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Notes to Accounts of Gillette India Ltd.

Jun 30, 2015

1. CORPORATE INFORMATION

Gillette India Limited ('the Company') is a public company incorporated under the provisions of the Companies Act, 1956. The Company is engaged in manufacturing and selling of branded packaged fast moving consumer goods in the grooming, portable power and oral care businesses. The Company's products are sold through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, department stores and high frequency stores. The Company has its manufacturing locations at Bhiwadi in Rajasthan and Baddi in Himachal Pradesh, apart from third party manufacturing locations spread across India.

2. (a) Contingent Liabilities:

(i) In respect of Income Tax demands for which the company has preferred appeals with appropriate authorities - Rs. 15 162 lakhs (Previous year: Rs. 10 009 lakhs). The contingent liability is in respect of matters related to: Income tax dispute on inventory write-off, allowability of losses carried forward from merged entities and others.

(ii) In respect of Sales Tax matters for which the company has preferred appeals with appropriate authorities - Rs. 3 182 lakhs (Previous year: Rs. 1 397 lakhs). The contingent liability is in respect of matters related to: non submission of "C" Forms/"F" Forms Rs. 2 471 lakhs (Previous year: Rs. 796 lakhs) and others Rs.711 lakhs (Previous year: Rs. 601 lakhs).

(iii) In respect of Excise, Service Tax and Customs matters for which the company has preferred appeals with appropriate authorities - Rs. 24 474 lakhs (Previous year: Rs. 20 816 lakhs). The contingent liabilities are in respect of denial of excise duty benefits at excise exempt location Rs. 20 476 lakhs (Previous year: Rs. 17 337 lakhs) out of which the Company has a right to claim Cenvat credit of Rs. 12 822 lakhs (Previous year: Rs. 8 943 lakhs); denial of Cenvat credit Rs. 55 lakhs (Previous year: Rs. 55 lakhs); Service tax matters Rs. 2 115 lakhs (Previous year: Rs. 1 591 lakhs); Customs valuation disputes Rs. 1 528 lakhs (Previous year: Rs. 1 528 lakhs) and others Rs. 300 lakhs (Previous year: Rs. 305 lakhs).

(iv) In respect of counter guarantees given to banks against guarantees given by banks Rs. 5 496 lakhs (Previous year: Rs. 4 112 lakhs). At the request of the Company, its bankers have issued guarantees to government bodies and third parties for performance obligation under various commercial agreements. The Company has issued counter guarantees to the banks in respect of these guarantees.

(v) in respect of other claims Rs. 714 lakhs (Previous year: Rs. 5 456 lakhs). The Company is a party to various legal proceedings in the normal course of business.

(vi) In respect of Demand raised by Delhi Development Authority towards interest on belated payment of Unearned Increase in respect of leasehold land charges Rs. 3 424 lakhs (Previous year: Rs. 3 424 lakhs).

Future Cash Flow in respect of the above, if any, is determinable only on receipt of judgements/decisions pending with the relevant authorities. The Company does not expect the outcome of matters stated in (i) to (vi) above to have a material adverse effect on the Company's financial condition, results of operations or cash flows.

(b) Commitments:

(i) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs. 71 lakhs (Previous year: Rs. 409 lakhs).

3. The Company had in earlier years filed a writ petition in the High Court of Himachal Pradesh at Shimla challenging the premature withdrawal of Excise duty exemption for packing/repacking activities at its Baddi Manufacturing Facility. The High Court has since passed an order on April 24, 2008 in favour of the Company and has struck down the notification withdrawing the excise exemption. The Excise department has preferred an appeal on October 31, 2009 with the Hon'ble Supreme Court of India against the said order of the High Court. The Company has, as a matter of prudence, created a Contingency Reserve of Rs. 8 850 lakhs (Previous year: Rs. 6 750 lakhs) by way of appropriation of profits to the extent of excise duty payable (net of Cenvat credit) on dispatches made from the Baddi plant. Accordingly, during the current year, profit of Rs. 2 100 lakhs (Previous year: Rs. 1 350 lakhs) have been appropriated. These Reserves will be reviewed as and when this litigation is finally decided.

4. Employee Benefits

The Company has classified the various benefits provided to employees as under:

I. Defined Contribution Plans

(a) Superannuation Fund

(b) State Defined Contribution Plans: Employer's Contribution to Employees' State Insurance

During the year, the Company has recognised the following amounts in the Statement of Profit and Loss:

II. Defined Benefit Plans

a. Gratuity Fund (Funded Scheme): Gratuity is payable to all eligible employees of the Company on Superannuation, death, permanent disablement or resignation in terms of the provisions of the Payment of Gratuity Act or Company's scheme whichever is more beneficial. Benefits would be paid at the time of separation based on the last drawn base salary.

b. Provident Fund (Funded Scheme): Provident Fund for all permanent employees is administered through a trust. The Provident Fund is administered by trustees of an independently constituted common trust recognised by the Income Tax authorities where two other group Companies are also participants. Periodic contributions to the Fund are charged to revenue. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the trust and notified interest rate by the Government. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.

c. Post Retirement Medical Benefit (PRMB) (Unfunded Scheme): Under this scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

d. Compensated absences for Plant technicians (Unfunded Scheme): The Company provides for encashment of leave on termination/retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year.

5. a) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Gillette Company, USA (TGC) had a "Global Employee Stock Ownership Plan" (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of TGC.

Every employee who opted for the scheme contributed by way of payroll deduction up to a specified percentage (upto 15%) of his gross salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee's contribution (restricted to 2.5% of gross salary). Such contribution is charged to staff cost.

Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with TGC on October 1, 2005, the shares of TGC got delisted from the New York Stock Exchange and the share purchase plan has been adopted by the Procter & Gamble Company, USA.

The shares of TGC (till September 30 2005)/The Procter & Gamble Company, USA are listed with New York Stock Exchange of USA and are purchased on behalf of the employees at market price on the date of purchase. During the year 2180.22 shares (Previous year: 2347.99 shares) were purchased by employees at weighted average fair value of Rs. 5 248.01 (Previous year: Rs. 4 908.51) per share. The Company's contribution during the year on such purchase of shares amounting to Rs. 35 lakhs (Previous year: Rs. 34 lakhs) has been charged under Employee Benefits Expense under Note 21.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Gillette Company, USA (TGC) had an Employees Stock Options Scheme whereby specified employees of its subsidiaries covered by the plan were granted an option to purchase shares of the Parent Company i.e. The Gillette Company, USA at a fixed price (grant price) for a fixed period of time. Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with The Gillette Company, USA on October 1, 2005, the shares of The Gillette Company got delisted from the New York Stock Exchange. Upon this change in control the 2005 Gillette Option award got automatically converted into P&G options at the established conversion ratio of 0.975 shares in the Procter and Gamble Company, USA for every share held in the Gillette Company. The shares of the Gillette Company (till September 30, 2005)/The Procter & Gamble Company, USA were/are listed with New York Stock Exchange of USA. The options were issued to Key Employees of the Company with Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years/5 years and have a 5 years/10 years life cycle.

