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Directors Report of Hindustan Unilever Ltd.

Mar 31, 2017

DIRECTORS'' REPORT

and Management Discussion and Analysis

To the Members,

Your Company''s Directors are pleased to present the 84th Annual Report of the Company, along with Audited Accounts, for the financial year ended 31st March, 2017.

1. FINANCIAL PERFORMANCE (STANDALONE)

1.1 Results

(Rs, crores)

For the year ended 31st March, 2017

For the year ended 31st March, 2016

Revenue from operations (including excise duty)

34,487

33,491

Profit before exceptional items and tax

6,155

5,977

Profit for the year

4,490

4,137

1.2 Category Wise Turnover

(Rs, crores)

For the year ended 31st March, 2017

For the year ended 31st March, 2016

Sales

Others*

Sales

Others*

Home Care

11,123

223

10,585

228

Personal Care

16,078

226

15,791

220

Refreshments

1,102

22

1,078

18

Foods

4,795

53

4,434

48

Others (including Exports, Infant and Feminine Care)

797

22

1,043

9

TOTAL

33,895

546

32930

524

*Others include service income from operations, relevant to the respective businesses.

1.3 Summarised Profit and Loss Account

(Rs, crores)

For the year ended 31st March, 2017

For the year ended 31st March, 2016

Sale of products (including excise duty)

33,895

32,929

Other operational income

592

562

Total Revenue

33,491

Operating Costs

28,440

27,742

Profit Before Depreciation, Interest, Tax (PBDIT)

6,047

5,749

Depreciation

396

321

Profit Before Interest & Tax (PBIT)

5,651

5,428

Other Income (net)

504

549

Profit before exceptional items

6,155

5,977

Exceptional items

241

(31)

Profit Before Tax (PBT)

6,396

5,946

Taxation

1,906

1,809

Profit for the year

4,490

4,137

Basic EPS (?)

20.75

19.12

The financial statements for the year ended 31st March, 2017 are the first the Company has prepared under IND AS (Indian Accounting Standards). The financial statements for the year ended 31st March, 2016 have been restated in accordance with IND AS for comparative information.

2. DIVIDEND

Your Directors are pleased to recommend a Final Dividend of Rs, 10/per equity share of face value of Rs, 1/- each for the year ended 31st March, 2017. The Interim Dividend of Rs, 7/- per equity share was paid on 15th november, 2016.

The Final Dividend, subject to the approval of Members at the Annual General Meeting on 30th June, 2017, will be paid on or after Wednesday, 5th July, 2017 to the Members whose names appear in the Register of Members, as on the date of Book Closure, i.e. from Saturday, 24th June, 2017 to Friday, 30th June, 2017 (both days inclusive). The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs, 17/- per equity share and will absorb Rs, 4,394 crores, including Dividend Distribution Tax of Rs, 715 crores.

3. RESPONSIBILITY STATEMENT

The Directors confirm that:

- in the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

- they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- they have prepared the annual accounts on a going concern basis;

- they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and

- they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

7. SUPPLY CHAIN

Your Company''s Supply Chain agenda was centered on five core areas - Customer Service Excellence, Creating Consumer Delight by dedicated end-to-end Quality Focus, Creating Value through cost savings programme, Sustainability and Supplier Partner to Win Programme.

The service levels improved steadily with Customer-Case Fill-On-Time (CCFOT) increasing to more than 95%. This was achieved by developing a segmented approach and having a clear roadmap developed for Category, Geography and Channels. Your Company continues to focus on last-mile delivery improvement programme and on strengthening the Sales and Operation Planning (S&OP) process to facilitate shorter planning cycles and response to market demands. This capability helps to align goals across Finance, Customer Development, Marketing, Research & Development and Supply Chain.

During the year, your Company set up a new state-of-the-art manufacturing facility in Doom Dooma Industrial Estate, Assam in record time and has already commenced commercial production. The first despatch was completed on 15th March, 2017. This unit will augment the production capacity of Personal Care products and make it a strategic sourcing site for the Company. The unit reinforces the Company''s long-term commitment to the state of Assam and to ‘Make in India''. Your Company acknowledges the excellent support it received in this regard from the Government and the local community.

Your Company continued its focus on quality by linking and improving on-shelf consumer relevant quality standards, thereby bringing together every part of the business to work on improving overall consumer experience. ‘Delighting consumers everyday'' is core to how your Company drives quality in its products and has been able to substantially improve the on-shelf quality by 37% over 2015.

