Mar 31, 2023
2 Critical Estimates and Judgements
(d) Estimated impairment of intangible assets with indefinite useful life
The Intangible assets with indefinite useful life comprises of Trademark and Copyrights
Impairment testing for Intangible assets with indefinite useful life is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount is determined based on the fair value (less) cost of disposal which has been measured using discounted cash flow projections, that require the use of assumptions.
The below intangible assets with indefinite useful life held by the Company, are considered significant in terms of size & sensitivity to assumptions used. No other intangible assets with indefinite useful life are considered significant in this respect.
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Company''s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
The preparation of the financial statements in conformity with GAAP requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. These estimates and associated assumptions are based on historical experience and management''s best knowledge of current events and actions the Company may take in future.
Information about critical estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities are included in the following notes:
(a) Impairment of financial assets (including trade receivable) (Note 27)
(b) Estimation of defined benefit obligations (Note 15)
(c) Estimation of current tax expenses and payable (Note 25)
(d) Estimated impairment of intangible assets with indefinite useful life (Note 5)
(e) Estimation of provisions and contingencies (Note 14 and 31)
(f) Recognition of deferred tax assets including MAT credit (Note 7)
(g) Lease Accounting (Note 3 b)
(h) Impairment of investment in subsidiaries (Note 6 a)
Impairment testing for financial assets (other than trade receivables) is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual financial asset is determined based on value-in-use calculations which requires use of assumptions.
Allowance for doubtful trade receivables represent the estimate of losses that could arise due to inability of the Customer to make payments when due. These estimates are based on the customer ageing, customer category, specific credit circumstances and the historical experience of the company as well as forward looking estimates at the end of each reporting period.
The liabilities of the company arising from employee benefit obligations and the related current service cost, are determined on an actuarial basis using various assumptions. Refer note 15 for significant assumptions used.
The growth rates & margins used to make estimate future performance are based on past performance & our estimates of future growths & margins achievable. Post-tax discount rates reflect specific risks relating to the relevant segments & geographies in which the CGUs operate.
Based on sensitivity analyses performed around the base assumptions, there were no reasonably possible changes in key assumptions that would cause the carrying amount to exceed the recoverable amount.
The Company''s tax charge is the sum of total current and deferred tax charges. Taxes recognized in the financial statements reflect management''s best estimate of the outcome based on the facts known at the balance sheet date. These facts include but are not limited to interpretation of tax laws of various jurisdictions where the company operates. Any difference between the estimates and final tax assessments will impact the income tax as well as the resulting assets and liabilities.
Provisions are liabilities of uncertain amount or timing recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable. Contingent liabilities are possible obligations that may arise from past event whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not fully within the control of the company. The Company exercises judgement and estimates in recognizing the provisions and assessing the exposure to contingent liabilities relating to pending litigations. Judgement is necessary in assessing the likelihood of the success of the pending claim and to quantify the possible range of financial settlement. Due to this inherent uncertainty in the evaluation process, actual losses may be different from originally estimated provision.
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(i) Recognition of MAT credit entitlements:
The credit availed under MAT is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. This requires significant management judgement in determining the expected availment of the credit based on business plans and future cash flows of the Company.
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate.
The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease.
Thediscountrateisgenerallybasedontheincrementalborrowingrate specifictotheleasebeingevaluated orforaportfolioof leases with similar characteristics.
The Company has considered leases with term up to 12 (Twelve) months as short term leases. Also leases where the value of asset is less than H 350,000 have been considered as low value. Such short term and low value leases are accordingly excluded from the scope for the purpose of Ind As 116 reporting.
Impairment testing of investment in subsidiaries is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual investment is determined based on value-in-use calculations which requires use of assumptions.
Estimation of fair value
(iv) The company obtains independent valuations for its investment properties at least annually.
The fair values of investment properties have been determined by a Registered Valuer in terms of Section 247 of the Companies Act, 2013. The Main inputs used are stamp duty ready recknor rates of the location where the properties are situated and other features of the respective property such as the built up area, the age of the property, Estimated future life, structural features e.t.c.
i. During the year ended March 31,2023 following asset held for sale was reclassified from Investment property:
Plant and Machinery - H 1 Crore
Building - H 4 Crores
ii. During the year ended March 31, 2023 following asset held for sale was reclassified from Property, Plant and Equipments:
Building - H 2 Crores
iii. The valuation of assets held for sale of the Company, is determined basis the details obtained from "The Ready Reckoner", location factor and physical verification of the property.
Equity Shares: The authorised share capital of the Company comprises of 150 Crores equity share of H 1 each and 8 Crores equity shares of H 10 each.
Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
Information relating to Marico ESOP 2016 including details of options issued, exercised, forfeited and lapsed during the Financial Year and options outstanding at the end of the reporting period, is set out in note 33 (a).
i. Aggregate of Nil (upto March 31,2022: Nil) Equity shares of H 1 each allotted as fully paid-up bonus , issued in year 2016
ii. Aggregate of 22,19,980 (March 31,2022: 23,16,080) Equity shares allotted under the Employee stock option plan schemes as consideration for services rendered by employees for which only exercise price has been received in cash.
These provisions have not been discounted as it is not practicable for the Company to estimate the timing of the provision utilization and cash outflows, if any, pending resolution.
(a) Provision for disputed indirect taxes mainly pertains to Entry tax dispute in the state of West Bengal, where the Govt of West Bengal has preferred an appeal before Division Bench, Hon''ble Court-Kolkata, which is pending before the Court. The matter is sub judice, it is not practicable to state the timing of the judgement & final outcome. Therefore, The company has retained the provision pending final adjudication of the matter.
(i) Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years and more are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employee''s last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The gratuity plan is funded through gratuity trust and the company makes contributions to the trust.
(ii) Provident fund
Contributions are made to a trust administered by the Company. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of the year and any shortfall in the fund balance maintained by the trust set up by the Company, is additionally provided for. There is no shortfall as at March 31, 2023 and March 31,2022.
(iii) Leave Encashment/Compensated absences.
The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment / availment. The liability is provided based on the number of days of unutilized leave at each Balance Sheet date on the basis of an independent actuarial valuation. Current leave obligations expected to be settled within the next 12 months.
(iv) Share-appreciation rights
In respect of Employee Stock Appreciation Rights (STAR) granted pursuant to the Company''s Employee Stock Appreciation Rights Plan, 2011, the liability is measured, initially and at the end of each reporting period until settled, at the fair value of the share appreciation rights, by applying an option pricing model, (excess of fair value as at the period end over the Grant price) and is recognized as employee compensation cost over the vesting period (refer note 33).
(d) Employee State Insurance Corporation
The Company has recognised H 0 Crore ( H 0 Crore for the year ended March 31, 2022) towards employee state insurance plan in the Statement of Profit and Loss.
(e) Risk exposure (For Gratuity and Provident Fund)
Through its defined benefit plans, the Group is exposed to below risk:
Asset volatility : The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan assets have investments in insurance/equity managed fund, fixed income securities with high grades, public/private sector units and government securities. Hence assets are considered to be secured.
Changes in bond yields : A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans'' bond holdings.
The Trust ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the group''s ALM objective is to match assets to the obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due.
The Company is eligible for government grants which are conditional upon construction of new factories in North East region. The factories had been constructed and been in operation since May 2016 and March 2017. These grants, recognized as deferred income, are being amortized over the useful life of the plant and machinery, and accounted as "Incentives (includes government grant, budgetary support, export incentives and others)" under the head "Other operating revenue" (Refer note 19), in proportion to depreciation expense.
VI. Nature of CSR activities include promoting education, health care including preventive health care , economic, empowerment, farmer livelihood enhancement, community and ecological sustenance.
VII. Above includes H 11.8 Crs (FY2021-22 H 7 Crs) -
Contribution amounting to H 4.4 Crs (FY2021-22 H 0.5 Crs) made to Marico Innovation Foundation (MIF), a subsidiary of the Company, which is a Section 25 registered Company under Companies Act, 1956, with the main objectives of fuelling innovation in India. The focus of the foundation is to work with people who have scalable ideas and help them scale it to benefit India in a direct way. MIF has already done work in the areas of renewable energy, waste management, employability, livelihoods and healthcare.
Contribution amounting to H 7.4 Crs (FY2021-22 H 6.7 Crs), made to Parachute Kalpavriksha Foundation (PKF), a subsidiary of the Company, which is also Section 8 registered Company under Companies Act, 2013, with the main objectives of undertaking/channelizing the CSR activities of the Company towards community and ecological sustenance.
VIII. The Company does not carry any provisions for Corporate social responsibility expenses for current year and previous year.
(c) Research and Development expenses aggregating to H 32 Crore have been included under the relevant heads in the Statement of Profit and Loss. (Previous year ended March 31,2022 aggregating H 29 Crore). Further Capital expenditure pertaining to this of H1 Crore have been incurred during the year (Previous year ended March 31, 2022 aggregating H 1 Crore).
The fair value of financial instruments as referred to in note above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurement) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows:
Level 1: Financial instruments measured using quoted prices. This includes instruments that have a quoted price in active market. The fair value of all instruments valued based on level 1 inputs is determined using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little
as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is considered here .For example,the forward contracts is valued based on Mark to Market statements from banks, the mutual funds are valued using the closing NAV pubhlished by mutual fund etc
Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs).
The carrying amounts of trade receivables, trade payables, capital creditors, loans and advances, security deposit, fixed deposit, insurance claim receivable, other financial liabilities and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature.
Financial Risks
In the course of its business, the Company is exposed to a number of financial risks: credit risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity price risk and equity price risk). This note presents the Company''s objectives, policies and processes for managing its financial risk and capital.
Board of Directors of the Company has approved Risk Management Framework through policies regarding Investment, Borrowing and Foreign Exchange Management policy. Management ensures the implementation of strategies and achievement of objectives as laid down by the Board through central Treasury function.
Treasury Management Guidelines define, determine & classify risk, by category of transaction, specific approval, execution and monitoring procedures.
In accordance with the aforementioned policies, the company only enters into plain vanilla derivative transactions relating to assets, liabilities or anticipated future transactions.
(A) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. Credit risk arises on liquid assets, financial assets, derivative assets, trade and other receivables.
In respect of its investments the company aims to minimize its financial credit risk through the application of risk management policies. Credit limits are set based on a counterparty value. The methodology used to set the list of counterparty limits includes, counterparty Credit Ratings (CR) and sector exposure. Evolution of counterparties is monitored regularly, taking into consideration CR and sector exposure evolution. As a result of this review, changes on credit limits and risk allocation are carried out. The company avoids the concentration of credit risk on its liquid assets by spreading them over several asset management companies and monitoring of underlying sector exposure.
Trade receivables are subject to credit limits, controls & approval processes. Due to large geographical base & number of customers, the Company is not exposed to material concentration of credit risk. Basis the historical experience, the risk of default in case of trade receivable is low. Provision is made for doubtful receivables as per expected credit loss , using simplified approach over the life of the asset depending on the customer ageing, customer category, specific credit circumstances and the historical experience of the Company.
The gross carrying amount of trade receivables is h854 Crores as at March 31, 2023 and H 571 Crores as at March 31,2022.
Security deposits are interest free deposits given by the company for properties taken on lease. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of Security deposit is H12 Crores as at March 31,2023 and H13 Crores as at March 31,2022.
Other financial asset includes investment, loans to employees and advances given to subsidiaries for various operational requirements and other receivables (refer note 6(a), 6(c) and 6(g)). Provision is made where there is significant increase in credit risk of the asset.
(B) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company treasury maintains flexibility in funding by maintaining availability of committed credit lines.
The current ratio of the company as at March 31, 2023 is 2.18 (as at March 31, 2022 is 2.07) whereas the liquid ratio of the company as at March 31,2023 is 1.49 (as at March 31,2022 is 1.18).
Apart from the above, the company also has an exposure of corporate guarantees given to banks on behalf of subsidiaries for credit and other facilities granted by banks (refer note 31). It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above corporate guarantees.
(C) Market Risk
The Company is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.
(i) Foreign currency risk
The Company is exposed to foreign currency risk from transactions and translation.
Transactional exposures arise from transactions in foreign currency. They are managed within a prudent and systematic hedging policy in accordance with the company''s specific business needs through the use of currency forwards and options.
ii) Interest rate risk
The Company is exposed primarily to fluctuation in interest rates in domestic market.
The Company manages its cash flow interest rate risk on long term borrowing, if any, by using floating-to-fixed interest rate swaps. Under these swaps, the company agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
The Company''s fixed rate borrowings, if any, are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
iii) Price risk
Mutual fund , market linked debentures and exchange traded fund Net Asset Values (NAVs) are impacted by a number of factors like interest rate risk, credit risk, liquidity risk, market risk in addition to other factors. A movement of 1% in NAV on either side can lead to a gain/loss of H 5 Crores on the overall portfolio as at March 31,2023 and H 4 Crores as at March 31,2022.
Impact of hedging activities
Derivate Asset and Liabilites through Hedge Accounting Derivative Fnancial Instruments
The Company''s derivatives mainly consist of currency forwards and options.Derivatives are mainly used to manage exposures to foreign exchange, interest rate and commodity price risk as described in section Market risk.
Derivatives are initially recognised at fair value. They are subsequently remeasured at fair value on a regular basis and at each reporting date as a minimum, with all their gains and losses, realised and unrealised, recognised in the Profit and Loss statement unless they are in a qualifying hedging relationship.
Hedge Accounting
The Company designates and documents certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair values of recognised assets and liabilities (fair value hedges) and highly probable forecast transactions (cash flow hedges).The effectiveness of such hedges is assessed at inception and verified at regular intervals.
Cash flow Hedges
The Company uses cash flow hedges to mitigate a particular risk associated with a recognised asset or liability or highly probable forecast transactions, such as anticipated future export sales, purchases of equipment and raw materials.
The effective part of the changes in fair value of hedging instruments is recognised in other comprehensive income, while any ineffective part is recognised immediately in the Statement of Profit and Loss.
Capital management is driven by company''s policy to maintain a sound capital base to support the continued development of its business. The Board of Directors seeks to maintain a prudent balance between different components of the Company''s capital. The Management monitors the capital structure and the net financial debt at individual level currency. Net financial debt is defined as current and non current borrowings.
The debt equity ratio highlights the ability of a business to repay its debts. Refer below for net Debt equity ratio.
(i) In accordance with Indian Accounting Standard IND AS 108, the Company has disclosed Consolidated Segment information in Consolidated Financial statement
(ii) Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM") of the company. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and CEO of the Company. The Company operates only in one business segment i.e. manufacturing and sale of consumer products within India, hence does not have any reportable segment as per Indian Accounting Standard 108 "operating segments" in Standalone. The company while presenting the consolidated financial statements has disclosed the segment information as required under Indian Accounting Standard 108 "operating segments".
(iii) The amount of the company''s revenue from external customers broken down by each product and service is shown in the table below.
Terms and conditions of transaction with related parties for Transfer Pricing regulations
The Company''s international transactions with related parties are at arm''s length as per the independent accountants report for the year ended March 31 2022. Management believes that the Company''s international transactions with related parties post March 31,2022 continue to be at arm''s length and that the transfer pricing legislation will not have any material impact on these financial statements, particularly on amount of tax expense and that of provision for taxation.
For the year ended March 31, 2023, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (2021-22: Nil). This assessment is undertaken each Financial Year through examining the financial position of the related party and the market in which the related party operates.
31 Contingent liabilities: The company had contingent liabilities in respect of : |
(H in Crore) |
|
Particulars |
As at 31st March, 2023 |
As at 31st March, 2022 |
Disputed tax demands / claims |
||
Sales tax/GST |
43 |
110 |
Income tax |
289 |
289 |
Employees state insurance corporation |
0 |
0 |
Excise duty |
33 |
33 |
Service Tax |
- |
0 |
Guarantees excluding financial guarantees: |
||
Corporate guarantees given to banks on behalf of Broadcast Audience Research Council (BARC) |
1 |
1 |
Credit and other facilities availed by subsidiaries from banks as at year-end against the corporate guarantee given by the Company |
403 |
244 |
Note:
1. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.
2. The Company has ongoing disputes with tax authorities. The disputes relate to tax treatment of certain expenses claimed as deductions, computation or eligibility of tax incentives and allowances. The Company has contingent liability of H 289 crore and H 289 crore as at March 31, 2023 and March 31, 2022 respectively, in respect of tax demands which are being contested by the Company based on the management evaluation and advice of tax consultants.
3. The Company periodically receives notices and inquiries from income tax authorities. The Company has assessed these notices and inquiries and has estimated that any consequent income tax claims or demands by the income tax authorities will not succeed on ultimate resolution.
32 Commitments |
(H in Crore) |
|
Particulars |
As at 31st March, 2023 |
As at 31st March, 2022 |
(A) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) |
20 |
2 |
(B) Corporate guarantees given to banks against which no credit facilities are availed at the year end |
141 |
43 |
(a) Employee stock option plan Marico ESOP 2016
During the year ended March 31, 2017, the Company implemented Marico Employee Stock Option Plan, 2016 ("Marico ESOP 2016" or "the Plan"). The Marico ESOP 2016 was approved by the shareholders at the 28th Annual General Meeting held on August 05, 2016, enabling grant of stock options to the eligible employees of the Company and its subsidiaries not exceeding in the aggregate 0.6% of the issued share equity share capital of the Company as on the commencement date of the Plan i.e. August 05, 2016. Further, the stock options to any single employee under single scheme under the Plan shall not exceed 0.15% of the issued equity share capital of the Company as on the commencement date (mentioned above). The Marico ESOP 2016 envisages to grant stock options to eligible employees of the Company and it''s subsidiaries through one or more Scheme(s) notified under the Plan. Each option represents 1 equity share in the Company. The vesting period under the Plan is not be less than one year and not more than five years. Pursuant to the said approval, the Company notified below schemes under the Plan:
Basic EPS amounts are calculated by dividing the profit after tax for the year attributable to equity holders of the Company by the weighted average number of Equity shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit after tax for the year attributable to equity shareholders by weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.
(e) Information concerning the classification of securities
(i) Share Options
Options granted to Employees under Marico Employee Stock Option Plan 2016 are considered to be potential equity shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 33.
(ii) Treasury shares
Treasury shares are excluded for the purpose of calculating basic and diluted earnings per share.
35 The Company has a process whereby periodically all long term contracts (including derivative contracts if any) are assessed for material foreseeable losses. At the year end, basis the review performed, no provision was required for material foreseeable losses on long term contracts (including derivative contracts).
37 (i) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other
sources or kind of funds) by the Company to or in any other person or entity, including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries).
(ii) The Company has not received any fund from any party (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
38 Information with regards to other matters in the Companies Act are either Nil or Not applicable to the Company.
Mar 31, 2022
Critical Estimates and Judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Companyâs accounting policies. This note provides an overview of the areas that involved a higher degree ofjudgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
"The preparation of the financial statements in conformity with GAAP requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. These estimates and associated assumptions are based on historical experience and managementâs best knowledge of current events and actions the Company may take in future.
Information about critical estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities are included in the following notes:"
(a) Impairment of financial assets (including trade receivable) (Note 27)
(b) Estimation of defined benefit obligations (Note 15)
(c) Estimation of current tax expenses and payable (Note 25)
(d) Estimated impairment of intangible assets with indefinite useful life (Note 5)
(e) Estimation of provisions and contingencies (Note 14 and 31)
(f) Recognition of deferred tax assets including MAT credit (Note 7)
(g) Lease Accounting (Note 3 b)
(h) Impairment of investment in subsidiaries (Note 6 a)
(a) Impairment of financial assets (including trade receivable)
Impairment testing for financial assets (other than trade receivables) is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual financial asset is determined based on value-in-use calculations which requires use of assumptions. Allowance for doubtful trade receivables represent the estimate of losses that could arise due to inability of the Customer to make payments when due. These estimates are based on the customer ageing, customer category, specific credit circumstances and the historical experience of the company as well as forward looking estimates at the end of each reporting period.
(b) Estimation of defined benefit obligations
The liabilities of the company arising from employee benefit obligations and the related current service cost, are determined on an actuarial basis using various assumptions. Refer note 15 for significant assumptions used.
(c) Estimation of current and deferred tax expenses and payable
The Companyâs tax charge is the sum of total current and deferred tax charges. Taxes recognized in the financial statements reflect managementâs best estimate of the outcome based on the facts known at the balance sheet date. These facts include but are not limited to interpretation of tax laws of various jurisdictions where the company operates. Any difference between the estimates and final tax assessments will impact the income tax as well as the resulting assets and liabilities.
(d) Estimated impairment of intangible assets with indefinite useful life
The Intangible assets with indefinite useful life comprises of Trademark and Copyrights Impairment testing for Intangible assets with indefinite useful life is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount is determined based on the fair value (less) cost of disposal which has been measured using discounted cash flow projections, that require the use of assumptions.
The below intangible assets with indefinite useful life held by the Company, are considered significant in terms of size & sensitivity to assumptions used. No other intangible assets with indefinite useful life are considered significant in this respect.
The growth rates & margins used to make estimate future performance are based on past performance & our estimates of future growths & margins achievable.Post-tax discount rates reflect specific risks relating to the relevant segments & geographies in which the CGUs operate.
Based on sensitivity analyses performed around the base assumptions, there were no reasonably possible changes in key assumptions that would cause the carrying amount to exceed the recoverable amount.
(e) Estimation of provisions and contingencies
Provisions are liabilities of uncertain amount or timing recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable. Contingent liabilities are possible obligations that may arise from past event whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not fully within the control of the company. The Company exercises judgement and estimates in recognizing the provisions and assessing the exposure to contingent liabilities relating to pending litigations. Judgement is necessary in assessing the likelihood of the success of the pending claim and to quantify the possible range of financial settlement. Due to this inherent uncertainty in the evaluation process, actual losses may be different from originally estimated provision.
(f) Recognition of deferred tax assets including MAT credit
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted.
Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.
The credit availed under MAT is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. This requires significant management judgement in determining the expected availment of the credit based on business plans and future cash flows of the Company.
) Lease Accounting
The Company evaluates ifan arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate.
The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease.
The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
The Company has considered leases with term up to 12 (Twelve) months as short term leases. Also leases where the current market value (for transition purpose determined basis the present value of future lease payments) is less than ''350,000 have been considered as low value. Such short term and low value leases are accordingly excluded from the scope for the purpose of Ind As 116 reporting.
) Impairment of investment in subsidiaries
Impairment testing of investment in subsidiaries is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual investment is determined based on value-inuse calculations which requires use of assumptions.
The Company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in market for similar properties.
(iv) The company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in market for similar properties.
The fair values of investment properties have been determined by an independent valuer who holds recognised and relevant professional qualification. The main inputs include details obtained from "The Ready Reckoner", location factor and physical verification of the property.
(i) During the previous year ended 31st March, 2021, the Company has acquired the remaining 55% stake for a consideration of '' 132 crores in ZED Lifestyle Private Limited (which was earlier a Joint Venture) and converted it into a wholly owned subsidiary.
(ii) During the previous year ended 31st March, 2021, the Company has made an assessment of the fair value of investment made in its subsidiary Marico South Africa Consumer Care (Pty) Limited, taking into account the past business performance, prevailing business conditions and revised expectations of the future performance. Based on above factors the Company has recognised an impairment loss in the value of investment made of '' 27 crores. The same is disclosed under "Exceptional items" in the Statement of Profit and Loss. The recoverable amount of the investment is determined at ''47 crores, which is based on its value in use considering a discount rate of 21% (refer note 36 (2)).
(iii) During the year ended 31st March, 2022, the Company has acquired the 52.38% stake for a consideration of '' 55 crores in APCOS naturals Private Limited.
During the previous year ended March 31,2021, the Company has settled various open indirect tax litigations under the "Vivad Se Vishwas'''' scheme, which has Notes:-
(i) Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years and more are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employee''s last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The gratuity plan is funded through gratuity trust and the company makes contributions to the trust.
(ii) Provident fund
Contributions are made to a trust administered by the Company. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of the year and any shortfall in the fund balance maintained by the trust set up by the Company, is additionally provided for. There is no shortfall as at 31st March, 2022 and 31st March, 2021.