Stock compensation expenses of Rs. 92 lakhs (Previous year: Rs. 185 lakhs) has been charged under Employee Benefits Expense under Note 21.

6. The Company has taken on lease guesthouses for accommodation of employees and godowns for storage of inventories, with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. Lease payments amounting to Rs. 743 lakhs (Previous year: Rs. 304 lakhs) have been charged to the Statement of Profit and Loss for the year.

7. (a) Reimbursement/(Recovery) of expenses cross charged to related parties include payment/recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreement of the Company with Procter & Gamble Hygiene and Healthcare Limited and Procter & Gamble Home Products Private Limited. (Refer Note 36)

(b) Certain expenses in the nature of employee costs, relocation costs and other expenses are cross charged by the Company to its fellow subsidiaries at actual. Similar expenses incurred by fellow subsidiaries are cross charged to the Company at actual.

8. a) Managerial Remuneration

The computation of managerial remuneration excludes an amount of Rs. 305 lakhs (Previous year: Rs. 137 lakhs) in respect of managerial personnel cross-charged from Procter & Gamble Hygiene and Health Care Limited and Procter & Gamble Home Products Private Limited in terms of common services agreement referred to in Note 35 (a) above.

b) Commission to Non-Executive Directors

During the current year, an aggregate amount of Rs. 44 lakhs has been provided as commission payable to the Non-Executive Directors which is within the overall limits of commission payable -to such directors under Schedule V to the Companies Act, 2013.

For the financial year 2013-14 the aggregate amount of Commission of Rs. 172 lakhs (including service tax of Rs. 19 lakhs) charged and since paid for the year in the Financial Statements, exceeded the maximum amount payable based on 1 % of the net profits of the Company by an amount of Rs. 24 lakhs (including service tax of Rs. 3 lakhs). The said excess amount of Rs. 24 lakhs has since been ratified by the members of the Company. The Company had made an application to the Central Government on January 6, 2014 for waiver of the excess commission; which was rejected. The Company has since recovered the excess amount of Rs. 24 lakhs from the Directors.

9. There are no outstanding derivative instruments as at year end.

Foreign currency exposures that have not been hedged by the company by a derivative instrument or otherwise are given below:

10. Related Party Disclosures

The Group Companies of The Procter & Gamble Company, USA include, among others, Gillette Worldwide Holding LLC; Procter & Gamble India Holding BV; Procter & Gamble Iron Horse Holding BV; Procter & Gamble Eastern Europe LLC; Procter & Gamble Nordic LLC; Procter & Gamble Global Holding Limited; Procter & Gamble Luxembourg Global SARL; Procter & Gamble International SARL; Procter & Gamble India Holdings Inc.; Procter & Gamble International Operations, SA; Gillette Group (Europe) Holdings, BV; Procter & Gamble Canada Holding BV; Procter & Gamble Overseas Canada, BV.

Details of Related parties:

a) Enterprises where control exists:

The Procter and Gamble Company, USA - Ultimate Holding Company The Procter & Gamble India Holdings B.V., Netherlands - Holding Company

11. Discontinuing operations

Consistent with the decision of Procter & Gamble Company U.S.A. to exit the business of Portable Power (Duracell), the Company in July 2015 received intimation that Procter & Gamble International Operations S.A. has decided to terminate the distributor arrangement entered into with the Company. Such termination will result in the Company not being able to act as the distributor of Duracell batteries from January 29, 2016. As a result of such termination, the Company will receive a sum of US $ 10 million (equivalent to Rs. 6 369 lakhs) [Net of tax Rs. 4 165 lakhs] as discontinuation facilitation payment from Procter & Gamble International SARL, Luxemburg in relation to the discontinuation of the Duracell India business.

The Duracell batteries business was a reportable segment under Portable Power segment, and is consequently treated as a discontinuing operation.

12. Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification / disclosure.


Jun 30, 2014

1. CORPORATE INFORMATION

Gillette India Limited (''the Company'') is a public company incorporated under the provisions of the Companies Act, 1956. The Company is engaged in manufacturing and selling of branded packaged fast moving consumer goods in the grooming, portable power and oral care businesses. The Company''s products are sold through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, department stores and high frequency stores. The Company has its manufacturing locations at Bhiwadi in Rajasthan and Baddi in Himachal Pradesh, apart from third party manufacturing locations spread across India.

2. a) Contingent Liabilities:

i) In respect of Income Tax demands for which the company has preferred appeals with appropriate authorities — Rs. 10 009 lakhs (Previous year: Rs. 4 160 lakhs). The contingent liability is in respect of matters related to: Income tax dispute on inventory write-off, allowability of losses carried forward from merged entities and others.

ii) In respect of Sales tax matters for which the company has preferred appeals with appropriate authorities — Rs. 1 397 lakhs (Previous Year: Rs. 1 135 lakhs). The contingent liability is in respect of matters related to: non submission of "C" Forms / "F" Forms Rs. 796 lakhs (Previous Year: Rs. 585 lakhs) and others Rs. 601 lakhs (Previous Year: Rs. 550 lakhs).

iii) In respect of Excise, Service Tax and Customs matters for which the company has preferred appeals with appropriate authorities — Rs. 20 816 lakhs (Previous Year: Rs. 16 292 lakhs). The contingent liabilities are in respect of denial of excise duty benefits at excise exempt location Rs. 17 337 lakhs (Previous Year: Rs. 9 943 lakhs) out of which the Company has a right to claim Cenvat credit of Rs. 8 943 lakhs (Previous Year: Rs. 6 017 lakhs); denial of Cenvat credit Rs. 55 lakhs (Previous Year: Rs. 3 161 lakhs); service tax matters Rs. 1 591 lakhs (Previous year: Rs. 1 361 lakhs); Customs valuation disputes Rs. 1 528 lakhs (Previous Year: Rs. 1 528 lakhs) and others Rs. 305 lakhs (Previous Year: Rs. 299 lakhs).

iv) In respect of counter guarantees given to bank against guarantees given by bank Rs. 4 112 lakhs (Previous Year: Rs. 3 291 lakhs). At the request of the Company, its bankers have issued guarantees to government bodies and third parties for performance obligation under various commercial agreements. The Company has issued counter guarantees to the banks in respect of these guarantees.

v) In respect of other claims Rs. 5 456 lakhs (Previous Year: Rs. 135 lakhs). The Company is a party to various legal proceedings in the normal course of business.

vi) In respect of Demand raised by Delhi Development Authority towards interest on belated payment of Unearned Increase in respect of leasehold land charges Rs. 3 424 lakhs (Previous Year: Rs. 3 424 lakhs).

Future Cash Flow in respect of the above, if any, is determinable only on receipt of judgements / decisions pending with the relevant authorities. The Company does not expect the outcome of matters stated in (i) to (vi) above to have a material adverse effect on the Company''s financial condition, results of operations or cash flows.

b) Commitments:

i) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs. 409 lakhs (Previous year: Rs. 159 lakhs). ii) Other commitments of Rs. Nil (Previous year: Rs. 50 lakhs) (Payable to a Contract Manufacturer towards commitment charges).

