Marico Ltd:Annual Report 2023-24 Analysis

Marico Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Marico Ltd. was founded in 1988 by Harsh Mariwala. It evolved from Bombay Oil Industries Limited (BOIL), a family business.

Headquarters Location and Global Presence:

The company’s headquarters are located in Mumbai, India. Marico has a significant international presence, particularly in emerging markets across Asia and Africa.

Company Vision and Mission:

While Marico doesn’t explicitly state a single, universally accessible “mission statement,” their actions demonstrate a commitment to:

• Creating value for stakeholders through sustainable and profitable growth.
• Developing and marketing high-quality, innovative products that meet consumer needs.
• Building a strong, purpose-driven organization with a positive social impact.

Key Milestones in Their Growth Journey:

• 1988: Marico incorporated as an independent entity.
• 1990s: Launch of flagship brands like Parachute and Saffola. Significant investment in brand building and distribution network.
• 2000s: Focus on international expansion, primarily in emerging markets in Asia and Africa. Diversification into new product categories.
• 2010s: Continued focus on innovation and strengthening market position through acquisitions.
• Present: Expanding digital presence and e-commerce channels. Emphasizing sustainability and responsible business practices.

Stock Exchange Listing Details and Market Capitalization:

Marico Ltd. is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Market capitalization fluctuates but is generally in the large-cap category.

Recent Financial Performance Highlights:

Marico consistently demonstrates strong financial performance, characterized by steady revenue growth, healthy profitability margins, and strong return on capital employed. Specific figures are subject to change and should be verified with the company’s latest annual reports and financial statements.

Management Team and Leadership Structure:

The company has a strong and experienced management team. Notable figures include:

• Chairman: Harsh Mariwala

Notable Awards or Recognitions:

Marico has received numerous awards and recognitions for its brand building, innovation, corporate governance, and sustainability efforts.

Their Products #

Complete Product Portfolio with Categories:

Marico’s product portfolio spans several categories:

• Hair Care: Parachute (coconut oil), Nihar Naturals (hair oils), Livon (hair serums).
• Edible Oils: Saffola (refined edible oils).
• Foods: Saffola Fittify Gourmet (healthy foods).
• Male Grooming: Beardo (men’s grooming products).
• Baby Care: Kaya Baby.
• Premium Skincare: Pure Sense.

Flagship or Signature Product Lines:

• Parachute: Synonymous with coconut oil in India.
• Saffola: A leading brand in the healthy edible oil segment.

Any Unique Selling Propositions or Technological Advantages:

• Strong focus on natural ingredients and formulations.
• Emphasis on healthy living and wellness.
• Deep understanding of consumer preferences in the Indian market.

Recent Product Launches or R&D Initiatives:

Marico regularly introduces new products and variants within its existing categories and explores opportunities in adjacent spaces. Recent initiatives include expanding its presence in the healthy foods and men’s grooming segments.

Primary Customers #

Geographic Markets (domestic vs. international):

Marico has a strong presence in the Indian domestic market and a growing international presence, particularly in Asia and Africa.

Distribution Network and Sales Channels:

Marico has an extensive distribution network that covers both urban and rural areas in India and its key international markets. This includes:

• General trade (kirana stores, small retailers).
• Modern trade (supermarkets, hypermarkets).
• E-commerce channels.
• Institutional sales (hotels, restaurants, caterers).

Major Competitors #

Direct Competitors in India and Globally:

• Hindustan Unilever Limited (HUL)
• Godrej Consumer Products Limited (GCPL)
• Dabur India Ltd.
• Adani Wilmar Limited
• Other regional and international players in specific categories.

Comparative Market Share Analysis:

Marico holds significant market share in its key categories like hair oil and refined edible oils. Market share varies depending on the specific product category and geographic region.

How They Differentiate from Competitors:

• Strong focus on brand building and consumer connect.
• Emphasis on natural and healthy ingredients.
• Extensive distribution network, particularly in rural areas.
• Agile and innovative approach to product development.

Industry Challenges and Opportunities:

• Rising raw material costs.
• Increasing competition from domestic and international players.
• Changing consumer preferences and demand for healthier products.
• Growth in e-commerce and digital marketing.

Market Positioning Strategy:

Marico positions its brands as high-quality, innovative products that cater to the evolving needs and aspirations of Indian consumers. They focus on building strong brand equity and creating emotional connections with their customers.

Future Outlook #

Expansion Plans or Growth Strategy:

• Continue to strengthen its presence in existing categories and markets.
• Expand into new product categories and geographies.
• Invest in digital transformation and e-commerce.
• Focus on sustainability and responsible business practices.

Sustainability Initiatives or ESG Commitments:

Marico is increasingly focused on sustainability and environmental, social, and governance (ESG) factors. This includes initiatives to reduce its carbon footprint, conserve water, promote sustainable sourcing, and support community development.

Industry Trends Affecting Their Business:

• Growing demand for natural and organic products.
• Increasing focus on health and wellness.
• Rise of e-commerce and digital marketing.
• Growing awareness of sustainability and ethical sourcing.