(iii) Leave Encashment/Compensated absences.
The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment / availment. The liability is provided based on the number of days of unutilized leave at each Balance Sheet date on the basis of an independent actuarial valuation. Current leave obligations expected to be settled within the next 12 months..
(iv) Share-appreciation rights
In respect of Employee Stock Appreciation Rights (STAR) granted pursuant to the Company''s Employee Stock Appreciation Rights Plan, 2011, the liability is measured, initially and at the end of each reporting period until settled, at the fair value of the share appreciation rights, by applying an option pricing model, (excess of fair value as at the period end over the Grant price) and is recognized as employee compensation cost over the vesting period (refer note 33).
The sensitivity analysis has been performed based on reasonably possible changes to the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet. There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
The privileged leave liability is not funded.
The Company has recognised '' 0 Crore ('' 0 Crore for the year ended 31st March 2021) towards employee state insurance plan in the Statement of Profit and Loss.
The company is eligible for government grants which are conditional upon construction of new factories in North East region. The factories had been constructed and been in operation since May 2016 and March 2017. These grants, recognized as deferred income, are being amortized over the useful life of the plant and machinery, and accounted as "Incentives (includes government grant, budgetary support, export incentives and others)" under the head "Other operating revenue" (Refer note 19), in proportion to depreciation expense.
Through its defined benefit plans, the company is exposed to below risk:
Asset volatility : The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan assets have investments in insurance/equity managed fund, fixed income securities with high grades, public/private sector units and government securities. Hence assets are considered to be secured.
Changes in bond yields : A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plansâ bond holdings.
The Trust ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the groupâs ALM objective is to match assets to the obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due.
The weighted average duration of the gratuity for the Company ranges from 5 to 10 years as at 31st March 2022 and 31st March 2021.
Contribution amounting to '' 0.5 Crs (FY 2020-21'' 0.3 Crs) made to Marico Innovation Foundation (MIF) , a subsidiary of the Company, which is a Section 25 registered Company under Companies Act, 1956, with the main objectives of fuelling innovation in India. The focus of the foundation is to work with people who have scalable ideas and help them scale it to benefit India in a direct way. MIF has already done work in the areas of renewable energy, waste management, employability, livelihoods and healthcare.
Contribution amounting to '' 6.7 Crs (FY 2020-21''5.5 Crs), made to Parachute Kalpavriksha Foundation (PKF), a subsidiary of the Company, which is also Section 8 registered Company under Companies Act, 2013, with the main objectives of undertaking/channelizing the CSR activities of the Company towards community and ecological sustenance.
I. The Company does not carry any provisions for Corporate social responsibility expenses for current year and previous year.
Research and Development expenses aggregating to ''29 Crore have been included under the relevant heads in the Statement of Profit and Loss. (Previous year ended 31st March, 2021 aggregating '' 29 Crore). Further Capital expenditure pertaining to this of '' 1 Crore have been incurred during the year (Previous year ended 31st March, 2021 aggregating '' 1 Crore).
The fair value of Financial assets is marked to an active market which factors the uncertainties arising out of COVID-19. The financial assets carried at fair value by the Company are mainly investments in liquid debt securities and accordingly, any material volatility is not expected.
Financial assets carried at amortised cost is in the form of cash and cash equivalents, bank deposits and earmarked balances with banks where the Company has assessed the counterparty credit risk. Trade receivables forms a significant part of the financial assets carried at amortised cost. Appropriate provisions/allowances using expected credit loss method are determined and recorded. In addition to the historical pattern of credit loss, we have considered the likelihood of increased credit risk and consequential default considering emerging situations due to COVID-19. This assessment is not based on any mathematical model but an assessment considering the nature of customers and the financial strength of the customers in respect of whom amounts are receivable.
The fair value of financial instruments as referred to in note above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurement) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows:
Level 1: Financial instruments measured using quoted prices. This includes instruments that have a quoted price in active market . The fair value of all instruments valued based on level 1 inputs is determined using the closing price as at the reporting period.
Security deposits are interest free deposits given by the company for properties taken on lease. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of Security deposit is ''13 Crores as at 31st March, 2022 and ''14 Crores as at 31st March, 2021.
Other financial asset includes investment, loans to employees and advances given to subsidiaries for various operational requirements and other receivables (refer note 6(a), 6(c) and 6(g)). Provision is made where there is significant increase in credit risk of the asset.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is considered here .For example, the forward contracts is valued based on Mark to Market statements from banks, the mutual funds are valued using the closing NAV published by mutual fund. Exchange traded fund units , are valued based on NAV published by the fund. Market linked debentures are valued using independent report from valuation agent of the instrument based on discounted cash flow method using an appropriate discount rate (ranging from 4% to 5 % as at 31 March 2022)
Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs).
The carrying amounts of trade receivables, trade payables, capital creditors, loans and advances, security deposit, fixed deposit, insurance claim receivable, other financial liabilities and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature.
(B) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company treasury maintains flexibility in funding by maintaining availability of committed credit lines.
The current ratio of the company as at 31st March, 2022 is 2.07 (as at 31st March, 2021 is 2.11) whereas the liquid ratio of the company as at 31st March, 2022 is 1.18 (as at 31st March, 2021 is 1.39).
In the course of its business, the Company is exposed to a number of financial risks: credit risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity price risk and equity price risk). This note presents the Companyâs objectives, policies and processes for managing its financial risk and capital.
Board of Directors of the Company has approved Risk Management Framework through policies regarding Investment, Borrowing and Foreign Exchange Management policy. Management ensures the implementation of strategies and achievement of objectives as laid down by the Board through central Treasury function.
Treasury Management Guidelines define, determine & classify risk, by category of transaction, specific approval, execution and monitoring procedures.
In accordance with the aforementioned policies, the company only enters into plain vanilla derivative transactions relating to assets, liabilities or anticipated future transactions.
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. Credit risk arises on liquid assets, financial assets, derivative assets, trade and other receivables.
In respect of its investments the company aims to minimize its financial credit risk through the application of risk management policies. Credit limits are set based on a counterparty value. The methodology used to set the list of counterparty limits includes, counterparty Credit Ratings (CR) and sector exposure. Evolution of counterparties is monitored regularly, taking into consideration CR and sector exposure evolution. As a result of this review, changes on credit limits and risk allocation are carried out. The company avoids the concentration of credit risk on its liquid assets by spreading them over several asset management companies and monitoring of underlying sector exposure.
Trade receivables are subject to credit limits, controls & approval processes. Due to large geographical base & number of customers, the Company is not exposed to material concentration of credit risk. Basis the historical experience, the risk of default in case of trade receivable is low. Provision is made for doubtful receivables as per expected credit loss , using simplified approach over the life of the asset depending on the customer ageing, customer category, specific credit circumstances and the historical experience of the Company.
Apart from the above, the company also has an exposure of corporate guarantees given to banks on behalf of subsidiaries for credit and other facilities granted by banks (refer note 31). It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above corporate guarantees.
The Company is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.
(i) Foreign currency risk
The Company is exposed to foreign currency risk from transactions and translation.
Transactional exposures arise from transactions in foreign currency. They are managed within a prudent and systematic hedging policy in accordance with the companyâs specific business needs through the use of currency forwards and options.
The Company is exposed primarily to fluctuation in interest rates in domestic market.
The Company manages its cash flow interest rate risk on long term borrowing, if any, by using floating-to-fixed interest rate swaps. Under these swaps, the company agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
The Companyâs fixed rate borrowings, if any, are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
The sensitivity analysis below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year.
Mutual fund , market linked debentures and exchange traded fund Net Asset Values (NAVs) are impacted by a number offactors like interest rate risk, credit risk, liquidity risk , market risk in addition to other factors. A movement of 1% in NAV on either side can lead to a gain/loss of '' 4 Crores on the overall portfolio as at 31st March, 2022 and '' 3 Crores as at 31st March, 2021.
Impact of hedging activities
Derivate Asset and Liabilites through Hedge Accounting Derivative financial instruments
The Companyâs derivatives mainly consist of currency forwards and options. Derivatives are mainly used to manage exposures to foreign exchange, interest rate and commodity price risk as described in section Market risk."
Derivatives are initially recognised at fair value. They are subsequently remeasured at fair value on a regular basis and at each reporting date as a minimum, with all their gains and losses, realised and unrealised, recognised in the Profit and Loss statement unless they are in a qualifying hedging relationship.
The Company designates and documents certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair values of recognised assets and liabilities (fair value hedges) and highly probable forecast transactions (cash flow hedges).The effectiveness of such hedges is assessed at inception and verified at regular intervals.
The Company uses cash flow hedges to mitigate a particular risk associated with a recognised asset or liability or highly probable forecast transactions, such as anticipated future export sales, purchases of equipment and raw materials.
The effective part of the changes in fair value of hedging instruments is recognised in other comprehensive income, while any ineffective part is recognised immediately in the Statement of Profit and Loss.
Capital management is driven by companyâs policy to maintain a sound capital base to support the continued development of its business. The Board of Directors seeks to maintain a prudent balance between different components of the Companyâs capital. The Management monitors the capital structure and the net financial debt at individual level currency. Net financial debt is defined as current and non current borrowings.
The debt equity ratio highlights the ability of a business to repay its debts. Refer below for net Debt equity ratio.
(i) In accordance with Indian Accounting Standard IND AS 108, the Company has disclosed Consolidated Segment information in Consolidated Financial statement
(ii) Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker ("CODM") of the company. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and CEO of the Company. The Company operates only in one business segment i.e. manufacturing and sale of consumer products within India, hence does not have any reportable segment as per Indian Accounting Standard 108 "operating segments" in Standalone. The company while presenting the consolidated financial statements has disclosed the segment information as required under Indian Accounting Standard 108 "operating segments".
The Marico Innovation Foundation ("MIF"), a company incorporated under Section 25 of the Companies Act, 1956 (being a private company limited by guarantee not having share capital) primarily with an objective of fuelling and promoting innovation in India, is a subsidiary of the Company with effect from 15 March, 2013.
Parachute Kalpavriksha Foundation ("PKF"), a company incorporated under Section 8 of the Companies Act, 2013 (being a private company limited by guarantee not having share capital) primarily with an objective of undertaking/channelizing the CSR activities of the Company towards community and ecological sustenance, is a subsidiary of the Company with effect from 27 December, 2018.
During the previous year ended 31st March, 2021, with acquisition of additional 55% stake in Zed Lifestyle Pvt Ltd, a joint venture, the said joint venture became wholly owned subsidiary of Marico Limited with effect from 30th June, 2020.
The Companyâs international transactions with related parties are at armâs length as per the independent accountants report for the year ended 31st March 2021. Management believes that the Companyâs international transactions with related parties post 31st March 2021 continue to be at armâs length and that the transfer pricing legislation will not have any material impact on these financial statements, particularly on amount of tax expense and that of provision for taxation.
For the year ended 31st March, 2022, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (2020-21: Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
The company had contingent liabilities in respect of :
('' in Crore) |
||
Particulars |
As at 31st March, 2022 |
As at 31st March, 2021 |
Disputed tax demands / claims : |
||
Sales tax |
110 |
93 |
Income tax |
289 |
181 |
Employees state insurance corporation |
0 |
0 |
Excise duty |
33 |
33 |
Service Tax |
0 |
0 |
Guarantees excluding financial guarantees: |
||
Corporate guarantees given to banks on behalf of Broadcast Audience Research Council (BARC) |
1 |
1 |
Credit and other facilities availed by subsidiaries from banks as at year-end against the corporate guarantee given by the Company |
244 |
188 |
Note:
1. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements
2. The Company has ongoing disputes with income tax authorities. The disputes relate to tax treatment of certain expenses claimed as deductions, computation or eligibility of tax incentives and allowances. The Company has contingent liability of '' 289 crore and '' 181 crore as at March 31, 2022 and March 31, 2021 respectively, in respect of tax demands which are being contested by the Company based on the management evaluation and advice of tax consultants.
The Company periodically receives notices and inquiries from income tax authorities. The Company has assessed these notices and inquiries and has estimated that any consequent income tax claims or demands by the income tax authorities will not succeed on ultimate resolution.
During the year ended 31st March, 2017, the Company implemented Marico Employee Stock Option Plan, 2016 ("Marico ESOP 2016" or "the Plan"). The Marico ESOP 2016 was approved by the shareholders at the 28th Annual General Meeting held on 5th August, 2016, enabling grant of stock options to the eligible employees of the Company and its subsidiaries not exceeding in the aggregate 0.6% of the issued share equity share capital of the Company as on the commencement date of the Plan i.e. 5th August, 2016. Further, the stock options to any single employee under single scheme under the Plan shall not exceed 0.15% of the issued equity share capital of the Company as on the commencement date (mentioned above). The Marico ESOP 2016 envisages to grant stock options to eligible employees of the Company and itâs subsidiaries through one or more Scheme(s) notified under the Plan. Each option represents 1 equity share in the Company. The vesting period under the Plan is not be less than one year and not more than five years. Pursuant to the said approval, the Company notified below schemes under the Plan:
Basic EPS amounts are calculated by dividing the profit after tax for the year attributable to equity holders of the Company by the weighted average number of Equity shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit after tax for the year attributable to equity shareholders by weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.
The Company has formed "Welfare of Mariconians Trust" (The Trust) for the implementation of the schemes that are notified or may be notified from time to time by the Company under the Plan. The Company has advanced '' 47 Crore as at 31st March, 2022 ('' 33 Crore as at 31st March, 2021) to the Trust for purchase of the Company''s shares under the Plan. As per the Trust Deed and Trust Rules, upon maturity, the Trust shall sell the Company''s shares and hand over the proceeds to the Company. The Company, after adjusting the loan advanced and interest thereon (on loan advanced afterl April, 2013), shall utilize the proceeds towards meeting its STAR Value obligation.
(i) Share Options
Options granted to Employees under Marico Employee Stock Option Plan 2016 are considered to be potential equity shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 33.
Treasury shares are excluded for the purpose of calculating basic and diluted earnings per share.
The Company has a process whereby periodically all long term contracts (including derivative contracts if any) are assessed for material foreseeable losses. At the year end, basis the review performed, no provision was required for material foreseeable losses on long term contracts (including derivative contracts).
i. (i) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries).
(ii) The Company has not received any fund from any party (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries. i Previous years figures have been regrouped/re-classified to conform to b low requirement of the ammended Schedule III to the Companies Act, 2013 effective 1st April 2021
a) Lease Liabilities seperately disclosed on the face of the Balance Sheet under the head "Financial liabilities"
b) Security deposits regrouped under ""Other Financial assets"", which were earlier part of "Loans"
Information with regards to other matters in the Companies Act are either Nil or Not applicable to the Company.
Mar 31, 2021
Investment and financial assets:i. Classification:
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
Classification of debt assets will be driven by the Companyâs business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset.
⢠Amortised Cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income.
⢠Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cashflows and for selling the financial assets, where the assets cash flow represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in the
Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income.
⢠Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the Statement of Profit and Loss within other gains/ (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
The Company subsequently measures all equity investments at fair value. Where the Companyâs management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognised in profit or loss as other income when the Companyâs right to receive the dividend is established.
iii. Impairment of financial assets:
The Company assesses if there is any significant increase in credit risk pertaining to the assets and accordingly creates necessary provisions, wherever required.
iv. Derecognition of financial assets:
A financial asset is derecognised only when
⢠the Company has transferred the rights to receive cash flows from the financial asset or
⢠the Company retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows so received to one or more recipients .
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
n) Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Company designates certain derivatives as either:
⢠hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges)
⢠hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges).
The Company documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values ofvarious derivative financial instruments used for hedging purposes are disclosed in Note 27. Movements in the hedging reserve in shareholdersâ equity are shown in Note 12(c). The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
The effective part of the changes in fair value of hedge instruments is recognized in other comprehensive
income, while any ineffective part is recognized immediately in the Statement of Profit and Loss.
o) Inventories:
Raw materials, packing materials, stores and spares are valued at lower of cost and net realizable value.
Work-in-progress, finished goods and stock-in-trade (traded goods) are valued at lower of cost and net realizable value.
By-products and unserviceable / damaged finished goods are valued at estimated net realizable value.
Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also includes all other costs incurred in bringing the inventories to their present location and condition. Cost is assigned on the basis of weighted average method. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
p) Trade Receivables:
Trade receivables are recognised initially at fair value and subsequently measured at cost less provision made for doubtful receivables as per expected credit loss method over the life of the asset depending on the customer ageing, customer category, specific credit circumstances and the historical experience of the Company.
q) Trade and other payables:
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
r) Borrowings:
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
General and specific borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
i. Short term obligations:
Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services upto the end of the reporting and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii. Defined contribution plan Provident fund:
Provident fund contributions are made to a trust administered by the Company. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of the year and any shortfall in the fund balance maintained by the Trust set up by
the Company is additionally provided for. Actuarial losses and gains are recognized in other comprehensive income and shall not be reclassified to the Statement of Profit and Loss in a subsequent period.
a) Gratuity:
Liabilities with regard to the gratuity benefits payable in future are determined by actuarial valuation at each Balance Sheet date using the Projected Unit Credit method and contributed to Employees Gratuity Fund. Actuarial gains and losses arising from changes in actuarial assumptions are recognized in other comprehensive income and shall not be reclassified to the Statement of Profit and Loss in a subsequent period.
b) Leave encashment / Compensated absences:
The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment / availment. The liability is provided based on the number of days of unutilized leave at each Balance Sheet date on the basis of an independent actuarial valuation and classified as long term and short term. Actuarial gains and losses arising from changes in actuarial assumptions are recognised in the Statement of Profit and Loss.
iv. Share based payments:
⢠Employee Stock Option Plan:
The fair value of options granted under the Company''s employee stock option scheme (excess of the fair value over the exercise price of the option at the date of grant) is recognised as an employee benefit expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted.
- including any market performance conditions (e.g. the entity''s share price).
- excluding the impact of any service and nonmarket performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the entity over a specified time period), and
- including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holding shares for a specific period of time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.
⢠Employee Stock Appreciation Rights Scheme:
Liability for the Company''s Employee Stock Appreciation Rights (STAR), granted pursuant to the Company''s Employee Stock Appreciation Rights Plan, 2011, shall be measured, initially and at the end of each reporting period until settled, at the fair value of the STARs, by applying an option pricing model, be and is recognized as employee benefit expense over the relevant service period. The liability is presented as employee benefit obligation in the balance sheet.
v. Treasury Shares:
The Company has created a "Welfare of Mariconians Trust", (WEOMA) for providing share-based payment to its employees under the STAR scheme. In order to fund the STAR schemes, the Trust, upon intimation from the Company, carries out secondary market acquisition of the equity shares, of the Company. They are equivalent to STARs granted to its employees. The Company provides loan to the Trust for enabling such secondary acquisition. As and when the STARs vest in eligible employees, upon intimation of such details by the Company, the Trust sells the equivalent shares and hands over the net proceeds to the Company in accordance with the Trust Rules framed. The Company treats, WEOMA as its extension and shares held by WEOMA are treated as treasury shares.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase or sale of the Company''s own equity instruments. Any difference between the carrying amount and the consideration is recognised in WEOMA reserve.
vi. Provisions and Contingent Liabilities:
Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or where any present obligation cannot be measured in terms of future outflow of resources or where a reliable estimate of the obligation cannot be made.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
A contingent asset is disclosed, where an inflow of economic benefits is probable. An entity shall not recognise a contingent asset unless the recovery is virtually certain.
u) Commitments:
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
(i) estimated amount of contracts remaining to be executed on capital account and not provided for;
(ii) uncalled liability on shares and other investments partly paid;
(iii) funding related commitment to subsidiary, associate and joint venture companies; and
(iv) other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
Other commitments related to sales/procurements made in the normal course of business are not disclosed to avoid excessive details.
v) Cash and Cash Equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value net of outstanding bank overdraft.
ii. Diluted earnings per share:
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
aa) Contributed Equity:
Equity shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
ab) Business Combinations:
Business combinations are accounted for using the acquisition accounting method as at the date of the acquisition, which is the date at which control is transferred to the Company. The consideration transferred in the acquisition and the identifiable assets acquired and liabilities assumed are recognised at fair values on their acquisition date. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. The Company recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest''s proportionate share of the acquired entity''s net identifiable assets. Consideration transferred does not include amounts related to settlement of pre-existing relationships. Such amounts are recognised in the Statement of Profit and Loss.
Transaction costs are expensed as incurred, other than those incurred in relation to the issue of debt or equity securities. Any contingent consideration payable is measured at fair value at the acquisition date. Subsequent changes in the fair value of contingent consideration are recognised in the Statement of Profit and Loss.
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which asset''s carrying amount exceeds its recoverable amount. The recoverable amount is higher of an asset''s fair value less cost of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
An item of income or expense which by its size, type or incidence requires disclosure in order to improve an understanding of the performance of the Company is treated as an exceptional item and disclosed as such in the financial statements.
y) Investment in subsidiaries andjoint ventures:
Investments in subsidiaries and associates are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries and associates, the difference between net disposal proceeds and the carrying amounts are recognised in the Statement of Profit and Loss.
i. Basic earnings per share:
Basic earnings per share is calculated by dividing:
⢠the profit attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares.
Business combinations arising from transfers of interests in entities that are under common control of the shareholder that controls the Company and the acquired entity are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are revised. The assets and liabilities acquired are recognized at their carrying amounts. The identity of the reserves is preserved and they appear in the financial statements of the Company in the same form in which they appeared in the financial statements of the acquired entity. The difference, if any, between the consideration and the amount of share capital of the acquired entity is transferred to Other equity in a separate reserve account.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
All amounts disclosed in the financial statement and notes have been rounded off to the nearest crores, unless otherwise stated.
Transactions and balances with values below the rounding off norm adopted by the Company have been reflected as "0" in the relevant notes in these financial statements.
ae) Recent Indian Accounting Standards (Ind AS):
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards. There is no such notification which would have been applicable from April 1, 2021.
MCA issued notifications dated 24th March, 2021 to amend Schedule III to the Companies Act, 2013 to enhance the disclosures required to be made by the Company in its financial statements. These amendments are applicable to the Company for the financial year starting 1st April, 2021.
2 Critical Estimates and Judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Companyâs accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
The preparation of the financial statements in conformity with GAAP requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. These estimates and associated assumptions are based on historical experience and managementâs best knowledge of current events and actions the Company may take in future.
Information about critical estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities are included in the following notes:
(a) Impairment of financial assets (including trade receivable) (Note 27)
(b) Estimation of defined benefit obligations (Note 15)
(c) Estimation of current tax expenses and payable (Note 25)
(d) Estimated impairment of intangible assets with indefinite useful life (Note 5)
(e) Estimation of provisions and contingencies (Note 14 and 31)
(f) Recognition of deferred tax assets including MAT credit (Note 7)
(g) Lease Accounting (Note 3 b)
(h) Impairment of investment in subsidiaries and joint venture (Note 6 a)
(a) Impairment of financial assets (including trade receivable)
Impairment testing for financial assets (other than trade receivables) is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual financial asset is determined based on value-in-use calculations which requires use of assumptions.
Allowance for doubtful trade receivables represent the estimate of losses that could arise due to inability of the Customer to make payments when due. These estimates are based on the customer ageing, customer category, specific credit circumstances and the historical experience of the company as well as forward looking estimates at the end of each reporting period.
(b) Estimation of defined benefit obligations
The liabilities of the company arising from employee benefit obligations and the related current service cost, are determined on an actuarial basis using various assumptions. Refer note 15 for significant assumptions used.
(c) Estimation of current and deferred tax expenses and payable
The Companyâs tax charge is the sum of total current and deferred tax charges. Taxes recognized in the financial statements reflect managementâs best estimate of the outcome based on the facts known at the balance sheet date. These facts include but are not limited to interpretation of tax laws of various jurisdictions where the company operates. Any difference between the estimates and final tax assessments will impact the income tax as well as the resulting assets and liabilities.
(d) Estimated impairment of intangible assets with indefinite useful life
The Intangible assets with indefinite useful life comprises of Trademark and Copyrights.