3. The Company had in earlier years filed a writ petition in the High Court of Himachal Pradesh at Shimla challenging the premature withdrawal of Excise duty exemption for packing / repacking activities at its Baddi Manufacturing Facility. The High Court has since passed an order on April 24, 2008 in favour of your Company and has struck down the notification withdrawing the excise exemption. The Excise department has preferred an appeal on October 31, 2009 with the Hon''ble Supreme Court of India against the said order of the High Court. The Company has, as a matter of prudence, created a Contingency Reserve of Rs. 6 750 lakhs (Previous Year: Rs. 5 400 lakhs) by way of appropriation of profits to the extent of excise duty payable (net of Cenvat credit) on dispatches made from the Baddi plant. Accordingly, during the current year, profit of Rs. 1 350 lakhs (Previous Year: Rs. 1 250 lakhs) have been appropriated. These Reserves will be reviewed as and when this litigation is finally decided.

4. Employee Benefits

The company has classified the various benefits provided to employees as under:

I. Defined Contribution Plans

a) Superannuation Fund

b) State Defined Contribution Plans: Employer''s Contribution to Employees'' State Insurance

The above amounts are included in Contribution to Provident and other Funds under Employee Benefit Expenses (Refer Note 21)

II. Defined Benefit Plans

a. Gratuity Fund (Funded Scheme): Gratuity is payable to all eligible employees of the Company on Superannuation, death, permanent disablement or resignation in terms of the provisions of the Payment of Gratuity Act or Company''s scheme whichever is more beneficial. Benefits would be paid at the time of separation based on the last drawn base salary.

b. Provident Fund (Funded Scheme): Provident Fund for all permanent employees is administered through a trust. The Provident Fund is administered by trustees of an independently constituted common trust recognised by the Income Tax authorities where two other group Companies are also participants. Periodic contributions to the Fund are charged to revenue. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the trust and notified interest rate by the Government. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.

c. Post Retirement Medical Benefit (PRMB) (Unfunded Scheme): Under this scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

d. Compensated absences for Plant technicians (Unfunded Scheme): The Company provides for encashment of leave on termination / retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year.

F) Category of Plan Assets

The Company''s Plan Assets in respect of Gratuity, alongwith two other group companies, are funded through the group scheme of the Life Insurance Corporation of India.

5. a) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Gillette Company, USA (TGC) had a "Global Employee Stock Ownership Plan" (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of TGC.

Every employee who opted for the scheme contributed by way of payroll deduction up to a specified percentage (upto 15%) of his gross salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee''s contribution (restricted to 2.5% of gross salary). Such contribution is charged to staff cost.

Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with TGC on October 1, 2005, the shares of TGC got delisted from the New York Stock Exchange and the share purchase plan has been adopted by the Procter & Gamble Company, USA.

The shares of TGC (till September 30 2005) / The Procter & Gamble Company, USA are listed with New York Stock Exchange of USA and are purchased on behalf of the employees at market price on the date of purchase. During the year 2347.99 shares (Previous year: 2326.78 shares) were purchased by employees at weighted average fair value of Rs. 4 908.51 (Previous year: Rs. 3 997.10) per share. The Company''s contribution during the year on such purchase of shares amounting to Rs. 34 lakhs (Previous year: Rs. 18 lakhs) has been charged under Employee Benefit Expenses under Note 21.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Gillette Company, USA (TGC) had an Employees Stock Options Scheme whereby specified employees of its subsidiaries covered by the plan were granted an option to purchase shares of the Parent Company i.e. The Gillette Company, USA at a fixed price (grant price) for a fixed period of time. Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with The Gillette Company, USA on October 1, 2005, the shares of The Gillette Company got delisted from the New York Stock Exchange. Upon this change in control the 2005 Gillette Option award got automatically converted into P&G options at the established conversion ratio of 0.975 shares in the Procter and Gamble Company, USA for every share held in the Gillette Company. The shares of the Gillette Company (till September 30, 2005) / The Procter & Gamble Company, USA were / are listed with New York Stock Exchange of USA. The options were issued to Key Employees of the Company with Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years / 5 years and have a 5 years / 10 years life cycle.

Stock compensation expenses of Rs. 185 lakhs (Previous year: Rs. 83 lakhs) has been charged under Employee Benefit Expenses under Note 21.

6. The Company has taken on lease guesthouses for accommodation of employees and with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. Lease payments amounting to Rs. 304 lakhs (Previous Year: Rs. 234 lakhs) have been charged to the Statement of Profit and Loss for the year. There are no ''Non cancellable'' leases.

7. Common service expenses paid / recovered include payment / recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreement of the Company with Procter and Gamble Hygiene and Healthcare Limited and Procter and Gamble Home Products Limited.

8. a) Managerial Remuneration

The computation of managerial remuneration excludes an amount of Rs. 137 lakhs (Previous year Rs. 127 lakhs) in respect of managerial personnel cross-charged from Procter & Gamble Hygiene and Health Care Limited and Procter & Gamble Home Products Limited in terms of common services agreement referred to in Note 35 above.

b) Commission to Non-Executive Directors

During the current year, an aggregate amount of Rs. 80 lakhs has been provided as commission payable to the Non-Executive Directors which is within the overall limits of commission payable to such directors under Schedule XIII to the Companies Act, 1956.

For the financial year 2012-13 the aggregate amount of Commission of Rs. 172 lakhs (including service tax of Rs. 19 lakhs) charged and since paid for the year in the Financial Statements, exceeded the maximum amount payable based on 1% of the net profits of the Company by an amount of Rs. 24 lakhs (including service tax of Rs. 3 lakhs). The said excess amount of Rs. 24 lakhs has since been ratified by the members of the Company. The Company has made an application to the Central Government on January 6, 2014 for waiver of the excess commission; the approval of the Central Government is awaited.

For the financial year 2011-12, the Company had paid commission to Non-Executive Directors amounting to Rs. 160 lakhs, of which an amount of Rs. 38 lakhs (excluding service tax), being amount in excess of 1% of net profits for the year ended June 30, 2012, was ratified by the members of the Company. The Central Government has rejected the Company''s re-application vide letter ref. ROC / CG / Approval / 2013-14 / 230 dated January 27, 2014. The Company has, accordingly, recovered the said excess amount of Rs. 38 lakhs from the Directors during the year.

9. There are no outstanding derivative instruments as at year end.

10. Related Party Disclosures:

The Group Companies of The Procter & Gamble Company, USA include, among others, Gillette Worldwide Holding LLC; Procter & Gamble India Holding BV; Procter & Gamble Iron Horse Holding BV; Procter & Gamble Eastern Europe LLC; Procter & Gamble Nordic LLC; Procter & Gamble Global Holding Limited; Procter & Gamble Luxembourg Global SARL; Procter & Gamble International SARL; Procter & Gamble India Holdings Inc.; Procter & Gamble International Operations, SA; Gillette Group (Europe) Holdings, BV; Procter & Gamble Canada Holding BV; Procter & Gamble Overseas Canada, BV.