Long-Term Vision and Strategic Goals:

Marico’s long-term vision is to be a leading consumer goods company in India and emerging markets, known for its innovative products, strong brands, and commitment to sustainable growth.

Financial Performance Analysis #

3-Year Trend Analysis of Key Financial Metrics #

• Consolidated turnover decreased by 1% year-over-year in FY24, reaching H 9,653 crore, but has grown at a 2-yr CAGR of ~0.3% over the past three years.
• Recurring consolidated net profit after tax increased by 15% year-over-year in FY24, amountng to ~1500cr, with growth rate of 7% since FY22 .
• Operating margin improved by 245 basis points to 21.0% in FY24, indicating enhanced profitability.
• Return on Capital Employed (ROCE) improved from 44.0% in FY23 to 44.7% in FY24.
• Return on Equity (ROE) increased from 36.4% in FY23 to 38.8% in FY24.
• Earnings Per Share (EPS) rose to H 11.5 in FY24 from H 10.08 in FY23.
• Debt/EBITDA remained minimal at 0.19x as of March 31, 2024.
• The dividend payout ratio for FY24 was 83%.
• Advertising and promotion spend in FY24 was 9.9% of sales, up 13% YoY.
• Cash profit increased to H1436cr from H1521Cr in FY23.

Business Segment Performance #

• Domestic Business: Turnover decreased by 3% year-over-year to H 7,132 crore, with an underlying volume growth of 2%. The operating margin for the India business was 22.4% in FY24, up from 19.8% the prior year.
• Parachute Rigids: Coconut Oil segment grew volume by 1%, with ~53 bps gain in volume market share.
• Saffola Edible Oils: Revenue decline due to pricing corrections but with stable volume growth; revenue growth expected to turn positive in the next year.
• Foods Portfolio: Showed impressive growth, now accounting for ~20% of domestic revenues, with Saffola Oats emerging as the No.1 brand. Foods portfolio closed the year ~4x its scale in FY20
• Value-Added Hair Oils: Experienced subdued trends at the bottom of the pyramid segment. The mid and premium segments within the category performed better. Titration in consumption.
• Premium Personal Care: Healthy momentum was observed, led by the Digital-first portfolio reaching an exit ARR of ~ H 450 crore.
• International Business: Turnover was H 2,521 crore, a 4% growth year-over-year, with a constant currency growth of 9%. Operating margin was 26.8%, up from 23.7% in FY23. Bangladesh recovered steadily, while MENA and South Africa showed strong growth and margin improvement.

Major Strategic Initiatives and Their Progress #

• Portfolio Diversification: The composite share of Foods and Premium Personal Care in domestic revenues reached ~20% in FY24. The goal is to increase this to ~25% by FY27, with a 20+% CAGR target for both Foods and Premium Personal Care.
• Project SETU: A 3-year roadmap to improve direct reach from ~1 million outlets to 1.5 million outlets by FY27. Expected to enhance urban and rural market share and assortment levels.
• Digital Transformation: Ongoing investments in digital capabilities across the value chain, including E-commerce, AI, and data analytics, to align with evolving consumer aspirations.
• Inclusion and Diversity: Increased focus with gender diversity at 28.9% in decision-making roles and 20.9% in leadership positions.

Risk Landscape Changes #

• Commodity Risks: Addressed volatility in input prices through a comprehensive process manual, strategic inventory positions, and sustainable agriculture programs.
• Macroeconomic Factors: Initiatives to address slower rural recovery included support for General Trade (GT) channel partners and expansion of direct reach through Project SETU.
• Cyber and Data Security: Implementation of IT security practices aligned with ISO 27001 standard and deployment of latest cyber security technologies.
• Compliance and Governance Risks: Use of IT-enabled compliance systems, reinforcement of Code of Conduct, and oversight by the Board of Directors.

ESG Initiatives and Metrics #

• Net Zero Emissions: Target of net zero emissions in global operations by 2040, and by 2030 in India. Achieved 79% reduction in GHG emissions intensity (Scope 1+2) compared to FY13.
• Water Stewardship: Jalgaon facility attained ‘Water Neutral’ certification. Created 3.73 billion litres of water conservation potential cumulatively.
• Circular Economy: Aim to achieve 100% recyclable packaging by 2027 and incorporate at least 30% recycled post-consumer resin (r-PCR). 95.3% Recyclable packing reported.
• Responsible Sourcing: 82% of critical suppliers completed Level 1 of Marico’s Responsible Sourcing Program (SAMYUT).
• Sustainable Agriculture: Over 100,000 farmers enrolled in the Parachute Kalpavriksha program, covering more than 3.5 lakh acres.
• Renewable Energy: 67.40% renewable energy share in operations.
• Inclusion Index: 82.
• Social Responsibility: Flagship CSR Program, Nihar Shanti Pathshala Funwala has benefitted over 10.3 lakh children and 1.65 lakh teachers.

