.A.
8% P.A. 8% P.A.
ii) Expected Rate of Return on Plan Assets 8% to 8.25% P.A. 8% P.A. 8% P.A.
iii) Salary Escalation Rate 5% to 7% P.A. 5% P.A. 5% P.A.
F-38
Gratuity
2009-10 2008-09 2007-08
Year Year Year
Rs. in Mio Rs. in
Mio
Rs. in
Mio
iv) Employee Turnover 1% to 2% P.A. 2% P.A. 2% P.A.
v) Mortality L.I.C (1994-96) Ultimate
The estimates of future salary increases, considered in actuarial valuation, take account of
inflation, seniority, promotion and other relevant factors, such as supply and demand in the
employment market.
Note: The Employee Benefit details furnished above pertain only to the Indian subsidiaries / joint ventures of
the Company. The disclosure of the above details not being mandatory in the respective countries of the
foreign subsidiaries, have not been furnished
F-39
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 15: NOTES TO CONSOLIDATED ACCOUNTS (Contd.)
2009-10 2008-09 2007-08
Rs. Mio Rs. Mio Rs. Mio
17. EARNINGS PER SHARE
a) Net Profit After Tax 3,395.86 1,732.58 1,592.37
b) Number of Equity Shares:
As at the commencement of the year 256,953,908 225,844,076 225,844,076
Issued during the year / (bought back and
extinguished) 51,236,136 31,109,832
-
As at the end of the year 308,190,044 256,953,908 225,844,076
Weighted Average Number of Equity Shares during the
year:
Basic and Diluted 299,627,293 253,811,746 225,844,076
c) Earning per Equity Share of Re. 1/- each.
Basic and Diluted 11.33 6.83 7.05
F-40
GODREJ CONSUMER PRODUCTS LIMITED - CONSOLIDATED
SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR ENDED
MARCH 31
SCHEDULE 15: NOTES TO CONSOLIDATED ACCOUNTS (Contd.)
18. Related Party Transactions
A) List of Related Parties
a) Enterprise having control over reporting enterprise:
i) Godrej & Boyce Mfg. Co. Ltd.
b) Joint Ventures:
i) Godrej Sara Lee Limited (from June 1, 2009)
ii) Godrej Hygiene Products Ltd. (Formerly Godrej SCA Hygiene Limited) (up to March 31,
2009)
c) Enterprises under common control with whom transactions have taken place during the year:
i) Godrej Industries Limited
ii) Godrej Agrovet Limited
iii) Godrej Hershey Limited
iv) Godrej Infotech Limited
d) Enterprise over which Key Management Personnel exercise significant influence:
i) Godrej Investments Private Limited
ii) Godrej Sara Lee Limited (up to May 31, 2009)
e) Key Management Personnel and Relatives:
i) Mr. Adi B. Godrej Chairman
ii) Mr. Hoshedar K. Press Vice-Chairman
iii) Mr. Dalip Sehgal Managing Director
iv) Mrs. Parmeshwar A. Godrej Wife of Mr. Adi B. Godrej
F-41
GODREJ CONSUMER PRODUCTS LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31
SCHEDULE 15: NOTES TO CONSOLIDATED ACCOUNTS (Contd.)
B) Transactions with Related Parties (Rs. in Mio)
Particulars Year Enterprise
Having
Control
Over
Reporting
Enterprise
Enterprise
Under
Common
Control
Joint
Venture
Company
Enterprise
over which
Key
Managemen
t Personnel
Exercise
Significant
Influence
Relatives of
Key
Managemen
t Personnel
Key
Managemen
t Personnel
Total
Sale of Goods 2009-10 1.99 61.79 15.56 - - - 79.34
2008-09 1.84 59.52 - 32.12 - - 93.49
2007-08 1.65 81.18 - 47.00 - - 129.82
Purchase of Materials, Spares and Capital
Equipment
2009-10 7.61 117.84 - - - - 125.45
2008-09 36.73 131.25 73.62 - - - 241.60
2007-08 12.30 80.31 128.62 - - - 221.22
Establishment and Other Expenses Paid /
(Received)
2009-10 1.06 69.58 3.61 - - - 74.26
2008-09 1.18 115.21 (7.08) (0.19) - - 109.11
2007-08 4.95 120.37 (17.80) (0.40) - - 107.11
Loan Given 2009-10 - 40.50 - - - - 40.50
2008-09 - - - - - - -
2007-08 - - - - - - -
Loan Repaid 2009-10 - 40.50 - - - - 40.50
2008-09 - - - - - - -
2007-08 - - - - - - -
Interest Received on Loan 2009-10 - 0.61 - - - - 0.61
2008-09 - - - - - - -
2007-08 - - - - - - -
Subscription towards Rights Issue 2009-10 - - - - - - -
2008-09 - 3,168.93 - - - - 3,168.9
3
2007-08 - - - - - - -
Issue of Equity Shares 2009-10 30.30 20.94 - - - - 51.24
2008-09 - - - - - - -
2007-08 - - - - - - -
Dividend Remitted 2009-10 497.68 223.84 - - 1.48 0.05 723.04
F-42
Particulars Year Enterprise
Having
Control
Over
Reporting
Enterprise
Enterprise
Under
Common
Control
Joint
Venture
Company
Enterprise
over which
Key
Managemen
t Personnel
Exercise
Significant
Influence
Relatives of
Key
Managemen
t Personnel
Key
Managemen
t Personnel
Total
2008-09 402.45 185.49 - 1.77 1.36 0.04 591.11
2007-08 378.64 86.76 - 8.85 1.28 - 475.52
Managerial Remuneration 2009-10 - - - - - 151.26 151.26
2008-09 - - - - - 43.37 43.37
2007-08 - - - - - 42.60 42.60
Lease Rentals paid 2009-10 - - - - 12.91 - 12.91
2008-09 - - - - 12.91 - 12.91
2007-08 - - - - 12.91 - 12.91
Outstanding Balances as at year end
Receivable 2009-10 0.07 4.51 0.92 - - - 5.50
2008-09 - 5.57 9.65 0.01 - - 15.23
2007-08 0.00 - - 0.25 - - 0.25
Payable 2009-10 0.06 4.21 1.87 - - - 6.14
2008-09 1.75 9.84 - - - 6.96 18.55
2007-08 - 10.00 5.79 - - 10.11 25.90 Note: Figures in italics denote figures for previous year.
F-43
GODREJ CONSUMER PRODUCTS LIMITED
SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31
SCHEDULE 15: NOTES TO CONSOLIDATED ACCOUNTS (Contd.)
C) The Significant Related Party Transactions are as under :
Nature of
Transaction
Year Enterprises
under Common
Control
Amount Joint
Venture
Company
Amount Enterprise over which Key
Management Personnel
Exercise Significant
Influence
Amount Key Management
Personnel &
Relatives
Amount
Sale of Goods
2009-
10
Godrej Industries
Ltd. 57.59 Godrej Sara
Lee Ltd. 15.56 Godrej Sara Lee Ltd. -
2008-
09
58.39 - 32.12
2007-
08
71.91 - 46.99
2009-
10
Godrej Agrovet
Ltd. 2.19
2008-
09
1.11
2007-
08
9.27
2009-
10
Godrej Hershey
Ltd. 2.01
2008-
09
-
2007-
08
-
Purchase of Materials,
Spares and Capital
Equipment
2009-
10
Godrej Industries
Ltd. 113.17 Godrej SCA
Hygiene Ltd. -
2008-
09
131.25 73.62
2007-
08
80.31 128.62
2009-
10
Godrej Hershey
Ltd. 4.67
F-44
Nature of
Transaction
Year Enterprises
under Common
Control
Amount Joint
Venture
Company
Amount Enterprise over which Key
Management Personnel
Exercise Significant
Influence
Amount Key Management
Personnel &
Relatives
Amount
2008-
09
-
2007-
08
-
Establishment and
Other Expenses
Paid / (Received)
2009-
10
Godrej Industries
Ltd. 69.64 Godrej Sara
Lee Ltd. 3.61 Godrej Sara Lee Ltd. -
2008-
09
115.44 - (0.19)
2007-
08
120.53 - -
2009-
10
Godrej Hershey
Ltd. (2.34) Godrej SCA
Hygiene Ltd. -
2008-
09
- (7.08)
2007-
08
- (17.80)
2009-
10
Godrej Agrovet
Ltd. 2.15
2008-
09
(0.40)
2007-
08
(0.56)
2009-
10
Godrej Infotech
Ltd.
0.14
2008-
09
-
2007-
08
2009-
10
Godrej HiCare
Ltd.
-
2008-
09
0.06
2007-
08
2009- Godrej Properties -
F-45
Nature of
Transaction
Year Enterprises
under Common
Control
Amount Joint
Venture
Company
Amount Enterprise over which Key
Management Personnel
Exercise Significant
Influence
Amount Key Management
Personnel &
Relatives
Amount
10 Ltd.
2008-
09
(0.13)
2007-
08
Loan Given
2009-
10
Godrej Industries
Ltd. 40.50
2008-
09
-
2007-
08
-
Loan Repaid
2009-
10
Godrej Industries
Ltd. 40.50
2008-
09
-
2007-
08
-
F-46
Nature of Transaction Year Enterprises
under Common
Control
Amount Joint
Venture
Company
Amount Enterprise over which Key
Management Personnel
Exercise Significant
Influence
Amount Key Management
Personnel &
Relatives
Amount
Interest Received on
Loan
2009-
10
Godrej Industries
Ltd. 0.61
2008-
09
-
2007-
08
-
Subscription towards
Rights Issue
2009-
10
Godrej Industries
Ltd. -
2008-
09
3,168.93
2007-
08
-
Issue of Equity Shares
Pursuant to Scheme of
Amalgamation
2009-
10
Godrej Industries
Ltd. 20.94
2008-
09
-
2007-
08
-
Dividend Remitted
2009-
10
Godrej Industries
Ltd. 223.84 Godrej Investments Ltd. - Mr. Adi B. Godrej -
2008-
09
185.49 1.77 -
2007-
08
86.76 8.85 -
2009-
10
Mr. Hoshedar K.
