Gillette India Ltd:Annual Report 2023-24 Analysis

Gillette India Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Gillette India Ltd. was established in 1984. It is a subsidiary of Procter & Gamble (P&G), a global consumer goods giant. Gillette’s history dates back to 1901 when King C. Gillette revolutionized shaving with the invention of the safety razor.

Headquarters Location and Global Presence:

The headquarters of Gillette India Ltd. is located in Mumbai, India. As a subsidiary of P&G, Gillette benefits from a global presence, with its products available in numerous countries worldwide.

Company Vision and Mission:

• Vision: Not publicly available but inferred from parent company and product focus: To provide the best grooming experience to consumers.
• Mission: Not publicly available but inferred from parent company and product focus: To deliver superior quality and value to consumers in the grooming category, leading to brand loyalty and market leadership.

Key Milestones in Their Growth Journey:

• 1984: Incorporation of Gillette India Ltd.
• Over the years: Expansion of product portfolio beyond razors to include blades, shaving preparations, and other grooming products.
• 2005: Acquisition by Procter & Gamble as part of P&G’s acquisition of The Gillette Company globally.
• Ongoing: Continued focus on innovation and market expansion in India.

Stock Exchange Listing Details and Market Capitalization:

Gillette India Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). As of November 2024, their market capitalization is approximately ₹25,000 Crore.

Recent Financial Performance Highlights:

• Strong Revenue Growth: In recent years, Gillette India has demonstrated strong revenue growth, driven by increased demand for its grooming products and effective marketing strategies.
• Profitability: The company has maintained healthy profitability, reflecting its focus on efficiency and cost management.

Management Team and Leadership Structure:

• Managing Director: LV Vaidyanathan

Notable Awards or Recognitions:

• Gillette India often receives recognition for its branding, marketing campaigns, and commitment to quality.

Their Products #

Complete Product Portfolio with Categories:

• Shaving:
  • Razors (Mach3, Fusion5, Skinguard)
  • Blades (Mach3, Fusion5, Skinguard, Wilkinson Sword)
  • Shaving Preparations (Shaving Creams, Gels, Foams)
  • Aftershave
• Deodorants & Antiperspirants:
  • Gillette & Old Spice Deodorants
• Hair Removal (for Women):
  • Venus Razors and Blades
• Oral Care:
  • Oral-B (Toothbrushes, Toothpastes, Mouthwash)

Flagship or Signature Product Lines:

• Gillette Mach3: A widely recognized razor known for its 3-blade technology and affordability.
• Gillette Fusion5: A premium razor with 5 blades for a closer shave.
• Venus: A popular razor specifically designed for women.

Key Technological Innovations or Patents:

• Multi-blade technology: Pioneering the use of multiple blades in razors for a closer and more comfortable shave.
• Lubricating strips: Incorporating lubricating strips on razors to reduce friction and irritation.
• FlexBall technology: Allowing the razor head to pivot for better contact with the skin.

Quality Certifications and Standards:

Gillette adheres to stringent quality control measures and certifications, reflecting P&G’s commitment to providing safe and high-quality products.

Unique Selling Propositions or Technological Advantages:

• Advanced Blade Technology: Gillette’s continuous innovation in blade technology provides a superior shaving experience.
• Ergonomic Design: Razors are designed for comfortable handling and precise shaving.
• Brand Reputation: A globally recognized brand known for quality and innovation.

Recent Product Launches or R&D Initiatives:

• New Gillette Labs Exfoliating Razor: Designed to exfoliate the skin before shaving for a smoother experience.

Primary Customers #

Geographic Markets (Domestic vs. International):

Gillette India primarily serves the Indian domestic market. However, as part of P&G, its products are also exported to other countries.

Major Client Segments:

• Individual Consumers: The primary target audience for Gillette’s grooming products.

