Procter & Gamble Hygiene and Health Care Ltd:Annual Report 2023-24 Analysis

Procter & Gamble Hygiene and Health Care Ltd. Overview #

About the Company #

• Year of Establishment and Founding History: Incorporated in 1964 as Richardson Hindustan Limited, a company involved in consumer health products. It became Procter & Gamble Hygiene and Health Care Limited in 1985 after Procter & Gamble acquired Richardson-Vicks globally.

• Headquarters Location and Global Presence: The company’s headquarters are located in Mumbai, India. While it primarily focuses on the Indian market, it leverages the global resources and expertise of its parent company, Procter & Gamble (P&G), a multinational corporation with a presence in numerous countries.

• Company Vision and Mission: A key element is improving the lives of the consumers they touch by providing branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come.

• Key Milestones in Their Growth Journey:

  • 1964: Incorporated as Richardson Hindustan Limited.
  • 1985: Renamed Procter & Gamble Hygiene and Health Care Limited after acquisition.
  • Subsequent years: Expansion of product portfolio in hygiene and health care categories.
  • Continuous Focus: Maintaining strong branding and distribution network across India.

• Stock Exchange Listing Details and Market Capitalization: Listed on the Bombay Stock Exchange (BSE: 500459) and the National Stock Exchange (NSE: PROCTERH&G). The market capitalization fluctuates based on stock price and market conditions. (Refer to financial websites for current market capitalization).

• Recent Financial Performance Highlights: Financial performance details such as revenue, profit margins, and market share can be found in the company’s annual reports and investor presentations. Recent highlights often include revenue growth, profitability, and market share gains in specific product categories.

• Management Team and Leadership Structure: The company follows a hierarchical structure, led by a Managing Director/CEO supported by functional heads responsible for marketing, sales, finance, operations, and other key areas. Details are readily available on the company’s website or in corporate reports.

• Any Notable Awards or Recognitions: May receive industry awards for product quality, marketing campaigns, or corporate social responsibility initiatives.

Their Products #

• Complete Product Portfolio with Categories:

  • Feminine Hygiene: Whisper (sanitary napkins, pads)
  • Healthcare: Vicks (vapor rub, cough drops, cough syrups, inhalers)

• Flagship or Signature Product Lines:

  • Whisper: Dominant player in the feminine hygiene market in India.
  • Vicks: Leading brand in the cough and cold segment.

• Key Technological Innovations or Patents: Innovations in absorbent materials and design are crucial for product advancement.

• Manufacturing Facilities and Production Capacity: Has manufacturing facilities in India. Information about capacity is generally proprietary but contributes to meeting local demand.

• Quality Certifications and Standards: Adheres to stringent quality control measures. Likely holds certifications such as ISO 9001 for quality management and relevant certifications pertaining to pharmaceutical manufacturing (e.g., GMP for Vicks products).

• Any Unique Selling Propositions or Technological Advantages: Product Differentiation and a strong brand name.

• Recent Product Launches or R&D Initiatives: New product launches and R&D are ongoing.

Primary Customers #

• Geographic Markets (domestic vs. international): Primarily focused on the Indian market.

• Major Client Segments (agricultural, industrial, residential, etc.): Predominantly residential/household consumers.

• Distribution Network and Sales Channels: Extensive distribution network covering urban and rural areas in India. Utilizes various sales channels, including:

  • Retail stores (supermarkets, pharmacies, general stores)
  • E-commerce platforms
  • Wholesalers and distributors

Major Competitors #

• Direct Competitors in India and Globally:

  • Feminine Hygiene: Johnson & Johnson (Stayfree), Unicharm (Sofy), Kimberly-Clark (Kotex)
  • Healthcare: Hindustan Unilever (cough & cold products), Dabur (cough & cold products), Glenmark Pharmaceuticals (cough & cold products).

• Comparative Market Share Analysis: The company holds a significant market share in the feminine hygiene category and a considerable share in the cough and cold segment. Market share data is usually available from market research reports.

• Competitive Advantages and Disadvantages:

  • Advantages: Strong brand recognition, extensive distribution network, global resources of P&G.
  • Disadvantages: Competition from local and international players, price sensitivity of the Indian market.

• How they differentiate from competitors: Focus on product quality, innovation, and branding.

• Market positioning strategy: Positions itself as a provider of high-quality hygiene and healthcare products.