Press
0.05
2008-
09
0.04
2007-
08
0.04
2009-
10
Ms. Parmeshwar
A. Godrej
1.48
2008-
09
1.36
2007- 1.28
F-47
Nature of Transaction Year Enterprises
under Common
Control
Amount Joint
Venture
Company
Amount Enterprise over which Key
Management Personnel
Exercise Significant
Influence
Amount Key Management
Personnel &
Relatives
Amount
08
Managerial
Remuneration
2009-
10
Mr. Adi B. Godrej 56.48
2008-
09
27.17
2007-
08
27.42
2009-
10
Mr. Hoshedar K.
Press
50.02
2008-
09
16.13
2007-
08
15.18
2009-
10
Mr. Dalip Sehgal 44.76
2008-
09
-
2007-
08
-
Lease Rentals Paid
2009-
10
Ms. Parmeshwar
A. Godrej
12.91
2008-
09
12.91
2007-
08
12.91
Note: Figures in italics denote figures for previous year.
F-48
SEGMENTAL INFORMATION
Within India Outside India Total
2009-10 2008-09 2007-08 2009-10 2008-09 2007-08 2009-10 2008-09 2007-08
Sales revenue by
geographical
markets
15,674.58 10,605.75 8,828.40 4,630.99 3,323.88 2,197.29 20,305.57 13,929.64 11,025.69
Carrying amount
of segment assets
11,353.46 8,047.51 5,096.82 4,156.12 3,737.65 669.40 15,509.58 11,785.16 5,766.22
Total cost
incurred during
the year to
acquire assets
724.27 694.01 262.52 38.23 443.99 54.85 762.50 1,138.00 317.37
19. JOINT VENTURE
Sales includes Rs. 4088.49 mio (2008-09 Rs. 72.07 mio, 2007-08 Rs. 57.78 mio) net of Excise Duty Rs.
141.18 mio (2008-09 Rs. Nil mio, 2007-08 Rs. Nil), being share in sales of jointly controlled entity
Figures for the current year pertain to Godrej Sara Lee Ltd., while the previous year figures pertain to
Godrej SCA Hygiene Ltd. (subsequently renamed Godrej Hygiene Products Ltd.)
20. GENERAL
a) Other information required by Schedule VI to the Companies Act, 1956, has been given only to
the extent applicable.
b) Figures for the previous year have been regrouped / restated wherever necessary to conform to
current year's presentation.
F-49
AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS OF GODREJ SARA LEE
LIMITED
THE BOARD OF DIRECTORS OF GODREJ SARA LEE LIMITED
Page 1 of 2
1. We have audited the attached Consolidated Balance Sheet of Godrej Sara Lee Limited (the “Company”)
and its subsidiaries, hereinafter referred to as the “Group” (refer Note 1(ii) on Schedule 18 to the attached
consolidated financial statements) as at March 31, 2010, the related Consolidated Profit and Loss Account
and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto, which we have
signed under reference to this report. These consolidated financial statements are the responsibility of the
Company‟s Management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the Management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
3. We did not audit the financial statements of two subsidiaries included in the consolidated financial
statements, which constitute total assets of Rs. 211,722 thousands and net assets of Rs. 121,248 thousands
as at March 31, 2010, total revenues of Rs. 379,366 thousands, net profit of Rs. 50,042 thousands and net
cash flows amounting to Rs. 48,580 thousands for the year then ended. These financial statements and
other financial information have been audited by other auditors whose reports have been furnished to us,
and our opinion on the consolidated financial statements to the extent they have been derived from such
financial statements is based solely on the report of such other auditors.
4. Without qualifying our report, we draw your attention to Note 12 on Schedule 18 regarding Stock
Option Plan. The Company has extended Stock Option Plan to eligible employees and equity shares of
Godrej Industries Limited are the underlying equity shares for the stock option plan. Accordingly,
stock options have been granted to the eligible employees of the Company. To execute the aforesaid
Plan, an independent trust has been created with ILFS Trust Company Limited and the Company has
extended a loan of Rs. 594,000 thousands to the trust. As at March 31, 2010, the market value of
Godrej Industries Limited‟s equity shares is lower by Rs. 223,969 thousands compared to the
acquisition price. The repayment of loan by the trust is dependent on the exercise of option by the
employees during the exercise period and/or market price of the underlying equity shares of unexercised
options at the end of the exercise period which is up to 5 years from respective grant date.
5. We report that, the consolidated financial statements have been prepared by the Company‟s Management in
accordance with the requirements of Accounting Standard (AS) 21 - Consolidated Financial Statements
notified under sub-section 3C of Section 211 of the Companies Act, 1956.
F-50
6. Based on our Audit and on consideration of reports of other auditors on separate financial statements and
on the other financial information of the components of the Group as referred to above, and to the best of
our information and according to the explanations given to us, in our opinion, the attached consolidated
financial statements give a true and fair view in conformity with the accounting principles generally
accepted in India:
(a) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Group as
at March 31, 2010; and
(b) in the case of the Consolidated Profit and Loss Account, of the profit of the Group for the year
ended on that date; and
(c) In case of Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended
on that date.
For Price Waterhouse
Firm Registration No.: 301112E
Chartered Accountants
Uday Shah
Partner
Membership No.: F-46061
Place : Mumbai
Date : May 13, 2010
F-51
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010 (All amounts in Rupees thousands unless otherwise indicated)
Schedule As at
March 31, 2010
As at
March 31, 2009
SOURCES OF FUNDS
Shareholders' Funds
Share Capital 1 102,150 102,150
Reserves and Surplus 2 2,651,968 1,527,036
2,754,118 1,629,186
Minority Interest - -
Loan Funds
Unsecured Loans 3 - 8,734
Deferred Tax Liability / (Asset) (Net) 4 3,607 28,364
TOTAL 2,757,725 1,666,284
APPLICATION OF FUNDS
Fixed Assets 5
Gross Block 1,229,388 1,149,868
Less: Depreciation/ Amortisation 551,089 478,588
Net Block 678,299 671,280
Capital Work-in-Progress 10,816 9,590
Exchange Fluctuation 1,334 1,148
Net Block 690,449 682,018
Current Assets, Loans and Advances
Inventories 6 806,957 699,467
Sundry Debtors 7 385,337 394,588
Cash and Bank Balances 8 1,668,690 376,775
Other Current Assets 9 6,132 3,031
Loans and Advances 10 1,230,740 1,148,622
4,097,856 2,622,483
Less: Current Liabilities and Provisions
Current Liabilities 11 1,986,688 1,532,256
Provisions 12 43,892 105,961
2,030,580 1,638,217
Net Current Assets 2,067,276 984,266
TOTAL 2,757,725 1,666,284
Notes to Accounts
The Schedules referred to above form an integral part of the Consolidated Balance Sheet.
This is the Cash Flow Statement referred to in our report of even date.
For Price Waterhouse For and on behalf of the Board
Firm Registration Number : 301112E
F-52
Chartered Accountants
Uday Shah A. B. Godrej A. Mahendran
Partner Chairman Managing Director
Membership No. F-46061
Narayan Barasia
Chief Financial Officer & Company Secretary
Place : Mumbai Place : Mumbai
Date : May 13, 2010 Date : May 13, 2010
F-53
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2010 (All amounts in Rupees thousands unless otherwise indicated)
Schedule 2009-2010 2008-2009
INCOME
Sales 9,648,359 8,047,819
Less: Excise Duty 329,021 501,304
9,319,338 7,546,515
Other Income 13 106,549 159,286
TOTAL 9,425,887 7,705,801
EXPENDITURE
Cost of Goods Sold 14 4,760,960 4,003,666
Employee Costs 15 836,033 491,556
Administrative and Other Expenses 16 2,092,806 1,869,088
Interest and Financial Charges 17 7,426 22,910
Depreciation/ Amortisation 83,887 86,956
TOTAL 7,781,112 6,474,176
Profit Before Taxation 1,644,775 1,231,625
Tax Expense
- Current Tax [Net of Provision in respect of earlier years 286,026 142,905
Rs. 1,845 (Provision written back Previous Year : Rs. 2,508)
- MAT Credit 11,703 32,510
- Deferred Tax (Credit)/ Charge (24,757) (1,326)
- Fringe Benefit Tax - 12,841
Profit After Taxation 1,371,803 1,044,695
Less: Minority Interest - -
Add: Balance Brought Forward from Previous Year 1,174,834 732,010
Less: Adjustment of Goodwill pursuant to Scheme of
Arrangement of a Subsidiary (Refer Note 13 on Schedule 18) - 26,427
PROFIT AVAILABLE FOR APPROPRIATIONS 2,546,637 1,750,278
APPROPRIATIONS
Interim Dividend 204,300 395,831
Tax on Interim Dividend [Including for Previous Year Rs. Nil
(Previous Year : Rs. 5,943)] 34,861 73,458
Transfer to General Reserve 132,204 106,155
Balance carried to Balance Sheet 2,175,272 1,174,834
Earnings per Share in Rs. (Basic and Diluted) 53.72 40.91
(Face value of Rs. 4 per Equity Share)
(Refer Note 8 on Schedule 18)
Notes to Accounts
The Schedules referred to above form an integral part of the Consolidated Profit and Loss Account.