Impairment testing for intangible assets with indefinite useful life is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions.
(e) Estimation of provisions and contingencies
Provisions are liabilities of uncertain amount or timing recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable. Contingent liabilities are possible obligations that may arise from past event whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not fully within the control of the company. The Company exercises judgement and estimates in recognizing the provisions and assessing the exposure to contingent liabilities relating to pending litigations. Judgement is necessary in assessing the likelihood of the success of the pending claim and to quantify the possible range of financial settlement. Due to this inherent uncertainty in the evaluation process, actual losses may be different from originally estimated provision.
(f) Recognition of deferred tax assets including MAT credit
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.
The credit availed under MAT is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. This requires significant management judgement in determining the expected availment of the credit based on business plans and future cash flows of the Company.
(g) Lease Accounting
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate.
The Company determines the lease term as the noncancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease.
The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
The company has considered leases with term up to 12 (Twelve) months as short term leases. Also leases where the current market value (for transition purpose determined basis the present value of future lease payments) is less than R 350,000 have been considered as low value. Such short term and low value leases are accordingly excluded from the scope for the purpose of Ind As 116 reporting.
(h) Impairment of investment in subsidiaries and joint venture
Impairment testing of investment in subsidiaries and joint ventures is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual investment is determined based on value-in-use calculations which requires use of assumptions.
Mar 31, 2019
1. Back ground and operations
Marico Limited (âMaricoâ or âthe Companyâ), headquartered in Mumbai, Maharashtra, India, carries on business in branded consumer products. Marico manufactures and markets products under the brands such as Parachute, Parachute Advansed, Nihar, Nihar Naturals, Saffola, Hair & Care, Revive, Mediker, Livon, Set-wet etc. Maricoâs products reach its consumers through retail outlets serviced by Maricoâs distribution network comprising regional offices, carrying & forwarding agents, redistribution centers & distributors spread all over India.
(i) Impairment loss
Impairment loss pertains to Plant and equipment which are in damaged condition or are lying idle and have no future use.
(ii) Contractual obligations
Refer to Note 3 2 for disclosure of contractual commitments for acquisition of property, plant and equipment.
(iii) Capital work-in-progress
Capital work-in-progress mainly com prises spends towards capacity expansion at Perundurai, India and for setting up new manufacturing unit at Ahmedabad, India.
(iv) Leased assets
Gross carrying amount of leasehold land represents amounts paid under lease agreements which are due for renewal in the years ranging from 2070 to 2117. In one case where the lease is expiring in 2070, the company has an option to purchase the property.
(v) Building
Buildings include Nil (31st March, 2018: Nil) being the value of shares in co-operative housing societies.
Estimation of fair value
The company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties.
(iv) The fair values of investment properties have been determined by an independent valuer who holds recognised and relevant professional qualification. The main inputs used are rental growth rates, expected vacancy rates, terminal yields and discount rates based on comparable transactions and industry data.
(v) During the year ended 31st March, 2019 investment property at Andheri, Mumbai has been classified as asset held for sale.
Notes:
(i) During the year ended 31st March, 2019, the Company acquired 22.46% stake in Revolutionary Fitness Private Limited, a joint venture.
(ii) During the year ended 31st March, 2019, the Company acquired additional 2.28% stake in Zed Lifestyle Private Limited, a joint venture. During the previous year ended 31st March 2018 the Company had acquired additional stake of 5.17% in joint venture. As at 31st March, 2019 company holds 42.88% stake in this joint venture.
(iii) The Companyâs investment in 45% of equity share capital of Bellezimo Professional Products Private Limited, a joint venture which was completely impaired during the previous year ended 31st March, 2017was sold for a consideration ofRl00/-to the promoters during previous year ended 31st March, 2018.
(iv) During the previous year ended 31st March, 2018 additional equity infusion was done in Marico South Africa Consumer Care (Pty) Limited (MSACC) whereby 322 equity shares were issued by MSACC for a consideration of ZARS. 30Million.
(v) During the previous year ended 31st March, 2018, the Company has made an assessment of the fair value of investment made in its subsidiary Marico Consumer Care Limited (âMCCLâ), taking into account the past business performance, prevailing business conditions and revised expectations of the future performance. Based on above factors the Company has recognised an impairment loss in the value of investment made in MCCL of RS. 104 crores. The same is disclosed under âExceptional itemsâ in the Statement of Profit and Loss. The recoverable amount of the investment is determined at RS. 642 crores, which is based on its value in use. This value in use calculation is performed taking into account the discount rate ofl0.90% per annum.
Non-recurring fair value measurements
Building classified as held for sale is being measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification. Fair value of Building classified as held for sale was Rs.13 Crore as at 31st March, 2019. The fair values of these assets have been determined by an independent valuer who holds recognised and relevant professional qualification. The main inputs include details obtained from âThe Ready Reckonerâ, location factor and physical verification of the property.
(ii) Rights, preferences and restrictions attached to equity shares
Equity Shares: The Company has one class of equity shares having a par value of Rs.1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(iii) Shares reserved for issue under options
Information relating to Marico ESOS 2014, MD CEO ESOP Plan 2014 and Marico ESOP 2016 including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 33.
These provisions have not been discounted as it is not practicable for the Company to estimate the timing of the provision utilization and cash outflows, if any, pending resolution.
(a) Provision for disputed indirect taxes mainly pertains to Entry tax dispute in the state of Himachal Pradesh and West Bengal where as company has filed a writ petition in both the states before both the respective Honourable High Courts and the matter is sub judice. It is not practicable to state the timing of the judgement & final outcome. Based on the monthly liability & filling return compliance, stay order granted by court, provision has been created for necessary amounts.
(b) Movement in provisions during the year as required by Ind AS-37 âProvisions, Contingent Liabilities and Contingent Assetâ specified under Section 133 of the Companies Act, 2013:
Notes:-
(i) Gratuity
The company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years and more are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employeeâs last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is funded through gratuity trust and the company makes contributions to the trust.
(ii) Provident fund
Contributions are made to a trust administered by the Company. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of the year and any shortfall in the fund balance maintained by the trust set up by the Company is additionally provided for. There is no shortfall as at 31st March, 2019 and 31st March,2018.
(iii) Leave Encashment/ compensated absences.
The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment / availment. The liability is provided based on the number of days of unutilized leave at each Balance Sheet date on the basis of an independent actuarial valuation.
(iv) Share-appreciation rights
In respect of Employee Stock Appreciation Rights (STAR) granted pursuant to the Companyâs Employee Stock Appreciation Rights Plan, 2011, the liability shall be measured, initially and at the end of each reporting period until settled, at the fair value of the share appreciation rights, by applying an option pricing model, (excess of fair value as at the period end over the Grant price) and is recognized as employee compensation cost over the vesting period (refer note 33).
- The expected rate of return on plan assets is based on expectation of the average long-term rate of return expected on investment of the fund during the estimated term of the obligations. (The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario.)
-- The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior year
Defined benefit liability and employer contributions
The weighted average duration of the gratuity is 6years as at31st March, 2019 and as at31st March, 2018 The expected employers contribution towards gratuity for the next year is RS. 8 crores
- The expected rate of return on plan assets is based on expectation of the average long-term rate of return expected on investment of the fund during the estimated term of the obligations. (The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario.)
- The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion, and other relevant factors such as supply and demand factors in the employment market.
(c) Privileged leave (Compensated absences for employees):
Amount recognized in the Balance Sheet and movements in net liability:
The privileged leave liability is not funded.
(d) Employee State Insurance Corporation
The Company has recognised Rs.0 Crore (Rs.0 Crore for the year ended 31st March 2018) towards employee state insurance plan in the Statement of Profit and Loss.
(e) Risk exposure (For Gratuity and Provident Fund)
Through its defined benefit plans, the company is exposed to below risk:
Asset volatility : The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan assets have investments in insurance/equity managed fund, fixed income securities with high grades, public/private sector units and government securities. Hence assets are considered to be secured.
Changes in bond yields : A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plansâ bond holdings.
The Trust ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the groupâs ALM objective is to match assets to the obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due.
The Company is eligible for government grants which are conditional upon construction of new factories in North east region. The Company has initiated the process for claim. The factories had been constructed and been in operation since May 2016 and March 2017. These grants, recognized as deferred income, is being amortized over the useful life of the plant and machinery in proportion in which the related depreciation expense is recognised.
(a) Miscellaneous expense includes printing and stationery, communication, rates and taxes, insurance and other expenses.
(b) Corporate social responsibility expenditure
(c) Research and Development expenses aggregating to Rs.6 Crore for food and edible items and Rs.25 Crore for others have been included under the relevant heads in the Statement of Profit and Loss. (Previous year ended 31st March, 2018 aggregating RS.30 Crore). Further Capital expenditure pertaining to this of Rs. Crore for food and edible items and R0 Crore for others have been incurred during the year (Previous year ended 31st March, 2018 aggregating Rs.1 Crore).
(d) Contribution to political parties during the year is Rs. Nil Previous year ended 31stMarch,2018is Rs. Nil)
Fair value hierarchy
(b) This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the Accounting Standard. An explanation of each level follows underneath the table.
The fair value of financial instruments as referred to in note above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurement) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows:
Level 1: Financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds, mutual funds, bonds and debentures, that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is considered here. For example, the fair value of forward exchange contracts, currency swaps and interest rate swaps is determined by discounting estimated future cash flows using a risk-free interest rate. The mutual funds are valued using the losing NAV published by mutual fund.
Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs). When the fair value of unquoted instruments cannot be measured with sufficient reliability, the company carries such instruments at cost less impairment, if applicable.
The carrying amounts of trade receivables, trade payables, capital creditors, loans and advances, security deposit, fixed deposit, insurance claim receivable, other financial liabilities and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature.
2. Financial Risk Management
Financial Risks
In the course of its business, the Company is exposed to a number of financial risks: credit risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity price risk and equity price risk). This note presents the Companyâs objectives, policies and processes for managing its financial risk and capital.
Board of Directors of the Company has approved Risk Management Framework through policies regarding Investment, Borrowing and Foreign Exchange Management policy. Management ensures the implementation of strategies and achievement of objectives as laid down by the Board through central treasury function.
Treasury Management Guidelines define, determine & classify risk, by category of transaction, specific approval, execution and monitoring procedures.
In accordance with the aforementioned policies, the company only enters into plain vanilla derivative transactions relating to assets, liabilities or anticipated future transactions.
(A) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. Credit risk arises on liquid assets, financial assets, derivative assets, trade and other receivables.
In respect of its investments the company aims to minimize its financial credit risk through the application of risk management policies. Credit limits are set based on a counterparty value. The methodology used to set the list of counterparty limits includes, counterparty Credit Ratings (CR) and sector exposure. Evolution of counterparties is monitored regularly, taking into consideration CR and sector exposure evolution. As a result of this review, changes on credit limits and risk allocation are carried out. The company avoids the concentration of credit risk on its liquid assets by spreading them over several asset management companies and monitoring of underlying sector exposure.
Trade receivables are subject to credit limits, controls & approval processes. Due to large geographical base & number of customers, the Company is not exposed to material concentration of credit risk. Basis the historical experience, the risk of default in case of trade receivable is low. Provision is made for doubtful receivables as per expected credit loss over the life of the asset depending on the customer ageing, customer category, specific credit circumstances and the historical experience of the Company.
The gross carrying amount of trade receivables is RS.435 Crores as at 31st March, 2019, RS.292 Crores as at 31st March, 2018
Security deposits are interest free deposits given by the company for properties taken on lease. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of Security deposit is RS.12 Crores as at31st March, 2019 and RS.13 Crores as at 31st March, 2018.
Other financial asset includes investment, loans to employees and advances given to subsidiaries and joint venture for various operational requirements and other receivables (refer note 6(a), 6(c) and 6(g)). Provision is made where there is significant increase in credit risk of the asset.
(B) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company treasury maintains flexibility in funding by maintaining availability of committed credit lines.
The current ratio of the company as at 31st March, 2019 is 2.41 (as at 31st March, 2018 is 2.46) whereas the liquid ratio of the company as at31st March, 2019 is 1.39 (as at31st March, 2018 is 1.17).
Apart from the above, the company also has an exposure of corporate guarantees given to banks on behalf of subsidiaries for credit and other facilities granted by banks (refer note 31). It is not practicable for the Company to estimate the timing of cash outflows, if any, i n respect of the above corporate guarantees.
(C) Market Risk
The Company is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.
(i) Foreign currency risk
The Company is exposed to foreign currency risk from transactions and translation.
Transactional exposures arise from transactions in foreign currency. They are managed within a prudent and systematic hedging policy in accordance with the companyâs specific business needs through the use of currency forwards and options.
ii) Interest rate risk
The Company is exposed primarily to fluctuation in interest rates in domestic market.
The Company manages its cash flow interest rate risk on long term borrowing, if any, by using floating-to-fixed interest rate swaps. Under these swaps, the company agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
The Companyâs fixed rate borrowings, if any, are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cashflows will fluctuate because of a change in market interest rates.
Financial assets classified at amortized cost have fixed interest rate. Hence, the Company is not subject to interest rate risk on such financial assets.
Sensitivity
The sensitivity analysis below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year.
iii) Price risk
Mutual fund Net Asset Values (NAVs) are impacted by a number of factors like interest rate risk, credit risk, liquidity risk, market risk in addition to other factors. A movement of 1% in NAV on either side can lead to a gain/loss of t2 Crores and Rs.4 Crores, on the overall portfolio as at31st March, 2019 and 31st March, 2018 respectively.
Impact of hedging activities Derivate Asset and Liabilities through Hedge Accounting Derivative financial instruments
The Companyâs derivatives mainly consist of currency forwards and options; interest rate swaps. Derivatives are mainly used to manage exposures to foreign exchange, interest rate and commodity price risk as described in section Market risk.
Derivatives are initially recognised at fair value. They are subsequently remeasured at fair value on a regular basis and at each reporting date as a minimum, with all their gains and losses, realised and unrealised, recognised in the Profit and Loss statement unless they are in a qualifying hedging relationship.
Hedge Accounting
The Company designates and documents certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair values of recognised assets and liabilities (fair value hedges) and highly probable forecast transactions (cash flow hedges).The effectiveness of such hedges is assessed at inception and verified at regular intervals.
Fair value hedges
The Company uses fair value hedges to mitigate foreign currency and interest rate risks of its recognised assets and liabilities.
Changes in fair values of hedging instruments designated as fair value hedges and the adjustments for the risks being hedged in the carrying amounts of the underlying transactions are recognised in the Statement of Profit and Loss.
Cash flow Hedges
The Company uses cash flow hedges to mitigate a particular risk associated with a recognised asset or liability or highly probable forecast transactions, such as anticipated future export sales, purchases of equipment and raw materials.
The effective part of the changes in fair value of hedging instruments is recognised in other comprehensive income, while any ineffective part is recognised immediately in the Statement of Profit and Loss.
3. Capital Management
(a) Risk Management
Capital management is driven by companyâs policy to maintain a sound capital base to support the continued development of its business.
The Board of Directors seeks to maintain a prudent balance between different components of the Companyâs capital. The Management monitors the capital structure and the net financial debt at individual level currency. Net financial debt is defined as current and non-current financial liabilities less cash and cash equivalents and short-term investments.
The debt equity ratio highlights the ability of a business to repay its debts. Refer below for Debt equity ratio as on March31,2019and 2018.
4. Segment Information
(i) Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (âCODMâ) of the company. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and CEO of the Company. The Company operates only in one business segment i.e. manufacturing and sale of consumer products within India, hence does not have any reportable segment as per Indian Accounting Standard 108 âoperating segmentsâ in Standalone. The company while presenting the consolidated financial statements has disclosed the segment information as required under Indian Accounting Standard 108 âoperating segmentsâ.
5. Related Party Transactions
I Name of related parties and nature of relationship:
a) Subsidiary Companies:
b) Joint venture:
Bellezimo Professional Products Private Limited (w.e.f. 7th March, 2018, the Company ceased to be an Associate Company)
During the year ended 31st March, 2019, the Company acquired additional 2.28% stake in Zed Lifestyle Private Limited, a joint venture. During the previous year ended 31st March 2018 the Company had acquired additional stake of5.17% in joint venture.
During the year ended 31st March, 2019, the Company acquired 22.46% stake in Revolutionary Fitness Private Limited, a joint venture.
c) Key management personnel (KMP):
Mr. Harsh Mariwala, Chairman and Non Executive Director Mr. Saugata Gupta, Managing Director and CEO
Mr. Anand Kripalu, Independent Director (Resigned w.e.f. 6th October, 2017)
Mr. Ananth Sankaranarayanan, Independent Director
Mr. Atul Choksey, Independent Director (Resigned w.e.f. 1st April, 2017)
Mr. B.S. Nagesh, Independent Director
Ms. Hema Ravichandar, Independent Director
Mr. Nikhil Khattau, Independent Director
Mr. Rajen Mariwala, Non executive Director
Mr. Rajeev Bakshi, Independent Director
Mr. Rishabh Mariwala, Non executive Director
Mr. Vivek Karve, Chief Financial Officer
Ms. Hemangi Ghag, Company Secretary & Compliance Officer
Mr. Surender Sharma, Head-Legal, International Business & Company Secretary (Resigned w.e.fl6th October, 2017)
d) Individual holding directly / indirectly an interest in voting power & their relatives (where transactions have taken place) - Significant Influence:
Mr. Harsh Mariwala, Chairman and Non Executive Director
Mr. Rajen Mariwala, Non executive Director
Mr. Rishabh Mariwala, son ofMr. Harsh Mariwala and Non executive Director
Mrs. Archana Mariwala, wife of Mr. Harsh Mariwala
e) Post employment benefit controlled trust
Marico Limited Employees Provident Fund
Marico Limited Employees Gratuity Fund
f) Others - Entities in which above (c) and (d) has significant influence and transactions have taken place:
Aqua Centric Private Limited
Ascent India Foundation
Feedback Business Consulting Services Private Limited
Kaya Limited
Mariwala Health Foundation
Soap Opera
The Bombay Oil Private Limited
Indian School of Communications Private Limited
II Transactions with related parties
The following transactions occurred with related parties:
Key management personnel compensation.
i. Provision for contribution to gratuity fund, leave encashment on retirement and other defined benefits which are made based on actuarial valuation on an overall Company basis are not included in remuneration to key management personnel.
ii. Remuneration for the current year does not include performance incentive for the year ended 31 March, 2019, pending finalisation.
iii. Also ESOP&STAR grant accrued annually are included in the KMPâs remuneration in the year in which the same are exercised.
Terms and conditions of transaction with related parties
The Companyâs international transactions with related parties are at armâs length as per the independent accountants report for the year ended 31 March 2018. Management believes that the Companyâs international transactions with related parties post 31 March 2018 continue to be at armâs length and that the transfer pricing legislation will not have any material impact on these financial statements, particularly on amount of tax expense and that of provision for taxation.
For the year ended 31st March, 2019, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (2017-18: Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
Disclosure for loans and advances in terms of Securities & Exchange Board of India (Listing obligation and disclosure requirements) Regulations 2015.
6. Commitments
(a) Estimated amount of contracts remaining to be executed on capital account and provided
for (net of advances) 59 38
(b) Non-cancellable operating leases
The Companyâs significant leasing arrangements are in respect of residential flats, office premises, warehouses, vehicles etc. taken on lease. The arrangements range between 11 months to 5 years and are generally renewable by mutual consent or mutually agreeable terms. Under these arrangements refundable interest-free deposits have been given.
7. Share-Based Payments
(a) Employee stock option plan
During the year ended 31st March, 2014, the Company implemented the Marico Employee Stock Option Scheme 2014 (âMarico ESOS 2014â). Marico ESOS 2014 was approved by the shareholders of the Company at the Extra Ordinary General Meeting held on 25 March, 2014 enabling the grant of 300,000 stock options to the Chief Executive Officer of the Company (Currently designated as Managing Director & CEO).
Pursuant to the said approval, on 1st April, 2014 the Company granted 300,000 stock options to the Managing Director & CEO of the Company, at an exercise price of Rs.1 per stock option. Each option represents 1 equity share in the Company. The vesting period is 2 years from the date of grant and the exercise period is 18 months from the date of vesting. During the year ended 31st March 2016, the aforesaid 300,000 stock options had increased to 600,000 on account of issue of bonus equity shares by the Company in the ratio of 1:1.
During the year ended 31st March, 2015, the Company implemented the Marico MD CEO Employee Stock Option Plan 2014 (âMD CEO ESOP Plan 2014â or âthe Planâ). The MD CEO ESOP Plan 2014 was approved by the shareholders at the 26th Annual General Meeting held on July 30, 2014 enabling grant of stock options not exceeding in the aggregate 0.5% of the number of issued equity shares of the Company, from time to time, through notification of one more Scheme(s) under the Plan. Each stock option represents 1 equity share in the Company. The vesting period and the exercise period under the Plan is not less than one year and not more than 5 year
Pursuant to the aforesaid approval, on 5th January, 2015, the Company notified Scheme I under the Plan and granted 46,600 stock options to the Managing Director & CEO of the Company, at an exercise price of Re.1 per stock option. The vesting date for stock options granted under the Scheme 1 is 31st March, 2017. Further, the exercise period is one year from the date of vesting. As at31st March 2016, the said 46,600 stock options have increased to 93,200 on account of issue of bonus equity shares by the Company in the ratio of 1:1. In view of the implementation of Marico Employee Stock Option Plan, 2016, as explained below, no further grant of stock options is envisaged under this Plan.
Marico ESOP 2016
During the year ended 31st March, 2017, the Company implemented Marico Employee Stock Option Plan, 2016 (âMarico ESOP 2016â or âthe Planâ). The Marico ESOP 2016 was approved by the shareholders at the 28th Annual General Meeting held on 5th August, 2016, enabling grant of stock options to the eligible employees of the Company and its subsidiaries not exceeding in the aggregate 0.6% of the issued share equity share capital of the Company as on the commencement date of the Plan i.e. 5th August, 2016. Further, the stock options to any single employee under the Plan shall not exceed 0.15% of the issued equity share capital of the Company as on the commencement date (mentioned above). The Marico ESOP 2016 envisages to grant stock options to eligible employees of the Company and itâs subsidiaries on an annual basis through one or more Scheme(s) notified under the Plan. Each option represents 1 equity share in the Company. The vesting period under the Plan is not be less than one year and not more than five year Pursuant to the said approval, the Company notified below schemes under the Plan:
(b) Share appreciation rights
The Corporate Governance Committee has granted Stock Appreciation Rights (âSTARâ) to certain eligible employees pursuant to the Companyâs Employee Stock Appreciation Rights Plan, 2011 (âPlanâ). The grant price is determined based on a formulae as defined inthe Plan. There are schemes under each Plan with different vesting periods. Scheme I to VI have matured on their respective vesting dates. Under the Plan, the specified eligible employees are entitled to receive a Star Value which is the excess of the maturity price over the grant price subject to certain conditions. The Plan is administered by Corporate Governance Committee comprising independent directors.
The Company has formed âWelfare of Mariconians Trustâ (The Trust) for the implementation of the schemes that are notified or may be notified from time to time by the Company under the Plan. The Company has advanced Rs.23 Crore as at 31st March, 2019 (Rs.37 Crore as at 31st March 2018) to the Trust for purchase of the Companyâs shares under the Plan. As per the Trust Deed and Trust Rules, upon maturity, the Trust shall sell the Companyâs shares and hand over the proceeds to the Company. The Company, after adjusting the loan advanced and interest thereon (on loan advanced after1 April, 2013), shall utilize the proceeds towards meeting its STAR Value obligation.
The fair value of the STARâS was determined using the Black-Scholes model using the following inputs at the grant date and as at each reporting date:
8. Earnings Per Share
Basic EPS amounts are calculated by dividing the profit after tax for the year attributable to equity holders of the parent by the weighted average number of Equity shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit after tax for the year attributable to equity shareholders by weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.
Information concerning the classification of securities
(i) Share Options
Options granted to Employees under Marico ESOS 2014, MD CEO ESOP Plan 2014 and Marico Employee Stock Option Plan 2016 are considered to be potential equity shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note33.