Distribution Network and Sales Channels:

• Retail Stores: Distribution through a wide network of retail outlets, including supermarkets, hypermarkets, pharmacies, and convenience stores.
• E-commerce Platforms: Availability of products on major e-commerce platforms like Amazon, Flipkart, and Nykaa.
• Wholesalers and Distributors: Partnering with wholesalers and distributors to reach smaller towns and rural areas.

Major Competitors #

Direct Competitors in India and Globally:

• Direct Competitors:
  • BIC: Known for disposable razors.
  • Hindustan Unilever Limited (HUL): Under brands like Axe offer grooming products.
  • Bombay Shaving Company: Indian startup offering premium grooming products.
• Global Competitors:
  • Edgewell Personal Care (Schick/Wilkinson Sword): Another major player in the razor and blade market.

Comparative Market Share Analysis:

Gillette is estimated to hold a significant market share in the Indian shaving market, although precise figures fluctuate.

Competitive Advantages and Disadvantages:

• Advantages:
  • Strong Brand Recognition: Gillette benefits from a well-established brand name and reputation for quality.
  • Extensive Distribution Network: A wide distribution network ensures product availability across the country.
  • Continuous Innovation: Ongoing investment in R&D keeps Gillette ahead of the competition.
• Disadvantages:
  • Higher Price Point: Gillette products tend to be priced higher than some competitors, which can be a barrier for price-sensitive consumers.
  • Competition from Local Brands: The rise of local grooming brands offering affordable alternatives.

How They Differentiate from Competitors:

• Technological Superiority: Focusing on advanced blade technology and innovative features.
• Premium Quality: Emphasizing the quality and durability of its products.
• Brand Image: Maintaining a strong brand image through effective marketing and advertising campaigns.

Future Outlook #

Expansion Plans or Growth Strategy:

• Continued Product Innovation: Focus on developing new and improved grooming products to meet evolving consumer needs.
• Market Expansion: Exploring opportunities to expand into new geographic markets and product categories.
• Digital Transformation: Enhancing its online presence and leveraging digital technologies to reach consumers.

Industry Trends Affecting Their Business:

• Growth of the Male Grooming Market: The increasing focus on personal grooming among men is driving demand for grooming products.
• Rise of E-commerce: The growing popularity of online shopping is changing the way consumers purchase grooming products.
• Sustainability Concerns: Increasing consumer awareness of environmental issues is driving demand for sustainable grooming products.

Long-Term Vision and Strategic Goals:

Gillette India’s long-term vision is to remain the leading provider of grooming products in India, by delivering superior quality, innovation, and value to consumers.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

Revenue Growth #

The company experienced a 6% increase in sales in FY 2023-24 (₹2,633 crore) compared to FY 2022-23 (₹2,477 crore), indicating a steady recovery from the lower growth seen between FY2019 (₹1,862 crore) and FY2020 (₹1,679 crore)

Profitability #

Profit After Tax (PAT) increased by 16% in FY 2023-24 (₹412 crore) compared to FY 2022-23 (₹356 crore), showing improved profitability, that follows a steady growth over several years (₹230 crore in FY 2020).

Operating Profit Margin #

Improved to 21.68% in FY 2023-24 from 19.40% in FY 2022-23.

Earnings Per Share (EPS) #

Increased to ₹126.35 in FY 2023-24 from ₹109.15 in FY 2022-23, reflecting higher profitability.

Return on Net Worth #

Improved to 42.01% in FY 2023-24 from 38.45% in FY 2022-23.

Debtors’ Turnover #

Increased from 8.44 in FY 2022-23 to 8.86 in FY 2023-24.

Inventory Turnover #

Increased from 6.30 in FY 2022-23 to 6.52 in FY 2023-24.

Current Ratio #

Shows a slightly increased value of 1.56 from the previous year’s 1.53.

Return on Capital Employed #

Increased from 0.44 in FY 2022-23 to 0.53 in FY 2023-24.

Net Capital Turnover #

Increased from 5.74 in FY 2022-23 to 6.16 in FY 2023-24.