Management Outlook #

• Expects a gradual improvement in core category growth in light of anticipated mass category consumption pickup.
• Aims for double-digit revenue growth through outperformance in domestic core portfolios and accelerated growth in Foods and Premium Personal Care.
• Commitment to driving a 20+% CAGR for Foods, aiming to scale it to 2x its current size by FY27, and doubling the Digital-first portfolio by FY27.
• Plans to continue seeking inorganic growth opportunities to consolidate competitive positions and expand market reach.
• Expects operating margin to structurally inch up over the next few years.
• Continued emphasis on the ‘4Ds’ (Diversification, Distribution, Digital, and Diversity) to drive sustainable and profitable growth.
• Refreshed the Values Charter to include Consumer First, Bold Ambition, Responsible Growth, Grow with Members, Accountability for Outcomes and Execute with Agility.

Detailed Analysis #

Financial Position Analysis #

Balance Sheet Analysis: 3-Year Comparative (Consolidated) #

(₹ in Crore)

Significant Year-over-Year Changes in Major Line Items (>10%) #

(₹ in Crore)

• Other Intangible Assets: Increased by ₹ 377 crore (67.32%) from FY23 to FY24, due to the acquisition of new businesses.
• Non-Current Investments:Decreased by 33.78% (175 crores) from FY23 to FY24.
• Deferred Tax Assets (net): Decreased by 53.42% (₹ 78 crores) from FY23 to FY24.
• Non-current tax assets (net): Increased by 41.79% (₹ 28 crores).
• Other current assets: Increased by ₹ 149 crore (65.07%) from FY23 to FY24, mainly on the growing scale of operations.
• Non-controlling interests: Increased by ₹ 180 crore (114.65%) from FY23 to FY24, mainly due to the Plix Acquisition.
• Other non-current financial liabilities: increased by 52.26% (139 crores).
• Deferred Tax Liabilities (net): increased by 56.74% (101 crores).

Working Capital Trends #

• Inventories: Increased by 9.06% (₹ 111 Crore) from FY23 to FY24, and by 19.7% (₹ 226 cr.) in 3 year period.
• Trade Receivables: Increased by 5.32% (₹ 54 Crore) from FY23 to FY24, and by 5.32% (₹ 54 Cr.) in 3 year period.
• Total current liabilities: Increased marginally by less than 1% (15 crores) from FY 23 to FY 24.

Asset Quality Metrics #

The asset quality remains strong, with no specific provisions for non-performing assets in financial assets. Allowance for doubtful debts and other financial assets remained constant.

Debt Structure and Maturity Profile #

• Non-Current Borrowings: Decreased to zero, indicating repayment or reclassification of long-term debt.
• Current Borrowings: Decreased by ₹ 90 crore (Decreased by 19.03%), reflecting a reduction in short-term debt obligations.
• Lease Liabilities: Show a mix of current and non-current portions, with a slight overall increase, indicating potential new leases or restructuring of existing leases.

Off-Balance Sheet Items #

• Contingent Liabilities: Include disputed tax demands and claims against the Group not acknowledged as debts, totaling ₹ 399 crore as at March 31, 2024 and ₹ 431 crore as at March 31, 2023.
• Corporate Guarantees: Include guarantees given to banks on behalf of subsidiaries (₹ 553 crore as on Mar 31, 2024, ₹ 538 crore as on Mar 31, 2023, and one to Broadcast Audience Research Council.

Operating Performance Analysis #

Revenue Breakdown #

Domestic Business #

• 74% of Consolidated Revenues
• FY24 Turnover: INR 7,132 crores, a 3% decline YoY
• Attribution: Pricing corrections in key portfolios
• Underlying Volume Growth: 2%

Breakdown within Domestic Business #

• Parachute Rigids: 1% volume growth in FY24
• Value-Added Hair Oils: Marginal decline in value terms
• Saffola Edible Oils: Low-single-digit volume growth, revenue decline due to pricing corrections
• Foods: 23% value growth in FY24
• Premium Personal Care: Healthy momentum

International Business #

• 26% of Consolidated Revenues
• FY24 Turnover: INR 2,521 crores, a 4% growth YoY
• Constant Currency Growth: 9%
• Reduced dependence on Bangladesh

Breakdown within International Business #

• Bangladesh: 3% constant currency growth in FY24
• Non-Coconut oil portfolio in Bangladesh: 7% constant currency growth
• South East Asia: 4% constant currency growth in FY24
• MENA: 25% constant currency growth in FY24
• Egypt and Middle East Businesses: Grew 15% and 55% in Constant currency
• South Africa: 26% constant currency growth in FY24
• New Country Development & Exports: 24% growth

Cost Structure Analysis #

• Cost of Materials Consumed: Decreased to 49.2% of revenue in FY24 from 54.8% in FY23
• Employee Cost: Increased to 7.7% of revenue in FY24 from 6.7% in FY23
• Advertisement and Sales Promotion: Increased to 9.9% of sales in FY24, up 13% YoY
• Other Expenses: Increased to 12.3% from 11.3%