(ii) Treasury shares
The weighted average number of shares takes into account the weighted average effect of changes in treasury share transactions during.
9. The Company has a process whereby periodically all long term contracts (including derivative contracts if any) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.
10. Previous yearâs figures have been regrouped/reclassified to make them comparable with those of current year.
Mar 31, 2018
Back ground and operations
Marico Limited (âMaricoâ or âthe Companyâ), headquartered in Mumbai, Maharashtra, India, carries on business in branded consumer products. Marico manufactures and markets products under the brands such as Parachute, Parachute Advansed, Nihar, Nihar Naturals, Saffola, Hair & Care, Revive, Mediker, Livon, Set-wet etc. Maricoâs products reach its consumers through retail outlets serviced by Maricoâs distribution network comprising regional offices, carrying & forwarding agents, redistribution centers & distributors spread all over India.
1 Critical estimates and Judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the groupâs accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.
The preparation of the financial statements in conformity with GAAP requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. These estimates and associated assumptions are based on historical experience and managementâs best knowledge of current events and actions the Company may take in future.
Information about critical estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities are included in the following notes:
(a) Impairment of financial assets and investment in subsidiaries and joint venture (including trade receivable) (Note 27)
(b) Estimation of defined benefit obligations (Note 15)
(c) Estimation of current tax expenses and payable (Note 25)
(d) Estimated impairment of intangible assets with indefinite useful life (Note 5)
(e) Estimation of provisions and contingencies (Note 14 and 31)
(f) Recognition of deferred tax assets (Note 7)
(g) Recognition of MAT credit entitlements (Note 7)
(a) Impairment of financial assets and investment in subsidiaries and joint venture (including trade receivable)
Impairment testing for financial assets including investment in subsidiaries and joint ventures (other than trade receivables) is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of the individual financial asset is determined based on value-in-use calculations which required use of assumptions.
Allowance for doubtful receivables represent the estimate of losses that could arise due to inability of the Customer to make payments when due. These estimates are based on the customer ageing, customer category, specific credit circumstances and the historical experience of the company as well as forward looking estimates at the end of each reporting period.
(b) estimation of defined benefit obligations
The liabilities of the company arising from employee benefit obligations and the related current service cost, are determined on an actuarial basis using various assumptions. Refer note 15 for significant assumptions used.
(c) estimation of current and deferred tax expenses and payable
The Companyâs tax charge is the sum of total current and deferred tax charges. Taxes recognized in the financial statements reflect managementâs best estimate of the outcome based on the facts known at the balance sheet date. These facts include but are not limited to interpretation of tax laws of various jurisdictions where the company operates. Any difference between the estimates and final tax assessments will impact the income tax as well as the resulting assets and liabilities.
(d) estimated impairment of intangible assets with indefinite useful life
Impairment testing for intangible assets with indefinite useful life is done at least once annually and upon occurrence of an indication of impairment. The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions.
(e) estimation of provisions and contingencies
Provisions are liabilities of uncertain amount or timing recognised where a legal or constructive obligation exists at the balance sheet date, as a result of a past event, where the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable. Contingent liabilities are possible obligations that may arise from past event whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not fully within the control of the company. The Company exercises judgement and estimates in recognizing the provisions and assessing the exposure to contingent liabilities relating to pending litigations. Judgement is necessary in assessing the likelihood of the success of the pending claim and to quantify the possible range of financial settlement. Due to this inherent uncertainty in the evaluation process, actual losses may be different from originally estimated provision.
(f) Recognition of deferred tax assets:
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(g) Recognition of MAT credit entitlements:
The credit availed under MAT is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. This requires significant management judgement in determining the expected availment of the credit based on business plans and future cash flows of the Company.
Estimation of fair value
The Company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties.
(iv) The fair values of investment properties have been determined by an independent valuer who holds recognised and relevant professional qualification. The main inputs used are rental growth rates, expected vacancy rates, terminal yields and discount rates based on comparable transactions and industry data. All resulting fair value estimates for investment properties are included in level 3.
Non-recurring fair value measurements
Building classified as held for sale was being measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification. Fair value of Building classified as held for sale was RS.40.69 Crore as at 31st March, 2017. The fair values of these assets have been determined by an independent valuer who holds recognised and relevant professional qualification. The main inputs include details obtained from âThe Ready Reckonerâ, location factor and physical verification of the property. All resulting fair value estimates for asset held for sale are included in level 3.
During the current Year 31st March, 2018 the same has been reclassified to Property, Plant and Equipment and will now be utilised for business purposes in the coming Year
(ii) Rights, preferences and restrictions attached to equity shares
Equity Shares: The Company has one class of equity shares having a par value of RS.1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(iii) Shares reserved for issue under options
Information relating to Marico ESOS 2014, MD CEO ESOP Plan 2014 and Marico ESOP 2016 including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 33.
Nature and purpose of reserves Securities premium account
Securities premium account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
General Reserve
The General Reserve is used from time to time to record transfer of profit from retained earnings, for appropriation purposes. As General Reserve is created by transfer from one component of equity to another and it is not an item of other comprehensive income, item included in the General Reserve will not be reclassified subsequently to Profit or Loss.
Share based option outstanding account
The Company has estabhlised variours equity settled share based payment plans for certain category of employees of the company. Refer note 33 for further details of this plans.
WeoMA reserve and Treasury shares
The company has formed Welfare of Mariconions Trust (WEOMA trust) for implementation of the schemes that are notified or may be notified from time to time by the Company under the plan, providing share based payment to its employees. WEOMA purchases shares of the Company out of funds borrowed from the Company. The Company treats WEOMA as its extension and shares held by WEOMA are treated as treasury shares. Profit on sale of treasury shares and dividend earned on the same by WEOMA trust is recognised in WEOMA reserve.
Hedge Reserve
The Company uses forward and options contracts to hedge its risks associated with foreign currency transactions relating to certain firm commitments and forecasted transactions. The Company also uses Interest rates swap contracts to hedge its interest rate risk exposure. The Company designates these as cash flow hedges. These contracts are marked to market as at the year end and resultant exchange differences, to the extent they represent effective portion of the hedge, are recognized directly in hedge reserve. The ineffective portion of the same is recognized immediately in the Statement of Profit and Loss. Exchange differences taken to hedge reserve account are recognized in the Statement of Profit and Loss upon crystallization of firm commitments or occurrence of forecasted transactions or upon discontinuation of hedge accounting resulting from expiry / sale / termination of hedge instrument or upon hedge becoming ineffective.
(a) Provision for disputed indirect taxes mainly pertains to Entry tax dispute in the state of Himachal Pradesh and West Bengal where company has filed a writ petition in both the states before the respective Honourable High Courts and the matter is sub judice. It is not practicable to state the timing of the judgement & final outcome. Management has assessed that unfavourable outcome of the matter is more than probable and therefore has created provisions for necessary amounts.
(b) Movement in provisions
Notes:-
(i) Gratuity
The company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are and more eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employeeâs last drawn basic salary per month computed proportionately foRs.15 days salary multiplied for the number of years of service. The gratuity plan is funded through gratuity trust and the company makes contributions to the trust.
(ii) provident fund
Contributions are made to a trust administered by the Company. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of the year and any shortfall in the fund balance maintained by the trust set up by the Company is additionally provided for. There is no shortfall as at 31st March, 2018 and 31st March,2017.
(iii) Leave Encashment/Compensated absences.
The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment / availment. The liability is provided based on the number of days of unutilized leave at each Balance Sheet date on the basis of an independent actuarial valuation.
(iv) Share-appreciation rights
In respect of Employee Stock Appreciation Rights (STAR) granted pursuant to the Companyâs Employee Stock Appreciation Rights Plan, 2011, the liability shall be measured, initially and at the end of each reporting period until settled, at the fair value of the share appreciation rights, by applying an option pricing model, (excess of fair value as at the period end over the Grant price) and is recognized as employee compensation cost over the vesting period (refer note 33).
The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The sensitivity analysis presented above may not be representative of the actual change in the projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the projected benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same method as applied in calculating the projected benefit obligation as recognised in the balance sheet. There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior Year
*The expected rate of return on plan assets is based on expectation of the average long term rate of return expected on investment of the fund during the estimated term of the obligations. (The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario.)
**The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion, and other relevant factors such as supply and demand factors in the employment market.
(c) Privileged leave (Compensated absences for employees)
Amount recognized in the Balance Sheet and movements in net liability:
The privileged leave liability is not funded.
(d) Employee State Insurance Corporation
The Company has recognised RS.0.28 Crore (RS.0.12 Crore for the year ended 31st March 2017) towards employee state insurance plan in the Statement of Profit and Loss.
Risk exposure (For Gratuity and Provident Fund)
Through its defined benefit plans, the company is exposed to below risk:
Asset volatility : The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan assets has investments in insurance/equity managed fund, fixed income securities with high grades, public/private sector units and government securities. Hence assets are considered to be secured.
Changes in bond yields : A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plansâ bond holdings.
The Trust ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the groupâs ALM objective is to match assets to the obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due.
Defined benefit liability and employer contributions
The weighted average duration of the gratuity is 6 years as at 31st March, 2018 and as at 31st March, 2017 The expected maturity analysis of gratuity is as follows:
The Company is eligible for government grants which are conditional upon construction of new factories in North east region. The Company has initiated the process for claim. The factories had been constructed and been in operation since May 2016 and March 2017. These grants, recognized as deferred income, is being amortized over the useful life of the plant and machinery in proportion in which the related depreciation expense is recognised.
(a) Net loss on foreign currency transactions and translation is other than as considered in finance cost.
(b) Miscellaneous expenses include :
(c) Corporate social responsibility expenditure
(d) Research and Development expenses aggregating to RS.6.55 Crore for food and edible items and RS.23.33 Crore for others have been included under the relevant heads in the Statement of Profit and Loss. (Previous year ended 31st March, 2017 aggregating RS.29.85 Crore). Further Capital expenditure pertaining to this of RS.0.23 Crore for food and edible items and RS.0.73 Crore for others have been incurred during the year (Previous year ended 31st March, 2017 aggregating RS.2.70 Crore).
Fair value hierarchy
(b) This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the Accounting Standard. An explanation of each level follows underneath the table.
The fair value of financial instruments as referred to in note above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurement) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows:
Level 1: Financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds, mutual funds, bonds and debentures, that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is considered here.For example, the fair value of forward exchange contracts, currency swaps and interest rate swaps is determined by discounting estimated future cash flows using a risk-free interest rate. The mutual funds are valued using the closing NAV pubhlished by mutual fund.
Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs). When the fair value of unquoted instruments cannot be measured with sufficient reliability, the company carries such instruments at cost less impairment, if applicable.
The Company policy is to recognize transfers into and transfer out of fair value hierarchy levels as at the end of the reporting period.
The carrying amounts of trade receivables, trade payables, capital creditors, loans and advances, security deposit, fixed deposit, insurance claim receivable, other financial liabilities and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature.
2 Financial Risk Management
Financial Risks
In the course of its business, the Company is exposed to a number of financial risks: credit risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity price risk and equity price risk). This note presents the Companyâs objectives, policies and processes for managing its financial risk and capital.
Board of Directors of the Company has approved Risk Management Framework through policies regarding Investment, Borrowing and Foregin Exchange Management policy. Management ensures the implementation of strategies and achievement of objectives as laid down by the Board through central Treasury function.
Treasury Management Guidelines define, determine and classify risk,by category of transaction, specific approval, execution and monitoring procedures.
In accordance with the aforementioned policies, the company only enters into plain vanilla derivative transactions relating to assets, liabilities or anticipated future transactions.
(A) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. Credit risk arises on liquid assets, financial assets, derivative assets, trade and other receivables.
In respect of its investments the company aims to minimize its financial credit risk through the application of risk management policies. Credit limits are set based on a counterparty value. The methodology used to set the list of counterparty limits includes, counterparty Credit Ratings (CR) and sector exposure. Evolution of counterparties is monitored regularly, taking into consideration CR and sector exposure evolution. As a result of this review, changes on credit limits and risk allocation are carried out. The company avoids the concentration of credit risk on its liquid assets by spreading them over several asset management companies and monitoring of underlying sector exposure.
Trade receivables are subject to credit limits, controls & approval processes. Due to large geographical base & number of customers, the Company is not exposed to material concentration of credit risk. Basis the historical experience, the risk of default in case of trade receivable is low. Provision is made for doubtful receivables on individual basis depending on the customer ageing, customer category, specific credit circumstances and the historical experience of the Company.
The gross carrying amount of trade receivables is RS.291.82 Crores as at 31st March, 2018, RS.230.53 Crores as at 31st March, 2017
Security deposits are interest free deposits given by the company for properties taken on lease. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of Security deposit is RS.13.07 Crores as at 31st March, 2018 and RS.15.04 Crores as at 31st March, 2017.
Advances are given to subsidiaries and joint venture for various operational requirements. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of loans and advances is RS.55.19 Crores as at 31st March, 2018 and RS.35.99 Crores as at 31st March, 2017.
(B) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company treasury maintains flexibility in funding by maintaining availability under committed credit lines.
The current ratio of the company as at 31st March, 2018 is 2.45 (as at 31st March, 2017 is 2.46) whereas the liquid ratio of the company as at 31st March, 2018 is 1.17 (as at 31st March, 2017 is 1.40).
Apart from the above, the company also has an exposure of corporate guarantees / stand by letter of credit (SBLC) given to banks on behalf of subsidiaries for credit and other facilities granted by banks (refer note 31). It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above corporate guarantees / SBLC.
(C) Market Risk
The Company is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.
(i) Foreign currency risk
The Company is exposed to foreign currency risk from transactions and translation.
Transactional exposures arise from transactions in foreign currency. They are managed within a prudent and systematic hedging policy in accordance with the Companyâs specific business needs through the use of currency forwards and options.
ii) Interest rate risk
The Company is exposed primarily to fluctuation in USD interest rates. Interest rate risk on financial debt is managed through interest rate swaps.
The Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Under these swaps, the company agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
The Companyâs fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
Sensitivity
The sensitivity analysis below have been determined based on the exposure to interest rates for both derivatives and nonderivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year.
iii) Price risk
Mutual fund Net Asset Values ( NAVs) are impacted by a number of factors like interest rate risk, credit risk, liquidity risk , market risk in addition to other factors. A movement of 1% in NAV on either side can lead to a gain/loss of RS.3.66 Crores and RS.3.91 Crores, on the overall portfolio as at 31st March, 2018 and 31st March, 2017 respectively.
Impact of hedging activities
Derivate Asset and Liabilites through Hedge Accounting Derivative financial instruments
The Companyâs derivatives mainly consist of currency forwards and options; interest rate swaps. Derivatives are mainly used to manage exposures to foreign exchange, interest rate and commodity price risk as described in section Market risk.
Derivatives are initially recognised at fair value. They are subsequently remeasured at fair value on a regular basis and at each reporting date as a minimum, with all their gains and losses, realised and unrealised, recognised in the Profit and Loss statement unless they are in a qualifying hedging relationship.
Hedge Accounting
The Company designates and documents certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair values of recognised assets and liabilities (fair value hedges) and highly probable forecast transactions (cash flow hedges). The effectiveness of such hedges is assessed at inception and verified at regular intervals.
Fair value hedges
The Company uses fair value hedges to mitigate foreign currency and interest rate risks of its recognised assets and liabilities.
Changes in fair values of hedging instruments designated as fair value hedges and the adjustments for the risks being hedged in the carrying amounts of the underlying transactions are recognised in the Statement of Profit and Loss.
The Company uses cash flow hedges to mitigate a particular risk associated with a recognised asset or liability or highly probable forecast transactions, such as anticipated future export sales, purchases of equipment and raw materials.
The effective part of the changes in fair value of hedging instruments is recognised in other comprehensive income, while any ineffective part is recognised immediately in the Statement of Profit and Loss.
3 Capital Management
(a) Risk Management
Capital management is driven by companyâs policy to maintain a sound capital base to support the continued development of its business.
The Board of Directors seeks to maintain a prudent balance between different components of the Companyâs capital. The Management monitors the capital structure and the net financial debt at individual level currency. Net financial debt is defined as current and non-current financial liabilities less cash and cash equivalents and short-term investments.
The debt equity ratio highlights the ability of a business to repay its debts. Refer below for Debt equity ratio as on 31st March, 2018 and 2017.
4 Segment Information
(i) Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (âCODMâ) of the company. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and CEO of the Company. The Company operates only in one business segment i.e. manufacturing and sale of consumer products within India, hence does not have any reportable segment as per Indian Accounting Standard 108 âoperating segmentsâ in Standalone. The company while presenting the consolidated financial statements has disclosed the segment information as required under Indian Accounting Standard 108 âoperating segmentsâ.
(ii) The amount of the companyâs revenue from external customers broken down by each product and service is shown in the table below.
(iiii) Revenue from external customer outside India and assets located outside India are not material. Further, the Company does not have revenue more than 10% of total revenue from single customer.
5 Related party Transactions
I Name of related parties and nature of relationship:
a) Subsidiary Companies:
*MEL Consumer Care & Partners - Wind a partnership firm got converted into joint stock company Marico for Consumer Care Products SAE w.e.f. 19th December, 2017.
The Marico Innovation Foundation (âMIFâ), a company incorporated under Section 25 of the Companies Act, 1956 (being a private company limited by guarantee not having share capital) primarily with an objective of fuelling and promoting innovation in India, is a wholly owned subsidiary of the Company with effect from 15th March, 2013.
**Thuan Phat Food stuff Joint Stock company has been merged with Marico South East Asia Corporation w.e.f. 1st December, 2016.
b) Joint venture:
Bellezimo Professionale Products Private Limited (w.e.f. 7th March, 2018, the Company ceased to be an Associate Company)
Zed Lifestyle Private Limited (During the previous year ended 31st March, 2017, the Company had acquired 35.43% stake on 17th March, 2017, during the year ended 31st March 2018 the Company acquired additional stake of 5.17%.
c) Key management personnel (KMP):
Mr. Harsh Mariwala, Chairman and Non Executive Director Mr. Saugata Gupta, Managing Director and CEO
Mr. Anand Kripalu, Independent Director (Resigned w.e.f. 6th October, 2017)
Mr. Ananth Sankaranarayanan, Independent Director (Appointed w.e.f. 26th June, 2017)
Mr. Atul Choksey, Independent Director (Resigned w.e.f. 1st April, 2017)
Mr. B.S. Nagesh, Independent Director Ms. Hema Ravichandar, Independent Director Mr. Nikhil Khattau, Independent Director Mr. Rajen Mariwala, Non executive Director Mr. Rajeev Bakshi, Independent Director
Mr. Rishabh Mariwala, Non executive Director (Appointed w.e.f. 2nd May, 2017)
Mr. Vivek Karve, Chief Financial Officer
Ms. Hemangi Ghag, Company Secretary & Compliance Officer (Appointed w.e.f. 30th October, 2017)
Mr. Surender Sharma, Head-Legal, International Business & Company Secretary (Resigned w.e.f. 16th October, 2017)
d) Individual holding directly / indirectly an interest in voting power and their relatives (where transactions have taken place) - Significant Influence:
Mr. Harsh Mariwala, Chairman and Non Executive Director Mr. Rajen Mariwala, Non Executive Director
Mr. Rishabh Mariwala, son of Mr. Harsh Mariwala and Non executive Director Mrs. Archana Mariwala, wife of Mr. Harsh Mariwala
e) Post employment benefit controlled trust Marico Limited Employees Provident Fund Marico Limited Employees Gratuity Fund
f) Others - Entities in which above (c) and (d) has significant influence and transactions have taken place:
Aqua Centric Private Limited
Ascent India Foundation
Feedback Business Consulting Services Private Limited
Kaya Limited
Kaya Middle East FZE
Mariwala Health Foundation
Soap Opera
The Bombay Oil Private Limited
II Transactions with related parties
The following transactions occurred with related parties:
The above remuneration to Key management personnel compensation does not include contribution to gratuity fund, as this contribution is a lump sum amount for all relevant employees based on actuarial valuation.
Terms and conditions of transaction with related parties
The Companyâs international transactions with related parties are at armâs length as per the indepentent accountants report for the year ended 31st March, 2017. Management belives that the Companyâs international transactions with related parties post 31st March, 2017 continue to be at armâs length and that the tranfer pricing legislation will not have any material impact on these financial statments, particularly on amount of tax expense and that of provision for taxation.
6 Share-Based payments
(a) Employee stock option plan
During the year ended 31st March, 2014, the Company implemented the Marico Employee Stock Option Scheme 2014 (âMarico ESOS 2014â). Marico ESOS 2014 was approved by the shareholders of the Company at the Extra Ordinary General Meeting held on 25th March, 2014 enabling the grant of 300,000 stock options to the Chief Executive Officer of the Company (Currently designated as Managing Director & CEO). Pursuant to the said approval, on 1st April, 2014 the Company granted
300,000 stock options to the Managing Director & CEO of the Company, at an exercise price of RS.1 per stock option. Each option represents 1 equity share in the Company. The vesting period is 2 years from the date of grant and the exercise period is 18 months from the date of vesting. During the year ended 31st March, 2016, the aforesaid 300,000 stock options had increased to 600,000 on account of issue of bonus equity shares by the Company in the ratio of 1:1.
During the year ended 31st March, 2015, the Company implemented the Marico MD CEO Employee Stock Option Plan 2014 (âMD CEO ESOP Plan 2014â or âthe Planâ). The MD CEO ESOP Plan 2014 was approved by the shareholders at the 26th Annual General Meeting held on 30th July, 2014 enabling grant of stock options not exceeding in the aggregate 0.5% of the number of issued equity shares of the Company, from time to time, through notification of one more Scheme(s) under the Plan. Each stock option represents 1 equity share in the Company. The vesting period and the exercise period under the Plan is not less than one year and not more than 5 Year Pursuant to the aforesaid approval, on 5th January, 2015, the Company notified Scheme I under the Plan and granted 46,600 stock options to the Managing Director & CEO of the Company, at an exercise price of RS.1 per stock option. The vesting date for stock options granted under the Scheme I is 31st March, 2017. Further, the exercise period is one year from the date of vesting. As at 31st March 2016, the said 46,600 stock options have increased to 93,200 on account of issue of bonus equity shares by the Company in the ratio of 1:1. In view of the implementation of Marico Employee Stock Option Plan, 2016, as explained below, no further grant of stock options is envisaged under this Plan.
During the year ended 31st March, 2017, the Company implemented Marico Employee Stock Option Plan, 2016 (âMarico ESOP 2016â or âthe Planâ). The Marico ESOP 2016 was approved by the shareholders at the 28th Annual General Meeting held on 5th August, 2016, enabling grant of stock options to the eligible employees of the Company and its subsidiaries not exceeding in the aggregate 0.6% of the issued share equity share capital of the Company as on the commencement date of the Plan i.e. 5th August, 2016. Further, the stock options to any single employee under the Plan shall not exceed 0.15% of the issued equity share capital of the Company as on the commencement date (mentioned above). The Marico ESOP 2016 envisages to grant stock options to eligible employees of the Company and itâs subsidiaries on an annual basis through one or more Scheme(s) notified under the Plan. Each option represents 1 equity share in the Company. The vesting period and the exercise period under the Plan is not be less than one year and not more than five Year Pursuant to the said approval, the Company notified below schemes under the Plan:
(b) Share appreciation rights
The Corporate Governance Committee has granted Stock Appreciation Rights (âSTARâ) to certain eligible employees pursuant to the Companyâs Employee Stock Appreciation Rights Plan, 2011 (âPlanâ). The grant price is determined based on a formulae as defined in the Plan. There are schemes undereach Plan with different vesting periods. Scheme I to V have matured on their respective vesting dates. Under the Plan, the specified eligible employees are entitled to receive a Star Value which is the excess of the maturity price over the grant price subject to certain conditions. The Plan is administered by Corporate Governance Committee comprising independent directors.