This is the Cash Flow Statement referred to in our report of even date.
F-54
For Price Waterhouse For and on behalf of the Board
Firm Registration Number : 301112E
Chartered Accountants
Uday Shah A. B. Godrej A. Mahendran
Partner Chairman Managing Director
Membership No. F-46061
Narayan Barasia
Chief Financial Officer & Company Secretary
Place : Mumbai Place : Mumbai
Date : May 13, 2010 Date : May 13, 2010
F-55
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2010 (All amounts in Rupees thousands unless otherwise indicated)
Particulars 2009-10 2008-09
A. Cash flow from operating activities :
Net Profit Before Tax 1,644,775 1,231,625
Adjustments for:
Depreciation/ Amortisation 83,887 86,956
(Profit)/ Loss on Sale of Fixed Assets (net) (13,644) (1,877)
Fixed Assets Written Off - 1,461
Interest Income (23,592) (69,292)
Interest and Financial Charges 7,426 22,910
Provision for Doubtful Advances / (written back) (net) (2,321) 1,913
Provision for Doubtful Debts (net) 19,680 5,966
Provision for Leave Encashment and Gratuity 5,829 8,104
Provision for Slow Moving Inventories 5,121 1,740
Advances / Deposit Written Off 1,012 549
Liabilities No Longer Required Written Back (4,963) (1,206)
Foreign Exchange (Gain)/ Loss (7,896) 7,894
Operating profit before working capital changes 1,715,314 1,296,743
Adjustments for change in working capital:
- (Increase)/ Decrease in Inventories (112,611) (57,292)
- (Increase)/ Decrease in Sundry Debtors (10,429) 76,068
- (Increase)/ Decrease in Loans and Advances (95,236) (402,402)
- Increase/ (Decrease) in Current Liabilities and Provisions 459,395 100,102
Cash generated from operations 1,956,433 1,013,219
- Direct taxes paid (283,928) (176,266)
Net cash from Operating Activities 1,672,505 836,953
B. Cash flow from Investing Activities :
Business Acquisition (619) (197,591)
Purchase of Fixed Assets including Capital Work-in-Progress (94,974) (152,895)
Sale Proceeds from Fixed Assets 17,105 4,536
Interest Received 20,491 54,141
Net cash used in investing activities (57,997) (291,809)
C. Cash flow from Financing Activities :
Proceeds from Borrowings (8,734) (64,512)
Dividend Paid (204,300) (517,134)
Dividend Tax Paid (102,133) (27,570)
Interest and Financial Charges paid (7,426) (22,910)
Net cash used in Financing Activities (322,593) (632,126)
Net (Decrease) / Increase in Cash and Cash Equivalents 1,291,915 (86,982)
Cash and Cash Equivalents at the beginning of the year 376,775 463,818
Cash and Cash Equivalents, end of year 1,668,690 376,775
F-56
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
Particulars 2009-10 2008-09
Cash and Cash Equivalents comprise :
Cash on Hand 686 2,459
Balances with Scheduled Banks in:
- Current Accounts 40,863 25,340
- Deposit Account 1,533,671 295,384
Balances with Non Scheduled Banks
- Current Accounts 22,830 18,026
- Deposit Account 70,640 35,566
1,668,690 376,775 Notes:
1. The above Cash Flow Statement has been prepared under the 'Indirect Method' as set out in ccounting Standard - 3
'Cash Flow Statements'.
2. Previous year's figures have been regrouped/ rearranged wherever necessary.
This is the Cash Flow Statement referred to in our report of even date.
For Price Waterhouse For and on behalf of the Board
Firm Registration Number : 301112E
Chartered Accountants
Uday Shah A. B. Godrej A. Mahendran
Partner Chairman Managing Director
Membership No. F-46061
Narayan Barasia
Chief Financial Officer & Company Secretary
Place : Mumbai Place : Mumbai
Date : May 13, 2010 Date : May 13, 2010
F-57
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 1
As at
March 31,
2010
As at
March 31, 2009
SHARE CAPITAL
Authorised
30,000,000 Equity Shares of Rs. 4 each. 120,000 120,000
25,000,000 Unclassified Shares of Rs. 4 each. 100,000 100,000
220,000 220,000
Issued, Subscribed and Paid-Up
25,537,500 (Previous Year: 25,537,500) Equity Shares 102,150 102,150
of Rs. 4 each, fully paid-up.
102,150 102,150
Notes:
Of the above shares:
1. 250,000 Equity Shares of Rs. 4 each, were issued for consideration other than cash pursuant to a contract for takeover
of erstwhile firm M/s. Transelektra.
2. 19,835,510 Equity Shares of Rs. 4 each, were issued as fully paid bonus shares by capitalising reserves.
3. 13,024,125 Equity Shares of Rs. 4 each, are held by Sara Lee Mauritius Holdings Private Limited, the Holding
Company. The Ultimate Holding Company is Sara Lee Corporation, USA.
4. As on March 31, 2009, 5,107,125 Equity Shares of Rs. 4 each had been transferred from Godrej Industries Limited
to Godrej Hygiene Care Private Limited (Formerly known as Build Tough Properties Private Limited). As on June 1,
2009, these Equity Shares were transferred to Godrej Consumer Products Limited.
5. As on March 30, 2009, 7,406,250 Equity Shares of Rs. 4 each had been transferred from Godrej and Boyce
Manufacturing Company Limitted to Consumer Biz Private Limited (Formerly known as Prashant Metal Forming
Industries Private Limited). As on June 1, 2009, these Equity Shares were transferred to Godrej Consumer Products
Limited.
F-58
SCHEDULE 2
As at
March 31,
2010
As at
March 31, 2009
RESERVES AND SURPLUS
Securities Premium
As per last Balance Sheet - 40,080
Less: Adjustment as per scheme of Arrangement - 40,080
(Refer Note 14 on schedule 18)
- -
General Reserve
As per last Balance Sheet 350,540 496,461
Less: Adjustment of Goodwill pursuant to Scheme of Arrangement of a
Subsidiary - 247,485
(Refer Note 13 on schedule 18)
Less: Adjustment as per Scheme of Arrangement - 4,591
(Refer Note 14 on schedule 18)
Add: Transferred from Profit and Loss Account 132,204 106,155
482,744 350,540
Capital Redemption Reserve
As per last Balance Sheet - 88,170
Less: Adjustment as per Scheme of Arrangement - 88,170
(Refer Note 14 on schedule 18)
- -
Cumulative Translation Adjustment (6,048) 1,662
Profit and Loss Account 2,175,272 1,174,834
2,651,968 1,527,036
F-59
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 3
As at
March 31, 2010
As at
March 31, 2009
UNSECURED LOANS
Cash Credit - 8,734
- 8,734
F-60
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 4
As at
March 31, 2010
As at
March 31, 2009
DEFERRED TAX LIABILITY/ (ASSET) (NET)
[Refer Note 1(ix) on Schedule 18]
Depreciation on Fixed Assets 11,058 42,819
Provision for Doubtful Debts / Advances / Inventory (7,451) (12,844)
Accrual for expenses allowable on payment - (1,611)
3,607 28,364
F-61
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 5
FIXED ASSETS [Refer Note 1(iii) on Schedule 18]
Gross Block Depreciation/ Amortisation Net Book Value
As at
April 1,
2009
Additions
during the
Year
Deletions
during
the Year
Adjustment as per
the Scheme of
Arrangement
(Refer Note 13
and 14 on
Schedule 18)
As at
March
31, 2010
As at
April 1,
2009
Charge
for the
year
On
Deductions
during the
Year
Adjustment as per
the Scheme of
Arrangement
(Refer Note 13
and 14 on
Schedule 18)
As at
March
31, 2010
As at
March
31, 2010
As at
March
31, 2009
Intangible Assets
Goodwill (Refer Note 1 Below)
194,800 619 - - 195,419 1,950 150 - - 2,100 193,319 192,850
Technical Know-
How
3,000 - - - 3,000 300 300 - - 600 2,400 2,700
Computer
Software
68,491 11,077 - - 79,568 29,437 15,896 - - 45,333 34,235 39,054
266,291 11,696 - - 277,987 31,687 16,346 - - 48,033 229,954 234,604
Tangible Assets -
Freehold Land 4,567 - 624 - 3,943 - - - - - 3,943 4,567
Building 92,524 991 1,977 - 91,538 31,019 2,926 999 - 32,946 58,592 61,505
Building on
Leasehold Land
66,886 11,072 - - 77,958 32,600 2,384 - - 34,984 42,974 34,286
[Refer Note 2
below]
Plant and
Machinery
557,564 60,794 1,317 - 617,041 276,092 44,539 1,169 - 319,462 297,579 281,472
and Electrical Installations
Furniture and
Fixtures, Office Equipments,
141,665 6,154 6,745 - 141,074 97,615 15,035 6,156 - 106,494 34,580 44,050
Computers
Vehicles 20,371 3,660 4,184 - 19,847 9,575 2,657 3,062 - 9,170 10,677 10,796
F-62
Gross Block Depreciation/ Amortisation Net Book Value
As at
April 1,
2009
Additions
during the
Year
Deletions
during
the Year
Adjustment as per
the Scheme of
Arrangement
(Refer Note 13
and 14 on
Schedule 18)
As at
March
31, 2010
As at
April 1,
2009
Charge
for the
year
On
Deductions
during the
Year
Adjustment as per
the Scheme of
Arrangement
(Refer Note 13
and 14 on
Schedule 18)
As at
March
31, 2010
As at
March
31, 2010
As at
March
31, 2009
883,577 82,671 14,847 - 951,401 446,901 67,541 11,386 - 503,056 448,345 436,676
Total 1,149,868 94,367 14,847 - 1,229,388 478,588 83,887 11,386 - 551,089 678,299 671,280
Previous Year 1,776,243 152,944 97,889 681,430 1,149,868 760,077 86,956 93,768 274,677 478,588
Exchange
Fluctuation
1,334 1,148
Capital Work-in-Progress
[including Capital
Advances Rs. 6,576 (Previous
Year : Rs. 1,364)]
10,816 9,590
690,449 682,018
Notes :
1. Goodwill as at March 31, 2010, includes goodwill on acquisition of Sara Lee Household and Body Care Lanka Private Limited Rs. 192,419 (Previous Year : Rs.