Margin Analysis #

• Gross Margin: Improvements noted across the portfolio, in Saffola Edible Oils margin stabilized and in Foods portfolio due to structural gross margin expansion from supply chain, GTM and cost structure refinements.
• Operating Margin: 21.0% in FY24, up 245 bps YoY, highest-ever
  • India business operating margin: 22.4% in FY24, up from 19.8% in FY23
  • International business operating margin: 26.8% in FY24, up from 23.7%
• Net Profit Margin (attributable to owners): 15.3% in FY24, up from 13.3% in FY23

Non-Recurring Items #

• FY24: One-time gain of approximately INR 14 crores (pre-tax) from the sale of fixed assets

GAAP vs. Non-GAAP Reconciliation #

• Recurring Consolidated Net Profit After Tax: INR 1,470 crores in FY24 (excluding one-offs), up 15% YoY
• Reported Net Profit After Tax: INR 1,502 Crore

EPS Analysis #

• Basic EPS: INR 11.46 in FY24, up from INR 10.08 in FY23
• Diluted EPS: INR 11.43 in FY24, up from INR 10.05 in FY23

Quarterly Trends #

• Q4 FY24 and Q1 FY25 saw consolidated revenue growth move into positive territory
• Gradual recovery in rural markets, premium and urban-centric segments outperformed
• General Trade channel faced challenges
• Green shoots visible in Rural towards end of fiscal

Business Segment Performance Analysis (FY24) #

Revenue and Profitability #

• Consolidated Turnover: ₹9,653 crores, down 1% YoY.
• Domestic Business (74% of Consolidated Turnover): ₹7,132 crores, down 3% YoY, with 2% volume growth.
• International Business (26% of Consolidated Turnover): ₹2,521 crores, up 4% YoY, with 9% constant currency growth.
• Consolidated Operating Profit: ₹2,026 crores, up 12% YoY.
• Consolidated Operating Margin: 21.0%, up 245 bps YoY.
• India Business Operating Margin: 22.4%, up from 19.8% in FY23.
• International Business Operating Margin: 26.8%, up from 23.7% in FY23.
• Recurring Consolidated Net Profit After Tax: ₹1,470 crores, up 15% YoY.

Market Share and Competitive Position #

• Coconut Oil: Parachute Rigids delivered 1% volume growth, gaining ~53 bps in volume market share. Overall Coconut Oil franchise: 63% volume market share (March 2024 MAT).
• Saffola Oats: Number 1 Oats brand in India, 43% value market share (Kantar 2022-2023).
• Saffola Soya Chunks and Saffola Honey: Market share and penetration gains.
• Value-Added Hair Oils: 27% value market share, focus on mid and premium segments.

Key Products/Services Performance #

• Parachute Rigids: 1% volume growth.
• Value-Added Hair Oils: Marginal decline in value terms. Mid and premium segments performed better.
• Saffola Oils: Stable traction, revenue drop due to pricing declines.
• Foods Portfolio: 23% growth. Saffola Oats became the Number 1 Oats brand in India. True Elements and Plix showed impressive scale-up.
• Premium Personal Care: Healthy momentum, Digital-first portfolio reaching ~₹450 crore exit ARR. Beardo grew threefold since FY21 with positive EBITDA. Just Herbs surpassed ₹1 billion ARR.
• International Business: Bangladesh regained momentum. Vietnam witnessed a slowdown in HPC demand. MENA and South Africa showed strong growth.

Geographic Distribution and Market Penetration #

• Reached one out of every three Indians.
• International Business: 26% of Group revenue.
  • Bangladesh: Regained momentum. Revenue and profit dependence reducing (expected ~40% by FY27).
  • Vietnam: Slowdown in HPC demand.
  • MENA & South Africa: Strong ramp-up and margin upside.

Capital Expenditure and Return on Capital Employed #

• Capital Expenditure (FY24): ₹153 crores.
• Return on Capital Employed (ROCE) (FY24): Improved from 44.0% to 44.7%.

Operational Efficiency #

• Cost management program, MarVal, supported strategic objectives.
• Gross margin expansion in Foods through supply chain refinements, GTM strategies, and cost structure improvements.
• Project SETU to improve direct reach from ~1 million outlets to 1.5 million outlets by FY27.
• Implemented primary stock reduction and extended credit terms selectively.

Growth Initiatives and Challenges #

Growth Initiatives #

• Portfolio diversification (domestic and international).
• Increase share of Foods and Premium Personal Care to ~25% of domestic revenues by FY27.
• Project SETU to expand direct reach.
• Leveraging digital capabilities.
• Investments in brand building and innovation.
• Scouting for inorganic growth opportunities.

Challenges #

• Slower-than-expected recovery in rural and urban consumption.
• Persistent challenges for the General Trade channel.
• Resurgence of regional and unorganized competition.
• Inflationary pressures and currency devaluation in Bangladesh.
• Slowdown in economic growth in Vietnam.