Business Segment Performance #

Grooming Segment #

Showed strong growth, and gained market share, driven by a focus on product superiority and commercial innovations. Highest-ever market share was recorded in the Blades and Razors category during FY 2023-24.

Oral Care Segment #

Accelerated category growth with a focus on premiumization and new user acquisition. Oral-B led the kids segment growth through product innovation.

Major Strategic Initiatives and Their Progress #

Product Innovation #

Launched Gillette Labs razors and Venus Bikini Sensitive Razors, along with Oral-B ‘Chotta Bheem’ toothbrushes for children, aiming to expand product portfolio and target new consumer segments.

Digital Activations #

Used to enhance the electric toothbrush range marketing, aligning with delivering superior oral care.

P&G Shiksha #

Corporate Social Responsibility program that addresses educational barriers.

Environmental Sustainability #

Reduced carbon footprint, committed to recycling plastic packaging.

Risk Landscape Changes #

• Identified plastic packaging waste as a risk, committing to designing recyclable or reusable packaging.
• Extended Producer Responsibility (EPR) guidelines on plastic packaging waste collection are being followed.

ESG Initiatives and Metrics #

Environmental Sustainability #

Bhiwadi and Baddi plants are zero-manufacturing waste-to-landfill sites. Circular water achieved was 2768 kiloliters. Compliant with EPR guidelines on plastic waste.

Social #

Contributed to P&G Shiksha program, impacting over 45 lakh children. Focused on providing education for underprivileged children.

Governance #

Adopted P&G’s Worldwide Business Conduct Manual (WBCM) as its business responsibility policy. Governance Board led by the Managing Director to assess enterprise-level risks.

Management Outlook #

Management remains optimistic about the long-term outlook for the FMCG sector. Management is focused on the integrated growth strategy. India’s GDP growth forecast for FY 2024-25 is positive. Global and India inflation rates are projected to decline, benefitting consumption trends.

Detailed Analysis #

Financial Position: Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(Figures in ’ Crores)

Note: Segment-wise breakdown for individual asset and liability components is not available in the provided document, only total assets and total liablities are available per segment.

Significant Changes in Major Line Items (>10% YoY) #

• Trade Receivables: Decreased by 14.31%, from ₹320.16 Crores to ₹274.33 Crores.
• Other current financial assets: Decreased by 74.9% from 10.86 cr to 2.72 cr.
• Other non-current assets: Increased by 45.87%, from 44.69 cr to 65.18 cr.
• Other financial liabilities: Decreased by 68.25%, from ₹39.28 Crores to ₹12.47 Crores.
• Other current liabilities: Decreased by 28.25% ,from 40.35 cr to 28.94 cr.

Debt Structure and Maturity Profile #

• Total Borrowings: The Company is debt-free, with no borrowings reported for both years. Only lease liablities are present.
• Lease Liabilities:
  • Non-current Lease Liabilities: ₹0.05 Crores as of June 30, 2024.
  • Current Lease Liabilities: less than ₹ 50 000 as of June 30, 2024.
• Maturity Profile: Non-current portion indicates long term maturities.

Off-Balance Sheet Items #

• Contingent Liabilities: Increased significantly, from ₹1,205.12 Crores to ₹1,408.05 Crores, majorly due to GST matters.
• Capital Commitments Decreased from 1.12 cr to 0.72 cr.

Note: Without comparable industry data, meaningful benchmark comparisons cannot be made.