191,800).
2. Cost of Building on Leasehold Land includes cost of Rs. 46,502 (Previous Year : Rs. 44,055) and Written Down Value of Rs. 15,417 (Previous Year : Rs. 14,504)
pertaining to improvements made to lease premises owned by a shareholder.
F-63
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 6
As at
March 31,
2010
As at
March 31, 2009
INVENTORIES
[Refer Note 1(iv) on Schedule 18]
Raw Materials [Including Goods-in-Transit Rs. 1,427 (Previous Year: Rs.
307)] 188,719 149,547
Packing Materials and Promotional Items 98,078 83,661
Work-in-Progress 46,194 49,385
Finished Goods 515,869 453,978
Stores and Spares 2,279 1,957
851,139 738,528
Less: Provision for Slow Moving Inventories 44,182 39,061
806,957 699,467
F-64
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 7
As at
March 31,
2010
As at
March 31, 2009
SUNDRY DEBTORS (Unsecured, unless otherwise stated)
Debts Outstanding for a Period exceeding Six Months
- Considered Doubtful 33,731 29,507
- Considered Good 3,989 15,123
37,720 44,630
Other Debts
- Considered Doubtful 9,999 2,425
- Considered Good [Including Rs. 21,949 (Previous Year: Rs. 38,432)
secured 381,348 379,465
by the way of Bank Guarantee and Security Deposit]
391,347 381,890
Less: Provision for Doubtful Debts 43,730 31,932
385,337 394,588
F-65
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 8
As at
March 31, 2010
As at
March 31, 2009
CASH AND BANK BALANCES
Cash on Hand 686 2,459
Balances with Scheduled Banks in
- Current Accounts 40,863 25,340
- Deposit Accounts * 1,533,671 295,384
Balances with Non - Scheduled Banks in
- Current Accounts 22,830 18,026
- Deposit Accounts 70,640 35,566
1,668,690 376,775
* These include deposits with banks as securities against bank
guarantees aggregating Rs. 13,671 (Previous Year : Rs. 15,384)
F-66
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 9
As at
March 31, 2010
As at
March 31, 2009
OTHER CURRENT ASSETS
Accrued Interest on Deposits 6,132 3,031
6,132 3,031
F-67
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 10
As at
March 31, 2010
As at
March 31, 2009
LOANS AND ADVANCES (Unsecured and Considered Good
unless otherwise stated)
Advances Recoverable in Cash or in Kind or for Value to be
Received
- Considered Good** [Includes Housing Loans aggregating 116,043 127,516
Rs. 26,457 (Previous Year : Rs. 903) secured by way of
first charge on the property]
- Considered Doubtful 3,979 6,300
120,022 133,816
Less: Provision for Doubtful Advances 3,979 6,300
116,043 127,516
Loan given to ILFS Trust Company Limited 594,000 584,000
(Refer Note 12 on Schedule 18)
Deposits and Balances with
- Excise Authorities 374,060 261,488
- Others 121,047 135,601
MAT Credit Entitlement - 11,703
Advance Payment of Income Tax 25,590 28,314
[Net of Provision for Tax]
520,697 437,106
1,230,740 1,148,622 * * Includes amount of Rs. 25,714 (Previous Year: Rs. 30,000) representing Housing Loan due from Directors of the Company.
The maximum balance outstanding during the year was Rs. 30,000 (Previous Year: Rs. 30,000).
F-68
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 11
As at
March 31, 2010
As at
March 31, 2009
CURRENT LIABILITIES
Sundry Creditors 1,809,228 1,412,990
(Refer Note 10 on Schedule 18)
Advances from Customers 60,017 15,836
Security Deposits 29,110 45,254
Temporary Book Overdraft 1,157 -
Other Liabilities 87,176 58,176
1,986,688 1,532,256
F-69
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 12
As at
March 31, 2010
As at
March 31, 2009
PROVISIONS
Provision for Leave Encashment and Gratuity 32,542 26,713
[Refer Note 1(v) and 11 on Schedule 18]
Dividend Tax - 67,272
Provision for Contingencies 11,350 11,350
[Refer Notes 1(xi) and 3 on Schedule 18]
Provision for Fringe Benefit Taxation - 626
[Net of Advance Tax]
43,892 105,961
2,030,580 1,638,217
F-70
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE
YEAR ENDED MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 13
2009-2010 2008-2009
OTHER INCOME
Interest 23,592 69,292
Export Incentives 28,474 29,385
Profit on Sale of Fixed Assets (net) 13,644 1,877
Provision for Doubtful Advances written back (net) 2,321 -
Liabilities No Longer Required Written Back 4,963 1,206
Foreign Exchange Gain (net) - 18,359
Commission Income 2,757 3,779
Cash Discount Received 12,578 21,844
Miscellaneous Income 18,220 13,544
106,549 159,286
F-71
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE
YEAR ENDED MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 14
2009-2010 2008-2009
COST OF GOODS SOLD
Raw Materials and Packing Materials Consumed (A) 3,395,199 2,773,840
Purchase of Traded Goods 1,064,615 943,862
Processing Charges 357,063 279,806
(B) 1,421,678 1,223,668
Increase / (Decrease) in Work-in-Progress and Finished Goods
Closing Stock
Finished Goods 515,869 453,978
Work-in-Progress 46,194 49,385
562,063 503,363
Opening Stock
Finished Goods 453,978 437,089
Work-in-Progress 49,385 39,553
503,363 476,642
Increase / (Decrease) in Inventory (C) 58,700 26,721
Increase / (Decrease) in Excise Duty on (D) (2,783) (32,879)
Finished Goods (Refer Note 9 on Schedule 18)
(A)+(B)-(C)-(D) 4,760,960 4,003,666
F-72
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE
YEAR ENDED MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 15
2009-2010 2008-2009
EMPLOYEE COSTS
Salaries, Wages, Bonus and Allowances (Refer Note 15 on Schedule 18) 780,171 435,419
Contribution to Provident and Other Funds 35,124 37,363
Staff Welfare Expenses 20,738 18,774
836,033 491,556
F-73
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE
YEAR ENDED MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 16
2009-2010 2008-2009
ADMINISTRATIVE AND OTHER EXPENSES
Stores and Spares Consumed 27,894 23,955
Power and Fuel 122,616 121,792
Rent 82,467 76,537
Utilities 11,714 11,109
Rates and Taxes 11,503 10,060
Repairs
- Buildings 4,812 3,970
- Plant and Machinery 2,969 4,101
- Others 5,501 6,285
Insurance 6,037 5,407
Advertisement and Publicity 940,868 728,707
Selling and Distribution Expenses 227,277 195,970
Schemes and Promotions 93,291 139,537
Communication 19,250 22,729
Conveyance and Travelling 43,287 49,408
Freight 280,483 289,022
Fixed Assets Written Off - 1,461
Provision for Doubtful Debts (net) 19,680 5,966
Provision for Doubtful Advances (net) - 1,913
Legal and Professional Fees 39,821 45,574
Royalty (Refer Note 10 on Schedule 18) 69,558 63,058
Advances/ Deposit Written Off 1,012 4,035
Less: Provision for Advances utilised - 3,486
1,012 549
Bad debts written off 7,292 -
Less: Provision for Doubtful Debts utilised 7,292 - -
Foreign Exchange Loss (net) 4,710 -
Miscellaneous Expenses 78,056 61,978
2,092,806 1,869,088
F-74
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE
YEAR ENDED MARCH 31, 2010
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE 17
2009-2010 2008-2009
INTEREST AND FINANCIAL CHARGES
Interest on :
- Bank Loans 1,679 11,886
- Others 3,003 3,803
Other Financial Charges 2,744 7,221
7,426 22,910
F-75
GODREJ SARA LEE LIMITED
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010
AND THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON THAT
DATE
(All amounts in Rupees thousands unless otherwise indicated)
SCHEDULE – 18
NOTES TO ACCOUNTS
1. SIGNIFICANT ACCOUNTING POLICIES
(i) Accounting Convention
The Financial Statements are prepared to comply in all material aspects with all the applicable accounting
principles in India, the applicable accounting standards notified u/s 211(3C) of the Companies Act, 1956
(“the Act”) and the relevant provisions of the Act.