Future Outlook #

• Expansion plans or growth strategy: Aim to grow by expanding its reach, and offering new products.

• Industry trends affecting their business:

  • Increasing consumer awareness of hygiene and health.
  • Growing demand for convenience and innovative products.
  • Rising disposable incomes in India.

• Long-term vision and strategic goals: To be the undisputed leader in consumer hygiene and health.

3-Year Trend Analysis of Key Financial Metrics #

Revenue Growth #

The company experienced revenue growth of 7% in FY2023-24, reaching ₹4,206 crore.

Profitability #

Profit After Tax (PAT) remained flat year-over-year at ₹675 crore in FY2023-24, due to one-time tax items. Operational profit, excluding these impacts, grew by 19% to ₹809 crore. The operating profit margin was 23% in 2023-24.

Earnings Per Share (EPS) #

Basic and diluted EPS were ₹207.95 in FY2023-24, a slight decrease from ₹208.91 in FY2022-23.

Return on Net Worth #

The return on net worth was 78% in FY2023-24, compared to 81% the previous year.

Return on Capital Employed (ROCE) #

ROCE increased to 1.10 in FY2023-24 from 0.81 in the prior year, due to reduced capital employed.

Cash Generation #

Company generated ₹ 749 cr. of cash.

Business Segment Performance #

Feminine Hygiene #

This segment, led by the Whisper brand, experienced growth driven by innovation, with revamps of Whisper Ultra Hygiene+Comfort XL and Whisper Ultra Soft Skin Love. Super-premium products like Whisper Period Panty contributed to growth. The #KeepGirlsInSchool initiative focused on early periods awareness.

Health Care #

The Vicks portfolio, including Vicks VapoRub, Vicks Throat Drops, and others, demonstrated growth. The launch of Vicks VapoRub Steam Pods and Vicks Headache Roll-on added to the portfolio. The cough & cold category saw a post-pandemic recovery.

Old Spice #

This segment delivered double-digit growth, led by 0% Gas Deodorants, with expanded distribution and new product launches.

Major Strategic Initiatives and Their Progress #

Integrated Growth Strategy #

The company continued its focus on a strategy encompassing a focused product portfolio, superiority (product performance, packaging, brand communication, retail execution, and consumer/customer value), productivity, constructive disruption, and an agile and accountable organization.

Innovation #

Product upgrades and new launches were central, including Whisper Ultra Hygiene+Comfort XL, Vicks Cough Drops Double Power, Vicks Headache Roll-on, and Whisper Period Panties.

#KeepGirlsInSchool Campaign #

Whisper’s campaign continued, focusing on early periods and menstrual education, impacting over 100 million girls and mothers.

P&G Shiksha #

The Company’s CSR program impacted 45 Lakh children by helping address barriers in education.

Risk Landscape Changes #

Economic Environment #

The operating environment was challenging, with tepid consumer demand in urban and rural markets, and inflationary pressures. The economy is going to remain challenged due to a tepid global economic outlook.

Plastic Packaging Waste #

The company faces risks associated with plastic packaging waste, mitigated by designing recyclable/reusable packaging and complying with Extended Producer Responsibility (EPR) guidelines.

ESG Initiatives and Metrics #

Environmental Sustainability #

The Goa plant is a zero-manufacturing-waste-to-landfill site. The company achieved 13,364 kiloliters of circular water. Efforts are ongoing to reduce Green House Gas (GHG) emissions.

Social Responsibility #

The P&G Shiksha program, focused on education, is a key initiative. Diversity and Inclusion efforts are integrated into workforce and consumer engagement.

Governance #

The company operates under P&G’s Worldwide Business Conduct Manual (WBCM), with training programs on various compliance topics (e.g., anti-corruption, data privacy).

Management Outlook #

Long-Term Outlook #

The long-term outlook for the FMCG sector is positive, and the company is positioned for sustained performance with its integrated growth strategy.

Focus Areas #

The company will continue to focus on its integrated growth strategy, consumer-centric approach, and superior product propositions.

Challenges #

The company acknowedges the short and medium term challenges.

Detailed Analysis #

Financial Position Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity (₹ Lakhs) #

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

• Current Assets: Decreased by 19.79% primarily due to a significant reduction in cash and cash equivalents and other financial assets.
• Other Current Financial assets: Increased from 3,277 to 8,924 Lakhs.
• Total Equity: Decreased by 18.1% from the reduction in other equity due to dividends, offsetting profits.
• Trade Payables (Current Liabilities): Decreased by 12.29%, indicating a potential shift in payment terms or reduced purchases.
• Cash and cash equivalents: Decreased by 40.4%.