Segment-Wise Financial Analysis: Risk Elements #

1) Strategic Risks: #

Changing Consumer Preferences: #

• Severity: High
• Likelihood: High
• Trend: Increasing, with shifts noted post-COVID-19, and accelerated by social media.
• Mitigation Strategies: Investment in consumer in-sighting, monitoring social media trends, product portfolio diversification, and innovation.
• Control Effectiveness: Partially effective, indicated by sustained market shares and penetration gains in 75% of the business.
• Potential Financial Impact: Revenue volatility, with optical revenue drops due to pricing declines (e.g., Saffola Oils), but potential for positive revenue growth.

Increasing Competitive Intensity: #

• Severity: High
• Likelihood: High
• Trend: Increasing, with growth of offline and online marketplaces and aggressive competitor pricing.
• Mitigation Strategies: Product differentiation, investment in brand building, cost-effective production, and strategic alliances.
• Control Effectiveness: Moderate, evidenced by the need for a sharper, targeted portfolio-SKU strategy across channels.
• Potential Financial Impact: Reduced market share, pricing power pressure, and impact on margins.

Underperformance of New Product Launches: #

• Severity: High
• Likelihood: Medium
• Trend: Stable, given the inherent low success rate in the FMCG sector.
• Mitigation Strategies: Phased, “prototype” approach to product introductions and continuous monitoring.
• Control Effectiveness: Moderate, needs enhancements in governance for scaling new ideas, continuous learning and adjustment.
• Potential Financial Impact: Loss of Investment.

Underachievement of Acquisition Deliverables: #

• Severity: High
• Likelihood: Medium
• Trend: Increasing, with focus on diversification, acquisition and growth.
• Mitigation Strategies: Defined playbook for acquisitions, due diligence, value finalization, integration and performance tracking.
• Control Effectiveness: Moderate, with defined playbook and governance; integration and synergy realization require ongoing focus.
• Potential Financial Impact: Financial burden from underperforming acquisitions, deferral of synergy benefits.

Underperformance in External Evaluation: #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Enhanced disclosure, frequent updates on company initiatives.
• Control Effectiveness: Partially effective
• Potential Financial Impact: Negative impact on investor confidence and market reputation.

2) Operational Risks: #

Commodity Risks: #

• Severity: High
• Likelihood: High
• Trend: Increasing volatility, with significant price changes in copra, rice bran oil, LLP, and HDPE in FY24.
• Mitigation Strategies: Comprehensive procurement process manual, strategic inventory policies, development of sustainable sourcing alternatives.
• Control Effectiveness: Partially effective, evidenced by the implementation of inventory policies and sourcing programs.
• Potential Financial Impact: Impact on margins.

Global Events: #

• Severity: High
• Likelihood: Low but unpredictable
• Trend: Stable, but with potential for sudden spikes.
• Mitigation Strategies: Business continuity plans.
• Control Effectiveness: Moderate, reliant on effectiveness of contingency measures.
• Potential Financial Impact: Significant business disruptions and financial losses.

Macroeconomic Factors: #

• Severity: Medium
• Likelihood: High
• Trend: Fluctuating, with recent sluggishness in rural sentiment and high food inflation.
• Mitigation Strategies: Focus on value-added products at affordable prices, aggressive cost management, and portfolio diversification.
• Control Effectiveness: Partially effective, reflected in stable urban growth but slower rural recovery.
• Potential Financial Impact: Downtrading from branded products.

Cyber and Data Security: #

• Severity: High
• Likelihood: Medium
• Trend: Increasing, with greater digital integration.
• Mitigation Strategies: Implementation of IT security practices (ISO 27001), disaster recovery plans, and cyber security technologies. Mock runs.
• Control Effectiveness: Moderate, with ongoing internal assessments.
• Potential Financial Impact: Business disruption, loss of critical data.

3) Financial Risks: #

Volatility in Interest Rates: #

• Severity: Medium
• Likelihood: Medium
• Trend: Fluctuating, impacted by central bank policies.
• Mitigation Strategies: Well-defined framework for capital gearing, maintaining liquidity, hedging for foreign currency borrowings, Board-approved investment policy.
• Control Effectiveness: Effective, with a low Debt/EBITDA ratio (0.19x) and ample liquidity.
• Potential Financial Impact: Impact on borrowing costs, mark-to-market losses on investments.

Foreign Currency Exposure: #

• Severity: High
• Likelihood: High
• Trend: Increasing, with significant operations in multiple countries and exposure to various currencies.
• Mitigation Strategies: Hedging framework for India and Bangladesh.
• Control Effectiveness: Partially effective; “translation risk” remains unhedged.
• Potential Financial Impact: Impacts financial performance.

4) Compliance/Governance Risks: #

Non-Compliance with Regulatory Requirements: #

• Severity: High
• Likelihood: Low
• Trend: Stable, with increasing regulatory scrutiny.
• Mitigation Strategies: IT-enabled compliance systems, periodic communication, and monitoring mechanisms.
• Control Effectiveness: High, demonstrated by the Company’s tracking systems.
• Potential Financial Impact: Financial losses, penalties, and reputational risk.