The Company has formed âWelfare of Mariconians Trustâ (The Trust) for the implementation of the schemes that are notified or may be notified from time to time by the Company under the Plan. The Company has advanced RS.37.45 Crore as at 31st March, 2018 (RS.54.26 Crore as at 31st March 2017) to the Trust for purchase of the Companyâs shares under the Plan. As per the Trust Deed and Trust Rules, upon maturity, the Trust shall sell the Companyâs shares and hand over the proceeds to the Company. The Company, after adjusting the loan advanced and interest thereon (on loan advanced afteRs.1st April, 2013), shall utilize the proceeds towards meeting its STAR Value obligation.
The fair value of the STARâs was determined using the Black-Scholes model using the following inputs at the grant date and as at each reporting date:
Information concerning the classification of securities
(i) Share Options
Options granted to Employees under Marico ESOS 2014, MD CEO ESOP Plan 2014 and Marico Employee Stock Option Plan 2016 are considered to be potential equity shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 33.
(ii) Treasury shares
The weighted average number of shares takes into account the weighted average effect of changes in treasury share transactions during the year.
7 Previous yearâs figures have been regrouped/reclassified to make them comparable with those of current year.
Mar 31, 2017
Back ground and operations
Marico Limited (âMaricoâ or âthe Companyâ), headquartered in Mumbai, Maharashtra, India, carries on business in branded consumer products. Marico manufactures and markets products under the brands such as Parachute, Parachute Advansed, Nihar, Nihar Naturals, Saffola, Hair & Care, Revive, Mediker, Livon, Set-wet, etc. Maricoâs products reach its consumers through retail outlets serviced by Maricoâs distribution network comprising regional offices, carrying & forwarding agents, redistribution centers & distributors spread all over India.
1 Investment Properties
(i) Amounts recognised in profit or loss for investment properties
(ii) Leasing arrangements
Investment properties are leased to tenants under long-term operating leases with rentals payable monthly. Minimum lease payments receivable under non-cancellable operating leases of investment properties are as follows:
(iii) Fair value
Estimation of fair value
The Company obtains independent valuations for its investment properties at least annually. The best evidence of fair value is current prices in an active market for similar properties.
(iv) The fair values of investment properties have been determined by independent valuer who holds recognised and relevant professional qualification . The main inputs used are rental growth rates, expected vacancy rates, terminal yields and discount rates based on comparable transactions and industry data. All resulting fair value estimates for investment properties are included in level 3.
(v) During the year 2015-16 building appearing as asset held for disposal having a net carrying value of Rs.12.74 Crore (Deemed cost of Rs. 12.96 Crore less depreciation of Rs. 0.22 Crore) has been reclassified as Investment property.
During the year ended 31st March, 2007 the Company carried out financial restructuring scheme (âSchemeâ) under the relevant provisions of the Companies Act, 1956 which was approved by the shareholders on 8th February, 2007 and subsequently by the Honâble High Court vide its order dated 23rd March, 2007. In terms of the Scheme, the Company adjusted the carrying value of Rs. 448.15 Crore of intangible assets such as trademarks, copyrights, business and commercial rights as on 31st January, 2007 and related deferred tax adjustment of Rs. 139.06 Crore (net adjustment of Rs. 309.09 Crore) against the balance in Securities Premium Reserve of Rs. 129.09 Crore and Capital Redemption Reserve of Rs. 180 Crore.
2 Assets Classified as Held for Sale
Non-recurring fair value measurements
Fair value of Building classified as held for sale was Rs. 40.69 Crore as at 31st March, 2017, Rs. 39.12 Crore as at 31st March, 2016 and Rs. 47.45 Crore as on 1st April, 2015. Building classified as held for sale during the reporting period was measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification. The fair values of these assets have been determined by independent valuer who holds recognised and relevant professional qualification. The main inputs include details obtained from âThe Ready Reckonerâ, location factor and physical verification of the property. All resulting fair value estimates for asset held for sale are included in level 3.
The company decided to sell land and building which was classified as asset held for sale as on 31st March, 2015. The assets situated at Goa were sold during the year ended 31st March, 2016, and the gain of Rs. 9.23 Crore was included in net gain on disposal of Property, Plant and Equipment in Note 19. The other asset was reclassified to investment property during the year ended 31st March, 2016. The delay in respect of the remaining asset (building) which the company has committed to sell is caused by certain event and circumstances which are beyond the entityâs control.
3(a) Equity Share Capital
(i) Movements in equity share capital
(ii) Rights, preferences and restrictions attached to equity shares
Equity Shares: The Company has one class of equity shares having a par value of Re.1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
(iii) Shares reserved for issue under options
Information relating to Marico ESOS 2007, Marico ESOS 2014, MD CEO ESOP Plan 2014 and including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period, is set out in note 33.
(iv) Details of shareholders holding more than 5% shares in the company
(v) During the year ended 31st March, 2016, the Company has issued 645,085,599 fully paid-up bonus equity shares of face value Re. 1 each in the ratio of 1:1 with record date of 24th December, 2015. As a result EPS has been adjusted for reporting as well as for all the comparative periods.
3(b) Other reserves Hedge reserve
Nature and purpose of reserves Securities premium account
Securities premium account is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Act.
General Reserve
The General Reserve account is used from time to time to record transfer of profit from retained earnings, for appropriation purposes. As General Reserve is created by transfer from one component of equity to another and it is not an item of other comprehensive income, item included in the General Reserve will not be reclassified subsequently to Profit or Loss.
Share based option outstanding account
The share based option outstanding account is used to recognise the grant date fair value of options as on the grant date, issued to employees under Companyâs employee stock option schemes.
WEOMA reserve and Treasury shares
Profit on sale of treasury shares by WEOMA trust is recognised in WEOMA reserve. (refer note 35)
Hedge Reserve
The Company uses forward and options contracts to hedge its risks associated with foreign currency transactions relating to certain firm commitments and forecasted transactions. The Company also uses Interest rates swap contracts to hedge its interest rate risk exposure. The Company designates these as cash flow hedges. These contracts are marked to market as at the year end and resultant exchange differences, to the extent they represent effective portion of the hedge, are recognized directly in hedge reserve. The ineffective portion of the same is recognized immediately in the Statement of Profit and Loss.
Exchange differences taken to hedge reserve account are recognized in the Statement of Profit and Loss upon crystallization of firm commitments or occurrence of forecasted transactions or upon discontinuation of hedge accounting resulting from expiry / sale / termination of hedge instrument or upon hedge becoming ineffective.
Note:-
(i) Cash Credit, Pre-shipment Credit in Foreign Currency, Working Capital Demand Loan and Export Packing Credit is secured by hypothecation of Inventory and Debtors, value of Rs. 1,310.57 Crore as at 31st March, 2017,Rs. 959.66 Crore as at 31st March, 2016 and Rs. 922.14 Crore as at 1st April, 2015.
(ii) ECB Loan was secured by (i) Pledge of shares of Marico South East Asia Corporation (a Subsidiary company, formerly known as International Consumer Products Corporation), carrying value of Rs. 254.98 Crore as at 1st April, 2015, 31st March, 2016 and 2017 (ii) First ranking pari passu charge over all current and future plant and machinery, carrying value of Rs. 188.57 Crore as at 1st April, 2015, Rs. 175.37 Crore as at 31st March, 2016 and the said loan has been repaid during the year and (iii) Mortgage on land and building situated at Andheri, Mumbai (Mortgage was only till previous year ended 31st March, 2015), carrying value of Rs. 44.08 Crore as at 1st April, 2015.
4 Provisions
(a) Provision for disputed indirect taxes mainly pertains to Entry tax dispute in the state of Himachal Pradesh and West Bengal where company has filed a writ petition in both the states before the honourable high court and the matter is sub judice. It is not practicable to state the timing of the judgement and final outcome. Management has assessed that unfavourable outcome of the matter is more than probable and therefore has created provisions for necessary amounts.
(b) Movement in provisions
Notes:-
(i) Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employeeâs last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is funded through gratuity trust.
(ii) Provident fund
Contributions are made to a trust administered by the Company. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of the year and any shortfall in the fund balance maintained by the Trust set up by the Company is additionally provided for. There is no shortfall as at 31st March, 2017, 31st March, 2016 and 1st April, 2015.
(iii) Leave Encashment/Compensated absences.
The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment / availment. The liability is provided based on the number of days of unutilized leave at each Balance Sheet date on the basis of an independent actuarial valuation. The company encourages its employees to plan and avail their leave within a year, hence the company has classified leave encashment provision amount as current.
(iv) Super annuation
The Company makes contribution to the Superannuation Scheme, a defined contribution scheme, administered by Insurance companies. The company has no obligation to the scheme beyond its monthly contributions.
(v) Share-appreciation rights
In respect of Employee Stock Appreciation Rights (STAR) granted pursuant to the Companyâs Employee Stock Appreciation Rights Plan, 2011, the liability shall be measured, initially and at the end of each reporting period until settled, at the fair value of the share appreciation rights, by applying an option pricing model, (excess of fair value as at the period end over the Grant price) and is recognized as employee compensation cost over the vesting period (refer note 33).
*The expected rate of return on plan assets is based on expectation of the average long term rate of return expected on investment of the fund during the estimated term of the obligations.
**The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion, and other relevant factors such as supply and demand factors in the employment market. (The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario.)
Sensitivity Analysis
The sensitivity of the defined benefit obligations to the changes in the weighted principal assumptions is as under:
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
*The expected rate of return on plan assets is based on expectation of the average long term rate of return expected on investment of the fund during the estimated term of the obligations.
**The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion, and other relevant factors such as supply and demand factors in the employment market. (The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario.)
(c) Privileged leave (Compensated absences for employees):
Amount recognized in the Balance Sheet and movements in net liability:
The privileged leave liability is not funded.
(d) Superannuation fund
The Company has recognised Rs. Nil for the year ended 31st March, 2017, Rs. 0.15 Crore for the year ended 31st March, 2016 and Rs. 0.22 Crore for the year ended 31st March, 2015 towards contribution to superannuation fund in the Statement of Profit and Loss.
The Company has recognised Rs.0.12 Crore for the year ended 31st March, 2017, Rs. 0.05 Crore for the year ended 31st March, 2016, Rs. 0.08 Crore for the year ended 31st March, 2015 towards employee state insurance plan in the Statement of Profit and Loss.
Risk exposure (For Gratuity and Provident Fund)
The Company is exposed to below risks, pertaining to its defined benefit plans.
Asset volatility : The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan assets has investments in insurance/equity managed fund, fixed income securities with high grades, public/private sector units and government securities. Hence assets are considered to be secured.
Changes in bond yields : A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plansâ bond holdings.
The Trust ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the employee benefit plans. Within this framework, the groupâs ALM objective is to match assets to the obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due.
Defined benefit liability and employer contributions
The weighted average duration of the Gratuity is 6 years as at 31st March, 2017, as at 31st March, 2016 and as at 31st March, 2015.
5 Other Expenses
(a) Net loss on foreign currency transactions and translation is other than as considered in finance cost.
(b) Miscellaneous expenses include :
(c) Corporate social responsibility expenditure
(d) Research and Development expenses aggregating to Rs. 6.70 Crore for food and edible items and Rs. 23.15 Crore for others have been included under the relevant heads in the Statement of Profit and Loss. (Previous year ended 31st March, 2016 aggregating Rs. 25.04 Crore). Further Capital expenditure pertaining to this of Rs. 0.59 Crore for food and edible items and Rs. 2.11 Crore for others have been incurred during the year (Previous year ended 31st March, 2016 aggregating Rs. 2.43 Crore).
6 Fair Value Measurements
(a) Financial Instruments by category
Fair value hierarchy
(b) This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels in accordance with the applicable Accounting Standard. An explanation of each level follows underneath the table.
The fair value of financial instruments as referred to in note above has been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurement) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows:
Level 1: Financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds, mutual funds, bonds and debentures, that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchanges is valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is considered here.For example, the fair value of forward exchange contracts, currency swaps and interest rate swaps is determined by discounting estimated future cash flows using a risk-free interest rate. The mutual funds are valued using the closing NAV pubhlished by mutual fund
Level 3: The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs). When the fair value of unquoted instruments cannot be measured with sufficient reliability, the company carries such instruments at cost less impairment, if applicable.
The Company policy is to recognize transfers into and transfer out of fair value hierarchy levels as at the end of the reporting period.
The carrying amounts of trade receivables, trade payables, capital creditors, loans and advances, security deposit, fixed deposit, insurance claim receivable, other financial liabilities and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature.
7 Financial Risk Management Financial Risks
In the course of its business, the Company is exposed to a number of financial risks: credit risk, liquidity risk, market risk (including foreign currency risk and interest rate risk, commodity price risk and equity price risk). This note presents the Companyâs objectives, policies and processes for managing its financial risk and capital.
Board of Directors of the Company has approved Risk Management Framework through policies regarding Investment, Borrowing and Foreign Exchange Management policy. Treasury Management Guidelines define,determine and classify risk,by category of transaction, specific approval, execution and monitoring procedures.
In accordance with the aforementioned policies, the company only enters into plain vanilla derivative transactions relating to assets, liabilities or anticipated future transactions.
(A) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. Credit risk arises on liquid assets, financial assets, derivative assets, trade and other receivables.
In respect of its investments the company aims to minimize its financial credit risk through the application of risk management policies. Credit limits are set based on a counterparty value . The methodology used to set the list of counterparty limits includes, counterparty Credit Ratings (CR) and sector exposure. Evolution of counterparties is monitored regularly, taking into consideration CR and sector exposure evolution. As a result of this review, changes on credit limits and risk allocation are carried out. The Company avoids the concentration of credit risk on its liquid assets by spreading them over several asset management companies and monitoring of underlying sector exposure.
Trade receivables are subject to credit limits, controls and approval processes. Due to large geographical base and number of customers, the Company is not exposed to material concentration of credit risk. Basis the historical experience, the risk of default in case of trade receivable is low. Provision is made for doubtful receivables on individual basis depending on the customer ageing, customer category, specific credit circumstances and the historical experience of the Company.
The gross carrying amount of trade receivables is Rs. 227.61 Crore as at 31st March, 2017, Rs. 192.10 Crore as at 31st March, 2016 and Rs. 130.55 Crore as at 1st April, 2015.
Security deposits are interest free deposits given by the Company for properties taken on lease. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of Security deposit is Rs. 15.04 Crore as at 31st March, 2017, Rs. 12.55 Crore as at 31st March, 2016 and Rs. 11.79 Crore as at 1st April, 2015.
Advances are given to subsidiaries andjoint venture for various operational requirements. Provision is taken on a case to case basis depending on circumstances with respect to non recoverability of the amount. The gross carrying amount of loans and advances is Rs. 37.59 Crore as at 31st March, 2017, Rs. 36.74 Crore as at 31st March, 2016 and Rs. 35.66 Crore as at 1st April, 2015
(B) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, company treasury maintains flexibility in funding by maintaining availability under committed credit lines.
The current ratio of the company as at 31st March, 2017 is 2.52 (as at 31st March, 2016 is 1.87, as at 1st April, 2015 is 1.97) whereas the liquid ratio of the company as at 31st March, 2017 is 1.42 (as at 31st March, 2016 is 1.15, as at 1st April, 2015 is 1.01).
(C) Market Risk
The Company is exposed to risk from movements in foreign currency exchange rates, interest rates and market prices that affect its assets, liabilities and future transactions.
(i) Foreign currency risk
The Company is exposed to foreign currency risk from transactions and translation.
Transactional exposures arise from transactions in foreign currency. They are managed within a prudent and systematic hedging policy in accordance with the Companyâs specific business needs through the use of currency forwards and options.
Excludes Loans payable of Rs. 178.87 Crore [USD 27,000,000] (Rs. 262.49 Crore [USD 42,000,000]) assigned to hedging relationship against highly probable forecast sales. The Cash flows are expected to occur and impact the Statement of Profit and Loss within the period of 1 year (Previous year: 2 years).
ii) Interest rate risk
The Company is exposed primarily to fluctuation in USD interest rates. Interest rate risk on financial debt is managed through interest rate swaps.
The Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Under these swaps, the Company agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
The Companyâs fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
Financial assets are classified at amortized cost have fixed interest rate. Hence, the Company is not subject to interest rate risk on such financial assets.
Sensitivity
The sensitivity analysis below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year.
iii) Price risk
Mutual fund Net Asset Values ( NAVs) are impacted by a number of factors like interest rate risk, credit risk, liquidity risk, market risk in addition to other factors. A movement of 1% in NAV on either side can lead to a gain/loss of Rs. 3.91 Crore, Rs. 3.59 Crore and Rs. 2.13 Crore, on the overall portfolio as at 31st March, 2017, 31st March, 2016 and 1st April, 2015 respectively.
Impact of hedging activities
Derivate Asset and Liabilites through Hedge Accounting Derivative financial instruments
The Companyâs derivatives mainly consist of currency forwards and options ; interest rate swaps. Derivatives are mainly used to manage exposures to foreign exchange, interest rate and commodity price risk as described in section Market risk.
Derivatives are initially recognised at fair value. They are subsequently remeasured at fair value on a regular basis and at each reporting date as a minimum, with all their gains and losses, realised and unrealised, recognised in the Profit and Loss statement unless they are in a qualifying hedging relationship.
Hedge Accounting
The Company designates and documents certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair values of recognised assets and liabilities (fair value hedges) and highly probable forecast transactions (cash flow hedges).The effectiveness of such hedges is assessed at inception and verified at regular intervals.
Fair value hedges
The Company uses fair value hedges to mitigate foreign currency and interest rate risks of its recognised assets and liabilities.
Changes in fair values of hedging instruments designated as fair value hedges and the adjustments for the risks being hedged in the carrying amounts of the underlying transactions are recognised in the Statement of Profit and Loss.
The Company uses cash flow hedges to mitigate a particular risk associated with a recognised asset or liability or highly probable forecast transactions, such as anticipated future export sales, purchases of equipment and raw materials.
The effective part of the changes in fair value of hedging instruments is recognised in other comprehensive income, while any ineffective part is recognised immediately in the Statement of Profit and Loss.
8 Capital Management
(a) Risk Management
Capital management is driven by Companyâs policy to maintain a sound capital base to support the continued development of its business. The Board of Directors seeks to maintain a prudent balance between different components of the Companyâs capital. The Management monitors the capital structure and the net financial debt at individual currency level. Net financial debt is defined as current and non-current financial liabilities less cash and cash equivalents and short term investments. The debt equity ratio highlights the ability of a business to repay its debts. Refer below for Debt equity ratio as on 31st March, 2017, 31st March, 2016 and 1st April, 2015.
9 Segment Information
(i) Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (âCODMâ) of the company. The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and CEO of the Company. The Company operates only in one business segment i.e. manufacturing and sale of consumer products within India, hence does not have any reportable segment as per Indian Accounting Standard 108 âoperating segmentsâ in Standalone. The company while presenting the consolidated financial statements has disclosed the segment information as required under Indian Accounting Standard 108 âoperating segmentsâ.
(ii) The amount of the Companyâs revenue from external customers broken down by each product and service is shown in the table below.
(iiii) Revenue from external customer outside India and assets located outside India are not material. Further, the Company does not have revenue more than 10% of total revenue from single customer.
10 Related Party Transactions
Name of related parties and nature of relationship:
a) Subsidiary Companies:
The Marico Innovation Foundation (âMIFâ), a company incorporated under Section 25 of the Companies Act, 1956 (being a private company limited by guarantee not having share capital) primarily with an objective of fuelling and promoting innovation in India, is a wholly owned subsidiary of the Company with effect from 15th March, 2013.
During the year ended 31st March, 2016, Marico South East Asia Corporation (formerly known as International Consumer Product Corporation) a subsidiary of the Company divested its entire stake in Beaute Cosmetique Societe Par Actions (BCS) on 14th May, 2015.
Thuan Phat Food stuff Joint Stock company has been merged with Marico South East Asia Corporation (formerly known as International Consumer Product Corporation) w.e.f 1st December, 2016.
b) Subsidiary firm:
MEL Consumer Care & Partners - Wind (Through MELCC)
c) Joint venture:
Bellezimo Professionale Products Private Limited (During the year ended 31st March, 2016, the Company has acquired 45% stake on 21st October, 2015)
Zed Lifestyle Private Limited (During the year ended 31st March, 2017, the Company has acquired 35.43% stake on 17th March, 2017)
d) Key management personnel (KMP):
Mr. Saugata Gupta, Managing Director and CEO
Mr. Harsh Mariwala, Chairman and Non Executive Director
Mr. Rajeev Bakshi, Independent Director
Mr. Atul Choksey, Independent Director
Mr. Nikhil Khattau, Independent Director
Mr. Anand Kripalu, Independent Director
Mr. Rajen Mariwala, Non executive Director
Mr. B.S. Nagesh, Independent Director
Ms. Hema Ravichandar, Independent Director
e) Individual holding directly / indirectly an interest in voting power and their relatives (where transactions have taken place) - Significant Influence:
Mr. Harsh Mariwala, Chairman and Non Executive Director Mr. Rishabh Mariwala, son of Mr. Harsh Mariwala
f) Post employment benefit controlled trust Marico Limited Employees Provident Fund Marico Limited Employees Gratuity Fund
g) Others - Entities in which above (e) has significant influence and transactions have taken place:
Marico Kaya Enterprises Limited (upto 18th April, 2015)
Kaya Limited Kaya Middle East FZE
II Transactions with related parties
The following transactions occurred with related parties:
Key management personnel compensation
The above remuneration to Key management personnel compensation does not include contribution to gratuity fund, as this contribution is a lump sum amount for all relevant employees based on actuarial valuation.
Contribution to post employment benefit controlled trust : refer note 15.
11 Contingent Liabilities and Contingent Assets
(a) Contingent liabilities
The Company had contingent liabilities in respect of :
It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above contingent liabilities pending resolution of the respective proceedings.
Note:
This contingent liability pertained to a possible obligation in respect of pure coconut oil packs up to 200 ml. This claim had been contested by the excise department. Based on the various judicial pronouncements, management believed that the probability of success in the matter was more likely than not and accordingly, the possible excise obligation was treated as a contingent liability in accordance with requirements of Indian Accounting Standard (Ind AS) 37 âProvisions, Contingent Liabilities and Contingent Assetsâ. The possible obligation of Rs. 563.73 Crores as at 31st March, 2016 (Rs. 443.85 Crores as at April 1, 2015) for the clearances made after June 3, 2009 (i.e. the date of issue of Board circular) till March 31, 2016 and Rs. 121.77 Crores as at March 31, 2016 (Rs. 121.77 Crores as at April 1, 2015) for clearances made prior to June 3, 2009 was disclosed as contingent liability to the extent of the time horizon covered by show cause notices issued by the excise department within the normal period of one year (from the date of clearance) as per the excise laws.
The aforementioned amount has not been considered under contingent liability as on 31st March 2017 as the matter has now been settled by orders of different adjudication authorities in the current financial year holding that clearance of pure coconut oil packs up to 200ml merits classification under chapter 15 and not under chapter 33 as contemplated by the excise department and accordingly the excise department has also withdrawn its circular dated June 3,2009 .
Consequently pending show cause notices issued by the excise authorities will not survive and therefore the contingent liability has been deleted from current financial year.
12 Share-Based Payments
(a) Employee stock option plan
The Corporate Governance Committee of the Board of Directors of Marico Limited had granted stock options to certain eligible employees of the Company and itâs subsidiaries pursuant to the Marico Employees Stock Options Scheme 2007 (âthe Schemeâ). Each option represents 1 equity share in the Company. The vesting period and the exercise period under the Scheme was not less than one year and not more than 5 years. The Scheme was administered by the Corporate Governance Committee of the Board comprising Independent Directors. All stock options granted under the Scheme were exercised on 10th June, 2015.
During the year ended 31st March, 2015, the Company implemented the Marico Employee Stock Option Scheme 2014 (âMarico ESOS 2014â). Marico ESOS 2014 was approved by the shareholders of the Company at the Extra Ordinary General Meeting held on March 25, 2014 enabling the grant of 300,000 stock options to the Chief Executive Officer of the Company (Currently designated as Managing Director & CEO).
Pursuant to the said approval, on 1st April, 2014 the Company granted 300,000 stock options to the Managing Director & CEO of the Company, at an exercise price of Re.1 per stock option. Each option represents 1 equity share in the Company. The vesting period is 2 years from the date of grant and the exercise period is 18 months from the date of vesting. As at 31st March, 2016, the aforesaid 300,000 stock options have increased to 600,000 on account of issue of bonus equity shares by the Company in the ratio of 1:1.