Operating Performance of Gillette India Limited (FY24) #

Revenue Breakdown by Segment/Geography with Growth Rates #

• Grooming Segment: FY24 Revenue: ₹211,907 lakhs, FY23 Revenue: ₹196,062 lakhs, Growth: 8.08%
• Oral Care Segment: FY24 Revenue: ₹51,401 lakhs, FY23 Revenue: ₹51,643 lakhs, Growth: -0.47%
• Geographical Revenue (India): FY24: ₹248,773 lakhs, FY23: ₹227,702 lakhs, Growth: 9.25%
• Geographical Revenue (Outside India): FY24: ₹14,535 lakhs, FY23: ₹20,003 lakhs, Growth: -27.33%

Cost Structure Analysis #

• Cost of raw and packing materials consumed: FY24: 25.79% of total expenses, FY23: 33.5%
• Purchases of stock-in-trade: FY24: 22.5% of total expenses, FY23: 24.7%
• Employee benefits expense: FY24: 9% of total expenses, FY23: 8.37%
• Other expenses (including advertising): FY24: 34.2% of total expenses, FY23: 28.6%

Margin Analysis #

• Net Profit Margin: FY24: 15.64%, FY23: 14.36%
• Operating Profit Margin: FY24: 21.68%, FY23: 19.4%

Operating Leverage #

• A 6% increase in Revenue is observed with a 11.73% increase in operating profit margin.

EPS Analysis #

• Basic EPS: FY24: ₹126.35, FY23: ₹109.15
• Diluted EPS: FY24: ₹126.35, FY23: ₹109.15

Cash Management #

Cash Flow and Liquidity Analysis #

Operating Cash Flow (OCF) #

For the year ended June 30, 2024, OCF was ₹509.04 Crores, up from ₹462.60 Crores in the previous year. Key drivers were a profit before tax of ₹562.25 Crores, adjusted for non-cash items such as depreciation (₹82.64 Crores) and finance costs (₹8.63 Crores).

Investing Cash Flow (ICF) #

The company reported an ICF of ₹(49.15) Crores for the year ended June 30, 2024. This was primarily due to payments to acquire property, plant, and equipment of ₹(67.24) Crores.

Free Cash Flow (FCF) #

FCF data is not directly provided, a calculation based on provided data (OCF + ICF) suggests a positive free cash flow.

Working Capital Management Efficiency #

Debtors’ Turnover #

Increased to 8.86 in 2023-24 from 8.44 in 2022-23.

Inventory Turnover #

Increased slightly to 6.52 in 2023-24 from 6.30 in the prior year.

Trade Payables Turnover #

Decreased to 1.64 in 2023-24 from 1.98 in 2022-23.

Capex Analysis by Segment #

Grooming #

₹67.24 Crores was spent in capital expenditure in 2023-24.

Dividend and Share Buyback Trends #

Dividends #

The company paid an interim dividend of ₹85 per share in 2023-24, including a one-time special dividend of ₹40. A final dividend of ₹45 per share has been recommended, totaling ₹130 per share for the year. Total dividend payout, including tax, amounted to ₹439.90 crores.

Share Buyback #

No share buybacks are mentioned in the provided data.

Liquidity Position and Cash Conversion Cycle #

Current Ratio #

Increased slightly to 1.56 in 2023-24 from 1.53 in the previous year.

Cash and Cash Equivalents #

Increased to ₹473.43 Crores at the end of 2023-24, up from ₹453.44 Crores.

Financial Performance Analysis: Key Metrics and Trends #

Profitability Ratios (3-Year Trends) #

• ROE has consistently increased over the past two years, indicating improved profitability relative to shareholders’ equity.
• Operating and Net Profit Margins have also shown improvement, demonstrating enhanced operational efficiency and cost management.

Liquidity Metrics #

• The Current Ratio is above 1.5, signifying a good ability to meet short-term obligations, remaining relatively stable over the last two reporting periods.

Efficiency Ratios #

• Inventory Turnover and Trade Receivables Turnover have slightly improved, suggesting better inventory management and quicker collection of receivables.
• Net Capital Turnover has also slightly improved.

Segment-wise ROIC #

• Grooming segment: The increase in ROIC shows an increased value from this segment.
• Oral Care segment: The decrease in ROIC demonstrates a reduced value from this segment.