(ii) Principles of Consolidation
The consolidated financial statements relate to Godrej Sara Lee Limited (“referred to as the Company”) and
its wholly owned foreign subsidiaries (collectively referred to as “the Group”). The consolidated financial
statements have been prepared on the following basis:
- The financial statements of the Company and its Subsidiary Companies have been combined on a line-by-
line basis by adding together the book values of like items of assets, liabilities, income and expenses.
- Intra group balances and intra group transactions and resulting profits are eliminated in full.
- The subsidiaries considered in the consolidated financial statements are:
Country of
Incorporation
% voting power
held as at
March 31, 2010
Godrej Sara Lee Lanka Private Limited Sri Lanka 99.99
Godrej Sara Lee Bangladesh Private Limited Bangladesh 99.99
Sara Lee Household and Body Care Lanka Private Limited (“H&BC Lanka”), a 100% Subsidiary of the
Company got merged with Godrej Sara Lee Lanka Private Limited (“GSLL Lanka”) w.e.f. March 21, 2009.
Consequently, the Ordinary Shares held by the Company in H&BC Lanka have been cancelled and additional
13,182,600 Ordinary Shares have been issued in GSLL Lanka.
(iii) Fixed Assets
Fixed assets are stated at cost of acquisition or construction less accumulated depreciation/ amortisation. The
Group capitalises all costs relating to the acquisition, installation and construction of fixed assets, including
interest on borrowed funds used to finance the acquisition and modification of fixed assets, up to the date
when the assets are ready for commercial use.
Tangible Assets
F-76
Depreciation on assets, other than assets in Head Office of the Group, leasehold improvements, computers
and tools, dies and moulds, is provided on the original cost, on the straight-line method, at the estimated
useful lives of the assets which equates the rates stipulated in Schedule XIV to the Act.
Computers are depreciated over the period of three years from the date of acquisition. Leasehold
Improvements are amortised over the minimum expected period of lease. Tools, dies and moulds are
depreciated on straight line method over a period of three and half years. Assets in the Head Office of the
Group are depreciated at the written down value method at the estimated useful lives of the assets which
equates the rates stipulated in Schedule XIV to the Act.
Depreciation is provided on pro-rata basis with reference to the month of addition / installation / disposal of
assets, except in case of assets costing Rs. 5,000 or less which are depreciated fully in the year of acquisition.
Intangible Assets
The Group has evaluated the useful life of Goodwill, based on growth rates and estimated discounted future
cash flow. Accordingly, the Goodwill (other than goodwill on acquisition of subsidiaries) is amortised over
the period of 20 years from the date of acquisition.
Goodwill arising on acquisition of subsidiaries is evaluated on an annual basis for potential impairment.
Technical Know-how is amortised over a period of 10 years. Computer Software having benefit of more
than one year is capitalised and amortised over a period of 4 years. Also, refer Note in respect of Trademarks
and Non-Compete fees.
The balance useful lives of Goodwill and Technical Know-how are as follows :
Particulars Balance Life (Years) as on
March 31, 2010
Goodwill
(Other than goodwill on acquisition of subsidiaries)
6 Years
Technical Know-how 8 Years
Assets Impairment
The Company assesses at each Balance Sheet date whether there is any indication that an asset may be
impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such
recoverable amount of the asset or recoverable amount of the cash-generating unit to which the asset belongs
is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction, if
any, is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance
Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the recoverable amount.
(iv) Inventories
Inventories are valued at the lower of cost and net realisable value. Costs are determined on a weighted
average basis. Cost of finished goods comprises materials, labour and manufacturing overheads. Excise duty
on finished goods is accounted for when the goods are produced.
(v) Employee Benefits
Defined Contribution Plans
F-77
The Company has Defined Contribution plans for post employment benefits namely Provident Fund and
Superannuation Fund.
The Company contributes to a Government administered Provident Fund and has no further obligation
beyond making its contribution.
The Superannuation Fund constitutes an insured benefit, which is classified as a defined contribution plan as
the Company makes contributions to an insurance company and has no further obligation beyond making the
payment to the insurance company.
The Company makes contributions to State plans namely Employees‟ State Insurance Fund and has no further
obligation beyond making the payment to them.
In respect of employees of Sri Lanka and Bangladesh subsidiaries, contribution to provident fund and
employees trust fund (as applicable) is in accordance with the statutes and regulations of the respective
countries.
The Group's contributions to the above funds are charged to revenue every year.
Defined Benefit Plan
The Company has Defined Benefit Plan comprising of Gratuity Fund. The gratuity scheme is funded through
Unit Linked Gratuity Plus Scheme with Life Insurance Corporation of India („LIC‟) and HDFC Standard Life
Insurance Company Limited. Liability for Defined Benefit Plan is provided on the basis of valuations, as at
the Balance Sheet date, carried out by an independent actuary. The actuarial valuation method used by
independent actuary for measuring the liability is the Projected Unit Credit Method.
Termination benefits are recognised as an expense as and when incurred.
Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Profit and Loss Account as income or expense.
In respect of employees of subsidiaries in Sri Lanka and Bangladesh, gratuity payable, if applicable, is
equivalent to an amount calculated based on half month‟s salary of the last month of the financial year for
each completed year of service, commencing from the first year of service.
Other Employee Benefits
The employees of the Company are entitled to leave encashment as per the leave policy of the Company. The
liability in respect of leave encashment is provided, based on an actuarial valuation carried out by an
independent actuary as at the year end.
(vi) Foreign Currency Transactions
Foreign currency transactions during the year are recorded at the exchange rates prevailing on the dates of the
transactions. Foreign currency denominated Monetary assets and liabilities, are translated into rupees at the
exchange rates prevailing at the date of the Balance Sheet. Exchange differences are recognised in the Profit
and Loss Account of the year. Non-Monetary foreign currency items are carried at cost.
In respect of transactions covered by forward exchange contracts, discounts / premiums on forward exchange
contracts are amortised over the period of the contract.
F-78
In case of Foreign Subsidiaries considered to be non-integral, the revenue and expense transactions effected
in Profit and Loss Account have been translated into Indian Rupees at an average exchange rate. The year-
end assets and liabilities have been translated into Indian Rupees at the closing exchange rate at the year-end.
The resultant transaction exchange gain/ loss has been disclosed as Cumulative Translation Adjustment in
Reserves and Surplus.
(vii) Revenue Recognition
Sales are recognised on the dispatch of goods to customers and are stated net of sales tax, sales returns and
trade discounts.
(viii) Research and Development Expenses
Research and development expenses of a revenue nature are charged to the Profit and Loss Account in the
year in which they are incurred.
Fixed assets used in research and development activities are capitalised and depreciated over their estimated
useful lives based on the accounting policy described in Note 1(iii) above.
(ix) Taxation
- Provision for income-tax is made on the assessable income at the applicable tax rate.
- Deferred Tax is recognised, subject to consideration of prudence, on timing differences, being the
difference between taxable income and accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. Deferred Tax Assets are not recognised unless there are timing
differences, the reversal of which, will result in sufficient income or there is a virtual certainty that
sufficient future taxable income will be available against which such deferred tax asset can be realised.
(x) Leases
Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are
classified as operating leases. Lease payments under operating leases are recognised as an expense on a
straight-line basis over the lease term.
(xi) Provisions and Contingent Liabilities
The Company recognises a provision when there is a present obligation as a result of a past event that
probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that
may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present
obligation that the likelihood of outflow of resources is remote, no provision or disclosure as specified in
Accounting Standard 29- „Provisions, Contingent Liabilities and Contingent Assets‟ is made.
2. CONTINGENT LIABILITIES
As at March
31, 2010
As at
March
31, 2009
1) Guarantee given to Bank 75,636 75,636 Pertains to guarantees given to bank for
F-79
on behalf of a Subsidiary
loan and cash credit facility provided by
bank to the Subsidiary.
2) Guarantee given by Banks
on behalf of the Group
21,090 15,384 Pertains to guarantees given by banks for
export performance and guarantees given to
Sales Tax Authorities.
3) Claims against the Group
not Acknowledged as
Debts
2,624 4,530 Pertains to litigations filed against the
Group by employees, distributors,
transporters etc. The Group has strong
grounds of appeal and does not foresee any
outflow in this regard.
4) Demand raised by tax
authorities against which
the Group has made an
appeal:
Pertains to litigations / disputes with
various tax authorities. The Group is in
appeal at various appellate levels. The
Group does not expect any outflow in this
regard.
- Sales Tax 121,983 106,945
- Excise Duty 5,563 5,563
- Income Tax 1,434 1,434
- Service Tax 1,621 2,006
229,951 211,498
3. PROVISION FOR CONTINGENCIES
Particulars 2009-2010 2008-2009
Provision as on April 1, 2009 11,350 11,350
Additional Provision made - -
Amounts Utilised - -
Provision Reversed - -
Provision as on March 31, 2010 11,350 11,350
Represents estimates made for probable liabilities arising out of pending disputes/ litigation with the Sales
Tax authorities. The outflow with regard to the said matters depends on exhaustion of remedies available to
the Group under the law and hence the Group is not able to reasonably ascertain the timing of the outflow.
4. Estimated amount of contracts (net of capital advances) remaining to be executed on capital account and not
provided for is Rs. 5,747 (Previous Year Rs. 15,716).