During the year ended 31st March, 2015, the Company implemented the Marico MD CEO Employee Stock Option Plan 2014 (âMD CEO ESOP Plan 2014â or âthe Planâ). The MD CEO ESOP Plan 2014 was approved by the shareholders at the 26th Annual General Meeting held on July 30, 2014 enabling grant of stock options not exceeding in the aggregate 0.5% of the number of issued equity shares of the Company, from time to time, through notification of one more Scheme(s) under the Plan. Each stock option represents 1 equity share in the Company. The vesting period and the exercise period under the Plan is not less than one year and not more than 5 years.
Pursuant to the aforesaid approval, on 5th January, 2015, the Company notified Scheme I under the Plan and granted 46,600 stock options to the Managing Director & CEO of the Company, at an exercise price of Re.1 per stock option. The vesting date for stock options granted under the Scheme I is 31st March, 2017. Further, the exercise period is one year from the date of vesting. As at 31st March, 2016, the said 46,600 stock options have increased to 93,200 on account of issue of bonus equity shares by the Company in the ratio of 1:1. In view of the implementation of Marico Employee Stock Option Plan, 2016, as explained below, no further grant of stock options is envisaged under this Plan.
During the current year ended 31st March, 2017, the Company implemented Marico Employee Stock Option Plan, 2016 (âMarico ESOP 2016â or âthe Planâ). The Marico ESOP 2016 was approved by the shareholders at the 28th Annual General Meeting held on 5th August, 2016, enabling grant of stock options to the eligible employees of the Company and its subsidiaries not exceeding in the aggregate 0.6% of the issued share equity share capital of the Company as on the commencement date of the Plan i.e. 5th August, 2016. Further, the stock options to any single employee under the Plan shall not exceed 0.15% of the issued equity share capital of the Company as on the commencement date (mentioned above). The Marico ESOP 2016 envisages to grant stock options to eligible employees of the Company and itâs subsidiaries on an annual basis through one or more Scheme(s) notified under the Plan. Each option represents 1 equity share in the Company. The vesting period and the exercise period under the Plan is not be less than one year and not more than five years. Pursuant to the said approval, the Company notified below schemes under the Plan:
(b) Share appreciation rights
The Corporate Governance Committee has granted Stock Appreciation Rights (âSTARâ) to certain eligible employees pursuant to the Companyâs Employee Stock Appreciation Rights Plan, 2011 (âPlanâ). The grant price is determined based on a formulae as defined in the Plan. There are schemes under each Plan with different vesting periods. Scheme I, II, III and IV have matured on their respective vesting dates. Under the Plan, the specified eligible employees are entitled to receive a Star Value which is the excess of the maturity price over the grant price subject to certain conditions. The Plan is administered by Corporate Governance Committee comprising independent directors.
Information concerning the classification of securities
(i) Share Options
Options granted to Employees under Marico ESOS 2014,MD CEO ESOP Plan 2014 and Marico Employee Stock Option Plan 2016 are considered to be potential equity shares. They have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 33.
(ii) Treasury shares
The weighted average number of shares takes into account the weighted average effect of changes in treasury share transactions during the year.
13 First time adoption of Ind AS Transition to Ind AS
These are the Companyâs first financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31st March, 2017, the comparative information presented in these financial statements for the year ended 31st March, 2016 and in the preparation of an opening Ind AS Balance Sheet at 1st April, 2015 (the Companyâs date of transition). In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).
An explanation of how the transition from previous GAAP to Ind AS has affected the companyâs financial position, financial performance and cash flows is set out in the following tables and notes.
A. Exemptions and exceptions availed
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A.1 Ind AS optional exemptions
A.1.1 Business combinations
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date.
The Company has elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.
The Company has applied same exemption for investment in subsidiaries and joint ventures.
A.1.2 Deemed cost
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 -Intangible Assets and investment property covered by Ind AS 40 - Investment Properties.
Accordingly, the Company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their previous GAAP carrying value.
A.1.3 Share-based payment transactions
Ind AS 102 deals with the accounting and disclosure requirements related to share-based payment transactions. The standard addresses three types of share-based payment transactions: equity-settled, cash-settled, and with cash-alternatives. A first-time adopter is encouraged, but is not required, to apply Ind AS 102 to:
(i) equity instruments that vested before the date of transition to Ind AS,
(ii) liabilities arising from share-based payment transactions that were settled before the date of transition to Ind AS.
The Company has availed this exemption and has not applied fair value to the equity instruments and liabilities that were vested and settled before the date of transition to Ind AS.
A.1.4 Investments in subsidiaries
When an entity prepares separate financial statements, Ind AS 27 requires it to account for its investments in subsidiaries, joint ventures and associates either at cost; or in accordance with Ind AS 109.
If a first-time adopter measures such an investment at cost in accordance with Ind AS 27, it shall measure that investment at one of the following amounts in its separate opening Ind AS Balance Sheet:
(a) cost determined in accordance with Ind AS 27; or
(b) deemed cost. The deemed cost of such an investment shall be its:
(i) fair value at the entityâs date of transition to Ind ASs in its separate financial statements; or
(ii) previous GAAP carrying amount at that date.
A first-time adopter may choose either (i) or (ii) above to measure its investment in each subsidiary, joint venture or associate that it elects to measure using a deemed cost.
The Company has availed the exemption and has measured its investment in subsidiaries at deemed cost being the previous GAAP carrying amount at that date.
A.2 Ind AS mandatory exceptions
A.2.1 Hedge accounting
Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in Ind AS 109, at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation can not be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of 1st April, 2015 are reflected as hedges in the companyâs result under Ind AS.
The Company had designated various hedging relationships as cash flow hedges under the previous GAAP. On date of transition to Ind AS, the entity had assessed that all the designated hedging relationship qualifies for hedge accounting as per Ind AS 109. Consequently, the company continues to apply hedge accounting on and after the date of transition to Ind AS.
A.2.2 Estimates
An entityâs estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1st April, 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The company made estimates for Investment in equity instruments carried at FVPL in accordance with Ind AS at the date of transition as these were not required under previous GAAP.
A.2.3 De-recognition of financial assets and liabilities
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirement provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.
The company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS .
A.2.4 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
Ind AS 101 requires the company to reconcile equity, total comprehensive income, and cash flow for prior periods. The following reconciliations provide the explanantions and quantification of the differences arising from the transition from previous GAAP to Ind AS in accordance with Ind AS 101:
(A) Reconciliation of Equity as at 1st April, 2015 and as at 31st March, 2016
(B) Reconciliation of Statement of Profit and Loss for the year ended 31st March, 2016 and
(C) The impact on cash flows from operating, investing and financing activities for the year ended 31st March, 2016.
C: Notes on First-time adoption
1 Consolidation of the Trust
The company has formed Welfare of Mariconions Trust (WEOMA trust) for implementation of the schemes that are notified or may be notified from time to time by the Company under the plan, providing share based payment to its employees. WEOMA purchases shares of the Company out of funds borrowed from the Company. The Company treats WEOMA as its extension and shares held by WEOMA are treated as treasury shares.
The Consolidation of the WEOMA trust financials statements with that of the Company does not in any manner affect the independence of the trustees where the rights and obligations are regulated by the trust deed.
Own equity instruments (treasury shares) are recognised at cost and deducted from equity. Profit on sale of treasury shares by WEOMA trust is recognised in WEOMA reserve.
Other items adjusted owing to the Trust consolidation include :
(a) Treasury shares
Upon consolidation, the investment in the Companyâs equity shares made by WEOMA Trust is debited to the Companyâs equity as treasury shares amounting to Rs. 68.37 Crore as at 31st March, 2016 (Rs. 28.29 Crore as at 1st April, 2015).
(b) WEOMA reserve
The income of the Trust till date comprising of profit on sale of Marico shares, forms a part of WEOMA reserve amounting to Rs. 20.18 Crore as at 31st March, 2016 (Rs. 2.66 Crore as at 1st April, 2015).
(c) Other Non Current Financial Assets and other income
Loan advanced to the Trust is eliminated on consolidation amounting to Rs. 50.59 Crore as at 31st March, 2016 (Rs. 8.40 Crore as at 1st April, 2015) forming a part of non current loans and Rs. 15.97 Crore (Rs. 19.76 Crore as at 1st April, 2015) being current loans in previous GAAP Accordingly, interest on above loan is also eliminated amounting to Rs. 2.12 Crore.
(d) Investments
The fair value of investments held by the Trust consolidated as per Ind AS amounts to Rs 1.47 Crore as at 31st March, 2016 (Rs. 4.52 Crore as at 1st April, 2015). The profit for the year ended 31st March, 2016 decreased by Rs. 3.05 Crore.
2 Employee Stock Option Liability
Under the previous GAAP, the cost of equity-settled employee share-based plan were recognised using the intrinsic value method. Under Ind AS, the cost of equity settled share-based plan is recognised based on the fair value of the options as at the grant date. Consequently, the amount recognised in share based option outstanding account decreased by Rs. 0.64 Crore as at 31st March, 2016 (1st April, 2015 - Rs. 0.31 Crore). The profit for the year ended 31st March, 2016 increased by Rs. 0.33 Crore. There is no impact on total equity.
3 STAR
Under the previous GAAP, the cost of cash-settled employee share-based plan were recognised using the intrinsic value of the rights (excess of market value as at period end over the Grant price) over the vesting period after adjusting amount recoverable from WEOMA trust. As per Ind AS 102, the Share appreciation rights liability shall be measured, initially and at the end of each reporting period until settled, at the fair value of the share appreciation rights, by applying an option pricing model, taking into account the terms and conditions on which the share appreciation rights were granted, and the extent to which the employees have rendered service to date. There is an increase in liability by Rs. 14.61 Crore whereby Rs. 0.83 Crore (Rs. 4.69 Crore as at 1st April, 2015) is long term and Rs. 13.78 Crore (Rs. 11.39 Crore as at 1st April, 2015) is short term. The profit for the year ended 31st March, 2016 decreased by Rs. 13.99 Crore. Equity has decreased by Rs. 30.10 Crore as at 31st March, 2016 (1st April, 2015 - Rs. 16.08 Crore)
4 Retained Earnings
Retained earnings as at 1st April, 2015 has been adjusted consequent to the above Ind AS transition adjustments
5 Time Value reclassified to OCI
Under previous GAAP, the company recognised movements in time value of options and forward element of forward contracts and Interest rate swaps contract in profit or loss in the period in which they arose. Under Ind AS, these movements are reclassified to OCI and thereby decreasing hedge reserve balance by Rs. 2.15 Crore as at 31st March, 2016 (1st April, 2015 Rs. 0.47 Crore). The profit for the year ended 31st March, 2016 is decreased by Rs 1.68 Crore. There is no impact on total equity.
6 Borrowings
Under previous GAAP, transaction costs incurred towards origination of borrowings were charged to profit or loss as and when incurred. Ind AS 109 requires these transaction costs to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Accordingly, borrowings as at 31st March, 2016 have been reduced by Rs. 0.35 Crore (1st April, 2015 Rs. 0.73 Crore) with a corresponding adjustment to retained earnings. The total equity increased by an equivalent amount. The profit for the year ended 31st March, 2016 reduced by Rs. 0.38 Crore as a result of the additional interest expense.
7 Other Intangible assets
In previous GAAP, there was a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. As per Ind AS 38, Intangible Assets having an indefinite life are not amortised and tested annually for impairment. The amortisation charged on copyrights and trademarks is reversed thereby increasing the value of intangible assets, retained earning and profit by Rs. 5.43 Crore as at 31st March, 2016.
8 Fair valuation of investments
Under the previous GAAP, investments in equity instruments and mutual funds were classified as non current investments or current investments based on the intended holding period and realisability. Non current investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognised in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended 31st March, 2016. This increased the retained earnings by Rs. 7.09 Crore as at 31st March, 2016 (1st April, 2015 - Rs. 2.89 Crore). The profit for the year ended 31st March, 2016 increased by Rs. 4.20 Crore.
9 Security deposits
Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, the company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent. Consequent to this change, the amount of security deposits decreased by Rs. 1.18 Crore as at 31st March, 2016 (1st April, 2015 - Rs. 1.49 Crore). The prepaid rent increased by Rs. 1.12 Crore as at 31st March, 2016 (1st April, 2015 - Rs. 1.40 Crore). Total equity decreased by Rs. 0.06 Crore as on 1st April, 2015. The profit for the year and total equity as at 31st March, 2016 decreased by Rs. 0.02 Crore due to amortisation of the prepaid rent of Rs. 0.53 Crore which is partially off-set by the notional interest income of Rs 0.55 Crore recognised on security deposits.
10 Deferred tax has been recognised on adjustments made on transition to Ind AS.
Revenue from operations
11 Excise duty
Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the Statement of Profit and Loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended 31st March, 2016 by Rs. 7.13 Crore. There is no impact on the total equity and profit.
12 Revenue, Advertisement and Sales Promotion (ASP) and other expense
The Company will recognise revenue at the fair value of consideration received or receivable. Any sales incentive, discounts or rebates in any form, including cash discounts given to customers will be considered as selling price reductions and accounted as reduction from revenue. Under IGAAP, some of these costs were included in âadvertising and sales promotionâ expenses. Accordingly, Rs. 60.78 Crore has been reclassified from Advertisement and Sales Promotion to Sales, Rs. 7.12 Crore has been reclassified from Advertisement and Sales Promotion to Cost of Goods Sold and Rs. 25.73 Crore from other expense to Sales.
Employee benefits expense
13 Remeasurements of post-employment benefit obligations
Under Ind AS, remeasurements i.e. actuarial gains and losses and return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31st March, 2016 increased by Rs. 2.83 Crore. There is no impact on the total equity as at 31st March, 2016.
14 Investment property and Asset held for sale
Under the previous GAAP, investment properties were presented as part of non-current investments. Under Ind AS, investment properties are required to be separately presented on the face of the Balance Sheet. There is no impact on the total equity or profit as a result of this adjustment.
Under the previous GAAP, asset held for sale were presented as part of other current assets. Under Ind AS, asset held for sale are required to be separately presented on the face of the Balance Sheet. There is no impact on the total equity or profit as a result of this adjustment.
15 Other comprehensive income
Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss includes remeasurements of defined benefit plans, effective portion of gains and losses on cash flow hedging instruments. The concept of other comprehensive income did not exist under previous GAAP.
14 Event occuring after Balance sheet date
As at 2nd May, 2017, the date of approval for issue of the standalone financial statement by the Board of Directors, the Company has no subsequent event which either warrant a modification in value of assets and liabilities or any other disclosure.
Mar 31, 2014
1. The Company and nature of its operations:
Marico Limited (''Marico'' or ''the Company''), headquartered in Mumbai,
Maharashtra, India, carries on business in branded consumer products.
Marico manufactures and markets products under brands such as
Parachute, Nihar, Saffola, Hair & Care, Revive, Mediker, Livon and
SetÂwet etc. Marico''s products reach its consumers through retail
outlets serviced by Marico''s distribution network comprising regional
offices, carrying & forwarding agents, redistribution centers and
distributors spread all over India.
Mar 31, 2013
1. The Company and nature of its operations:
Marico Limited (''Marico'' or ''the Company''), headquartered in Mumbai,
Maharashtra, India, carries on business in branded consumer products.
Marico manufactures and markets products under brands such as
Parachute, Nihar, Saffola, Hair & Care, Revive,Mediker, Livon and
Set-wet. Marico''s products reach its consumers through retail outlets
serviced by Marico''s distribution network comprising regional offices,
carrying & forwarding agents, redistribution centers and distributors
spread all over India.
2 Contingent liabilities:
As at March 31,
2013 2012
Rs. Crore Rs. Crore
Disputed tax demands / claims :
Sales tax 24.99 13.32
Income tax 0.77 4.14
Customs duty 0.40 0.40
Agricultural produce marketing cess 9.58 8.84
Employees state insurance corporation 0.18 0.13
Excise duty on subcontractors 0.41 0.35
Service Tax 0.17 -
Excise duty on CNO dispatches (Refer note
(a) below) 364.09 278.92
Claims against the Company not acknowledged
as debts. 0.42 0.28
Total 401.01 306.38
(a) The contingent liability pertains to a possible excise duty
obligation in respect of pure coconut oil packs up to 200 ml. This
claim has been contested and a legal opinion in the matter has been
obtained. Based on the legal opinion and in its assessment, the
management believes that the probability of success in the matter is
more likely than not and accordingly, the possible excise obligation
has been treated as a contingent liability in accordance with
requirements of Accounting Standard (AS) 29 "Provisions, Contingent
Liability and Contingent Asset". The possible excise duty obligation of
Rs. 242.32 Crore (Rs. 157.15 Crore) for the clearances made after June
3, 2009 (i.e. the date of issue of Board circular) till March 31, 2013
and Rs. 121.77 Crore (Rs. 121.77 Crore) for clearances made prior to
June 3, 2009 has been disclosed as contingent liability to the extent
of the time horizon covered by show cause notices issued by the excise
department within the normal period of one year (from the date of
clearance) as per the excise laws.
The Company will continue to review this matter during the coming
accounting periods based on the developments on the outcome in the
pending cases and the legal advice, that it may receive from time to
time.
3. Research and Development expenses aggregating Rs. 5.95 Crore (Rs.
6.37 Crore) have been included under the relevant heads in the
Statement of Profit and Loss.
4. On May 29, 2012, the Company concluded the effective acquisition
of the personal care business of Paras Pharmaceuticals Limited ("PPL")
for a consideration of Rs. 745.60 Crores. The acquisition was effected
through Marico Consumer Care Limited ("MCCL"), a wholly owned
subsidiary of the Company. MCCL was incorporated on April 20, 2012 and
it acquired 100 % equity stake in Halite Personal Care India Private
Limited ("Halite") from Halite''s erstwhile owners. The personal care
business had been demerged from PPL into Halite effective March 1, 2012
under a Scheme of amalgamation and arrangements approved by the High
Court of Punjab and Haryana.
The shareholders of the Company, at their meeting held on May 2, 2012,
approved issue of equity shares on preferential allotment basis
aggregating Rs. 500 Crores at a price of Rs. 170 per equity share to
two overseas investors for funding a part of the Halite acquisition.
Subsequently, the Company allotted 29,411,764 equity shares of face
value Re. 1 each at a share premium of Rs. 169 each to these investors
on May 16, 2012. This resulted in increase of Equity share capital by
Rs. 2.94 Crores and Securities premium reserve by Rs. 497.06 Crores.
The proceeds of the issue together with internal accruals were infused
by Marico as equity investment in MCCL. MCCL utilized the equity
proceeds for acquiring 100% equity stake in Halite on May 29, 2012.
5 a) Additional information on assets taken on lease:
The Company''s significant leasing arrangements are in respect of
residential flats, office premises, warehouses, vehicles etc taken on
lease. The arrangements range between 11 months to 3 years and are
generally renewable by mutual consent or mutually agreeable terms.
Under these arrangements refundable interest-free deposits have been
given.
a. Effective January 1, 2013, the Company has retrospectively changed
its method of providing depreciation on Factory Building and Plant &
Machinery from the ''Written Down Value Method'' to ''Straight Line
Method'' at the rates prescribed in Schedule XIV to the Companies Act,
1956. This change results in a more appropriate presentation and will
give a systematic basis of depreciation charge, representative of the
time pattern in which the economic benefits flow to the Company.
Accordingly, the Company has recognised the surplus of Rs. 37.45 Crores
arising from this retrospective change.
Had the previous method of depreciation been followed, depreciation
charge for the quarter and year ended March 31, 2013 would have been
higher by Rs. 2.96 Crores and the profit before tax for the current
quarter and year ended March 31, 2013 would have been lower by an
equivalent amount.
b. During the year ended March 31, 2011, the Company had recognised an
impairment loss of Rs. 13.88 Crores towards brand "Fiancee". During the
current year, the Company has reassessed the value in use and
accordingly reversed an impairment loss of Rs. 9.05 Crores. The
management has considered a pre-tax discount rate of 17.40% for
determining value in use during the year.
Excludes Loans payable of Rs. 293.1 1 Crore [USD 54,000,000] (Rs.
293.81 Crore [USD 57,750,000]) assigned to hedging relationship against
highly probable forecast sales. The Cash flows are expected to occur
and impact the Statement of Profit and Loss within the period of 1 to 4
years (1 to 5 years).
c) Pursuant to the Announcement of the Institute of Chartered
Accountants of India''s (ICAI) "Accounting for Derivatives" on
encouraging the early adoption of Accounting Standard (AS) 30,
"Financial Instruments: Recognition and Measurement", the Company had,
during the year ended March 31, 2009, decided an early adoption of AS
30 to the extent it does not conflict with existing mandatory
accounting standards and other authoritative pronouncements, Company
Law and other regulatory requirements. Accordingly, the net unrealised
gain/(loss) of Rs.(52.49) Crore [Rs. (33.92) Crore] in respect of
outstanding derivative instruments and foreign currency loans at the
year end which qualify for hedge accounting, is standing in the ''Hedge
Reserve'', which would be recognised in the Statement of Profit and Loss
when the underlying transaction or forecast revenue arises.
6. Segment Information
The Company has only one reportable segment in terms of Accounting
Standard 17 (AS 17) ''Segment Reporting'' mandated by Rule 3 of the
Companies (Accounting Standard) Rules 2006, which is manufacturing and
sale of consumer products and geographical segments are insignificant.
Middle East FZE (MME) at their meeting held on March 18, 2013 approved
the disinvestment of 100% stake in Kaya Middle East FZE (KME) to Derma
Rx International Aesthetics Pte. Ltd (DIAL) for a consideration of
55,050,000 UAE Dirhams. The disinvestment was effected through a share
purchase agreement between MME and DIAL dated February 7, 2013 and
executed on March 25, 2013, subject to approval from Hamriyah Free Zone
Authority (HFZA). Post approval it will become a subsidiary of Derma Rx
International Aesthetics Pte. Ltd (DIAL).
b) The Board of Directors of the Company at their meeting held on March
15, 2013, approved Marico Limited becoming a member of Marico
Innovation Foundation ("MIF"), a company incorporated under Section 25
of the Companies Act, 1956 (being a private company limited by
guarantee not having share capital) primarily with an objective of
fuelling and promoting innovation in India and MIF became a wholly
owned subsidiary of the Company with effect from the said date. Marico
Limited controls the composition of the Board of MIF and has
accordingly appointed two directors as its nominees.
ii) Subsidiary firm :
Wind Company. (Through MEL Consumer Care SAE)
iii) Key management personnel (KMP) :
Harsh Mariwala, Chairman and Managing Director
iv) Relatives of Key management personnel :
Rishabh Mariwala, son of Harsh Mariwala
v) Others - Entities in which KMP has significant influence :
The Bombay Oil Private Limited
7 a) The Corporate Governance Committee has granted Stock Appreciation
Rights ("STAR") to certain eligible employees pursuant to the Company''s
Employee Stock Appreciation Rights Plan, 2011 ("Plan"). The grant price
is determined based on a formula as defined in the Plan. There are
three schemes under the Plan with different vesting period. Under the
Plan, the respective employees are entitled to receive a Star Value
which is the excess of the maturity price over the grant price subject
to fulfilment of certain conditions. The Plan is administered by
Corporate Governance Committee comprising independent directors.
c) The Company has formed "Welfare of Mariconians Trust" (The Trust)
for the implementation of the schemes that are notified or may be
notified from time to time by the Company under the Plan. The Company
has advanced Rs. 76.44 Crore (Rs. 19.92 Crore) to the Trust for
purchase of the Company''s shares under the Plan, of which Rs. 35.73
Crore is included under "Long term loans and advances" (Refer Note 15)
and balance under "Short term loans and advances" (Refer Note 21). As
per the Trust Deed and Trust Rules, upon maturity, the Trust shall sell
the Company''s shares and hand over the proceeds to the Company. The
Company, after adjusting the loan advanced, shall utilize the proceeds
towards meeting its STAR Value obligation.
d) The difference between the market price of the Company''s shares as
at the year end and the grant price after adjusting for the difference
between the amounts due from the Trust and the loan advanced to the
Trust is recognised as an expense over the vesting period and
accordingly an amount of Rs. 2.37 Crore (Rs. 5.30 Crore) is charged in
the Statement of Profit and Loss. The total provision of Rs 7.68 Crore
(Rs. 5.32 Crore) as at March 31, 2013 which relates to STAR Scheme I
maturing on September 30, 2013 has been disclosed under Short Term
provision (Refer Note 11)
e) As on March 31, 2013, the market price of the Company''s shares on
the stock exchanges was lower than the average price at which the Trust
had bought the shares under one of the STAR schemes. This has resulted
in diminution in the recoverable value of loan advanced to the Trust.