Working Capital Trends #

• Working Capital: Decreased significantly, primarily due to the reduction in current assets, specifically cash and cash equivalents.
• Net Capital Turnover: Increased from 9.54 to 19.20, indicating higher sales against reduced working capital, which can be the result of effecient operations.

Asset Quality Metrics #

• Allowance for doubtful trade receivables increased from 21628 to 24083 Lakhs.

Debt Structure and Maturity Profile #

• Total debt is very minimal as represented only by small portion of Lease liabilities.

Off-Balance Sheet Items #

• Contingent Liabilities: Increased from ₹35,616 lakhs to ₹60,596 lakhs, primarily driven by increases in income tax and GST matters.
• Capital Commitments: Increased from ₹259 lakhs to ₹311 lakhs.

Operating Performance of Procter & Gamble Hygiene and Health Care Limited #

Revenue Breakdown #

• Total Revenue (FY2023-24): ₹4,206 crores, a 7% increase year-over-year.
• Feminine Hygiene: 67% of total turnover.
• Health Care: 31% of total turnover.

Geographic Breakdown #

• India: 97.26% of total turnover.
• Exports: 2.74% of total turnover, serving 7 countries.

Cost Structure Analysis #

• Cost of Materials Consumed: ₹771.94 crores (FY2023-24), decreased from ₹847.55 crores.
• Purchases of Stock-in-Trade: ₹854.38 crores (FY2023-24), increased from ₹824.01 crores.
• Changes in Inventory: Net increase of ₹12.13 crores (FY2023-24).
• Employee Benefit Expenses: ₹245.64 crores (FY2023-24), increased from ₹205.79 crores.
• Other Expenses: ₹1,362.61 crores, increased from ₹1,180.45.

Margin Analysis #

• Operating Profit Margin: 23% (FY2023-24), up from 22%.
• Net Profit Margin: 16% (FY2023-24), down from 17%.

Non-Recurring Items #

• Significant impact from one-time tax-related items affecting Profit After Tax (PAT).
• Operational profit (excluding one-time tax impacts): ₹809 crores, up 19% year-over-year.
• One-time special dividend: ₹60 per equity share, declared during the fiscal year.

GAAP vs. Non-GAAP Reconciliation #

• Reference to “operational profit” excluding one-time tax items indicates a non-GAAP measure.

EPS Analysis #

• Basic EPS: ₹207.95 (FY2023-24), decreased from ₹208.91.
• Diluted EPS: ₹207.95 (FY2023-24), decreased from ₹208.91.

Cash Management Analysis #

Cash Flow Analysis #

Operating Cash Flow (OCF) #

• FY2024: ₹74,875 Lakhs; FY2023: ₹1,05,531 Lakhs
• Net cash generated from operations after tax: FY24: ₹47,053 Lakhs; FY23: ₹82,577 Lakhs

Investing Cash Flow (ICF) #

• FY2024: ₹106 Lakhs; FY2023: ₹(991) Lakhs

Financing Cash Flow (FCF) #

• FY2024: ₹(86,175) Lakhs; FY2023: ₹(47,701) Lakhs

Working Capital Management Efficiency #

• Trade Receivables Turnover: FY24: 18.40; FY23: 19.19
• Inventory Turnover: FY24: 18.89; FY23: 17.27
• Trade Payables Turnover: FY24: 1.78; FY23: 1.88
• Net Capital Turnover: FY24: 19.20; FY23: 9.54

Capex Analysis #

• Total Property, Plant, and Equipment additions: FY24: ₹4,285 Lakhs; FY23: ₹6,547 Lakhs

Dividend and Share Buyback Trends #

Dividends #

• FY24: ₹86,021 Lakhs
• FY23: ₹47,068 Lakhs
• Interim dividend FY24: ₹160 per share (including special dividend of ₹60)
• Proposed final dividend FY24: ₹95 per share
• Aggregate dividend FY24: ₹255 per share

Share Buybacks #

• No share buybacks reported.

Debt Service Coverage #

• The company is Debt Free.