Violation of Ethics and Business Integrity: #

• Severity: High
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Code of Conduct (CoC), Marico Code of Business Ethics (MCoBE), vigil mechanism, mandatory certifications, and Board oversight.
• Control Effectiveness: High, with detailed orientation and certifications for employees and stakeholders.
• Potential Financial Impact: Damage to corporate reputation and business results.

Emerging Rules and Regulations: #

• Severity: High
• Likelihood: Medium
• Trend: Increasing regulations.
• Mitigation Strategies: Participation in industry platforms, capacity building.
• Control Effectiveness: High, with ongoing monitoring.
• Potential Financial Impact: Increased cost.

5) Emerging Risks: #

• Severity: High
• Likelihood: High
• Trend: Escalating
• Mitigation Strategies: Not fully quantified.
• Control Effectiveness: Varied
• Potential Financial Impact: Increased costs, reduced productivity, damaged reputation, disruptions.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• Diversification: Marico aims to reduce dependency on specific categories and geographies by expanding its Foods and Premium Personal Care segments in India. The combined revenue share of these segments in the domestic business increased to ~20% in FY24, up from ~15% in FY23 and is targeted to reach ~25% by FY27.
• International Business: The company is focused on expanding its portfolio and market presence. Bangladesh business revenue dependence will be gradually reduced to about 40% by FY27.
• Project SETU: Aims for an improved direct reach from ~1 million outlets to 1.5 million outlets in FY27 in the India business, and a total direct reach multiplier reduction from ~5.8x to ~4x.

Competitive Advantages and Market Positioning #

• Market Share: In the domestic business, at least 75% of the business maintained or gained market share, and 100% of the business either maintained or gained penetration during the year.
• Saffola Oats: Became the Number 1 Oats brand in India during the year, per Kantar Household Panel Data, with a 43% value market share.
• Parachute Coconut Oil Holds 63% of the market share in the Coconut Oil franchise.
• Bangladesh: The Bangladesh business has regained its momentum and demonstrated resilience, with a broad-based portfolio.
• Foods Portfolio:Foods business is nearly at 4x its scale in FY20.

Innovation Initiatives and R&D Effectiveness #

• R&D Investments: Marico invested 9.9% of sales in brand building. R&D investments were J 45 crores.
• Product Innovation: The company launched new products and variants across multiple categories. This includes launching new product formats for Parachute Advansed, Set Wet, and Saffola brands, and diffusion technology with natural ingredients for “Herbs India.”
• Patents: Marico has 18 granted patents.
• Partnerships: Marico is collaborating with research institutions in India and globally to enhance its R&D capabilities.

M&A Strategy and Execution #

• Strategic Investment: Marico made a strategic investment in ‘Plix’, a digital-first nutraceuticals and plant-based personal care brand, to broaden its play in chosen categories in India and acquired a 51.24% equity stake.
• Acquisition of HW Wellness Solutions Private Limited allowed to expand total addressable market.
• Acquisition of Beauty X Joint Stock Company.
• Playbook for Acquisitions: The Company has a well-defined process for selecting targets, due diligence, value finalization and integration.
• Inorganic Growth: Marico actively seeks inorganic growth opportunities to consolidate its competitive position and expand its market presence.

Management’s Track Record in Execution #

• Diversification Success: Revenue share increase of Food and Premium Personal care.
• Operating Margin: Achieved the highest-ever operating margin of 21.0% in FY24.
• Digital-First Brands: The Digital-first portfolio reached an exit ARR of ~ H 450 crore. Beardo has grown threefold since FY21 with positive EBITDA this year.

Capital Allocation Strategy #

• Capital Expenditure: Incurred H 153 crores in capital expenditure for capacity expansion and maintenance.
• Dividend Payout: Dividend payout ratio for FY24 was 83%.
• Reinvestment: Prioritizing investments in brand building, innovation, and portfolio diversification.

Organizational Changes and Their Impact #

• Project SETU: A 3-year roadmap to improve direct reach in India, expected to be cost-neutral through re-allocation of resources and efficiencies.
• Values Refresh Initiative: Conducted extensive workshops involving over 150 participants from seven regions, to reflect organization’s vision for building Marico 3.0.
• Inclusion & Diversity (I&D) Council:, instituted the previous year, is enhancing policies to enable a more diverse workforce.