Details of Related parties:

a) Enterprises where control exists:

The Procter and Gamble Company, USA - Ultimate Holding Company The Procter & Gamble India Holdings B.V., Netherlands - Holding Company

11. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Jun 30, 2013

1. CORPORATE INFORMATION

Gillette India Limited (''the Company'') is a public company incorporated under the provisions of the Companies Act, 1956. The company is engaged in manufacturing and selling of branded packaged fast moving consumer goods in the grooming, portable power and oral care businesses. The company''s products are sold through retail operations including mass merchandisers, grocery stores, membership club stores, drug stores, department stores and high frequency stores. The Company has its manufacturing locations at Bhiwadi in Rajasthan and Baddi in Himachal Pradesh, apart from third party manufacturing locations spread across India.

2. a) Contingent Liabilities:

i) In respect of Income Tax demands for which the company has preferred appeals with appropriate authorities - Rs. 4 160 lakhs (Previous year: Rs. 5 428 lakhs). The contingent liability is in respect of matters related to: Income tax dispute on inventory write-off allowability of losses carried forward from merged entities and others.

ii) In respect of Sales tax matters for which the company has preferred appeals with appropriate authorities — Rs. 1 135 lakhs (Previous year: Rs. 2 237 lakhs). The contingent liability is in respect of matters related to: non submission of "C" Forms/"F" Forms Rs. 585 lakhs (Previous year: Rs. 1 609 lakhs) and others Rs. 550 lakhs (Previous year: Rs. 629 lakhs).

iii) In respect of Excise, Service Tax and Customs matters for which the company has preferred appeals with appropriate authorities — Rs. 16 292 lakhs (Previous year: Rs. 13 303 lakhs). The contingent liabilities are in respect of denial of excise duty benefits at excise exempt location Rs. 9 943 lakhs (Previous year: Rs. 8 265 lakhs) out of which the Company has a right to claim Cenvat credit ofRs. 6 017 lakhs (Previous year: Rs. 4 993 lakhs); denial of Cenvat credit Rs. 3 161 lakhs (Previous year: Rs. 3 161 lakhs); service tax matters Rs. 1 361 lakhs (Previous year : Rs. 50 lakhs); Customs valuation disputes Rs. 1 528 lakhs (Previous year: Rs. 1 528 lakhs) and others Rs. 299 lakhs (Previous year: Rs. 299 lakhs).

iv) In respect of counter guarantees given to bank against guarantees given by bank Rs. 3 291 lakhs (Previous year: Rs. 1 652 lakhs). At the request of the Company, its bankers have issued guarantees to government bodies and third parties for performance obligation under various commercial agreements. The Company has issued counter guarantees to the banks in respect of these guarantees.

v) In respect of other claims Rs. 135 lakhs (Previous year: Rs. 382 lakhs). The Company is a party to various legal proceedings in the normal course of business.

vi) In respect of Demand raised by Delhi Development Authority towards interest on belated payment of Unearned Increase in respect of leasehold land charges Rs. 3 424 lakhs (Previous year: Rs. 395 lakhs).

vii) Other commitments of Rs. 50 lakhs (Previous year: Rs. 450 lakhs) (Payable to a Contract Manufacturer towards commitment charges).

Future Cash Flow in respect of the above, if any, is determinable only on receipt of judgements/decisions pending w ith the relevant authorities. The Company does not expect the outcome of matters stated in (i) to (vi) above to have a material adverse effect on the Company''s financial condition, results of operations or cash flows.

b) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs. 159 lakhs (Previous year: Rs. 104 lakhs).

3. As informed in the previous Financial Statements, the Company had filed a writ petition in the High Court of Himachal Pradesh at Shimla challenging the premature withdrawal of Excise duty exemption for packing/repacking activities at its Baddi Manufacturing Facility. The High Court has since passed an order on April 24, 2008 in favour of your company and has struck down the notification withdrawing the excise exemption. The Excise department has preferred an appeal on October 31, 2009 with the Hon''ble Supreme Court of India against the said order of the High Court. The Company has as a matter of prudence, created a Contingency Reserve ofRs. 5 400 lakhs (Previous year: Rs. 4 150 lakhs) by way of appropriation of profits to the extent of excise duty payable (net of C''envat credit) on dispatches made from the Baddi plant. Accordingly during the current year profit ofRs. 1 250 lakhs (Previous year: Rs. 1 150 lakhs) have been appropriated. These Reserves will be reviewed as and when this litigation is finally decided.

4. Kmployee Benefits

The Company has classified the various benefits provided to employees as under:

1. Defined Contribution Plans

a) Superannuation Fund .

b) State Defined Contribution Plans: Employer''s Contribution to Employees'' State Insurance

During the year, the Company has recognized the following amounts in the Statement of Profit and Loss:

II. Defined Benefit Plans

a. Gratuity Fund (Funded Scheme): Gratuity is payable to all eligible employees of the Company on Superannuation, death, permanent disablement or resignation in terms of the provisions of the Payment of Gratuity Act or Company''s scheme whichever is more beneficial. Benefits would be paid at the time of separation based on the last drawn base salary.

b. Provident Fund (Funded Scheme): Provident Fund for all permanent employees is administered through a trust. The Provident Fund is administered by trustees of an independently constituted common trust recognised by the Income Tax authorities where two other group Companies are also participants. Periodic contributions to the Fund are charged to revenue. The Company has an obligation to make good the shortfall, if any. between the return from the investment of the trust and notified interest rate by the Government. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of sendee.

c. Post Retirement Medical Benefit (PRMB) (Non-funded Scheme): Under this scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

5. a) Global Employee Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Gillette Company, USA (TGC) had a "Global Employee Stock Ownership Plan" (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of TGC.

Every employee who opted for the scheme contributed by way of payroll deduction up to a specified percentage (upto 15%) of his base salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee''s contribution (restricted to 2.5% of base salary). Such contribution is charged to staff cost.

Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with TGC on October 1, 2005, the shares of TGC got delisted from the New York Stock Exchange and the share purchase plan has been adopted by the Procter & Gamble Company, USA.

The shares of TGC (till September 30 2005) / The Procter & Gamble Company, USA are listed with New York Stock

Exchange of USA and are purchased on behalf of the employees at market price on the date of purchase. During the year 2326.78 shares (Previous year: 2 478.13 shares) were purchased by employees at weighted average fair value ofRs. 3 997.10 (Previous year: Rs. 3 220.89) per share. The Company''s contribution during the year on such purchase of shares amounting to Rs. 18 lakhs (Previous year: Rs. 25 lakhs) has been charged under Employee Benefit Expenses under Note 21.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Gillette Company, USA (TGC) had an Employees Stock Options Scheme whereby specified employees of its subsidiaries covered by the plan were granted an option to purchase shares of the Parent Company i.e. The Gillette Company, USA at a fixed price (grant price) for a fixed period of time. Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company. USA) with The Gillette Company, USA on October 1, 2005, the shares of The Gillette Company got delisted from the New York Stock Exchange. Upon this change in control the 2005 Gillette Option award got automatically converted into P&G options at the established conversion ratio of 0.975 shares in the Procter and Gamble Company, USA for every share held in the Gillette Company. The shares of the Gillette Company (till September 30, 2005) / The Procter & Gamble Company, USA were/are listed with New York Stock Exchange of USA. The options were issued to Key Employees of the Company with Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years/5 years and have a 5 years /10 years life cycle.