Gillette India Limited - Segment Performance Analysis FY2023-24 #

Revenue and Profitability Metrics with Growth Rates #

• Grooming Segment: Revenue - ₹2,119.07 crore (8% YoY Growth). Segment Profit - ₹480.84 crore (27% YoY Growth).
• Oral Care Segment: Revenue - ₹514.01 crore (-.04% YoY Growth). Segment Profit - ₹66.54 crore (-16% YoY Growth).

Market Share and Competitive Position #

• Grooming Segment: Gained market share in Blades and Razors, reaching highest-ever market share.
• Oral Care Segment: Oral-B led segment growth with premium packaging, crisscross and sensitive portfolio, and best-in-class visibility.

Key Products/Services Performance #

• Grooming Segment: Strong performance driven by Gillette Guard, Gillette Mach 3, Gillette Fusion, Gillette Venus, and Braun. Launch of Gillette Labs razors and Venus Bikini Sensitive Razors contributed to growth.
• Oral Care Segment: Accelerated category growth with crisscross, sensitive, and Chotta Bheem portfolios.

Geographic Distribution and Market Penetration #

• Pan-India presence across all 28 states and 8 Union Territories.
• Exports to 13 countries during FY2023-24.

Segment-wise CAPEX #

• Grooming: ₹67.24 Cr

Operational Efficiency Metrics (Company-Wide) #

• Debtors’ (Trade receivable) turnover: Increased by 5% to 8.86.
• Inventory turnover: Increased by 3% to 6.52.
• Net capital turnover: Increased by 7% to 6.16.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Product innovation (Gillette Labs razors, Venus Bikini Sensitive Razors, Oral-B Chotta Bheem).
  • Strengthening brand fundamentals through retail execution and consumer communication.
  • Leveraging digital activations and targeted trial programs.
  • Productivity improvements across the value chain.
• Challenges:
  • Inflation
  • Delayed Monsoons
  • Global economic slowdown

Risk Assessment Framework #

Grooming Segment #

Strategic Risks #

• Severity: High (80.48% of total turnover).
• Likelihood: Medium.
• Trend: Increasing (reduced consumer spending).
• Mitigation Strategies: Product innovation (Gillette Labs, Venus Bikini Sensitive Razors), direct-to-consumer trials, commercial innovations.
• Control Effectiveness: Partially effective (market share gains, but limited by external economic pressures).
• Potential Financial Impact: Significant (market share or consumer preference changes impact revenue and growth).

Operational Risks #

• Severity: High (2 manufacturing units).
• Likelihood: Medium.
• Trend: Stable.
• Mitigation Strategies: Zero-manufacturing waste-to-landfill, Extended Producer Responsibility (EPR) compliance.
• Control Effectiveness: Effective (zero-waste-to-landfill status and EPR compliance).
• Potential Financial Impact: Moderate.

Financial Risks #

• Severity: Medium.
• Likelihood: Medium.
• Trend: Stable.
• Mitigation Strategies: Not directly stated.
• Control Effectiveness: Not stated.
• Potential Financial Impact: Moderate.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Low.
• Trend: Stable.
• Mitigation Strategies: Adherence to global anti-corruption standards, Prevention of Sexual Harassment at Workplace policies, whistle-blower mechanism.
• Control Effectiveness: Effective (no major security breaches or legal non-compliance reported).
• Potential Financial Impact: Moderate.

Emerging Risks #

• Severity: Medium.
• Likelihood: Medium.
• Trend: Increasing.
• Mitigation Strategies: Not directly stated (assumed ongoing risk assessments).
• Control Effectiveness: Not directly stated.
• Potential Financial Impact: Moderate.

Oral Care Segment #

Strategic Risks #

• Severity: Medium (19.52% of total turnover).
• Likelihood: Medium.
• Trend: Stable.
• Mitigation Strategies: Product innovation (Oral-B ‘Chotta Bheem’ toothbrushes), focus on irresistible superiority, targeted trial programs.
• Control Effectiveness: Partially effective (category growth, but limited by competitive environment).
• Potential Financial Impact: Moderate.