ESG Framework #

Environmental Metrics and Targets #

• GHG Emissions Reduction: Achieved a 79% reduction in direct GHG emissions (Scope 1+2) intensity compared to the FY13 baseline. Scope 1 emissions were 1,053 tCO2e, and Scope 2 emissions were 9,712 tCO2e. Scope 3 GHG emission intensity was 80.08 tCO2e / Crore.
• Renewable Energy: 67.40% of total energy consumption in operations is from renewable sources. Thermal energy needs are met with over 90% renewable sources.
• Water Stewardship: The Jalgaon facility attained “Water Neutral” certification. Created 3.73 billion liters of water conservation potential cumulatively. Water withdrawal intensity in operations stood at 18.63 KL / Crore.
• Circular Economy: 95.30% of packaging is recyclable by weight. Two successful trials have been completed using rPCR material in packaging.
• Responsible Sourcing: 82% of critical suppliers completed Level 1 of Marico’s Responsible Sourcing Program (Samyut), and 26% completed Level 2.

Social Responsibility Programs #

• Parachute Kalpavriksha Foundation: Enrolled over 100,000 farmers cumulatively, covering more than 3.5 lakh acres of farmland, and achieved a 17% increase in productivity.
• Nihar Shanti Pathshala Funwala: Benefitted over 1 million children and trained over 165,000 teachers in English literacy, and engaged 71,000 active teachers.
• Community Sustenance: Impacted over 1.6 million lives cumulatively through community initiatives, including health camps.
• Employee Engagement: Achieved a member engagement score of 87% and an inclusion index of 82.
• Diversity: 28.9% Gender diversity in decision-making roles(Managers & partners)

Governance Structure and Effectiveness #

• Board Composition: The Board consists of 12 members: 1 Executive Director, 8 Non-Executive Independent Directors (including 3 women), and 3 Non-Executive Non-Independent Directors.
• Audit Committee: Comprised of 3 Independent Directors. Met 8 times during FY24.
• Nomination and Remuneration Committee (NRC): Comprised of 5 Independent Directors. Met 6 times during FY24.
• CSR Committee: Comprised of 5 Directors, including 3 Independent Directors. Met 3 times during FY24.
• Risk Management Committee (RMC): Consists of 1 Independent Director, the MD & CEO, and the CFO. Met 2 times during FY24.
• Ethics and Compliance: Maintained a Code of Conduct, an anti-bribery and anti-corruption policy, and a vigil mechanism for reporting concerns.
• Indian Corporate Governance Scorecard: Ranked in the ‘LEADERSHIP’ category for 2023.

Sustainability Investments and ROI #

• Capital Expenditure: INR 153 crores was spent on capacity expansion and maintenance of existing facilities, contributing to resource optimization.
• R&D Investments: INR 45 crores invested in R&D, with 71.2% of Marico’s FY24 revenue invested in improving the environmental and social impacts of products.
• CSR Expenditure: INR 23.79 crores spent on CSR activities, exceeding the statutory requirement.
• Operational Savings: Cost management initiatives led to savings and partially offset the unfavorable impact of foreign exchange depreciation.

ESG Ratings and Peer Comparison #

• BW Businessworld: Recognized as one of the Top 3 Sustainable Companies in the FMCG Sector.
• Parachute Kalpavriksha Foundation: Earned a 7-Star Rating and 1st Place in the Social Responsibility Category at the 9th International Best Practice Competition (IBPC).
• Best Managed Companies India 2023: Ranked among the Best Managed Companies by Deloitte India.

Regulatory Compliance and Future Preparations #

• Compliance: Complied with all applicable environmental laws and regulations, including Extended Producer Responsibility (EPR) framework.
• Materiality Assessment: Conducted a structured and comprehensive materiality assessment to identify critical ESG issues for ensuring a sustainable journey.
• Sustainability Vision 2030: Established eight pivotal themes for the decade of action, including climate change, water stewardship, circular economy, responsible sourcing, purposeful brands, diversity and inclusion, sustainable agriculture, and corporate governance.
• Digital Transformation: Ongoing investments in digital technologies and platforms, such as Cloud-based ERP/PLM, LC/NC, Data Lake, RPA Bots, and Virtual Assistants.
• Compliance Management System: Invested in IT-enabled compliance systems and processes, ensuring all functions and units are aware of and comply with applicable laws and regulations.

Future Projections and Guidance #

Management Guidance and Assumptions #

• Management aims for double-digit revenue growth in the medium term. This growth will be driven by outperformance in core domestic portfolios, accelerated growth in Foods and Premium Personal Care, and double-digit constant currency growth in the International business.
• Management plans to re-allocate resources from wholesale and organized trade channels and supply chain efficiencies to fund Project SETU.
• Management is also looking at potential inorganic growth opportunities to add value.
• Operating margin is expected to structurally increase over the next few years, enhanced by scale benefits and portfolio premiumization across both India and overseas businesses.

Market Growth Forecasts #

• Premium and urban-centric segments are outpacing rural and mass segments.
• Rural and mass category consumption is expected to pick up through the coming year, supported by a normal monsoon forecast, moderate retail inflation, and continued government spending.
• Organized trade and E-Commerce channels are witnessing growing salience, while General Trade is facing growth and profitability pressures.