Stock compensation expenses ofRs. 83 lakhs (Previous year: Rs. 546 lakhs) has been charged under Employee Benefit Expenses under Note 21.

6. The Company has taken on lease guesthouses for accommodation of employees and godowns for storage of inventories, with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. Lease payments amounting to Rs. 234 lakhs (Previous year: Rs. 218 lakhs) have been charged to the Statement of Profit and Loss for the year. There are no ''Non cancellable'' leases.

7. Common service expenses paid/recovered include payment/recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreement of the Company with Procter and Gamble Hygiene and Health Care Limited and Procter and Gamble Home Products Limited.

8. a) Re-appointment of Managing Director

Mr. S. Khosla has been re-appointed by the Members of the Company as the Managing Director of the Company vide resolution dated December 11, 2012 and the approval from the Ministry of Corporate Affairs vide letter no. SRN B41469586/4/2012 - CL.VII dated January 10, 2013 pursuant to the provisions of Section 316 (4) of the Companies Act, 1956.

b) Commission to Non-Executive Directors

During the current year, an aggregate amount ofRs. 80 lakhs has been paid as commission to the Non-Executive Directors which is within the overall limits of commission payable to such directors under schedule XIII to the Companies Act, 1956. The said payment constitutes 53% of the aggregate amount ofRs. 153 lakhs (excluding service tax of Rs. 19 lakhs) which is payable to the Non-Executive Directors and is provided for in the financial statements.

The aggregate amount of Commission ofRs. 172 lakhs (including service tax ofRs. 19 lakhs) payable and charged for the year in the financial statements as is stated above, exceeds the maximum amount payable based on 1 % of the net profits of the Company amounting to Rs. 148 lakhs (as per the computation below) for the year ended June 30, 2013, by an amount ofRs. 24 lakhs (including service tax of Rs. 3 lakhs). The said excess amount of Rs. 24 lakhs which is provided but not paid, is subject to by approval of the Members of the Company by way of a special resolution at the ensuing 29th Annual General Meeting of the Company, and the Central Government.

During the previous year ended June 30, 2012 also, the Company had paid commission to Non-Executive Directors amounting to Rs. 160 lakhs, of which an amount ofRs. 48 lakhs (including service tax ofRs. 10 lakhs), being amount in excess of 1% of net profits for the year ended June 30, 2012. This was paid during the current year and the same was ratified by the members at the 28th Annual General Meeting of the Company. The Company has made an application to the Central Government on January 3, 2013 for waiver of the excess commission, which is as yet pending for approval by the Central Government.

9. Related Party Disclosures:

The Group Companies of The Procter & Gamble Company, USA include, among others, Gillette Worldwide Holding LLC; Procter & Gamble India Holding BV; Procter & Gamble Iron Horse Holding BV; Procter & Gamble Eastern Europe LLC; Procter & Gamble Nordic LLC; Procter & Gamble Global Holding Limited; Procter & Gamble Luxembourg Global SARL; Procter & Gamble International SARL; Procter & Gamble India Holdings Inc.; Procter & Gamble International Operations, SA; Gillette Group (Europe) Holdings, BV; Procter & Gamble Canada Holding BV; Procter & Gamble Overseas Canada, BV.

Details of Related parties:

a) Parties where control exists:

The Procter and Gamble Company, USA - Ultimate Holding Company -

The Procter & Gamble India Holdings B.V. - Holding Company

b) Other related parties with whom transactions have taken place during the year:

i) Fellow Subsidiaries:

Procter & Gamble Bangladesh Pvt. Ltd Procter & Gamble Hygiene & Healthcare Limited

Gillette Diversified Operations Private Limited Gillette UK Limited

Gillette Products Private Limited The Procter & Gamble Distributing LLC

Mining Consultants (India) Private Limited The Gillette Company, USA

Wella India Haircosmetics Private Limited P&G International Operations SA - ROHQ

Procter & Gamble International Operations SA, Ceemea Div. Nexus Mercantile Private Limited

Gillette (Shanghai) Ltd The Procter & Gamble US Business Services

Procter & Gamble Do Brasil S/A Company

Procter & Gamble Trading (Thailand) Ltd. Procter & Gamble (Guangzhou) Ltd.

Procter & Gamble International Operations SA, Procter & Gamble Home Products Limited

Singapore Branch P&G Europe S.A.,Singapore Branch

Gillette Poland International Sp. Z O.O. Petersburg Products International Zao.

Procter & Gamble (China) Sales Co., Ltd. Procter & Gamble Productions, Inc.

Procter & Gamble International Operations SA PT Procter & Gamble Home Products Indonesia

ii) Investing company in respect of which the Company is an associate:

Wella India Haircosmetics Private Limited ("Wella") (Formerly known as Gillette Group India Private Limited) #

# Also being a fellow subsidiary Company

iii) Key Managerial Personnel of the Company

Mr. Shantanu Khosla Managing Director

Note: Related parties have been identified by the management

10. Excise duty deducted from turnover represents amount of excise duty collected by the company on sale of goods. Excise duty shown under Note 23 - Other Expenses represents difference in amount of excise duty on closing stock and opening stock of finished goods.

11. Salaries and Wages includes Rs. Nil (Previous year: Rs. 45 lakhs) for expenditure on Voluntary Retirement Scheme.

12. No borrowing costs have been capitalised during the year.

13. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification/disclosure.


Jun 30, 2011

1. (a) Contingent Liabilities:

(i) In respect of Income Tax demands for which the company has preferred appeals with appropriate authorities - Rs.13 42 95 184 (Previous year : Rs.12 99 57 557). The contingent liability is in respect of matters related to: Income tax dispute on inventory write-off, allowability of losses carried forward from merged entities and others.

(ii) In respect of Sales tax matters for which the Company has preferred appeals with appropriate authorities - Rs.22 16 36 473 (Previous year : Rs.22 70 19 399). The contingent liability is in respect of matters related to: non submission of "C" Forms / "F" Forms Rs.19 37 99 184 (Previous year : Rs. 18 21 19 292) and Interest demand on VAT rate difference Rs.8 831 (Previous year : Rs.56 85 537) and others Rs.2 78 28 458 (Previous year : Rs.3 92 14 570).