5. SEGMENT REPORTING
In accordance with Accounting Standard 17 “Segmental Reporting”, the Group has determined its operations as
a single reportable business segment, namely „Household and Body Care Products‟. Hence it has no other
reportable segments. Accordingly, the segment revenue, segment results, total carrying value of segment assets
and liabilities, capital expenditure incurred to acquire the assets, the total amount of charge for depreciation are
all as reflected in the financial statements as of and for the year ended March 31, 2010 and March 31, 2009.
Particulars India Outside India Total
2009-2010
2008-2009
2009-2010
2008-2009
2009-2010
2008-2009
F-80
Secondary Segment (Geographical Segment):
6. OPERATING LEASES
The details of operating leases are as follows:
Particulars Minimum Future Lease Rentals Amount
recognised during
the year Due within one
year
Due later than
one year and not
later than five
years
Due after five
years
Office Premises 2,478
(22,768)
1,088
(3,693)
-
(-)
22,768
(22,768)
Residential
Premises
2,700
(-)
-
(-)
-
(-)
3,600
(2,700)
Vehicles 200
(425)
-
(97)
-
(-)
617
(1,026)
Computers 4,843
(3,455)
6,507
(3,147)
-
(-)
4,908
(4,269)
Total 10,221
(26,648)
7,595
(6,937)
-
(-)
31,893
(30,763)
Note: Figures in bracket represents figures for the previous year.
The operating lease arrangement relating to office premises extend upto a maximum of thirty three months from
the respective dates of inception and are renewable on mutual consent. In addition, the Group has entered into
various cancellable leasing arrangements for office and residential premises in respect of which an amount of
Rs. 51,191 (Previous Year Rs. 46,800) has been included under the head “Administrative and Other Expenses”
under Schedule „16‟ annexed and forming part of the Profit and Loss Account.
Amount recognised during the year in respect of Office Premise given on sub-lease aggregating Rs. 1,135
(Previous Year Rs. 1,665) has been included under the head “Other Income – Miscellaneous Income” under
Schedule „13‟ annexed and forming part of Profit and Loss Account.
7. RELATED PARTY DISCLOSURES
I. Enterprise having direct or indirect control over the Company
1. Sara Lee Corporation, USA.
2. Sara Lee / DE N.V., Utrecht
3. Sara Lee Mauritius Holdings Private Limited
4. Godrej Industries Limited (upto March 31, 2009)
5. Godrej and Boyce Manufacturing Company Limited (upto March 30, 2009)
Sales
Revenue
8,016,311
6,426,998
1,303,027
1,119,517
9,319,338
7,546,515
Carrying
Amount of
Assets
4,185,222 2,718,339 603,083
586,162
4,788,305 3,304,501
Capital
Expenditure
95,160 151,382 433 1,513 95,593 152,895
F-81
6. Godrej Consumer Biz Private Limited (Previously known as Prashant Metal Forming Industries
Private Limited) (Upto May 31, 2009)
7. Godrej Hygiene Care Private Limited (Previously known as Build Tough Private Properties Limited)
(Upto May 31, 2009)
8. Godrej Consumer Products Limited (w.e.f. June 1, 2009)
II. Enterprise under common control with the Company
1. Koninklijke Douwe Egberts, Netherlands
2. Sara Lee Household and Body Care Research Netherlands
3. Buttress B.V. Netherlands
4. Kiwi European Holding B.V. Netherlands
5. Sara Lee Household and Body Care USA
6. Sara Lee Malaysia SDN. BHD.
7. Sara Lee Singapore Pte Limited
8. Fujian Sara Lee Consumer Products Co Limited
9. Sara Lee (Thailand) Limited
10. Sara Lee Household and Body Care Italy
11. Sara Lee Household and Body Care France S.N.C
12. Sara Lee Household and Body Care Australia
13. Sara Lee Household and Body Care Japan
14. Sara Lee – UK Limited
15. Sara Lee Household and Body Care Poland
16. Bama International – West Germany
17. Sara Lee Household and Body Care Spain
18. Sara Lee, Hellas Greece
19. Sara Lee, Hungary
20. Sara Lee Hong Kong Limited
21. Sara Lee Philippines Inc.
22. Kiwi Brand (Tianjin) Co. Limited
23. Sara Lee Russia
24. Sara Lee – P.T. (Indonesia)
25. Sara Lee International B.V. Netherlands
26. Sara Lee Household and Body Care Belgium
27. Sara Lee Household and Body Care Osterreich
28. Sara Lee Household and Body Care Austria
29. Sara Lee Japan Limited
30. Sara Lee Household and Body Care Portugal
31. Godrej Hi-care Limited
32. Sara Lee Household and Body Care Kenya Limited
33. Godrej Consumer Products Limited (Upto May 31, 2009)
34. Godrej Infotech Limited
35. Godrej Hersheys Beverages and Foods Limited
36. Godrej Agrovet Limited
37. Godrej Consumer Biz Private Limited (w.e.f. June 1, 2009- Previously known as Prashant Metal
Forming Industries Private Limited)
38. Godrej Hygiene Care Private Limited (w.e.f. June 1, 2009- Previously known as Build Tough Private
Properties Limited)
39. Godrej Industries Limited (w.e.f. April 1, 2009)
40. Godrej and Boyce Manufacturing Company Limited (w.e.f. March 31, 2009)
41. Godrej Global Mideast F.Z.E.
42. Godrej Oil Palm Limited
43. Godrej SCA Hygiene Limited
44. Sara Lee South East Asia SDN
45. Sara Lee Southern Europe
46. CII Naoroji Godrej Centre
F-82
III. Key Management Personnel and Relatives
1. Mr. A. Mahendran, Managing Director
2. Mr. Ravi Venkateswar, Director and Chief Operating Officer (Ceased to be Director effective April 1,
2009)
3. Mrs. Mythili Mahendran (Wife of Mr. A Mahendran)
IV. Companies in which Parties referred in IV exercise Significant Influence
1. Harvey Health Care Limited
2. Great Lake Institute of Management
3. DB Apparel India Private Limited
8. EARNINGS PER SHARE
2009-2010 2008-2009
Profit After Taxation (Rs. ‟000) 1,371,803 1,044,695
Weighted average number of shares (Nos.) 25,537,500 25,537,500
Nominal Values of shares outstanding (Rs.) 4 4
Basic and Diluted Earnings Per Share (Rs.) 53.72 40.91
9. EXCISE DUTY
The amount of excise duty disclosed as deduction from turnover is the total excise duty for the year except
the excise duty related to the difference between the closing stock and opening stock and excise duty paid but
not recovered, which has been disclosed as excise duty expense in “Cost of Goods Sold – Increase (Decrease)
in Excise Duty on Finished Goods” under Schedule „14‟ annexed and forming part of Profit and Loss
Account.
10. The Company has entered into Manufacturing and Distribution Licence agreement with Kiwi European
Holding B.V. Netherlands for Kiwi and Ambipur brands and with Buttress B.V. Netherlands for Brylcreem
brand. In terms of these agreements, the Company has agreed to pay for the use of licence marks and
technical know-how @ 5% of Net Outside Sale and an additional 1.4% of Net Outside Sale is payable for
R&D Support to Sara Lee Household and Body Care Research, The Hague, (together, “Royalty”). The
Company has made an application to the Secretariat for Industrial Assistance for approval of payment of
royalty, which is awaited. The royalty payable balance accrued in these financial statements as at March 31,
2010 aggregates Rs. 154,882 (Previous Year : Rs. 103,296).
11. The Company has adopted Accounting Standard 15 „Employee Benefits‟ with effect from April 1, 2007.
Pursuant to adoption, the Company has classified various benefits provided to employees as under:-
I Defined Contribution Plans
a. Provident Fund
b. State Defined Contribution Plans
i. Employers' Contribution to Employee's State Insurance
ii. Employers' Contribution to Employee's Pension Scheme 1995
c. Superannuation
During the year, the Group has recognised the following amounts in the Profit and Loss Account:
2009-2010 2008-2009
- Employers' Contribution to Provident Fund *
[Includes EDLI charges and Employers' Contribution to Employee's
18,457 17,667
F-83
Pension Scheme 1995]
- Employers' Contribution to Employee's State Insurance* 266 503
- Superannuation* 4,018 3,650
* Included in Contribution to Provident and Other Funds (Refer Schedule „15‟)
II Defined Benefit Plan
Gratuity
In accordance with Accounting Standard 15, actuarial valuation was done in respect of the aforesaid
defined benefit plan of gratuity based on the following assumptions:-
2009-2010 2008-2009
Discount Rate (per annum) 7.75% 7.00%
Rate of increase in Compensation Levels 7.00% 6.00%
Rate of Return on Plan Assets 8.00% 8.00%
a) Changes in the Present Value of Obligation
2009-2010 2008-2009
Present Value of Obligation at the beginning of the year 40,268 28,603
Interest Cost 3,048 1,843
Current Service Cost 5,118 3,000
Past Service Cost (Vested Benefit) 10,756 -
Benefits Paid (3,242) (4,996)
Actuarial (Gain) / Loss on Obligations 3,925 11,818
Present Value of Obligation as at the end of the year 59,873 40,268
b) Changes in the Fair value of Plan Assets
2009-2010 2008-2009
Present Value of Plan Assets at the beginning of the year 40,690 28,603
Expected Return on Plan Assets 4,102 2,853
Actuarial Gain / (Loss) on Plan Assets 6,584 (1,735)
Contributions 12,200 15,965
Benefits Paid (3,242) (4,996)
Fair Value of Plan Assets as at the end of the year 60,334 40,690
c) Percentage of each Category of Plan Assets to total Fair Value of Plan Assets as at March
31, 2010
The Plan Assets are administered by Life Insurance Corporation of India („LIC‟) and HDFC
Standard Life Insurance Company Limited as per Investment Pattern stipulated for Pension
and Group Schemes Fund by Insurance Regulatory and Development Authority regulation.