With a robust funnel of savings programme, your Company continued on its path of delivering consistent end-to-end cost savings and achieved savings of six per cent of the total cost. Your Company brought down its inventory holding by 2.7 days.

Your Company has increased its renewable energy share to 28% in line with the Unilever Sustainable Living Plan commitments. This was achieved by converting agricultural process waste from its operations into fuel, besides increasing the utilization of traditional befouls like agri-waste. Your Company installed equipment to convert process wastes such as spent coffee and tea from beverages factories into fuel for boilers and air-heaters. Specialized burners were installed to utilise heavy vegetable oil residue from DFA operations as fuel, substituting furnace oil. Factory teams also worked to reduce specific energy consumption by eliminating idle operation of equipment, rightsizing of drives and installation of digital controllers. This has also contributed to reduction in your Company''s CO2 footprint by 13% over the previous year.

All factories and warehouses continue to maintain ‘zero non-hazardous waste to landfill site'' status. Year-on-year reduction of water usage continues to be a key priority for your Company. Increase in harvested rain water utilization in processes, reuse of treated effluent water, reduction of water losses from boiler and cooling tower blow down, process water requirement optimizations, etc. have all contributed to reduction of fresh water abstraction and lowering of water consumption across factories by nine per cent over previous year.

Your Company continues to progress on world-class manufacturing journey and covers 25% of production cost perimeter. Factories started delivering more than 10% cost savings on perimeter by eliminating non-value added activities.

Your Company''s ‘Partner to Win'' programme, aims at developing Joint Business Plans with suppliers and business partners. It has resulted in reduced lead-time and costs, improved reliability and new innovation- delivery.

8. RESEARCH & DEVELOPMENT

Your Company continues to derive sustainable benefit from the strong foundation and long tradition of Research & Development (R&D) at Unilever, which differentiates it from many others. New products, processes and benefits flow from work done in various Unilever R&D centres across the globe, including India. The Unilever R&D labs in Mumbai and Bengaluru work closely with the business to create exciting innovations to help us win with our consumers. With world-class facilities and a superior science and technology culture, your Company is able to attract the best talent to provide a significant technology differentiation to its products and processes.

The R&D programmes, undertaken by Unilever globally, are focused on the development of breakthrough and proprietary technologies with innovative consumer propositions. The R&D team comprises highly qualified scientists and technologists working in the areas of Home Care, Personal Care, Foods, Refreshments and Water Purification and critical functional capability teams in the areas of Regulatory, Clinicals, Digital R&D, Product & Environment Safety and Open Innovation.

Your Company has an existing Technical Collaboration Agreement (TCA) and a Trade Mark License Agreement (TMLA) with Unilever which was entered in the year 2012. The TCA provides for payment of royalty on net sales of specific products manufactured by your Company, with technical know-how provided by Unilever. The TMLA provides for the payment of trade-mark royalty, as a percentage of net sales on specific brands, where Unilever owns the trademark in India. The pace of innovations and the scope of services have expanded over the years. Unilever''s global resources are providing greater expertise and superior innovations. Your Company is enjoying the benefits of an increasing stream of new products and innovations, backed by technology and know-how from Unilever, such as those mentioned below. This has helped in bringing to the Indian consumers bigger, better and faster innovations.

During the year, your Company introduced several innovations across categories. Dove, a beauty brand trusted by women and mothers around the world, recently marked its entry into the Baby Care category in India with the launch of Baby Dove during the year. Developed for babies with normal to dry skin, the range includes the Baby Dove Rich Moisture Baby Bar, Baby Lotion, Diaper Rash Cream, Baby Wipes and a Sensitive Moisture Baby Bar to take special care of babies with sensitive skin. The range is built on its heritage of moisture, mildness and care to develop cleansers enriched with Dove''s iconic % moisturizing cream - a technology to protect the skin''s natural barrier. Dermatologist-tested and pediatrician-approved, Baby Dove range is formulated uniquely to replenish essential nutrients and is hypoallergenic and pH-neutral for skin types of all babies.

Lifebuoy continued to delight consumers by creating winning mixes and raising the bar on its germ protection technologies through Active Silver Formula to give strongest protection against both ordinary and stronger infection-causing germs.

In the Fabric Wash business, Surf excel Hand wash and Matic powders were relaunched with increased stain-removal efficacy, thereby driving better in-wash, tough and oily stain removal. Fabric conditioner was also relaunched with improved performance and fragrance delivery.