Liquidity Position #

Current Ratio #

• FY24: 1.22; FY23: 1.38

Cash and Cash Equivalents #

• End of FY24: ₹57,367 Lakhs
• End of FY23: ₹96,383 Lakhs

Financial Analysis of Procter & Gamble Hygiene and Health Care Limited #

Profitability Ratios (3-Year Trends) #

• ROE has slightly decreased, potentially indicating a minor reduction in efficiency in generating profit from shareholders’ equity.
• ROCE improved significantly, indicates a more efficient use of total capital.
• Operating and Net Profit Margins are relatively stable, showcasing consistent profitability.

Liquidity Metrics #

• Current Ratio has decreased, still above 1, signals the short-term obligations are covered.

Efficiency Ratios #

• Inventory turnover has improved, signifying better inventory management.
• Trade receivables turnover marginally declined, reflecting a minor decrease in the efficiency of collecting receivables.
• Net capital turnover has improved greatly, indicating a significant increase in efficient use of working capital for sales.

Leverage Metrics #

• The company is debt-free, highlighting strong financial stability.

Working Capital Ratios #

• Number of days of account payables: 82 days in FY 2023-24.

Concentration of Sales #

• Sales to dealers / distributors as % of total sales: 90.48%.
• Sales to top 10 dealers / distributors as % of total sales to dealers / distributors: 57.81%.

Share of Related Party Transactions (RPTs) #

• Purchase (Purchase with related parties / total purchases): 47%
• Sales (Sales to related parties / total sales): 2%
• Loans & advances (Loans & advances given to related parties / total loans & advances): 100%

Procter & Gamble Hygiene and Health Care Limited - Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

• Overall Company: Revenue from operations was ₹4,206 crores, a 7% increase year-over-year. Profit before tax was ₹939 crores, a 12% increase year-over-year. Operational profit (excluding one-time items) was ₹809 crores, up 19% year-over-year. Profit After Tax (PAT) decreased slightly to ₹675 crore from ₹678 crore, driven by one-time tax-related events.
• Feminine Hygiene: Contributed 67% of total turnover.
• Health Care: Contributed 31% of total turnover. Experienced fast growth as the Cough & Cold category recovered post-pandemic.
• Old Spice: Strong double-digit growth.

Market Share and Competitive Position #

• Whisper: Market leader in the feminine hygiene category in India.
• Vicks: India’s No. 1 health care brand. Many sub-brands within Vicks grew their market share.

Key Products/Services Performance #

• Whisper: Product upgrades and launches including Whisper Ultra Hygiene+Comfort XL, Whisper Ultra Soft Skin Love (revamp), and Whisper Period Panty. The Whisper Choice portfolio also had a significant upgrade.
• Vicks: Strong performance of the existing portfolio (Vicks VapoRub, Throat Drops, Action 500 Advanced, Inhaler, Xtra Strong Rub, Baby Rub). New product launches included Vicks VapoRub Steam Pods and Vicks Headache Roll-on.
• ZzzQuil: Continued focus on accelerating growth for sleep supplements.
• Old Spice: 0% Gas Deodorants drove growth.

Geographic Distribution and Market Penetration #

• National: Pan-India presence, with products sold across all 28 states and 8 Union Territories.
• International: Products are exported to 7 countries, contributing 2.74% of the total turnover.
• Rural demand has been impacted due to delayed monsoons causing lower agricultural yields.

Segment-wise CAPEX and ROIC #

• Return on Capital Employed (ROCE): Increased to 1.10 from 0.81, a 36% increase. Attributed in part to the dividend payout that reduced employed capital.

Operational Efficiency Metrics #

• Debtors (trade receivables) turnover: 18.40, a slight decrease of 4% from the previous year.
• Inventory turnover: 18.89, a 9% increase from the previous year.
• Trade payables turnover: 1.78.
• Operating Profit Margin: 23%, a slight increase.
• Zero-Waste Manufacturing: The Goa plant is highlighted as a “zero-manufacturing-waste-to-landfill” site.

Growth Initiatives and Challenges #

• Growth Initiatives:

  • Continued product innovation and upgrades across both feminine hygiene and healthcare segments.
  • Focus on premiumization (e.g., Whisper Ultra range).
  • Category growth driven by consumer education and awareness campaigns (e.g., Whisper’s #KeepGirlsInSchool).
  • Expansion into whitespace categories (e.g., sleep supplements).
  • P&G Shiksha, CSR program on education.