d) Reconciliation of Present Value of Defined Benefit Obligation and the Fair value of Assets
2009-2010 2008-2009
Present Value of Funded Obligation at the end of the year 59,873 40,268
Fair Value of Plan Assets as at the end of the year 60,334 40,690
F-84
Funded (Asset)/Liability recognised in the Balance Sheet** (461) (422)
** Included under “Advances Recoverable in Cash or in Kind” (Refer Schedule „10‟)
e) Amount recognised in the Balance Sheet
*** Included under “Advances Recoverable in Cash or in Kind” (Refer Schedule „10‟)
f) Expenses recognised in the Profit and Loss Account
2009-2010 2008-2009
Current Service Cost 5,118 3,000
Interest Cost 3,048 1,843
Expected Return on Plan Assets (4,102) (2,853)
Past Service Cost (Vested Benefit) Recognised 10,756 -
Net actuarial (Gain) / Loss recognised in the year (2,658) 13,553
Total Expenses recognised in the Profit and Loss Account**** 12,163 15,543
**** Included in Employee Cost “Contribution to Provident and Other Fund” (Refer Schedule „15‟)
g) Expected Contribution to be paid for next year
2009-2010 2008-2009
Funded 11,499 5,008
The liability for leave encashment and compensated absences as at year end is
Rs. 32,122 (Previous Year Rs. 26,713).
In respect of employees of subsidiary in Sri Lanka, gratuity payable is equivalent to an amount calculated
based on half month‟s salary of the last month of the financial year for each completed year of service,
commencing from the first year of service. Gratuity expense have been included in Employee Cost
“Contribution to Provident and Other Fund” (Refer Schedule „15‟) and gratuity payable have been included
in Provision for Leave Encashment and Gratuity “Provision” (Refer Schedule „12‟)
12. At its board meeting dated June 1, 2007 and March 20, 2008, the Board of Directors approved a resolution to
extend the benefits of a new employee stock option scheme „Godrej Sara Lee Limited Employees Stock
Option Plan‟ to eligible employees on terms and conditions as specified in the Scheme. At its board meeting
dated May 13, 2010, the Board of Directors approved a resolution to extend the exercise period of the stock
option scheme up to 5 years from respective grant date. Accordingly, Stock options have been granted to the
eligible employees of the Company. The equity shares of „Godrej Industries Limited‟ are the underlying
equity shares for the stock option scheme. In order to execute the Scheme, an independent trust has been
created with ILFS Trust Company Limited and the Company has given an interest bearing loan of Rs.
594,000 to the trust to execute the scheme. The outstanding loan has been disclosed under the head „Loans
and Advances‟ under Schedule „10‟ annexed and forming part of the Balance Sheet.
As at March 31, 2010, the market value of Godrej Industries Limited‟s equity shares are lower by Rs.
223,969 as compared to the cost of acquisition of shares. The repayment of the loans granted to the said Trust
is dependent on the exercise of the options by the employees and the market price of the underlying shares of
the unexercised options at the end of the exercise period. The fall in value of underlying equity shares is on
account of current market volatility and the loss, if any, can be determined only at the end of the exercise
period. In view of the aforesaid, provision for diminution of Rs. 223,969 is not considered necessary in these
financial statements.
2009-2010 2008-2009
Present Value of Obligation at the end of the year 59,873 40,268
Fair Value of Plan Assets as at the end of the year 60,334 40,690
(Asset)/Liability recognised in the Balance Sheet*** (461) (422)
F-85
13. During the previous year, pursuant to the Scheme of Arrangement between the Godrej Sara Lee Limited (“the
Holding Company”) and Sara Lee Household and Body Care India Private Limited (“a subsidiary company”)
and their respective Shareholders, as approved in the Annual General Meeting held on June 16, 2008 and
subsequently sanctioned by the High Court of Bombay vide order dated October 24, 2008 and made effective
on December 1, 2008 (“the Scheme”), the wholly owned subsidiary was amalgamated with holding Company
w.e.f. April 1, 2008. Accordingly, Goodwill of Rs. 273,912 was adjusted to General Reserve and
Accumulated Profit and Loss Account balance, as appropriate.
14. During the previous year, pursuant to the Scheme referred in Note 13 above, the book value of Trademarks of
Rs. 24,315 and non-compete fees of Rs. 108,526 as at April 1, 2008 were adjusted against Capital
Redemption Reserve by Rs. 88,170, Securities Premium by Rs. 40,080 and General Reserve by Rs. 4,591.
15. The company has announced „Early Separation Scheme-2009 (ESS)‟ for employees of Pondicherry units in
March 2009. Accordingly, separation cost aggregating Rs. 3,550 has been paid by the Company under ESS
and has been disclosed under the head „Employee Costs‟ under Schedule „15‟ annexed to and forming part of
the Profit and Loss Account.
16. Research and Development Expenses
Particulars 2009-2010 2008-2009
Research and Development Expenses 49,163 40,580
17. Previous year‟s figures have been reclassified wherever necessary to conform with current year‟s presentation.
The Schedules 1 to 18 and Annexure referred to above form an integral part of the Accounts.
For and on behalf of the Board
For Price Waterhouse A. B. Godrej A. Mahendran
Firm Registration No. : 301112E Chairman Managing Director
Chartered Accountants
Uday Shah Narayan Barasia
Partner Chief Financial Officer & Company Secretary
Membership No. F-46061
Place : Mumbai Place : Mumbai
Date : May 13, 2010 Date : May 13, 2010
F-86
SCHEDULES FORMING PART OF CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2010 AND THE CONSOLIDATED PROFIT AND
LOSS ACCOUNT FOR THE YEAR ENDED ON THAT DATE. (All amounts in Rupees thousands unless otherwise indicated)
Schedule 18
NOTES TO ACCOUNTS - Contd.
Particulars Parties
referred
to in (I)
Parties
referred
to in (I)
Parties
referred
to in
(II)
Parties
referred
to in
(II)
Personnel
referred
to in (III)
Personnel
referred
to in (III)
Parties
referred
to in
(IV)
Parties
referred
to in
(IV)
Total Total
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
a) Transactions during the Year
Sales
Sara Lee Household and Body Care France
S.N.C.
- - 91,702 85,182 - - - - 91,702 85,182
Sara Lee Malaysia SDN. BHD. - - 171,081 144,098 - - - - 171,081 144,098
Sara Lee Household and Body Care Spain - - 133,508 155,576 - - - - 133,508 155,576
Sara Lee Corporation, USA 70,075 69,791 - - - - - - 70,075 69,791
Others - 414 226,930 242,263 - - - - 226,930 242,677
Total 70,075 70,205 623,221 627,119 - - - - 693,296 697,324
Reimbursement of expenses received
Godrej Hi-care Limited - - 148 563 - - - - 148 563
Godrej Consumer Products Limited 12,259 - - - - - - - 12,259 -
Godrej Industries Limited - 4,255 1,279 - - - - - 1,279 4,255
Godrej Hersheys Beverages and Foods
Limited
- - 3,088 153 - - - - 3,088 153
Koninklijke Douwe Egberts, Netherlands - - 4,944 5,513 - - - - 4,944 5,513
Others - - 532 184 - - - 91 532 275
Total 12,259 4,255 9,991 6,413 - - - 91 22,250 10,759
Rent Received
F-87
Particulars Parties
referred
to in (I)
Parties
referred
to in (I)
Parties
referred
to in
(II)
Parties
referred
to in
(II)
Personnel
referred
to in (III)
Personnel
referred
to in (III)
Parties
referred
to in
(IV)
Parties
referred
to in
(IV)
Total Total
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
Godrej Hi-care Limited - - 110 - - - - - 110 -
Godrej Consumer Products Limited 46 - - - - - - - 46 -
Godrej Hersheys Beverages and Foods
Limited
- - 1,095 1,452 - - - - 1,095 1,452
Total 46 - 1,205 1,452 - - - - 1,251 1,452
Volume Shortfall Received
Koninklijke Douwe Egberts, Netherlands - - 6,089 - - - - - 6,089 -
Total - - 6,089 - - - - - 6,089 -
Interest received
Mr. A. Mahendran - - - - 2,523 - - - 2,523 -
Total - - - - 2,523 - - - 2,523 -
Royalty Income
Sara Lee Malaysia SDN. BHD. - - 7,850 6,310 - - - - 7,850 6,310
Total - - 7,850 6,310 - - - - 7,850 6,310
Loan Repayment
Mr. Ravi Venkateswar - - - - - 406 - - - 406
Mr. A. Mahendran - - - - 4,286 1,512 - - 4,286 1,512
Total - - - - 4,286 1,918 - - 4,286 1,918
Deposit/Advance Repaid
Mr. A. Mahendran - - - - 5,778 10,078 - - 5,778 10,078
Godrej Industries Limited - 1,571 1,520 - - - - - 1,520 1,571
Total - 1,571 1,520 - 5,778 10,078 - - 7,298 11,649
Purchases
F-88
Particulars Parties
referred
to in (I)
Parties
referred
to in (I)
Parties
referred
to in
(II)
Parties
referred
to in
(II)
Personnel
referred
to in (III)
Personnel
referred
to in (III)
Parties
referred
to in
(IV)
Parties
referred
to in
(IV)
Total Total
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
Godrej Hi-care Limited - - - 382 - - - - - 382
Godrej Industries Limited - 8,933 8,198 - - - - 8,198 8,933
Godrej and Boyce Manufacturing Company
Limited
- 50 - - - - - - - 50
Others - - 3,067 - - - - - 3,067 -
Total - 8,983 11,265 382 - - - - 11,265 9,365
Rent, Internal Audit Fees, Repairs &
Maintenance & Conference Expenses etc.