In the Water business, your Company launched ‘Classic RO'' - a range of five product variants in the ‘affordable reverse osmosis (RO) devices'' segment of the market. The R&D team developed a novel manufacturing process for making carbon filters, which resulted in a 60% reduction in CO2 emissions with a significant reduction in electricity consumption, manpower and water-use compared to the earlier process.

In the Skin Care business, Pond''s, for the first time, launched pimple-clear face wash based on thymol-terpineol technology to visibly clear pimples, such that the difference could be seen in just three days.

Next generation skin-lightening molecule ‘Hexyl Resorcinol'' and ‘diamond'' powder was introduced in Lakme Perfect Radiance Serum portfolio to claim ‘Hi-Res Crystal Radiance''. Lakme also, for the first time, introduced a transformation technology in the form of Lakme ‘9 to 5'' CC transform cream with key claim of ‘Fairness cream that changes color to give a make-up finis''.

In Hair Care, TRESemme offered ‘Beauty-full Volume'' where unique Reverse Wash System was developed for consumers seeking voluminous hair. TRESemme was awarded ‘Product of the Year'' for its range of shampoo and conditioners.

LEVER Ayush introduced 16 products and 23 SKUs as part of the launch across Skin Care and Cleansing, Body, Oral and Hair Care. LEVER Ayush products, formulated with ayurvedic ingredients written in the 5000-years-old ‘granthas'', use ingredients that are highly beneficial to the skin, hair and teeth. The goodness of ingredients like turmeric, saffron, cow''s ghee, cardamom, rock salt, etc. are authentic solutions to modern day beauty problems.

In Foods, the year saw the launch of new variants of premium jams of Kissan. These have met with strong initial success and we continue to expand their availability footprint.

In Beverages, your Company launched for the first time, boilable tea bags in 3 Roses called ‘tasty tea buds'' in Tamil Nadu as a value-added tea proposition. As part of your Company''s commitment to sustainable sourcing, your Company contributes towards defining Maximum Residue Limits (MRLs) for pesticides in tea through the Plant Production Code Committee, an initiative of the Tea Board of India. Unilever has commissioned a research project with Centre for Agriculture and Biosciences International (CABI) and Tea Research Institutes in India to evaluate ecological approaches for pest management in tea.

R&D has further contributed to the Company''s sustainability agenda. Your Company was ranked 2nd in the first-ever India Access to Nutrition Index (ATNI). Your Company continues to work on improving the taste and nutritional quality of its products using globally recognized standards. 100% of the children''s Frozen Desserts and edible ice products have 110 kilocalories or fewer per portion.

With access to strong scientific expertise and the capability to deliver high value technologies developed globally by Unilever, your Company is well-placed to leverage the opportunities to drive faster growth on the back of strong support from R&D as well as brand development capabilities. At the same time, your Company is equipped to meet the challenges of increased competition.

8.1 Technology Absorption

Your Company maintains strong and healthy interactions with Unilever through a well-coordinated management exchange programme, which includes setting out governing guidelines pertaining to identifying areas of research, agreeing timelines, resource requirements; scientific research based on hypothesis testing and experimentation which leads to new / improved / alternative technologies; supporting the development of launch-ready product formulation based on research and implementation of the launch ready product formulations in markets. Your Company continuously imports technology from Unilever under the Technical Collaboration Agreement and the same is fully absorbed. The benefits derived by your Company through technology absorption and R&D have been detailed earlier in this report.

Your Company also receives continuous support and guidance from Unilever to drive functional excellence in marketing, supply management, media buying and IT, among others, which help your Company to build capabilities, remain competitive and further step-up its overall business performance. Unilever is committed to ensuring that the support in terms of new products, innovations, technologies and services is commensurate with the needs of your Company and enables it to win in the marketplace.

The details of expenditure on scientific Research and Development at the Company''s in-house R&D facilities eligible for a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 for the year ended 31st March, 2017, are as follows:

Capital Expenditure : Rs, 2 crores

Revenue Expenditure : Rs, 28 crores

9. ENVIRONMENT, SAFETY, HEALTH AND ENERGY CONSERVATION

Your Company upholds Safety, Health and Environment as non-negotiable values. The Company''s Safety approach not only encompasses employees and assets, but also the communities that it operates in. An environment of safe work, safe behavior and safe travel is achieved through implementation and internalization of your Company''s vision of an injury-free organization. This is reflected in the continually reducing injury rates, which came down by over 20% in 2016 as compared to 2015. The absolute injury rate in 2016 was less than 0.4 injuries per million man-hours worked.