(iii) In respect of Excise and Customs matters for which the company has preferred appeals with appropriate authorities - Rs. 1 04 98 83 545 (Previous year :Rs. 1 92 44 66 782). The contingent liabilities are in respect of denial of excise duty benefits at excise exempt location Rs.51 15 19 503 (Previous year : Rs.1 51 26 75 466), denial of Cenvat credit Rs.35 07 41 809 (Previous year : Rs.22 34 04 285), Customs valuation disputes Rs. 15 28 06 226 (Previous year :Rs. 15 28 06 226) and others Rs.3 48 16 007 (Previous year : Rs.3 55 80 805).

(iv) In respect of counter guarantees given to bank against guarantees given by bank - Rs. 11 99 29 266 (Previous year : Rs.6 86 85 067). At the request of the Company, its banks have issued guarantees in the event of the Company failing to fulfil its performance obligation under various commercial agreements. The Company has issued counter guarantees to the banks in respect of these guarantees.

(v) In respect of other claims - Rs.2 00 31 519 (Previous year : Rs. 1 53 00 000).

The Company is a party to various legal proceedings in the normal course of business. The Company does not expect the outcome of these proceedings to have a material adverse effect on the Company's financial conditions, results of operations or cash flows.

(vi) In respect of Demand raised by Delhi Development Authority towards interest on belated payment of Unearned Increase in respect of leasehold land charges Rs.3 94 57 027 (Previous year : Rs.3 94 57 027).

(b) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs.61 02 977 (Previous year : Rs.5 92 63 288).

2. As informed in the last Financial Statements, the Company had filed a writ petition in the High Court of Himachal Pradesh at Shimla challenging the premature withdrawal of Excise duty exemption for packing / repacking activities at its Baddi Manufacturing Facility. The High Court has since passed an order in favour of your company and has struck down the notification withdrawing the excise exemption. The Excise department has preferred an appeal with the Hon'ble Supreme Court of India against the said order of the High Court. The company has as a matter of prudence, created a Contingency Reserve of Rs.30 00 00 000 (Previous year : Rs.21 00 00 000) by way of appropriation of profits to the extent of excise duty payable on despatches made from the Baddi plant. Accordingly during the current year profit of Rs.9 00 00 000 (Previous year : Rs.6 00 00 000) have been appropriated. These Reserves will be reviewed as and when this litigation is finally decided.

3. Common service expenses paid/recovered include payment/recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreement of the Company with Procter and Gamble Hygiene and Healthcare Limited and Procter and Gamble Home Products Limited.

4. The Company has taken on lease guesthouses for accommodation of employees and godowns for storage of inventories, with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. Lease payments amounting to Rs. 1 48 96 204 (Previous year :Rs. 1 90 69 601) have been charged to the Profit and Loss Account for the year. There are no 'Non-cancellable' leases.

30th June 2009. Accordingly, additional commission of Rs.20 00 000 was paid during the previous year. Further w.e.f. 1st July 2009, the commission of Mr. S. K. Poddar is Rs. 1 00 00 000 per annum.

The commission to Non-Executive Directors of Rs. 1 60 00 000 paid during the year is in excess of limits specified in Section 309 (4) of the Companies Act, 1956 by Rs.21 40 965. The said excess amount of Rs.21 40 965 is considered as an advance held under trust for the company by the respective non-executive directors (Refer note 13(b) below). The company is seeking the approval of the shareholders and of the Central Government to enable the non-executive Directors to retain the amounts in excess of the limit of 1%.

II. Defined Benefit Plans

(a) Gratuity Fund (Funded Scheme): Gratuity is payable to all eligible employees of the Company on Superannuation, death, permanent disablement or resignation in terms of the provisions of the Payment of Gratuity Act or Company's scheme whichever is more beneficial. Benefits would be paid at the time of separation based on the last drawn base salary.

(b) Providend Fund (Funded Scheme): Provident Fund for all permanent employees is administered through a trust. The Provident Fund is administered by trustees of an independently constituted common trust recognised by the Income Tax authorities where two other group Companies are also participants. Periodic contributions to the Fund are charged to revenue. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the trust and notified interest rate by the Government. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.

(c) Post Retirement Medical Benefit (PRMB) (Non-funded Scheme): Under this scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

(d) Compensated absences for Bhiwadi Plant employees (Non-funded Scheme): Eligible employees can carry forward and encash leave as per Company policy.

(E) Category of Plan Assets

The Company's Plan Assets in respect of Gratuity, alongwith two other group companies, are funded through the group scheme of the Life Insurance Corporation of India.

9. Disclosures under the Micro, Small and Medium Enterprises Development Act, 2006:

(a) There were no amounts due and outstanding to suppliers covered under the Micro, Small and Medium Enterprises Development Act, 2006 as at the end of the current year and previous year on account of Principal and Interest.

(b) No interest was paid during the year and in the previous period.

(c) No interest is payable at the end of the current accounting year and at the end of the previous period other than interest under Micro, Small and Medium Enterprises Development Act, 2006.

(d) No amount of interest was accrued and unpaid at the end of the current accounting year and at the end of the previous period.

The above information and that given in Schedule 10 "Current Liabilities" regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

(b) Directors Loan/Advances

Loans and advances include

- Housing Loans to the directors amounting to Rs.Nil (Previous year : Rs.12 58 132).

The maximum balance outstanding during the year amounted to Rs. 12 58 132 (Previous year : Rs.23 72 153).

- Advances to non-executive directors' amounting to Rs.21 40 965 (Previous year : Rs.Nil)

The maximum balance outstanding during the year amounted to Rs.21 40 965 (Previous year : Rs. Nil).

14. Related Party Disclosures:

The Group Companies of The Procter & Gamble Company, USA include, among others, Gillette Worldwide Holding LLC; Procter & Gamble India Holding BV; Procter & Gamble Iron Horse Holding BV; Procter & Gamble Eastern Europe LLC; Procter & Gamble Nordic LLC; Procter & Gamble Global Holding Limited; Procter & Gamble Luxembourg Global SARL; Procter & Gamble International SARL; Procter & Gamble India Holdings Inc.; Procter & Gamble International Operations, SA; Gillette Group (Europe) Holdings, BV; Procter & Gamble Canada Holding BV; Procter & Gamble Overseas Canada, BV.

(a) Parties where control exists:

The Procter & Gamble Company, USA - Ultimate Holding Company The Procter & Gamble India Holdings B.V. - Holding Company

(b) Other related parties with whom transactions have taken place during the year

(i) Fellow Subsidiaries:

Wella India Haircosmetics Private Limited (Formerly

known as Gillette Group India Private Limited)

Gillette Diversified Operations Private Limited

Gillette Products Private Limited

Mining Consultants (India) Private Limited

Nexus Mercantile Private Limited

Gillette UK Limited

Procter & Gamble Trading (Thailand) Ltd.

Gillette Shanghai Limited

The Procter & Gamble Distributing LLC

Procter & Gamble International Operations SA SG Branch (Formerly known as Procter & Gamble International Operations Pte. Ltd.)

Procter & Gamble Lanka Private Limited

Procter & Gamble Australia Pty Ltd.

Procter & Gamble Distributing (Philipines) Inc.

Procter & Gamble US Business Services Co.