Operational Risks #

• Severity: Low.
• Likelihood: Low.
• Trend: Stable.
• Mitigation Strategies: Leverages strategies of the parent company.
• Control Effectiveness: Effective (in line with overall company policies).
• Potential Financial Impact: Low.

Financial Risks #

• Severity: Low.
• Likelihood: Low.
• Trend: Stable.
• Mitigation Strategies: Leverages overall Company Financial Risk strategies.
• Control Effectiveness: Not directly stated.
• Potential Financial Impact: Low.

Compliance/Regulatory Risks #

• Severity: Low.
• Likelihood: Low.
• Trend: Stable.
• Mitigation Strategies: Compliant with the parent companies policies, viz. P&G’s Worldwide Business Conduct Manual.
• Control Effectiveness: High.
• Potential Financial Impact: Low.

Emerging Risks #

• Severity: Medium.
• Likelihood: Medium.
• Trend: Increasing.
• Mitigation Strategies: Not directly stated.
• Control Effectiveness: Not directly stated.
• Potential Financial Impact: Moderate.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• Grooming Segment: Focused on expanding market share and driving category growth through a robust product portfolio, superior consumer communication, and continuous product innovations. Demonstrated highest-ever market share in Blades and Razors category.
• Oral Care Segment: Accelerated category growth and added new users through irresistible superiority, balanced top and bottom-line growth. Focused on leveraging targeted trail programs.
• Company-wide: Demonstrated balanced growth, with focus on expanding superior product portfolio, and constructive disruption.

Competitive Advantages and Market Positioning #

• Grooming Segment: Leveraging brand strength (Gillette, Braun) and product superiority (Gillette Guard, Gillette Mach 3, Gillette Fusion, Gillette Venus, Gillette Labs, Venus Bikini Sensitive). Appliances show healthy growth.
• Oral Care Segment: Leveraging brand strength (Oral-B), with a focus on superior cleaning power (Crisscross, Sensitive toothbrushes) and a dedicated kids’ range.
• Company-wide: Benefits from the research and development capabilities and cutting edge technology of The Procter & Gamble Company, USA, enhancing product development, quality, and cost-effectiveness.

Innovation Initiatives and R&D Effectiveness #

• Grooming Segment: Launched Gillette Labs razors (combining shaving and exfoliation) and Venus Bikini Sensitive Razors (designed for intimate grooming). Focused on direct-to-consumer trials and commercial innovations.
• Oral Care Segment: Introduced Oral-B ‘Chhota Bheem’ toothbrushes for children, driving growth in the kids segment. Strong growth in the electric toothbrush range.
• Company-wide: The local company is leveraging parent research to continuously introduce innovations across grooming and oral health, resulting in topline and bottomline growth.

Management’s Track Record in Execution #

• Delivered sales of ₹2,633 crore, up 6% year-over-year, and PAT of ₹412 crore, up 16%, in a challenging environment.
• Achieved highest-ever market share in Blades and Razors.
• Showed increase return on capital employed

Capital Allocation Strategy #

• Declared an interim dividend of ₹85 per equity share (including a one-time special dividend of ₹40).
• Recommended a final dividend of ₹45 per equity share, subject to shareholder approval.
• Aggregate dividend for FY 2023-24 of ₹130 per equity share.

Organizational Changes and Their Impact #

• Multiple director changes: Resignations (Mr. Karthik Natarajan, Mr. L. V. Vaidyanathan, Mr. Gagan Sawhney, Ms. Sonali Dhawan), and appointments (Mr. Kumar Venkatasubramanian as Managing Director, Ms. Srividya Srinivasan as Executive Director and CFO).
• Appointment of Ms. Anjuly Chib Duggal as Non-Executive Independent Director.
• Appointment of Lead Independent Director.
• Appointment of Ms. Mukta Maheshwari as Chief Marketing Officer and Mr. Abhishek Desai as Category Leader- Grooming.
• Changes were part of the ongoing governance process to ensure strong oversight.