Accordingly, the Company has charged an amount of Rs. 0.81 Crore (Nil)
to the Statement of Profit and Loss (Refer note 15).
f) The Securities and Exchange Board of India (SEBI) in January 2013
amended the SEBI (ESOS and ESPS) Guidelines 1999, vide which it
mandated that no ESOS/ESPS schemes shall involve acquisition of
securities of the Company from the secondary market. The Company had
approached SEBI for a clarification whether the amendment also covered
non-ESOS employee welfare trust such as WEOMA trust. SEBI had clarified
that the clarification corrected secondary market purchases by the
WEOMA Trust. Many companies, including Marico Limited, had made a
representation to SEBI requesting SEBI to allow the employee trusts to
continue holding the shares. After hearing the representations of these
companies in a joint meeting convened by SEBI, SEBI had indicated that
it will come out with a clarification in this matter. The Company
awaits further guidance from SEBI.
C. Defined contribution plan :
The Company has recognised Rs. 6.32 Crore (Rs. 5.20 Crore) towards
contribution to provident fund, Rs. 0.41 Crore (Rs. 0.45 Crore) towards
contribution to superannuation fund and Rs. 0.39 Crore (Rs. 0.35 Crore)
towards employee state insurance plan in the Statement of Profit and
Loss.
The informatoin in respect of Provident Fund is provided to the extent
of available with the Company.
8 a) On January 7, 2013, the Board of Directors'' of Marico Limited
approved a Scheme of Arrangement (the Scheme) for demerger of the
business undertaking of Kaya ("Kaya Business") with effect from
appointed date, April 1, 2013 (''the Scheme'') subject to all regulatory
and statutory approvals. The Scheme envisages the de-merger of Kaya
Business into a new company, "Marico Kaya Enterprises Limited
(''MaKE'')", which was incorporated on January 19, 2013 for the purpose.
As a consideration, the shareholders of Marico Limited as on the record
date shall be issued 1 share of MaKE with a face value of Rs. 10 each
for every 50 shares of Marico with a face value of Re. 1 each, fully
paid-up. Consequently, the share holding structure of MaKE will mirror
the share holding structure of Marico Limited.
The management of the Company believes that the proposed de-merger will
enable value creation for both the FMCG and Kaya businesses through
focus and flexibility.
As on March 31, 2013, Marico Ltd is the sole shareholder of MaKE. Upon
the Scheme becoming effective and upon issue of shares by MaKE to the
shareholders of Marico Limited, all the shares held by Marico Ltd shall
stand cancelled without any payment.
In view of the above, the investments and loans and advances pertaining
to Kaya business have been considered as current / short-term in
nature.
d) The Board of Directors of Kaya Ltd, at their meeting held on March
1, 2013 approved the conversion of the entire loan due to Marico
Limited as on February 28, 2013, aggregating to Rs. 108.84 Crore, into
equity capital. In consideration of the conversion of the outstanding
loan, Kaya Ltd issued 3,348,975 Equity Shares of face value of Rs. 10
each at a premium of Rs. 315 per share on a rights basis to Marico Ltd
vide a board resolution passed on March 18, 2013.
9 Previous year figures
a) Previous year figures have been re-grouped and reclassified wherever
necessary to conform to this year''s classification
b) The figures in brackets represent those of the previous year.
Mar 31, 2012
1. The Company and nature of its operations :
Marico Limited ('Marico' or 'the Company'), headquartered in
Mumbai, Maharashtra, India, carries on business in branded consumer
products. Marico manufactures and markets products under brands such as
Parachute, Nihar, Saffola, Hair & Care, Revive, Shanti, Oil of Malabar,
Mediker and Manjal. Marico's products reach its consumers through
retail outlets serviced by Marico's distribution network comprising
regional offices, carrying & forwarding agents, redistribution centers
and distributors spread all over India.
a Rights, preferences and restrictions attached to shares :
Equity Shares: The Company has one class of equity shares having a par
value of Re.1 per share. Each shareholder is eligible for one vote per
share held. The dividend proposed by the Board of Directors is subject
to the approval of the shareholders in the ensuing Annual General
Meeting, except in case of interim dividend. In the event of
liquidation, the equity shareholders are eligible to receive the
remaining assets of the Company after distribution of all preferential
amounts, in proportion to their shareholding.
The Corporate Governance Committee of the Board of Directors of Marico
Limited has granted Stock Options to certain eligible employees
pursuant to the Marico 'Employees Stock Options Scheme 2007'
("Scheme"). Each option represents 1 equity share in the Company.
The Vesting period and the Exercise Period both range from 1 year to 5
years.
The Scheme is administered by a Corporate Governance Committee
comprising of independent Directors. The weighted average share price
of options excerised during the year was Rs. 56.98 (Rs. 55.57).The
Scheme lapses on February 1, 2013. The options outstanding as on the
Balance Sheet date correspond to about 0.13% (0.39%) of the current
paid-up equity share capital of the Company,
The Company has applied the intrinsic value based method of accounting
for determining compensation cost for its stock based compensation plan
and has accordingly accounted Rs. (0.04) Crore (Rs. 0.04 Crore) as
compensation cost under the 'intrinsic value' method (Refer note
25). Had the Company considered 'fair value' method for accounting
of compensation cost, the Company's net income and Basic and Diluted
earnings per share as reported would have reduced to the pro-forma
amounts as indicated:
The Company has advanced long term loans to its wholly owned
subsidiary, Marico South Africa Consumer Care (pty) Limited, which is
outstanding as at the year end. The operations of the said subsidiary
are classified as 'Non - integral foreign operations'. Accordingly,
as per the requirements of Accounting Standard 11 'The effect of
changes in Foreign Exchange Rates', exchange gain of Rs. 6.04 Crore
(Rs. 5.74 Crore) arising on revaluation of the said loan is accumulated
in 'Foreign Currency Translation Reserve', to be recognised as
income or expenses in the Statement of Profit and Loss upon disposal of
the net investment in said subsidiary.
a The Corporate Governance Committee has granted Stock Appreciation
Rights ("STAR") to certain eligible employees pursuant to the
Company's Employee Stock Appreciation Rights Plan, 2011 ("Plan"). The
grant price is determined based on a formula as defined in the Plan.
There are two schemes under the Plan with different vesting period.
Under the Plan, the respective employees are entitled to receive excess
of the maturity price over the grant price subject to fulfilment of
certain conditions. The difference between the market price of
Company's shares as at the year end and the grant price is recognised
over the vesting period and accordingly an amount of Rs. 5.30 Crore
(Rs. 0.02 Crore) is charged in the Statement of Profit and Loss. The
Plan is administered by Corporate Governance Committee comprising of
independent directors.
b The Company has formed "Welfare of Mariconians Trust" (The trust) for
the implementation and admistration of Schemes that are notified or may
be notified from time to time by the Company under the Plan as at March
31, 2012. The Company has advanced Rs. 19.92 Crore (Nil) to the Trust
for purchase of shares under the Plan, which are included under "Long
term loans and advances" (refer note 14).
a Buyers credit arrangements are loans taken in foreign currency for a
term of twelve months and carry interest rate of LIBOR plus applicable
spread ranging from 0.05% to 1.5% per annum.
b Pre-shipment credit in foreign currency arrangements are for a term
of six months and carry interest rate of LIBOR plus applicable spread
ranging from 1.30% to 2% per annum.
c Other term loans availed in the current year are in foreign currency
for a term of 12 months and carries interest rate of 3 months LIBOR
spread of 2.3% per annum. (previous year amount borrowed in Indian
Rupees carried interest rate of 8% per annum).
d Commercial papers were borrowed for a term of 12 months and carried
interest rate ranging from 7% to 10% per annum.
a The Company had issued 300 8.25% Rated Taxable Secured Redeemable Non
- Convertible Debentures of Face Value Rs. 10 lakhs each on May 8, 2009
which were secured against first pari passu charge over Land and
Building situated in Andheri (East) Mumbai, aggregating to Rs. 30 Crore
and same were redeemable at par after 3 years. As per the terms of the
issue Put / Call option was available with the Investors / Company at
the end of 2 years. Investors exercised the option and debentures were
repaid during the year. These debentures were listed on the National
Stock Exchange.
a Provison for income tax is net off advance tax and other tax payments
for various years of Rs. 310.01 Crore (Rs. 233.17 Crore)
b Provision for disputed taxes (other than Income tax) / claims
represents claims against the Company not acknowledged as debts, where
management has assessed that unfavourable outcome of the matter is more
than probable.
2 Contingent liabilities :
As at March 31,
2012 2011
Rs. Crore Rs.Crore
Disputed tax demands / claims :
Sales tax 13.32 17.24
Income tax 4.14 -
Customs duty 0.40 0.40
Agricultural produce marketing cess 8.84 8.14
Employees state insurance corporation 0.13 0.13
Excise duty on subcontractors 0.35 0.29
Excise duty on CNO dispatches (Refer note 46) 278.92 210.74
Claims against the Company not acknowledged
as debts. 0.28 0.27
Possible indemnification obligations under
the Deed of Assignment for - 4.00
assignment of "Sweekar" brand.
Total 306.38 241.21
3 Research and Development expenses aggregating Rs. 6.37 Crore (Rs.
7.53 Crore) have been included under the relevant heads in the
Statement of Profit and Loss.
4 During the year, the Company signed definitive agreements to acquire
the personal care business of Paras Pharmaceuticals Limited (PPL), a
100% subsidiary of Reckitt Benckiser Investments India Private Limited
for a consideration of Rs. 740 Crore. The acquisition transaction is
expected to be concluded in May 2012. The Company intends to fund the
requirements with a mix of proceeds from an issuance of equity shares
and internal accruals. The shareholders, at their meeting held on May
2, 2012 have approved issue of equity shares on preferential allotment
basis aggregating Rs. 500.00 Crore at a price of Rs. 170 per equity
share (face value Re. 1 and share premium Rs. 169) to two overseas
investors.
In terms of the agreement, the Company had deposited Rs. 25.00 Crore in
an Escrow deposit account maintained with a bank which is appointed by
the parties for operating the account. The balance in Escrow account
would be released to the seller in the event the said transaction could
not be completed due to reasons attributable to the Company. The said
balance is reflected as 'non - current assets' in the balance sheet
having regards to the capital nature of the transaction.
*Converted into the exchange rate at the year end.
**Out of the forward contracts outstanding as on March 31, 2012, USD
18,825,189 (USD 11,000,000), AUD Nil
(AUD 297,898), having fair value of Rs. 97.37 Crore (Rs. 52.01 Crore)
and all outstanding option contracts as on
March 31, 2012, USD 8,100,000 (Rs. Nil) having fair value of Rs. 0.89
Crore (Rs. Nil) have been designated as Cash flow hedges.
- The Company has entered into interest rate swap for hedging its
interest rate exposure on borrowings in foreign currency of USD
30,750,000 (USD 8,750,000), which has a fair value of Rs. 1.55 Crore
(Rs. 0.34 Crore).
- The Cash flows are expected to occur and impact the Statement of
Profit and Loss within the period of 1 year except interest rate swap,
in respect of which Cash flows are expected to occur and impact the
Statement of Profit and Loss within the period of 1 to 5 years (1 to 2
years).
- All the derivative contracts entered by the Company were for hedging
purpose and not for any speculative purpose.
Excludes Loans payable of Rs. 293.81 Crore [USD 57,750,000] (Rs. 279.77
Crore [USD 62,750,000]) assigned to hedging relationship against highly
probable forecast sales. The Cash flows are expected to occur and
impact the Statement of Profit and Loss within the period of 1 to 5
years (1 to 6 years).
c) Pursuant to the Announcement of the Institute of Chartered
Accountants of India's (ICAI) "Accounting for Derivatives" on
encouraging the early adoption of Accounting Standard (AS) 30,
"Financial Instruments: Recognition and Measurement", the Company
had, during the year ended March 31, 2009, decided an early adoption of
AS 30 to the extent it does not conflict with existing mandatory
accounting standards and other authoritative pronouncements, Company
Law and other regulatory requirements. Accordingly, the net unrealised
gain/(loss) of Rs. (33.92) Crore [Rs. 4.99 Crore] in respect of
outstanding derivative instruments and foreign currency loans at the
year end which qualify for hedge accounting, is standing in the
'Hedge Reserve', which would be recognised in the Statement of
Profit and Loss when the underlying transaction or forecast revenue
arises.
5 Segment Information :
The Company has only one reportable segment in terms of Accounting
Standard 17 (AS 17) 'Segment Reporting' mandated by Rule 3 of the
Companies (Accounting Standard) Rules 2006, which is manufacturing and
sale of consumer products and geographical segments are insignificant.
*The expected rate of return on plan assets is based on expectation of
the average long term rate of return expected on investment of the fund
during the estimated term of the obligations.
**The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion, and other
relevant factors such as supply and demand factors in the employment
market. The expected rate of return on plan assets is based on the
current portfolio of assets, investment strategy and market scenario.
C. Defined contribution plan :
The Company has recognised Rs. 5.20 Crore (Rs. 5.11 Crore) towards
contribution to provident fund, Rs 0.45 Crore (Rs. 0.56 Crore) towards
contribution to superannuation fund and Rs. 0.35 Crore (Rs. 0.23 Crore)
towards employee state insurance plan in the Statement of Profit and
Loss.
6 The Guidance Note on implementing AS 15, Employee benefits (revised
2005) issued by Accounting Standards Board (ASB) states that benefits
involving employer-established provident funds, which require interest
shortfalls to be recompensed, are to be considered as defined benefit
plans. The Actuarial Society of India has issued the final guidance for
measurement of provident fund liabilities during the year. The actuary
has accordingly provided a valuation and based on the below provided
assumptions there is no shortfall as at March 31, 2012.
There are no previous year figures as the actuarial valuation has been
done for the first time in the current year,
7 During the year ended March 31, 2010, the Company had made
provisions towards 75% of possible excise duty obligations in respect
of the coconut oil packs up to 200 ml, which is being contested by the
Company. Based on facts of the case and the legal opinion obtained, the
Company had made an assessment that the probability of success in the
matter is more likely than not and the liability was in the nature of
contingent liability. As the said provisioning of contingent liability
was not in accordance with the requirement of Accounting Standard (AS)
29 "Provisions, Contingent Liability and Contingent Assets", the
Company reviewed the matter and reversed the provision of Rs. 29.35
Crores made upto March 31, 2010 during the year ended March 31, 2011
(Refer Note 38 above) and the same was included under the "Exceptional
items" in the Statement of Profit and Loss. Further, deferred tax asset
of Rs. 9.75 Crores recognised during the year ended March 31, 2010 was
reversed and included in deferred tax charge for the year in the
Statement of Profit and Loss for the said year.
The possible excise duty obligation of Rs. 157.15 Crores (Rs. 88.97
Crores) for clearences made after June 3, 2009 (i.e. the date of issue
of relevant excise circular) till March 31, 2012 and Rs. 121.77 Crores
(Rs. 121.77 Crores) for clearences made prior to June 3, 2009 has been
disclosed as contingent liability to the extent of the time horizon
covered by show cause notice issued by the excise department with in
the normal period of one year (from the date of clearance) under the
excise laws.
The Company will continue to review this matter during the coming
accounting periods based on the developments on the outcomes in the
pending cases and the legal advice that it may receive from time to
time.
8 As at March 31, 2012, Marico Limited ("Marico") holds 100 % of the
Equity Capital of Kaya Limited ("Kaya") at a cost of Rs.73.00 Crore
(Rs.73.00 Crore). The Company has also advanced long term loans to Kaya
of Rs. 103.00 Crore (Rs. 112.92 Crore). As per the latest audited
financial statements, Kaya has negative net-worth as at March 31, 2012.
The management believes that these losses are not reflective of future
trends and operations of the Company and the Kaya business model
continues to be robust and offers significant long term growth
opportunities. Further, the operations of Kaya are expected to improve
significantly due to positive changes in the economic environment,
maturity of new clinics, renewed focus on reducing the time to scale up
revenues in new clinics, improve capacity utilization of clinics,
expansion of Kaya's range of services and product offerings,
rationalization of costs and other restructuring measures under
consideration, including leveraging the synergies from the acquisition
of Derma Rx business in Singapore (by its wholly owned subsidiary) and
by increasing the share of product sales in the total business. Having
regard to the above factors, based on the fundamentals of Kaya and its
future business plans and improved performance in the current year, the
management is of the opinion that it is strategically desirable for
Marico to continue to support Kaya through funding (equity / debt
infusion), through either fresh funds or conversion of existing loans
into equity. Accordingly, the management perceives that the erosion in
the value of investments in Kaya is not other than temporary. Hence, no
provision for diminution in value is considered necessary in respect of
the Company's investments in Kaya or of the loans and advances given
to Kaya.
9 Previous year figures :
a) The financial statements for the year ended March 31, 2011 had been
prepared as per the then applicable, pre-revised Schedule VI to the
Companies Act, 1956. Consequent to the notification of Revised Schedule
VI under the Companies Act, 1956, the financial statements for the year
ended March 31, 2012 are prepared as per Revised Schedule VI.
Accordingly, the previous year figures have also been reclassified to
conform to this year's classification. The adoption of Revised
Schedule VI for previous year figures does not impact recognition and
measurement principles followed for preparation of financial
statements.
b) The figures in brackets represent those of the previous year.
Mar 31, 2011
1) The Company and nature of its operations:
Marico Limited (Marico or the Company), headquartered in Mumbai,
Maharashtra, India, carries on business in Branded Consumer Products.
Marico manufactures and markets products under brands such as
Parachute, Nihar, Saffola, Hair & Care, Revive, Shanti, Oil of Malabar,
Mediker and Manjal. MaricoÃs products reach its consumers through
retail outlets serviced by MaricoÃs distribution network comprising
regional offices, carrying & forwarding agents, redistribution centers
and distributors spread all over India.
2) a) Contingent liabilities not provided for in respect of:
(i) Disputed tax demands/ claims:
Rs. Crore
March 31, 2011 March 31, 2010
Sales tax 17.24 6.08
Customs duty 0.40 0.40
Agricultural Produce Marketing cess 8.14 7.93
Employees State Insurance Corporation 0.13 0.13
Excise duty on Subcontractors 0.29 0.24
(ii) Excise duty on CNO dispatches Rs. 210.74 Crore (Rs.131.57 Crore)
(Refer note 25 below)
(iii) Claims against the Company not acknowledged as debts Rs. 0.27
Crore (Rs.0.22 Crore)
(iv) Possible indemnification obligations under the Deed of Assignment
for assignment of "Sweekar" brand, in the event the Company is unable
to reinstate the trademark registration number in the records of the
trademark registry within a period of six months from the date of
execution of the deed - Rs. 4.00 Crore (Refer note 24 below).
b) (i) Corporate guarantees given to banks on behalf of subsidiaries
for credit and other facilities granted by banks Rs. 137.44 Crore
(Rs.41.40 Crore) . The credit and other facilities availedby the
subsidiaries as at the year end is Rs. 59.04 Crore (Rs.7.02 Crore)
(ii) Stand by Letter of Credit given to banks on behalf of subsidiaries
for credit and other facilities granted by banks Rs.108.47 Crore
(Rs.76.45 Crore). The credit and other facilities availed by the
subsidiaries as at the year end is Rs. 96.65 Crore (Rs. 54.14 Crore)
(iii) Bank guarantees given to statutory authorities Rs. 12.26 Crore
(Rs.7.08 Crore)
c) Amount outstanding towards Letters of Credit Rs. Nil (Rs. 2.81
Crore)
4) Estimated amount of contracts remaining to be executed on capital
account and not provided for Rs. 54.48 Crore (Rs. 21.22 Crore) net of
advances.
5) Borrowing costs capitalized during the year amount to Rs. 0.42 Crore
(Rs. 2.83 Crore).
6) Miscellaneous income includes lease income Rs. 0.39 Crore (Rs.0.43
Crore), profit on sale / disposal of assets (net) Rs. 0.08 Crore
(Rs.0.09 Crore), royalty from subsidiaries Rs. 6.84 Crore (Rs. 6.56
Crore) and export subsidy Rs. 3.54 Crore (Rs.1.00 Crore).
7) Miscellaneous expenses include labour charges Rs. 4.53 Crore (Rs.
2.06 Crore), training and seminar expenses Rs. 4.62 Crore (Rs. 3.47
Crore), outside services Rs. 2.22 Crore (Rs. 2.21 Crore) and
professional charges Rs. 18.34 Crore (Rs. 13.42 Crore),donations Rs.
0.04 Crore (Rs. 0.43 Crore) and capital advance written off Rs. 1.00
Crore and are net of excess provisions no longer required written back
Rs. 1.96 Crore ( Rs. 7.54 Crore) [including Impairment provision of Rs.
1.03 Crore (Rs.1.20 Crore)].
8) Research and Development expenses aggregating Rs. 7.53 Crore (Rs.
7.54 Crore) have been included under the relevant heads in the Profit
and Loss account.
10) Additional information on assets taken on lease:
The companys significant leasing arrangements are in respect of
residential flats, office premises, warehouses, vehicles etc taken on
lease. The arrangements range between 11 months to 3 years and are
generally renewable by mutual consent or mutually agreeable terms.
Under these arrangements refundable interest-free deposits have been
given.
11) Additional information on assets given on operating lease:
The Company has given on lease certain plant & machinery for a lease
period ranging between 1 to 3 years. These arrangements are in the
nature of cancelable lease and are generally renewable by mutual
consent or mutual agreeable terms.
*Converted into the exchange rate at the year end.
**Out of the forward contracts outstanding as on March 31, 2011, USD
11,000,000 (USD 6,307,775), AUD 297,898 (AUD 600,000), having fair
value of Rs. 52.01 Crore (Rs. 31.19 Crore) and all outstanding option
contracts as on March 31, 2011, having fair value of Rs. Nil (Rs. 1.01
Crore ) have been designated as Cash Flow hedges.
- The Company has entered into Interest rate swap of USD 8,750,000 (USD
4,583,333), for hedging its interest rate exposure on borrowings in
foreign currency which has a fair value of Rs. 0.34 Crore (Rs. 0.63
Crore).
- The Cash flows are expected to occur and impact the Profit and Loss
account within the period of 1 year except interest rate swap, in
respect of which Cash Flows are expected to occur and impact the Profit
and Loss account within the period of 1 to 2 years (1 to 3 years).
- All the derivative contracts entered by the Company were for hedging
purpose and not for any speculative purpose.
c) Pursuant to the Announcement of the Institute of Chartered
Accountants of IndiaÃs (ICAI) "Accounting for Derivatives" on
encouraging the early adoption of Accounting Standard (AS) 30,
"Financial Instruments: Recognition and Measurement", the Company had,
during the year ended March 31, 2009, decided an early adoption of AS
30 to the extent it does not conflict with existing mandatory
accounting standards and other authoritative pronouncements, Company
Law and other regulatory requirements. Accordingly the net unrealised
gain/(loss) of Rs. 4.99 Crore [P.Y Rs. 2.81 Crore] in respect of
outstanding derivative instruments and foreign currency loans at the
year end which qualify for hedge accounting, is standing in the ÃHedge
Reserve AccountÃ, which would be recognised in the Profit and Loss
account when the underlying transaction or forecast revenue arises.
16) Segment Information
The Company has only one reportable segment in terms of Accounting
Standard 17 (AS 17) ÃSegment Reportingà mandated by Rule 3 of the
Companies (Accounting Standard) Rules 2006, which is manufacturing and
sale of consumer products and geographical segments are insignificant.