P&G Ceemea

Procter & Gamble Home Products Limited

Procter & Gamble Hygiene & Healthcare Limited

The Gillette Company, USA

Procter & Gamble International Operations SA

Procter & Gamble DO Brasil SA

P&G Europe S.A., SG Branch (Formerly known as

Procter & Gamble Asia Pte. Ltd.)

P&G Int'L Ops SA-ROHQ (Formerly known as

Procter & Gamble Asia Pte. Ltd. (MROH))

Procter & Gamble Bangladesh Pvt. Ltd.

(ii) Investing company in respect of which the Company is an associate:

# Also being a fellow subsidiary Company

Wella India Haircosmetics Private Limited ("Wella")

(Formerly known as Gillette Group India Private Limited (GGIPL)) #

(iii) Key Management Personnel

Mr. Shantanu Khosla Managing Director

Mr. Subhash Bansal (till May 31, 2011) Whole-time Executive Director

All the employees of the Company including its Managing Director are given the right to purchase shares of the ultimate holding company - The Procter & Gamble Company, USA under its Employees Stock Option Plan.

Under the above plan, Mr. Subhash Bansal has been granted the right to purchase Nil shares (Previous year : 2600 shares) during the year.

15. Global Employee Stock Ownership Plan (Stocks of the Parent Company)

The Gillette Company, USA (TGC) had a "Global Employee Stock Ownership Plan" (employee share purchase plan) whereby all permanent employees of the Company had been given a right to purchase shares of TGC.

Every employee who opted for the scheme contributed up to a specified percentage (upto 10%) of his gross salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee's contribution (restricted to 1% of gross salary). Such contribution is charged to staff cost.

Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with TGC on October 1, 2005, the shares of TGC got delisted from the New York Stock Exchange and the share purchase plan has been adopted by the Procter & Gamble Company, USA.

The shares of TGC (till 30 September 2005)/The Procter & Gamble Company, USA are listed with New York Stock Exchange of USA and are purchased on behalf of the employees at market price on the date of purchase.

During the year 2 457.29 shares (Previous year : 2 161.60 shares) were purchased by employees at weighted average fair value of Rs.2 841.87 (Previous year : Rs.2 778.56) per share.

The Company's contribution during the year on such purchase of shares amounting to Rs.21 22 809 (Previous year : Rs. 17 93 395) has been charged under Payment to and Provisions for employees under Schedule 14.

16. Employees Stock Options Plan (Stocks of the Parent Company)

The Gillette Company, USA (TGC) had an Employees Stock Options Scheme whereby employees of the Company covered by the plan were granted an option to purchase shares of the Ultimate Holding Company i.e. The Gillette Company, USA at a fixed price (grant price) for a fixed period of time.

Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with The Gillette Company, USA on October 1, 2005, the shares of The Gillette Company got delisted from the New York Stock Exchange. Upon this change in control the 2005 Gillette Option award got automatically converted into P&G options at the established conversion ratio of 0.975 shares in the Procter and Gamble Company, USA for every share held in the Gillette Company.

The shares of the Gillette Company (till September 30, 2005)/The Procter & Gamble Company, USA were/are listed with New York Stock Exchange of USA. The options were issued to Key Employees of the Company with Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years/5 years and have a 10 years life cycle.

Stock compensation expenses of Rs.6 63 55 981 (Previous year : Rs.66 56 778) has been charged under Payment to and Provisions for employees under Schedule 14.

18. Excise duty deducted from turnover represents amount of excise duty collected by the company on sale of goods. Excise duty shown under Schedule 15 - operating and other expenses represents difference in amount of excise duty on closing stock and opening stock of finished goods.

19. Salaries, wages and bonus under Schedule 15 includes Rs.Nil (Previous year : Rs.1 32 58 358) for expenditure on Voluntary Retirement Scheme.

20. Professional fees in Schedule 15 (Operating and other expenses) includes an amount of Rs. 1 10 300 (Previous year: Rs.1 10 300) on account of fees to Cost Auditors.

21. No borrowing costs have been capitalised during the year.

22. Previous year's figures have been rearranged/regrouped wherever necessary.














Jun 30, 2010

1. (a) Contingent Liabilities:

(i) In respect of Income Tax demands for which the company has preferred appeals with appropriate authorities - Rs. 12 99 57 557 (Previous year : Rs.11 21 29 632). The contingent liability is in respect of matters related to Income tax dispute on inventory write-off, allowability of losses carried forward from merged entities and others.

(ii) In respect of Sales tax matters for which the company has preferred appeals with appropriate authorities - Rs.22 70 19 399 (Previous year : Rs.13 50 65 417). The contingent liability is in respect of matters related to: non-submission of "C" Forms/"F" Forms Rs.18 21 19 292 (Previous year : Rs.12 85 81 880) and Interest demand on VAT rate difference Rs.56 85 537 (Previous year : Rs.56 85 537) and others Rs. 3 92 14 570 (Previous year : Rs.7 98 000).

(iii) In respect of Excise and Customs matters for which the company has preferred appeals with appropriate authorities - Rs.1 92 44 66 782 (Previous year : Rs.1 67 99 51 934). The contingent liabilities are in respect of denial of excise duty benefits at excise exempt location Rs. 1 51 26 75 466 (Previous year: Rs. 1 26 76 87 071); denial of Cenvat credit Rs.22 34 04 285 (Previous year:Rs.22 34 04 285), Customs valuation disputes Rs. 15 28 06 226 (Previous year : Rs. 15 28 06 226) and others Rs.3 55 80 805 (Previous year : Rs.3 60 54 352).

(iv) In respect of counter guarantees given to bank against guarantees given by bank - Rs.6 86 85 067 (Previous year : Rs.7 10 73 988). At the request of the Company, its banks have issued guarantees in the event of the Company failing to fulfil its performance obligation under various commercial agreements. The Company has issued counter guarantees to the banks in respect of these guarantees.

(v) In respect of other claims - Rs. 1 53 00 000 (Previous year : Rs. 1 53 00 000). The Company is a party to various legal proceedings in the normal course of business. The Company does not expect the outcome of these proceedings to have a material adverse effect on the Companys financial conditions, results of operations or cash flows.

(vi) In respect of Demand raised by Delhi Development Authority towards interest on belated payment of Unearned Increase in respect of leasehold land charges Rs.3 94 57 027 (Previous year : Rs.Nil).

(b) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs.5 92 63 288 (Previous year : Rs.51 72 799).

2. As informed in the last Financial Statements, the Company had filed a writ petition in the High Court of Himachal Pradesh at Shimla challenging the premature withdrawal of Excise duty exemption for packing/repacking activities at its Baddi Manufacturing Facility. The High Court has since passed an order in favour of your company and has struck down the notification withdrawing the excise exemption. The Excise department has preferred an appeal with the Honble Supreme Court of India against the said order of the High Court. The company has as a matter of prudence, created a Contingency Reserve of Rs.6 00 00 000 (Previous year : Rs.9 00 00 000) by way of appropriation of profits to the extent of excise duty payable on despatches made from the Baddi plant. These Reserves will be reviewed as and when this litigation is finally decided.