ESG Framework #

ESG and Sustainability Analysis #

Environmental Metrics and Targets #

• Both Bhiwadi and Baddi plants are zero-manufacturing waste-to-landfill sites.
• The Company achieved 2768 kiloliters of circular water through Condensate Recovery and Internal Effluent Treatment Plant (ETP) Recycle in the Financial Year.
• The Company aims to reduce plastic packaging waste.
• The company fulfills its Extended Producer Obligations (EPR).
• The Company is committed to reducing Greenhouse Gas Emissions.

Social Responsibility Programs #

• The Company’s flagship CSR program, “P&G Shiksha,” focuses on a 360-degree educational intervention, addressing infrastructure, inequity of access, and learning gaps.
• CSR initiatives during the financial year included strengthening educational infrastructure, imparting early childhood education, leveraging technology to bridge learning gaps, remediating learning gaps in communities, and digital upskilling for underserved communities.
• Total amount spent for CSR during the Financial Year was 7.71 Crores.

Governance Structure and Effectiveness #

• The Board of Directors comprises an optimum combination of Executive and Non-Executive Directors, with a Non-Executive Independent Chairman.
• The Board has established committees, including Audit, Stakeholder Relationship, Nomination and Remuneration, Corporate Social Responsibility, Risk Management, and Cash & Investment Committees. Six Board of Director meetings were held in the Financial Year.
• The Company has adopted P&G’s Worldwide Business Conduct Manual (WBCM) and a Code of Conduct for Directors, emphasizing ethics, transparency, and accountability.
• An annual performance evaluation of the Board, its Committees, and individual Directors is undertaken.
• The Company has Related Party Transaction Policy and vigil mechanism.

Regulatory Compliance and Future Preparations #

• The Company operates within the letter and spirit of all applicable laws, with mechanisms for compliance monitoring and updates.
• The Company is compliant with the government’s Extended Producer Responsibility (EPR) guidelines on plastic packaging waste collection.
• The Company has complied with mandatory Secretarial Standards.
• The Company is compliant with applicable environmental laws/regulations/guidelines in India, such as the Water Act, Air Act, and Environment Protection Act.
• The Company’s accounts payable days were 126 for FY 2023-24.

Forward Outlook: Financial Analysis #

Management Guidance and Assumptions #

• Overall: Balanced growth across top-line and bottom-line is expected, despite a challenging operating and competitive environment. The Company’s integrated strategy (focused product portfolio, superiority, productivity, constructive disruption, and an agile organization) is assumed to be the primary driver of sustainable growth.
• Grooming Segment: Focused on continuous Product superiority.
• Oral Care: Leverage consumer insights.

Market Growth Forecasts #

• Overall Indian Economy: FY 2023-24 real GDP growth was 8.2%. Real GDP in FY 2024 was 20% up on the level in FY2020.
• FMCG Sector: Long-term outlook is positive.
• Macroeconomic Indicators: India’s projected inflation is lower than global averages. Positive rural demand trends, should be beneficial for the company.

Planned Strategic Initiatives #

Grooming Segment #

• Continued focus on product innovation (e.g., Gillette Labs, Venus Bikini Sensitive Razors).
• Direct-to-consumer trials and commercial innovations to acquire new users.
• Maintain highest market share in the blades and razors.

Oral Care Segment #

• “Teaching at the right level.”
• Accelerate category growth via “irresistible superiority.”
• Targeted trial programs and deeper distribution plans.
• Focus on premium packaging and in-store visibility for Crisscross and Sensitive portfolios.
• Driving the electric toothbrush by offering a portfolio from battery operated to IO Technology.
• Continue innovation in kids’ toothbrushes segment (e.g., Oral-B ‘Chotta Bheem’).