Planned Strategic Initiatives #

• Project SETU: A 3-year roadmap to improve direct reach from ~1 million outlets to 1.5 million outlets by FY27.
• Portfolio Diversification: Aggressively drive the Foods and Premium Personal Care segments, targeting a 20+% CAGR for Foods and doubling the Digital-first portfolio’s ARR by FY27. Revenue share of Foods and Premium Personal Care is targeted to reach 25% of total turnover by FY27.
• International Business: Reduce revenue share of Bangladesh to about 40% by FY27, while continuing to pursue organic growth.
• Innovation and Brand Building: Continuous investment in consumer in-sighting, new product development, and brand communication to adapt to evolving preferences.
• Go-to-Market Transformation: Drive go-to-market transformation in urban, rural, and new-age channels.
• Digital Capabilities: Enhancing digital capabilities across the value chain to align with evolving consumer aspirations.
• Cost Management: Institutionalized cost management program (MarVal) is expected to continue supporting the Company’s strategic objectives.

Capital Expenditure Plans #

• FY24 capital expenditure was ₹ 153 crores for capacity expansion and maintenance of existing manufacturing facilities.

Efficiency Improvement Targets #

• Structural gross margin expansion in the Foods business through supply chain refinements, GTM strategies, and cost structure improvements.
• Double-digit EBITDA margin in the Digital-first portfolio by FY27, supported by an established operating playbook.
• Project Setu to improve direct reach and weighted distribution.

Potential Challenges and Opportunities #

• Challenges: Slower-than-expected recovery in rural consumption, subdued sentiment in the general trade channel, and macroeconomic headwinds in overseas markets pose challenges.
• Opportunities: Urbanization, premiumization, rising incomes, digital adoption, and supportive government policies in India present robust growth prospects. Resilient overseas markets remain attractive for investment and growth.

Scenario Analysis and Sensitivity to Key Assumptions #

• Copra Prices: Volume traction is expected in the Parachute brand, given pricing resilience and moderately inflationary trends in copra prices.
• Monsoon and Government Spending: A normal monsoon forecast and continued government spending are critical assumptions for rural and mass category consumption pickup.
• Currency Fluctuations: The International business, particularly in Bangladesh, is sensitive to currency devaluation, although broad-basing of the International business to reduce exposure to any single currency, is expected to help mitigate any adverse impact.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The Statutory Auditors, M/s. B S R & Co. LLP, issued an unmodified opinion on the consolidated and standalone financial statements, indicating compliance with accounting principles generally accepted in India.
• The auditors did not report any fraud under Section 143(12) of the Act.
• Audit trail edit log facility was not enabled at the database level, and for certain application changes.

Key Accounting Policies and Changes #

• The financial statements comply with Indian Accounting Standards (Ind AS).
• No new standards or amendments to existing standards were applicable for FY24.
• The company uses, among others, the Black Scholes Model to evaluate employee stock options.

Internal Control Effectiveness #

• The Company maintains an internal control structure and a management audit team for continuous monitoring.
• The Audit Committee reviews internal audit findings and action plans.
• Internal financial controls over financial reporting are deemed adequate and operating effectively.
• The Company is leveraging technology to enhance internal controls.

Regulatory Compliance Status #

• The Company has complied with all applicable provisions of Secretarial Standards - 1 and Secretarial Standard - 2.
• The Company complied with corporate governance requirements under the SEBI listing regulations.
• The Company has complied with the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015
• The Company has complied with regulations related to unclaimed dividends and transfer of shares to IEPF.
• The Company has complied with regulations related to the filing of reports on related party transactions.
• The Company has a system in place that complies with all applicable laws.

Legal Proceedings and Their Potential Impact #

• The Company has ongoing disputes with income tax authorities regarding the tax treatment of certain expenses.
• The Company periodically receives notices and inquiries from tax authorities. The financial impact, if any, is accounted for in the financial statements as per provisions of IND AS.
• The Company has ongoing disputes regarding disputed tax demands, with sales tax, GST, income tax, and excise duty. The financial impact amounts to a contingent liability of H 289 crore.

Related Party Transactions #

• All transactions with related parties were conducted at arm’s length and in the ordinary course of business.
• There were no materially significant related party transactions during FY24 that may have a potential conflict with the interests of the Company.
• The Company has complied with Section 177 and 188 of the Companies Act, 2013 with regard to related party transactions.

Subsequent Events #

• Mr. Nikhil Khattau ceased to be the Chairman/Member of the Audit Committee, Risk Management Committee and Stakeholders’ Relationship Committee as well as the Member of the Nomination and Remuneration Committee, upon completion of his tenure as an Independent Director w.e.f close of business hours on March 31, 2024 and was appointed as a Non-Executive, Non-Independent Director of the Company.

Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The unmodified audit opinion suggests high accounting quality. The use of recognized valuation models (Black-Scholes for stock options, discounted cash flow for impairment testing) supports reliable financial reporting.
• Regulatory Risk Assessment: The primary area of regulatory risk arises from ongoing tax disputes. The Company has ongoing disputes with income tax authorities and other tax regulatory bodies. The Company, on a conservative basis, is carrying a provision for the same.