To further improve the safety performance, your Company has introduced ‘WCM Risk Assessment Tools'' at specific sites in addition to the existing Be Safe initiatives across all factories and offices. Be Safe is a behavioral safety framework, which helps in bringing about a change in the behavior patterns and aims to eliminate unsafe acts by improving risk perception of the employees, be it in factories, offices or homes.

Your Company has a robust system of recording and investigating safety incidents. All cases of injuries requiring medical intervention are reported in Unilever''s global safety portal and the same is audited by an external agency. Learnings from safety incidents are cascaded top-down for mitigation of risks, which can avoid repeat incidents.

Your Company celebrates National Safety Day each year across all sites. Special programmes are designed by the Corporate Safety Team jointly with the sites and many of them extend the events to a full Safety Week.

Your Company has a Central Safety, Health and Environment Sub-Committee, which is led by the Managing Director and Chief Executive Officer of the Company. In this forum, performances of specific safety and environment related sub-committees, each of which is led by a Managing Committee (MC) member, are reviewed. This helps in bringing newer insights and direction from the top management.

As part of Unilever Sustainable Living Plan (USLP), your Company strives to grow the business whilst reducing environmental footprint and increasing positive social impact. Accordingly, your Company has taken ambitious targets of year-on-year reductions in CO2 emissions (kg per tonne of production), groundwater abstraction (cubic meter per tonne of production) and waste generation (kg per tonne of production) in its operations. Some of the sustainability initiatives undertaken during the year were:

- In order to reduce groundwater usage, factories are working on direct use of rainwater in plants and processes. In several sites, make-up water for utilities is taken from rainwater harvested during monsoons. 2016 saw an impressive increase of 22% in rainwater re-use in operations over 2015. Water consumption, in cubic meter per tonne of production, reduced by 53% as compared to 2008 baseline and by 9% over 2015.

- In continuation of your Company''s successful trials of using vegetable oil residue as fuel in Orai, similar equipment was installed in Pondicherry and Bhuj to maximize in-house use of such residue as source of renewable energy.

- Amli and Kandla factories installed solar thermal plants for heating of process water, utilizing the high solar insulation. The project at Amli has also received partial subsidy from Ministry of New and Renewable Energy (MNRE). More such installations have been planned.

- Biogas plants for utilization of canteen waste for gas generation were installed in five factories.

- The contribution of renewable energy in total energy consumed for the year was 28.5%. This was supported by sustained usage of biogenic fuels across factories. CO2 emissions (kg per tonne of production) reduced by 49% versus 2008 baseline and by over 13% versus 2015.

- Over 23 million units (KWH) were reduced from your Company''s energy footprint during the financial year 2016-17 due to execution of various capital projects ranging from installation of energy efficient chillers and motors, condensate recoveries, air compressor heat recoveries, etc. Your Company has made investments totaling Rs, 17 crores in such projects in the above period.

- Total waste generated from the factories reduced by 21.5% in 2016 as compared to 2015. Factories identified newer avenues for re-use and energy recovery from waste, in addition to the current reduction and recycling streams, within the purview of statutory guidelines of waste disposals. Your Company maintained the status of ‘zero non-hazardous waste to landfill'' from all factories and offices.

With the continuous evolution of the USLP in a changing landscape, in January 2017, Unilever announced a commitment to ensure that all of our plastic packaging will be fully re-usable, recyclable or compostable by 2025.

Your Company''s initiatives in the area of Safety and Environment were recognized through awards from National Safety Council, Shrishti Green Governance, Karnataka State Pollution Control Board, Confederation of Indian Industry (CII), Green Tech, Frost & Sullivan, etc.

10. HUMAN RESOURCES

Your Company considers Great Brands and Great People as its biggest assets. The Human Resource agenda continues to support the business in achieving sustainable and responsible growth by building the right capabilities in the organization. It continues to focus on progressive employee relations policies, creating an inclusive work culture and a strong talent pipeline.

Your Company is known as the ‘Leadership Factory'', that exports talent to Unilever and to India Inc., the industry at large. The foundation of all your Company''s learning practices is based on a 70-20-10 approach to learning. 70% of learning is done through on-the-job training, building business-linked capabilities to achieve ambitious business targets. 20% of learning is coaching and 10% of learning is through formal development. Your Company''s learning curriculum is designed to support the entire life cycle of an employee''s career.

Driven by the ‘Leaders build Leaders'' philosophy, your Company''s flagship management trainee programme, the Unilever Future Leaders Programme (UFLP) has been the training ground for many inspiring leaders, which provides extensive cross functional experience through live projects and assignments.