Godrej Industries Limited - 22,352 26,113 - - - - - 26,113 22,352
Mrs. Mythili Mahendran - - - - 3,600 3,600 - - 3,600 3,600
Godrej Hi-care Limited - - 536 325 - - - - 536 325
Others 14 384 230 11 - - - - 244 395
Total 14 22,736 26,879 336 3,600 3,600 - - 30,493 26,672
Staff Related Expenses
Godrej Consumer Products Limited 3,102 - - 280 - - - - 3,102 280
Godrej Industries Limited - 10,793 5,306 - - - - - 5,306 10,793
Godrej Hersheys Beverages and Foods
Limited
- - 144 1,631 - - - - 144 1,631
Godrej Hi-care Limited - - 186 78 - - - - 186 78
Great Lakes Institute - - - - - - 1,178 - 1,178 -
Others - 333 234 - - - 90 1,093 324 1,426
Total 3,102 11,126 5,870 1,989 - - 1,268 1,093 10,240 14,208
Managerial Remuneration
Mr. A. Mahendran - - - - 49,303 34,322 - - 49,303 34,322
Mr. Ravi Venkateswar - - - - - 15,536 - - - 15,536
F-89
Particulars Parties
referred
to in (I)
Parties
referred
to in (I)
Parties
referred
to in
(II)
Parties
referred
to in
(II)
Personnel
referred
to in (III)
Personnel
referred
to in (III)
Parties
referred
to in
(IV)
Parties
referred
to in
(IV)
Total Total
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
Total - - - - 49,303 49,858 - - 49,303 49,858
Computer, Internet, Communication
Professional Charges
Godrej Industries Limited - 167 1,481 - - - - - 1,481 167
Godrej Infotech Limited - - - 1,310 - - - - - 1,310
Others - - 72 - - - - - 72 -
Total - 167 1,553 1,310 - - - - 1,553 1,477
Advertisement, Schemes and Promotion
Expenses
Godrej Consumer Products Limited 30,595 - - 29,893 - - - - 30,595 29,893
Godrej and Boyce Manufacturing Company
Limited
- 1,646 -
- - - - - 1,646
Koninklijke Douwe Egberts, Netherlands - - - 2,000 - - - - - 2,000
Sara Lee International B.V - - 4,984 - - - - - 4,984 -
Others - 48 - - - - 490 - 490 48
Total 30,595 1,694 4,984 31,893 - - 490 - 36,069 33,587
Royalty Expenses
Sara Lee Household and Body Care
Research Netherlands
- - 15,215 13,801 - - - - 15,215 13,801
Kiwi European Holding B.V. Netherlands - - 42,300 36,115 - - - - 42,300 36,115
Buttress B.V. Netherlands - - 12,043 13,142 - - - - 12,043 13,142
Total - - 69,558 63,058 - - - - 69,558 63,058
Purchase of Fixed Assets
Godrej and Boyce Manufacturing Company
Limited
- 1,678 5,350 - - - - - 5,350 1,678
F-90
Particulars Parties
referred
to in (I)
Parties
referred
to in (I)
Parties
referred
to in
(II)
Parties
referred
to in
(II)
Personnel
referred
to in (III)
Personnel
referred
to in (III)
Parties
referred
to in
(IV)
Parties
referred
to in
(IV)
Total Total
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
Godrej Hi-care Limited - - - 3,195 - - - - - 3,195
Godrej Industries Limited - 319 - - - - - - - 319
Total - 1,997 5,350 3,195 - - - - 5,350 5,192
Deposits and Advances given
Godrej Industries Limited - 2,080 2,160 - - - - - 2,160 2,080
Mr. A. Mahendran - - - - 5,904 10,078 - - 5,904 10,078
Total - 2,080 2,160 - 5,904 10,078 - - 8,064 12,158
Loan Given
Mr. A. Mahendran - - - - - 30,000 - - - 30,000
Total - - - - - 30,000 - - - 30,000
Sale of Fixed Assets
Godrej Hersheys Beverages and Foods
Limited
- - 402 - - - - - 402 -
Total - - 402 - - - - - 402 -
Dividend
Sara Lee Mauritius Holding Private Limited 104,193 201,874 - - - - - - 104,193 201,874
Godrej Industries Limited - 79,160 - - - - - - - 79,160
Godrej and Boyce Manufacturing Company
Limited
- 114,797 - - - - - - - 114,797
Godrej Consumer Biz Private Limited - - 59,250 - - - - - 59,250 -
Godrej Hygiene Care Private Limited - - 40,857 - - - - - 40,857 -
Total 104,193 395,831 100,107 - - - - - 204,300 395,831
Acquisition of Subsidiary
F-91
Particulars Parties
referred
to in (I)
Parties
referred
to in (I)
Parties
referred
to in
(II)
Parties
referred
to in
(II)
Personnel
referred
to in (III)
Personnel
referred
to in (III)
Parties
referred
to in
(IV)
Parties
referred
to in
(IV)
Total Total
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
Sara Lee Mauritius Holdings Private
Limited
- 16,573 - - - - - - - 16,573
Total - 16,573 - - - - - - - 16,573
b) Balances as at year-end
Receivables net of payables
Sara Lee Household and Body Care France
S.N.C.
- - 23,695 39,466 - - - - 23,695 39,466
Sara Lee Household and Body Care Spain - - 65,124 90,664 - - - - 65,124 90,664
Sara Lee Corporation, USA 13,475 27,198 - - - - - - 13,475 27,198
Others 2,940 856 57,959 47,645 - - 91 - 60,990 48,501
Total 16,415 28,054 146,778 177,775 - - 91 - 163,285 205,829
Payables net of receivables
Sara Lee Household and Body Care
Research Netherlands
- - 35,972 24,633 - - - - 35,972 24,633
Kiwi European Holding B.V. Netherlands - - 96,624 66,904 - - - - 96,624 66,904
Buttress B.V. Netherlands - - 32,575 21,812 - - - - 32,575 21,812
Others - - 4,864 - - - - - 4,864 -
Total - - 170,035 113,349 - - - - 170,035 113,349
Deposits and Advances given
Mrs. Mythili Mahendran - - - - 20,000 20,000 - - 20,000 20,000
Mr. A. Mahendran - - - - 126 - - - 126 -
Godrej Industries Limited - 17,022 17,662 - - - - - 17,662 17,022
Total - 17,022 17,662 - 20,126 20,000 - - 37,788 37,022
F-92
Particulars Parties
referred
to in (I)
Parties
referred
to in (I)
Parties
referred
to in
(II)
Parties
referred
to in
(II)
Personnel
referred
to in (III)
Personnel
referred
to in (III)
Parties
referred
to in
(IV)
Parties
referred
to in
(IV)
Total Total
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
2009-
2010
2008-
2009
Loan given
Mr. A. Mahendran - - - - 25,714 30,000 - - 25,714 30,000
Total - - - - 25,714 30,000 - - 25,714 30,000
151
DECLARATION
All the relevant provisions of the Companies Act, 1956 and the guidelines issued by the Government of India or the
guidelines issued by the Securities and Exchange Board of India, established under Section 3 of the Securities and
Exchange Board of India Act, 1992, as the case may be, have been complied with and no statement made in this
Placement Document is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board
of India Act, 1992 or rules made or guidelines issued thereunder, as the case may be. We further certify that all
statements in this Placement Document are true and correct.
Signed by:
Mr. Adi Godrej
Chairman
Godrej Consumer Products Limited
Date: July 1, 2010 Place: Mumbai
GODREJ CONSUMER PRODUCTS LIMITED
REGISTERED OFFICE OF THE COMPANY
Pirojshanagar, Eastern Express Highway
Vikhroli, Mumbai 400 079
BOOK RUNNING LEAD MANAGERS
Kotak Mahindra Capital Company Limited
1st Floor, Bakhtawar
229, Nariman Point
Mumbai 400 021
HSBC Securities and Capital Markets (India) Private Limited
52/60, Mahatma Gandhi Road, Fort
Mumbai 400 001
DOMESTIC LEGAL ADVISOR TO THE
COMPANY
Amarchand & Mangaldas & Suresh A. Shroff & Co.
Peninsula Chambers
Peninsula Corporate Park
Ganpatrao Kadam Marg
Lower Parel
Mumbai 400 013
INTERNATIONAL LEGAL ADVISOR TO THE
BOOK RUNNING LEAD MANAGERS
Jones Day 3 Church Street
#14 - 02 Samsung Hub
Singapore 049483
AUDITORS TO THE COMPANY
M/s. Kalyaniwalla & Mistry
5th
Floor, Kalpataru Heritage
127, M. G. Road, Fort
Mumbai 400 001
