Home  »  Company  »  Marico Ltd.  »  Quotes  »  Notes to Account
Enter the first few characters of Company and click 'Go'

Notes to Accounts of Marico Ltd.

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 Set–wet 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. 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) 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 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. 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 ‘Hedge Reserve Account’, 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) ‘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.

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 ‘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 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Employees’ 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 Company’s 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 Kaya’s 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 Company’s 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 ‘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. 5.74 Crore (Rs. 3.23 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.

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 period’s 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 • 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.

Find IFSC