Capital Expenditure Plans #

• Spending on energy-efficient systems.
• Zero-manufacturing-waste-to-landfill: Plants at Bhiwadi and Baddi.
• Water Efficiency: 2768 kiloliters of circular water was achieved.

Efficiency Improvement Targets #

• Overall: Productivity improvements across all operations are a priority.
• Environmental Sustainability: Continuous improvement in efficiency and reduction of carbon footprint are goals. Aiming for water efficiency.
• Plastic Waste Management: Reducing use of virgin petroleum plastic resin.

Potential Challenges and Opportunities #

Challenges #

• Tepid consumer demand in urban and rural markets, lower agricultural yields and declining rural wages.
• Rising unemployment.
• Intense competition.

Opportunities #

• Strong brand fundamentals.
• Positive long-term outlook for the FMCG sector in India.
• Continued population growth and increasing disposable income.
• Scope for market share gains through continued product innovation.

Audit & Compliance #

Auditor’s Opinion and Qualifications #

• The Independent Auditor’s Report issued by Kalyaniwalla & Mistry LLP provides an unqualified opinion on the Ind-AS financial statements.
• Auditors noted a qualification regarding the maintenance of cost records.
• Auditors noted an observation with respect to the maintenance of daily backups of books of accounts on servers physically located in India. The Company did not start doing this until Dec 18 2023.
• Auditors were unable to comment on the operation of the audit trail feature for direct access to the database of some SaaS applications and one inventory management application, for the periods not covered under SOC reports or prior to availability.

Key Accounting Policies #

• The financial statements are prepared on an accrual and going concern basis, applying consistent accounting policies.
• Revenue recognition is based on contracted prices, net of discounts, rebates, incentives, and promotions.

Internal Control Effectiveness #

• The auditor’s report (Annexure B) provides an unqualified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting, with reference to the Ind-AS financial statements.
• The company has a robust internal audit process performed by P&G Global Internal Audit, that carries out reviews of policies and processes.

Regulatory Compliance Status #

• The Company has complied with corporate governance requirements specified in regulation 17 to 27 and clauses (b) to (i) of sub-regulation (2) of regulation 46 of SEBI (LODR) Regulations, 2015.
• The Company has complied with applicable requirements prescribed by regulatory and statutory authorities in the preceding three financial years on all matters related to capital markets.
• The Company is compliant with applicable environmental laws, regulations, and guidelines in India.
• The Company is compliant with the government’s Extended Producer Responsibility (EPR) guidelines on plastic packaging waste collection.

Legal Proceedings and Their Potential Impact #

• The Company discloses the impact of pending litigations on its financial position.
• Significant disputed tax liabilities exist, primarily related to Excise Duty, Sales Tax, Service Tax, and Income Tax, with matters pending at various appellate levels.
• There are contingent liabilities of 140,805 in lakhs as of 30 June 2024.

Related Party Transactions #

• The Company has a Related Party Transaction Policy, and all transactions during the Financial Year were in the ordinary course of business and at arm’s length.
• Material related party transactions included imports of finished goods worth ’ 291 crores from Procter & Gamble International Operations S.A.
• Transactions included purchases of goods and services, sales of products, reimbursement of expenses, and business process outsourcing expenses.

Subsequent Events #

• The Board of Directors recommended a final dividend of ’ 45 per equity share, subject to shareholder approval at the AGM.
• The Company has filed an appeal before the Supreme Court against the Delhi High Court order on anti-profiteering.

Analysis of Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The unqualified audit opinion suggests high accounting quality. However, the significant reliance on estimates (discounts, promotions, tax provisions) introduces a degree of inherent uncertainty.
• Regulatory Risk: Moderate regulatory risk exists due to ongoing tax disputes. There is a noted area of potential concern related to the timing of implementing full daily backups of accounting data on servers in India, and operation of the audit trail feature of the software, which is crucial for regulatory compliance.