As per the latest Campus Track Business School Survey, conducted by Nielsen for B-School students, your Company has been chosen as the preferred employer across all sectors. Your Company has also retained the ‘Dream Employer'' status. Your Company is known for having the best people practices for developing future leaders. The ability to attract the best talent, provides a competitive edge to the organization.

A series of programmes like maternity and paternity support, Career by Choice and location flexibility have helped in driving the Inclusion and Diversity agenda. Your Company continues to focus on driving inclusion through building leadership capability and recognizing line managers who provide a simple, flexible and respectful work environment for their teams.

Your Company has been recognized as one of the ‘Top 10 Best Companies for Women in India'' by The Best Companies for Women in India (BCWI) Study 2016. This award is a recognition of your Company''s commitment towards creating a diverse and inclusive work-culture.

In the beginning of the year, Unilever launched the ‘Connected 4 Growth'' (C4G) framework which entailed setting up of empowered Cluster Category Business Teams (CCBTs) with representatives from different functions. During the year, the C4G framework has been embedded well in the business through 15 fully functional CCBTs. Your Company is confident that this framework will help bring more speed and agility in its operations to compete in the marketplace and strengthen the consumer connect.

Over the years, the Industrial Relations function of your Company achieved many milestones by strengthening its base through Institutional Capability

Development Initiatives, Gender Diversity, Digitization and Community Development. Your Company drives sustainable growth by leveraging employee-potential through capability development initiatives in line with Unilever Production System and by reducing cost and complexity in Supply Chain units.

Your Company is focused on building a high-performance culture with a growth mindset where employees are engaged and empowered to be the best they can be. Developing and strengthening capabilities of all employees in your Company has remained an ongoing priority.

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Act and Rule 5 (1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Rules) have been appended as Annexure to this report. Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) and 5(3) of Rules are available at the Registered Office of the Company during working hours, 21 days before the Annual General Meeting and shall be made available to any shareholder on request. Such details are also available on your Company''s website https://www.hul.co.in/investor-relations/.

11. FINANCE, ACCOUNTS & IT

The agenda for the Finance and Accounts function of your Company is to assist in driving superior performance of the business, pioneer thought-leadership and develop future-ready talent in Finance.

During the year, your Company implemented projects to leverage technology for building business intelligence thereby, enabling growth and reducing costs through project Livewire and Zero Based Budgeting (ZBB). Massive simplification of processes led to deploying people on value partnering through projects like Finance Excellence Team (FET), Amazingly Simple and One Accounting Centre.

Project ‘Livewire'' was implemented for end to end business analytics. It continues to evolve as a pioneering technology enabling your Company to drive business performance management with speed and agility. The tool based on bringing together raw data from different sources, delivers ready-made off-the-shelf analytics in pictorial and graphical form, and offers actionable insights that help us spot opportunities and challenges in a faster manner.

To enhance standardization of accounting processes, improve efficiency in operations and enhance accounting expertise, three accounting centers are being formed for consolidating - Sales Accounting, Head Office Accounting and Factory Accounting.

Your Company invested in a common distribution management system that has been further upgraded during the year to make it future-ready. The common mobility solution has also been upgraded. These would enable a sharper and richer sales execution process in the marketplace.

The e-commerce capabilities have been further enhanced. Ability to manage the digital content of our products and brands and to seamlessly publish the same to our partners have helped improve the quality of consumer engagement online. Analytical solutions have been developed for improved understanding of consumer sentiments and to engage with them in an agile manner.

Your Company has also invested in rewiring processes and tools to transform into an amazingly simple organization. Investments in new technologies like Financial Closing Cockpit have cut timelines and improved predictability of the month-end close process. Expanding the SAP Global Available To Promise (GATP) capability to run the order management process has helped move the needle on customer service. Your Company has continued the active engagement with the external environment and is investing to enhance solutions across the value chain, thereby preparing itself for the Goods and Services Tax (GST) era. Your Company continues to drive resilience through targeted remediation of high risk Information Technology (IT) components, including hardware, database, operating systems and applications. Alongside the investment in technology, your Company is also improving its service management processes to prevent any defects in the IT environment and to enable faster resolution of any such incidents with minimum business disruption.

Indian Accounting Standards (IND AS) - IFRS Converged Standards

Your Company, its subsidiaries and joint venture had adopted IND AS with effect from 1st April, 2016 pursuant to Ministry of Corporate Affairs notification dated 16th February, 2015 notifying the Companies (Indian Accounting Standard) Rules, 2015. Your Company has published IND AS Financials for the year ended 31st March 2017 along with comparable as on 31st March 2016 and Opening Statement of Assets and Liabilities as on 1st April 2015.