• Challenges:

  • Tepid consumer demand in both urban and rural markets due to inflation and other macroeconomic factors.
  • Declining rural wages and rising unemployment, although expected to stabilize.
  • Plastic packaging waste and compliance with Extended Producer Responsibility (EPR) guidelines.

Risk Assessment: Procter & Gamble Hygiene and Health Care Limited #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Continuous investment in R&D with focus on customer needs.
• Control Effectiveness: High
• Potential Financial Impact: Market share decline could lead to revenue reduction.

Operational Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Improving
• Mitigation Strategies: Business Contingency Plan for natural disasters and key vendors. Adequate security and insurance coverage.
• Control Effectiveness: High
• Potential Financial Impact: Cost incurred on well-being measures as % of total revenue for FY 2023-2024 is 0.05%

Financial Risks #

• Severity: Low
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Operational contingency plan and Business Contingency Plan, stringent assessment system for distributors and vendors.
• Control Effectiveness: High
• Potential Financial Impact:
  • Debtors Turnover Ratio: -4% Change (YoY)
  • Return on Investment: 32% change
  • Return on capital employed: 36% change

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Compliance monitoring, periodic training programs for employees (e.g., Global Anti-Corruption Standards, Prevention of Sexual Harassment, Whistle-blower Mechanism).
• Control Effectiveness: Good
• Potential Financial Impact: During the financial year, there are no fines/penalties punishment/ award/ compounding fees/ settlement amount paid.

Emerging Risks: Plastic Packaging Waste Risk #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing public and regulatory scrutiny.
• Mitigation: Focus on recyclable/reusable packaging and Extended Producer Responsibility (EPR) compliance.
• Control Effectiveness: Moderate (compliant with current EPR guidelines, but future regulations may tighten).
• Potential Financial Impact: Negative costs associated with compliance and packaging redesign.

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• The Company aims for balanced top- and bottom-line growth, focusing on serving consumers, customers, employees, society, and shareholders.
• A core element of the strategy focuses on product portfolio, superiority, productivity, disruption, and an agile, accountable structure to obtain balanced growth and value.
• Environmental, social, and governance (Citizenship) factors are viewed as opportunities for competitive advantage and shareholder value creation.
• The Company is committed to reducing plastic waste by EPR guidelines.

Competitive Advantages and Market Positioning #

• The Company’s portfolio includes brands in categories where performance drives brand choice.
• Whisper is positioned as a market leader in the feminine hygiene category, and Vicks in healthcare.
• The Company’s access to advanced technology and continuous upgrades from The Procter & Gamble Company, USA, is cited as an unmatched competitive advantage.

Innovation Initiatives and R&D Effectiveness #

• Continuous innovation, product upgrades, and new product launches are central to the Company’s approach (e.g., Whisper Ultra XL, Vicks Cough Drops Double Power, Vicks VapoRub Steam Pods, Vicks Headache Roll-on).
• The company has continuously invested in growing the category.
• The Company benefits from the research and development of The Procter & Gamble Company, USA, and its subsidiaries, but did not incur any direct R&D expenditure during the Financial Year.

Management’s Track Record in Execution #

• The Company delivered strong operational growth, with sales of ₹4192 crore, up 7% year-over-year, and also delivered an operational profit of ₹809, up 19% versus year ago.
• The Company’s management has led the Vicks Brand to achieve faster growth as the category recovered from the post-pandemic slowdown.
• Management has launched successful product upgrades and campaigns, resulting in market share growth for several sub-brands.

Capital Allocation Strategy #

• The company declared an interim dividend of ₹160 per share (including a one-time special dividend of ₹60) during the year, and a final dividend of ₹95 was declared.
• The company has also given intercorporate loans to a group company.

Organizational Changes and Their Impact #

• Mr. Kumar Venkatasubramanian was appointed as Managing Director, effective May 1, 2024, succeeding Mr. L. V. Vaidyanathan.
• Ms. Mrinalini Srinivasan was appointed as Chief Financial Officer, effective June 29, 2024, succeeding Mr. Prashant Bhatnagar.
• There were director changes where the current board has 10 directors with expertise across key categories.
• The Company focuses on creating an agile and empowered organization to achieve business results and shareholder value.

ESG Framework #

Environmental Metrics and Targets #

• The Company’s plant site at Goa is a zero-manufacturing-waste-to-landfill site.
• The Company achieved 13,364 kiloliters of circular water in FY 2023-24.
• The Company is compliant with Extended Producer Responsibility (EPR) guidelines on plastic packaging waste collection.
• The Company’s market Based scope 2 net GHG emissions is NIL.