17) a) Employee Stock Option Scheme 2007
The Corporate Governance Committee of the Board of Directors of Marico
Limited has granted Stock Options to certain eligible employees
pursuant to the Marico ÃEmployees Stock Options Scheme 2007Ã. Each
option represents 1 equity share in the Company. The Vesting period and
the Exercise Period both range from 1 year to 5 years. Pursuant to
exercise of 5,073,850 (325,700) options during the year, the issued and
subscribed share capital has increased by Rs. 0.51 Crore (Rs.0.03
Crore) to Rs. 61.44 Crore (Rs. 60.93 Crore) and Securities Premium
account has increased by Rs. 28.20 Crore (Rs. 1.80 Crore) to Rs. 43.50
Crore (Rs. 15.30 Crore). The options outstanding as on the Balance
sheet date correspond to about 0.39% (1.28%) of the current paid up
equity capital of the Company.
b) The Corporate Governance Committee has granted stock appreciation
rights to certain eligible employees pursuant to the CompanyÃs Employee
Stock Appreciation Rights Scheme, 2011("Scheme") . The vesting period
under the Scheme is from March 28, 2011 to September 30, 2013. Under
the Scheme, the respective employees are entitled to receive excess of
the maturity price over the grant price subject to fulfillment of
certain conditions. The stock appreciation rights equivalent to
2,874,000 shares were granted to employees which were outstanding as at
the year end and difference between the market price of CompanyÃs
shares as at the year end and the grant price is recognized over the
vesting period amounting to Rs. 0.02 Crore in the Profit and Loss
account.
1. The above remuneration to Chairman and Managing Director does not
include contribution to Gratuity Fund and provision for Leave
encashment, as these are lump sum amounts for all relevant employees
based on actuarial valuation.
2. Since no commission is payable during the year, computation of net
profits for the year under section 198 of the Companies Act, 1956 has
not been given.
20) The Following table sets forth the funded status of the plan and
the amounts relating to gratuity and leave encashment recognized in the
CompanyÃs Financials:
*The expected rate of return on plan assets is based on expectation of
the average long term rate of return expected on investment of the fund
during the estimated term of the obligations.
**The estimates of future salary increases, considered in actuarial
valuation, take account of inflation, seniority, promotion, and other
relevant factors such as supply and demand factors in the employment
market. The expected rate of return on plan assets is based on the
current portfolio of assets, investment strategy and market scenario.
B. Privileged leave (Compensated Absence for Employees):
The Company permits encashment of privileged leave accumulated by its
employees on retirement and separation. The liability for unexpired
leave is determined and provided on the basis of actuarial valuation at
the Balance Sheet date. The privileged leave liability is not funded.
C. Defined contribution plan :
The Company has recognised Rs. 5.11 Crore (Rs. 5.03 Crore) towards
contribution to provident fund, Rs 0.56 Crore (Rs. 0.64 Crore) towards
contribution to superannuation fund and Rs. 0.23 Crore (Rs. 0.18 Crore)
towards employee state insurance plan in Profit and Loss account.
21) The Guidance Note on implementing AS 15, Employee benefits (revised
2005) issued by Accounting Standards Board (ASB) states that benefits
involving employer-established provident funds, which require interest
shortfalls to be recompensed, are to be considered as defined benefit
plans. Pending the issuance of the guidance note from the Actuarial
Society of India, the CompanyÃs actuary has expressed an inability to
reliably measure provident fund liabilities. Accordingly, the Company
has accounted for the same as a defined contribution plan. However, as
permitted by the circular number 2009/104919 issued by the EmployeesÃ
Provident Fund Organization, the interest shortfall can be adjusted
against the Reserve available with the trust. Based on the unaudited
financial statements of the fund as at March 31, 2011, the Reserve
available with the fund are adequate to cover interest shortfalls
arising till the said date. Hence no provision for liability is
required to be created on such interest shortfall as on March 31, 2011.
This information as required to be disclosed under the Micro, Small and
Medium Enterprises Development Act, 2006 has been determined to the
extent such parties have been identified on the basis of information
available with the Company.
23) a) Secured Debentures represent 300 8.25% Rated Taxable Redeemable
Non- convertible Debentures of Face Value Rs. 10 lakhs each,
aggregating to Rs. 30.00 Crore which were issued on May 8, 2009 and are
redeemable at par after 3 years. As per the terms of the issue Put /
Call option is available with the Investor / Company at the end of 2
years. These debentures are listed on the National Stock Exchange.
b) During the year, on March 30, 2011, The Company has issued 500
10.05% Rated Taxable Unsecured Redeemable Non-convertible debentures of
face value of Rs. 10 lakhs each aggregating to Rs. 50.00 Crore which
are redeemable at par after 30 months. These debentures have been
listed on the National Stock Exchange after the Balance Sheet date.
24) During the year, on March 25, 2011, the Company divested its edible
oil brand "Sweekar" to Cargill India Private Limited for a
consideration of Rs. 50.00 Crore The divestment comprised assignment of
trademark, designs, copyrights as also a non-compete agreement and
limited period licensing for some of the intellectual rights. The
profit arising from this divestment aggregating Rs. 50 Crore has been
reflected as part of "Exceptional Items" in the Profit and Loss account
(Refer Note 13 above).
25) During the year ended March 31, 2010, the Company had made a
provision of Rs. 29.35 Crore towards 75% of possible excise duty
obligation which may arise in the event of unfavorable outcome of the
matter in respect of coconut oil packed in container size up to 200ml
and cleared on and after June 3, 2009, which is being contested by the
Company. Based on the facts of the case and the legal opinion obtained
in this regard, the Company had made an assessment that the probability
of success in the matter is more likely than not. In terms of
Accounting Standard (AS) 29 "Provisions, Contingent Liabilities and
Contingent Assets", the possible obligation on this account could be in
the nature of contingent liabilities, which need not be provided for in
the accounts. Pending outcome of the matter, the Company had made the
aforesaid provision in the accounts for the year ended March 31, 2010.
The Management had, while finalizing financial results for the quarters
ended June 30, 2010, September 30, 2010 and December 31, 2010,
continued to make provision on the said basis and had provided Rs.
26.61 Crore for the first nine months ended December 31, 2010.
The Auditors had qualified their audit report for the year ended March
31, 2010 and the limited review reports for the said quarter to the
effect that the said provisioning was not in accordance with the
requirements of AS 29.
As at March 31, 2011, the Company has reviewed the matter again and has
taken a legal opinion, which has reaffirmed the earlier assessment that
the probability of success in the matter is more likely than not.
Considering the continued strength of the CompanyÃs case, the Company
has, during the year, reversed the entire provision of Rs. 29.35 Crore
and Rs. 26.61 Crore made during the year ended March 31, 2010 and
during the nine months ended December 31, 2010 respectively, having
regard to the fact that the said provision was not in accordance with
the requirements of AS 29. The reversal of the provision pertaining to
the year ended March 31, 2010 aggregating to Rs. 29.35 Crore has been
included under the head "Exceptional Items" in the Profit and Loss
account. Further, deferred tax asset of Rs. 9.75 Crore created during
the year ended March 31, 2010 has been reversed and included in
Deferred Tax charge for the year in the Profit and Loss account.
Provisions of Rs. 26.61 Crore made in the first nine months ended
December 31, 2010 were reversed in the quarter ended March 31, 2011,
which has no impact for the results of the full year ended March 31,
2011.
Consequentially, the possible excise duty obligation of Rs. 88.97 Crore
for clearances made after June 03, 2009 till March 31, 2011 and Rs.
121.77 Crore for clearances made prior to June 03, 2009 has been
disclosed as Contingent Liability to the extent of the time horizon
covered by show-cause notices issued by the excise department within
the normal period of one year (from the date of clearance) under the
excise laws.
Had the Company continued to make provisions on the same basis as in
the previous year, the Profit before tax and Exceptional Items for the
year would have been lower by Rs.37.38 Crore. Further, balances as at
March 31, 2011 in Deferred Tax Asset and Provisions would have been
higher by Rs. 21.65 Crore and Rs. 66.73 Crore respectively and balance
in Reserve and Surplus would have been lower by Rs. 45.08 Crore.
The Company will continue to review this matter during the coming
accounting periods based on the developments on the outcomes in the
pending cases and the legal advice that it may receive from time to
time.
26) During the year, the Company has recognized impairment of
intangible assets comprising of Trademark relating to Fiancée brand,
which is used by Egyptian American Investment & Industrial Development
Company. The Company charges royalty from the said subsidiary for the
use of Trademark. Having regard to the impairment indicators such as
losses incurred in the Fiancée business due to multiple factors like
shifting consumer habits, trade issues, weakening brand strength, etc ,
the Company has recognized a provision of Rs. 13.88 Crore towards
Impairment of Fiancée Trademark, which is included in "Exceptional
Items" in the Profit and Loss account. The Company has considered
pre-tax discount rate of 19 % for determining value in use.
27) As at March 31, 2011, Marico Limited ("Marico") holds 100 % of the
Equity Capital of Kaya Limited ("Kaya") at a cost of Rs.73.00 Crore
(Rs.73.00 Crore). The Company has also advanced loans to Kaya of Rs.
112.92 Crore (Rs. 79.97 Crore). As per the latest audited financial
statements, Kaya has negative net-worth as at March 31, 2011. The
management believes that these losses are not reflective of future
trends and operations of the Company and the Kaya business model
continues to be robust and offers significant long term growth
opportunities. Further, the operations of Kaya are expected to improve
significantly due to positive changes in the economic environment,
focus on same store growth, expansion of KayaÃs range of services and
product offerings, savings resulting from cost management initiatives
and leveraging the synergies from the acquisition of Derma Rx business
in Singapore (by its wholly owned subsidiary) and by increasing the
share of product sales in the total business.
Having regard to the above factors, and based on the fundamentals of
Kaya and its future business plans, the management is of the opinion
that it is strategically desirable for Marico to continue to support
Kaya through funding (equity / debt infusion), through either fresh
funds or conversion of existing loans into equity. Accordingly, the
management perceives that the erosion in the value of investments in
Kaya is not other than temporary. Hence, no provision for diminution in
value is considered necessary in respect of the CompanyÃs investments
in Kaya or of the loans and advances given to Kaya.
28) The Company has advanced long term loan to its wholly owned
subsidiary Marico South Africa Consumer Care (Pty) Limited which is
outstanding at the year ended March 31, 2011. The operations of the
said subsidiary are classified as ÃNon à integral foreign operationsÃ.
Accordingly, as per the requirements of Accounting Standard 11 ÃThe
effect of changes in Foreign Exchange RatesÃ, exchange gain of Rs. 5.74
Crore (Rs. 3.23 Crore) arising on revaluation of the said loan is
accumulated in ÃForeign Currency Translation ReserveÃ, to be recognized
as income or expenses in the Profit and Loss account upon disposal of
the net investment in said subsidiary.
30) (a) The figures in brackets represent those of the previous year
(b) The figures for the previous year have been restated / regrouped
where necessary to conform to current periodÃs classification.
Mar 31, 2010
1) The Company and nature of its operations:
Marico Limited (Marico or the Company), headquartered in Mumbai,
Maharashtra, India, carries on business in Branded Consumer Products.
Marico manufactures and markets products under brands such as Parachute
and its extensions, Nihar, Saffola, Sweekar, Hair & Care, Revive,
Shanti, Oil of Malabar, Mediker and Manjal. Maricos products reach its
consumers through retail outlets serviced by Maricos distribution
network comprising regional offices, carrying & forwarding agents,
consignment agent, redistribution centers and distributors spread all
over India.
2) a) Contingent liabilities not provided for in respect of:
(i) Disputed tax demands/ claims:
Rs. Crore March 31,2010 March 31,2009
Sales tax 6.08 4.88
Customs duty 0.40 2.86
Agricultural Produce Marketing
Committee cess 7.93 7.81
Employees State Insurance Corporation 0.13 0.18
Excise duty on Subcontractors 0.24 Nil
(ii) Excise duty on CNO dispatches Rs. 131.57 Crore (Rs. Nil) (Refer
note 24 below)
(iii) Claims against the Company not acknowledged as debts. Rs. 0.22
Crore (Rs. 0.21 Crore)
b) (i) Counter guarantees given to banks on behalf of subsidiaries Rs,
41.40 Crore (Rs. 46.05 Crore)
(ii) Stand by Letter of Credit given to banks on behalf of subsidiaries
Rs. 76.45 Crore (Rs. 80.15 Crore)
c) Amount outstanding towards Letters of Credit Rs. 2.81 Crore (Rs.
18.07 Crore)
3) Estimated amount of contracts remaining to be executed on capital
account and not provided for Rs. 21.22 Crore (Rs. 10.38 Crore) net of
advances.
4) Borrowing costs capitalized during the year amount to. Rs. 2.83
Crore (Rs. 3.55 Crore).
5) Miscellaneous income includes lease income Rs. 0.43 crore (Rs. 0.41
Crore), profit on sale / disposal of assets (net) Rs. 0.09 Crore
(Rs.Nil) and royalty from subsidiaries Rs. 6.56 Crore (Rs. 4.39 Crore).
6) Miscellaneous expenses include labour charges Rs. 2.06 Crore (Rs.
1.91 Crore), training & seminar expenses Rs. 3.47 Crore (Rs. 2.42
Crore), outside services Rs. 2.21 Crore (Rs. 2.37 Crore), professional
charges Rs. 13.42 Crore (Rs. 9.61 Crore), donations Rs. 0.43 Crore (Rs.
1.19 Crore), leakage and damage expenses of Rs. 7.84 Crore (10.65
Crore), loss on sale / disposal of assets (net) Rs. Nil (Rs. 0.14
Crore) and are net of reversal of excess provisions no longer required
written back Rs.7.54 Crore (Rs. 5.14 Crore) [including Impairment
provision of Rs. 1.20 Crore (Rs. 0.86 Crore)]
7) Research and development expenses aggregating Rs. 7.54 Crore (Rs.
5.73 Crore) have been included under the relevant heads in the Profit
and Loss account.
8) Additional information on assets taken on lease:
The Companys significant leasing arrangements are in respect of
residential flats, office premises, warehouses, vehicles etc taken on
lease. The arrangements range between 11 months to 3 years and are
generally renewable by mutual consent or mutually agreeable terms.
Under these arrangements refundable interest-free deposits have been
given.
9) Additional information on assets given on operating lease:
The Company has given on lease certain plant & machinery for a lease
period ranging between 1 to 3 years. These arrangements are in the
nature of cancelable lease and are generally renewable by mutual
consent or mutual agreeable terms.
10) During the year, upon completion of necessary compliances under
FEMA regulations, the Company divested its stake in Sundari LLC
(Sundari) on June 8,2009. Sundari ceased to be subsidiary of the
Company from the said date. The resultant effect of the said
transaction is reflected as exceptional item in the Profit and Loss
account as under.
11) Segment Information
The Company has only one reportable segment in terms of Accounting
Standard 17 (AS 17) Segment Reporting mandated by Rule 3 of the
Companies (Accounting Standard) Rules 2006, which Is manufacturing and
sale of consumer products.
12) Employee Stock Option Scheme 2007
The Corporate Governance Committee of the Board of Directors of the
Company has granted Stock Options to certain eligible employees
pursuant to the Marico Employees Stock Options Scheme 2007. Each
option represents 1 equity share in the Company. The Vesting Period and
the Exercise Period both range from 1 year to 5 years. Pursuant to
exercise of 325,700 (Nil) options during the year, the issued and
subscribed share capital has increased by Rs. 0.03 (Rs. Nil) to Rs.
60.93 Crore and Securities Premium account has increased by Rs. 1.80
Crore to Rs. 15.30 Crore. The options outstanding as on the Balance
Sheet date correspond to about 1.28% (1.37%) of the current paid up
equity capital of the Company.
13) The Following table sets forth the funded status of the plan and
the amounts relating to gratuity and leave encashment recognized in the
Companys financials:
14) The Guidance Note on implementing AS 15, Employee benefits (revised
2005) issued by Accounting Standards Board (ASB) states that benefits
involving employer-established provident funds, which require interest
shortfalls to be recompensed, are to à be considered as defined benefit
plans. Pending the issuance of the guidance note from the Actuarial
Society of India, the Companys actuary has expressed an inability to
reliably measure provident fund liabilities. Accordingly, the Company
has accounted for the same as a defined contribution plan. However, as
per the information provided by trustees, there is no interest
shortfall as at the year end.
15) There are no Micro and Small Enterprises to whom the Company owes
dues, which are outstanding for more than 45 days as at March 31, 2010
(Rs. Nil), This information as required to be disclosed under the
Micro, Small and Medium Enterprises Development Act, 2006 has been
determined to the extent such parties have been identified on the basis
of information available with the Company.
16) During the year, on May 08, 2009, the Company issued 300 8.25%
Rated Taxable Secured Redeemable Non-convertible Debentures of Face
Value Rs. 10 lakhs each, aggregating to Rs. 30.00 Crore which are
redeemable at par after 3 years. As per the terms of the issue Put/Call
option is available with the investor and Company at the end of 2
years.
17) The Company manufactures and markets pure coconut oil (CNO) under
the brands Parachute, Nihar and Oil of Malabar. Such CNO is a 100 %
natural product and meets all standards of edible oil as given in the
Prevention of Food Adulteration Act. For the purpose of Excise, CNO is
classified as a vegetable oil under Chapter 15 and attracts excise at
nil rate. Although in the past the Central Excise Department
(Department) has attempted to classify CNO as hair oil by issuing show
cause notices to some of the Companys job workers, the Companys stand
has been vindicated by the decisions of Appellate Tribunal benches
("the Tribunal"), confirming that CNO is not hair oil but a vegetable
oil. Some of these decisions are being contested by the Excise
Department in the Hon. Supreme Court.
On June 3,2009, however, the Central Board of Excise & Customs (CBEC)
issued a circular under which it classified coconut oil packed in
container size up to 200 ml as hair oil, chargeable to excise duty. The
Department has, at some locations, asked the Company / some of its job
workers to clear coconut oil packs up to 200 ml. on or after June 3,
2009, only on payment of excise duty and issued show cause notices
(including for periods prior to June 3,2009) As the Circular and
consequent actions by the Department are contrary to the classification
under excise tariff and Appellate Tribunal decisions, the Company / its
job workers filed writ petitions with the Hon. High Courts of Mumbai
(Goa bench) and Keraia challenging the validity of the Departments
actions. The Honorable High Court of Mumbai has, in the interim,
allowed dispatches of coconut oil in packs up to 200 ml without payment
of excise duty based on the security of bank guarantees / surety bonds
as applicable. The petition, filed with the Honorable High Court of
Mumbai is pending final disposal. The Honorable Kerala High Court has
disposed of the petition with a direction that the excise authorities
cannot call upon the Company to pay excise duty on clearances of
coconut oil packs up to 200 ml. till the disposal of the appeals filed
by the Department before the Supreme Court.
While passing this judgment, the High Court has also held that the
Department cannot take the stand that they are entitled to depart from
the stand taken by the Appellate Tribunal.
The Management had, while finalizing financial results for the quarter
ended June 30,2009, September 30, 2009 and December 31, 2009, based on
then available facts had assessed the probable obligation in respect of
clearance after the date of the circular dated June 3, 2009 and had
made a provision of Rs 28.20 Crore for the period from 3rd June, 2009
to 31 st December, 2009 on account of excise duty on clearances after
the date of circular.
At the year ended March 31, 2010, the Management reviewed the matter
particularly in the light of decision of Kerala High Court and has also
obtained legal opinion in this regard in accordance with which the
Company has a strong case even for clearances after the date of the
circular. Having regard to the said facts and legal advice obtained,
the Management has made an assessment that the probability of success
in the matter is more likely than not. In terms of Accounting Standard
(AS) 29, Provisions, Contingent liability and Contingent assets, the
possible obligation on this account could be in the nature of
contingent liabilities, which need not be provided in the accounts.
However, as a matter of abundant caution and financial prudence, the
Company has, pending outcome of the matter, made a provision at 75% of
the excise duty that may have to be paid on the dispatches of coconut
oil on packs up to 200 ml after June 3, 2009 in the event the matter is
decided against the Company. Accordingly a provision of Rs. 29.35
Crore has been made for the year ended March 31, 2010 and recognized in
the Profit and Loss account. The balance amount of Rs. 9.83 Crore and a
possible obligation of Rs. 121.74 Crore for the period prior to June 3,
2009 arising out of show-cause notices received in the past has been
disclosed as contingent liability to the extent the time horizon
covered by such notice is within the normal period of one year under
the excise laws.
The Company will continue to review this matter in the coming
accounting periods based on the developments on the outcomes in the
pending cases and the legal advice that it may receive from time to
time.
Had the Company treated the entire possible obligation towards the
above matter as a contingent liability, the profit before tax for the
year would have been higher by Rs. 29.35 Crore profit after tax for
year and balance in the Reserves & Surplus at the year end would have
been higher by Rs. 19.60 Crore and the contingent liabilities at the
year end would have been higher by Rs. 29.35 Crore.
18) As at March 31, 2010, the Company holds 100% of the Equity Capital
of Kaya Limited ("Kaya") at a cost of Rs. 73.00 Crore (Rs.73.00 Crore).
The Company has also advanced loans to Kaya of Rs. 79.97 Crore (Rs.
54.71 Crore). As per the latest audited financial statements, Kaya has
negative net-worth as at March 31, 2010.
Since the incorporation of Kaya during 2002-03, its business has been
under development. It has also moved from time to time in expansion
phases. Encouraged by the consumer response to Kayas pioneering
offerings in products andservices, it has focused on building the brand
"Kaya" through setting up of a large number of Clinics at several
locations. In the process Kaya has invested significant set up costs
including advertisement and sales promotion cost, leading to losses.
The operations of Kaya had shown significant improvement till the year
ended March 31, 2009.
During the year, Kaya incurred significant losses due to combined
effect of tough economic environment, opening of 31 new clinics in last
two years which in normal course would have required 3-4 years to
achieve profitability and provision of significant one time costs
resulting from strategic decision to close down Kaya Life centers by
April 30,2010 and 7 Skin Clinics by June 30, 2010. This has resulted in
net worth of Kaya turning negative as on March 31, 2010.
Kaya is a fairly young business - only 7 years since its inception. The
business has been able to ramp up its presence to 87 clinics in India
across 27 cities and a large customer base with significant long term
growth potential. The Management believes that the losses during FY10
are not reflective of future trends and the Kaya business model
continuous to be robust and offers significant long term growth
opportunities. Further, the operations of Kaya are expected to improve
significantly due to positive changes in economic environment, maturity
of new clinics, renewed focus on reducing the time to scale up revenues
in new clinics, improve capacity utilizations in existing ones and add
to Kayas range of service and product offerings and anticipated
savings resulting from restructuring of operations.
Having regard to the above factors, and based on the fundamentals of
Kaya and its future business plans, the Management is of the opinion
that it is strategically desirable for Marico to continue to support
Kaya through funding (equity / debt infusion), through either fresh
funds or conversion of existing loans into equity. Having regard to
this, the Management perceives the erosion in the value of investment
in Kaya, is not other than temporary. Hence, no provision for
diminution in value is considered necessary in respect of the Companys
investment in Kaya or of the loans and advances given to Kaya.
19) The Company has advanced long term loan to its wholly owned
subsidiary Marico South Africa Consumer Care (Pty) Limited which is
outstanding at the year ended March 31, 2010. The operations of the
said subsidiary are classified as Non - integral foreign operations.
Accordingly, as per the requirements of Accounting Standard 11 The
effect of changes in Foreign Exchange Rates, exchange gain/ (loss) of
Rs. 3.23 Crore [(Rs. 1.72 Crore)] arising on revaluation of the said
loan is accumulated in Foreign Currency Translation Reserve, to be
recognized as income or expenses in the Profit and Loss account upon
disposal of the net investment in said subsidiary.
20) There are no dues payable to the Investor Education and Protection
Fund as at March 31, 2010.
21) (a) The figures in brackets represent those of the previous year.
(b) The figures for the previous year have been regrouped where
necessary to conform to current periods classification.
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