3. During the previous year the Company has changed the method of valuation of raw materials (excluding bulk raw materials), stores and spare parts and traded finished goods from First In First Out basis to Weighted Average basis. As a result of the said change, the inventory as at June 30, 2009 was higher by Rs.22 50 927 and consequently the consumption was lower by Rs.22 50 927 and profits for that year were higher by Rs.22 50 927.

4. Common service expenses paid/recovered include payment/recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreement of the Company with Procter and Gamble Hygiene and Health Care Limited and Procter and Gamble Home Products Limited.

5. The Company has taken on lease for guesthouses, accommodation for employees and godowns for storage of inventories, with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. Lease payments amounting to Rs. 1 90 69 601 (Previous year : Rs. 1 25 14 117) have been charged to the Profit and Loss Account for the year. There are no Non-cancellable leases.

6. Employee Benefits

The Company has classified the various benefits provided to employees as under:

II. Defined Benefit Plans

(a) Gratuity Fund (Funded Scheme): Gratuity is payable to all eligible employees of the Company on Superannuation, death, permanent disablement or resignation in terms of the provisions of the Payment of Gratuity Act or Companys scheme whichever is more beneficial. Benefits would be paid at the time of separation based on the last drawn base salary.

(b) Provident Fund (Funded Scheme): Provident Fund for all permanent employees is administered through a trust. The Provident Fund is administered by trustees of an independently constituted common trust recognised by the Income Tax authorities where two other group Companies are also participants. Periodic contributions to the Fund are charged to revenue. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the trust and notified interest rate by the Government. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.

(c) Post Retirement Medical Benefit (PRMB) (Non-funded Scheme): Under this scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

(d) Compensated absences for Bhiwadi Plant employees (Non-funded Scheme): Eligible employees can carry forward and encash leave as per Company policy.

7. Disclosures under the Micro, Small and Medium Enterprises Development Act, 2006:

(a) There were no amounts due and outstanding to suppliers covered under the Micro, Small and Medium Enterprises Development Act, 2006 as at the end of the current year and previous year on account of Principal and Interest.

(b) No interest was paid during the year and in the previous period.

(c) No interest is payable at the end of the current accounting year and at the end of the previous period other than interest under Micro, Small and Medium Enterprises Development Act, 2006.

(d) No amount of interest was accrued and unpaid at the end of the current accounting year and at the end of the previous period.

The above information and that given in Schedule 10 "Current Liabilities" regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

8. Related Party Disclosures:

The Group Companies of The Procter & Gamble Company, USA include, among others, Gillette Worldwide Holding LLC; Procter & Gamble India Holding BV; Procter & Gamble Iron Horse Holding BV; Procter & Gamble Eastern Europe LLC; Procter & Gamble Nordic LLC; Procter & Gamble Global Holding Limited; Procter & Gamble Luxembourg Global SARL; Procter & Gamble International SARL; Procter & Gamble India Holdings Inc.; Procter & Gamble International Operations, SA; Gillette Group (Europe) Holdings, BV; Procter & Gamble Canada Holding BV; Procter & Gamble Overseas Canada, BV.

(a) Parties where control exists:

The Procter & Gamble India Holdings B.V. - Holding Company The Procter & Gamble Company, USA - Ultimate Holding Company

9. Global Employee Stock Ownership Plan (Stocks of the Parent Company)

The Gillette Company, USA (TGC) had a "Global Employee Stock Ownership Plan" (employee share purchase plan) whereby all permanent employees of the Company had been given a right to purchase shares of TGC.

Every employee who opted for the scheme contributed up to a specified percentage (upto 10%) of his gross salary towards purchase of shares on a monthly basis. The Company contributes 50% of employees contribution (restricted to 1% of gross salary). Such contribution is charged to staff cost.

Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with TGC on October 1, 2005, the shares of TGC got delisted from the New York Stock Exchange and the share purchase plan has been adopted by the Procter & Gamble Company, USA. The shares of TGC (till 30 September 2005)/The Procter & Gamble Company, USA are listed with New York Stock Exchange of USA and are purchased on behalf of the employees at market price on the date of purchase. During the year shares 2 161.60 shares (Previous year : 2 063 shares) were purchased by employees at weighted average fair value of Rs.2 778.56 (Previous year : Rs.2 799) per share.

The Companys contribution during the year on such purchase of shares amounting to Rs. 17 93 395 (Previous year : Rs.13 74 350) has been charged to the Profit and Loss Account.

10. Employees Stock Options Plan (Stocks of the Parent Company)

The Gillette Company, USA (TGC) had an Employees Stock Options Scheme whereby employees of the Company covered by the plan were granted an option to purchase shares of the Ultimate Holding Company i.e. The Gillette Company, USA at a fixed price (grant price) for a fixed period of time.

Subsequent to the worldwide merger of Aquarium Acquisition Corporation (wholly owned subsidiary of the Procter & Gamble Company, USA) with The Gillette Company, USA on October 1, 2005, the shares of The Gillette Company got delisted from the New York Stock Exchange. Upon this change in control the 2005 Gillette Option award got automatically converted into P&G options at the established conversion ratio of 0.975 shares in the Procter and Gamble Company, USA for every share held in the Gillette Company.

The shares of the Gillette Company (till September 30, 2005)/The Procter & Gamble Company, USA were/are listed with New York Stock Exchange of USA. The options were issued to Key Employees of the Company with Exercise price equal to the market price of the underlying shares on the date of the grant. Accordingly no stock compensation expenses have been incurred by the Company during the period. The Grants issued are vested after 3 years/5 years and have a 10 years life cycle.

Notes on Segment Information:

(1) Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organisation structure as well as the differential risks and returns of these segments. Business segments have been considered as primary segments.

(2) Segment Revenue, Results and Capital Employed figures include the respective amounts identifiable to each of the segments. Unallocable income/expenses include income/expenses incurred at a corporate level which relate to the company as a whole. Unallocable income/expenses mainly includes income from investment of surplus funds and exchange gain/(loss).

(3) Details of type of products included in each segment: Grooming Blades, Razors and Toiletries Portable Power Batteries

Oral Care Tooth brushes, and Oral Care products

(4) Unallocable Corporate assets include Cash and Bank balances, Debtors and Loans and Advances.

(5) Unallocable Corporate liabilities include Creditors and Provisions.

11. Excise duty deducted from turnover represents amount of excise duty collected by the company on sale of goods. Excise duty shown under Schedule 15 - operation and other expenses represents difference in amount of excise duty on closing stock and opening stock of finished goods.

12. Salaries, wages and bonus under Schedule 15 includes Rs.1 32 58 358 (Previous year : Rs.Nil) for expenditure on Voluntary Retirement Scheme.

13. Professional fees in Schedule 15 (Operating and other expenses) includes an amount ofRs. 1 10 300 (Previous year : Rs. 1 10 300) on account of fees to Cost Auditors.

14. No borrowing costs have been capitalised during the year.

15. Previous years figures have been rearranged/regrouped wherever necessary.

 
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