Social Responsibility Programs #

• The Company’s flagship CSR program, “P&G Shiksha,” focuses on a 360-degree educational intervention, including infrastructure, early childhood education, and learning gap remediation.
• Whisper’s #KeepGirlsInSchool campaign aims to provide period education and free sanitary pads.

Governance Structure and Effectiveness #

• The Board of Directors comprises a Non-Executive Independent Chairman, a Managing Director, one Executive Director, and seven Non-Executive Directors.
• Seven Board meetings were held during FY 2023-24, demonstrating consistent engagement.
• The Company has established committees, including Audit, Stakeholder Relationship, Nomination and Remuneration, Corporate Social Responsibility, Risk Management, and Cash & Investment.
• The Company has a comprehensive risk management system including risk Identification, assessment, planning, and mitigation.
• The Company has achieved Whistleblower Mechanism report, reviewed by Audit Committee on quarterly Basis.
• The Company has adopted various policies, including policies on related party transactions, corporate social responsibility, vigil mechanism, nomination and remuneration, materiality of events and dividend distribution policy.

Sustainability Investments and ROI #

• The Company is constructing Rain Water Harvesting Systems at P&G Shiksha supported schools.
• The Company aims to design consumer packaging to be recyclable or reusable, and to reduce the use of virgin petroleum.

ESG Ratings and Peer Comparison #

• P&G India was recognized as one of the top 100 companies for women in India by AVTAR for the seventh consecutive year.
• The company was recognized as the Best Organization for Women by ET Now (2024) and Buddies of Wellness by People Matters (2023).
• The company received recognition for progress on LGBTQ+ inclusion at the Workplace by the India Workplace Equality Index (2023).

Regulatory Compliance #

• The Company is compliant with the government’s Extended Producer Responsibility (EPR) guidelines.
• The Company is compliant with applicable environmental laws, regulations, and guidelines in India.
• The Company has adopted the P&G anti-bribery Policy and conducts regular employee training.
• The Company adheres to the provisions of the Companies Act, 2013, Secretarial Standards, and SEBI (LODR) Regulations, 2015.
• The Company’s plant at Goa is ISO certified with Quality Management system ISO 9001:2015 and ISO 13485:2016. The Plant has also a BIS License- IS 5405:2019

Future Outlook: P&G Hygiene and Health Care Limited #

Management Guidance and Assumptions #

• Strategy focuses on performance-driven brand choice, superiority, productivity, constructive disruption, and an agile, accountable organization.
• Strategy is dynamic and adapts to changing consumer, customer, and societal needs.
• Guiding principle: pay for performance, pay competitively, and focus on the long term.
• Continued focus on creating value for stakeholders.
• Emphasis on keeping consumers at the center of operations.

Market Growth Forecasts #

• Long-term outlook for the FMCG sector in India remains positive.
• Rural demand is expected to improve, aligning with positive trends due to above-normal rainfall.
• FMCG will grow in long term due to reduced inflation and higher GDP of India.
• The Cough & Cold category is recovering from a post-pandemic slowdown.

Planned Strategic Initiatives #

• Continued investment in category growth through product innovation that addresses customer needs.
• Consistent improvement and upgrades of product offerings to enhance consumer satisfaction.
• Enhancements related to superior products, packaging, brand communication, retail execution, and customer value.
• Continued expansion of the product portfolio, including recent launches like Vicks Cough Drops Double Power, Whisper Ultra XL, Vicks VapoRub Steam Pods, Vicks Roll On, and Whisper Period Panties.
• Continued brand investment in whitespace categories, such as sleep supplements with ZzzQuil.
• Maintain commitment to the “Whisper Menstrual Health & Hygiene Program”.
• Continued CSR though “P&G Shiksha.”

Efficiency Improvement Targets #

• Continued commitment to improving operational efficiency.
• The company’s plant site in Goa aims for zero-manufacturing-waste-to-landfill.
• The Company aims at continuous water efficiency, achieving 13,364 kiloliters of circular water in the reported year.
• Reduce the usage of virgin petroleum plastic.
• Reduction of Green House Gas (GHG) emissions to align with the P&G group’s ambition.

Potential Challenges and Opportunities #

• Challenges: Short to medium-term challenges exist due to a tepid global economic outlook. Declining rural wages and rising unemployment were mentioned as watch-outs, expected to stabilize with government interventions.
• Opportunities: The Company views Environmental, Social, and Governance (ESG) areas as opportunities to create competitive advantage. Superior and sustainable packaging solutions are seen as an opportunity for sales and profit growth. Diversity and Inclusion initiatives provide competitive advantage. Community impact, in line to National priorities.

Scenario Analysis and Sensitivity to Key Assumptions #

• Assumption: The Company has a diverse product mix with varying units of measure, and is unable to measure intensity Vs. physical output.
• Assumption: Indian economy will recover and expand in an orderly fashion post pandemic. The risk is sensitivity to global factors, however as Indian economy has recovered post-pandemic to 20% higher than pre-pandemic levels, it is resilient to challenges, providing stability to this assumption.
• Assumption: Rural demand will recover due to adequate rainfall. The risk is sensitivity to monsoons and agricultural yields.
• Assumption: Long-term outlook for FMCG sector is positive, with the Company well-positioned to sustain and improve performance with its integrated growth strategy. Sensitivity to macroeconomic variables like inflation, which is assumed to reduce to target levels.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The Independent Auditor’s Report provides an unqualified opinion on the Ind-AS financial statements, stating they give a true and fair view in conformity with Indian Accounting Standards.
• However, there’s an observation in paragraph 2(b) and 2(h)(vi) of the ‘Report on Other Legal and Regulatory Requirements’. The Company maintained periodic backups of accounting records on servers in India, not daily backups, until December 17, 2023.
• The auditors state that the audit trail feature was enabled and operational throughout the year, however, because of non-availability of audit trail data for the whole year, they are unable to comment for the period, where SOC reports or bridge letter has not been available.
• There were delays in transferring amounts to the Investor Education and Protection Fund (IEPF) due to technical errors at the MCA portal.

Key Accounting Policies and Changes #

• The financial statements are prepared under the historical cost convention, on an accrual basis, and in accordance with Ind AS.
• Revenue recognition is upon transfer of control of goods to customers, net of discounts and rebates.
• The company has assessed recent accounting pronouncements (amendments to Ind AS 117, 103, and 101) and does not expect a significant impact.
• No Changes in accounting policy as compared to prior year.

Internal Control Effectiveness #

• The Auditor’s Report (Annexure B) states that, in their opinion, the Company has an adequate internal financial controls system with reference to the Ind-AS financial statements, and such controls were operating effectively as of June 30, 2024.

Regulatory Compliance Status #

• The Company has complied with the corporate governance requirements of SEBI (LODR) Regulations, 2015.
• No strictures or penalties were imposed on the Company by regulatory authorities related to capital markets in the past three years.
• There are instances of non-compliance with the Companies Act, 2013 and Rules framed thereunder.

Legal Proceedings and Potential Impact #

• The Company discloses the impact of pending litigations on its financial position in Note 36.
• There are contingent liabilities related to income tax, sales tax, excise duty, service tax, custom duty, and Good and Services Tax matters that are pending before appellate authorities.
• The Company is also a party to other legal proceedings, but the disclosure does not quantify these.
• Total contingent liabilities amount to Rs. 60596 lakhs.

Related Party Transactions #

• The Company has a Related Party Transaction Policy.
• All related party transactions during the year were in the ordinary course of business and on an arm’s length basis.
• Material related party transaction was entered into with Procter & Gamble Home Products Private Limited for purchase of goods (Contract Manufacturing), Amounting to Rs. 729.50 Crores, approved by shareholder.
• Details of transactions with related parties are disclosed in Note 33, including purchases, sales, recovery/reimbursement of expenses, business process outsourcing expenses, royalty, and interest income.

Subsequent Events #

• The Board of Directors recommended a final dividend of ’ 95 per equity share on August 28, 2024, subject to shareholder approval.

Analysis of Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The unqualified audit opinion suggests a high level of accounting quality. However, the observation of periodic only backup of accounting data until December 17, 2023 and that SOC reports for audit trail records were not available for full year raises a minor concern about data integrity.
• Regulatory Risk: The Company faces regulatory risk primarily related to pending tax litigations. The contingent liabilities for tax matters are significant, indicating potential financial impact if the outcomes are unfavorable. The delay in transferring funds to the IEPF, even though due to technical issues, needs to be noted. The non-daily backup of books before December 18, 2023, and the missing SOC reports for complete financial year highlight a compliance gap.