Your Company has proactively shared all four quarters re-stated IND AS Profit and Loss Statement with Investors along with quarterly results for June, 2016, for comparison.

Capital Expenditure during the year was at Rs, 1,372 crores (Rs, 750 crores in the previous year).

During the year, your Company did not accept any public deposits under Chapter V of Companies Act, 2013. In terms of the provisions of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 / Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, Rs, 5.43 crores of unpaid / unclaimed dividends were transferred during the year to the Investor Education and Protection Fund.

Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for the last four years and for the year ended 31st March,

2017, are given below:

IGAAP

IND AS

Particulars

2012-13

2013-14

2014-15

2015-16

2015-16

2016-17

Return on Net Worth (%)

94.70

104.10

99.50

88.70

72.80

76.70

Return on Capital Employed (%)

109.10

130.20

127.70

128.40

105.80

105.90

Basic EPS (after exceptional items) (?)

17.56

17.88

19.95

18.87

19.12

20.75

There were no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year to which this financial statements relate on the date of this report.

Segment-wise results

During the year, your Company re-organized the businesses into four categories - Home Care, Personal Care, Foods and Refreshments. Accordingly, the Management Committee reviews performance of categories basis new segments.

Your Company identified five business segments, in line with the Accounting Standard on Segment Reporting (IND AS-107), which comprises: (i) Home Care, (ii) Personal Care, (iii) Foods,

(iv) Refreshments, and (v) Others, including Exports, Infant and Feminine Care, etc. The audited financial results of these segments are provided as a part of financial statements.

Details of loans, guarantee or investments made by your Company under Section 186 of the Companies Act, 2013 during the financial year 2016-17 is appended as an Annexure to this report.

11.1 Risk and Internal Adequacy

Your Company has an elaborate Risk Management procedure, which is based on three pillars: Business Risk Assessment, Operational Controls Assessment and Policy Compliance processes. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. The Company has set up a Risk Management Committee to monitor the risks and their mitigating actions and the key risks are also discussed at the Audit Committee. Some of the risks identified by the Risk Management Committee relate to competitive intensity and cost volatility. The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key business areas. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company''s internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company''s risk management policies and systems.

During the year, your Company started monitoring and reporting Controls through Livewire - a comprehensive analytics tool that tracks compliance with internal controls framework established by the management. The controls dash board allows the management to perform a thematic analysis of its control health across different processes and activities, time periods and responsibility centers. This will enable the management to pro-actively protect value through implementation of a robust control environment.

Your Company manages cash and cash flow processes assiduously, involving all parts of the business. There was a net cash surplus of Rs, 1,671 crores (2015-16: Rs, 2,759 crores), as on 31st March, 2017. The Company''s low debt equity ratio provides ample scope for gearing the Balance Sheet, should the need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company''s imports and exports. The Company accounts for mark-to-market gains or losses every quarter end, in line with the requirements of Accounting Standard 11. The details of foreign exchange earnings and outgo as required under Section 134 of the Act and Rule 8(3) of Companies (Accounts) Rules, 2014 are mentioned below:

(Rs, In crores)

For the year ended 31st March, 2017

For the year ended 31st March, 2016

Foreign Exchange earnings

541

559

Foreign Exchange outgo

1,214

1,084

11.2 Mergers, Acquisitions and Divestments

During the year, your Company completed the acquisition of Indulekha Hair oil. The addition of this brand has further strengthened our position in the evolving ‘naturals'' segment. The brand is now fully integrated into our Personal Care portfolio and is performing well.

Your Company also completed the sale and transfer of its rice exports business carried out under the brands ‘Gold Seal Indus Valley'' and ‘Rozana'', to LT foods Middle East DMMC, a group Company of LT Foods Limited.

Your Company announced its intention to divest its shareholding in Kimberley Clark Lever Limited (KCLL) to its JV partner Kimberley Clark Corporation (KCC). The decision to divest from this business is in line with our strategy focus on core business.

11.3 Goods and Service tax

Goods and Services Tax (GST) is a landmark reform which will have a lasting impact on the economy and on businesses. Implementation of a well-designed GST model that applies to the widest possible base at a low rate can provide significant growth stimulus to the business and contribute to the Prime Minister''s mission of ‘Make in India''. Your Company has been preparing for migrating to GST for the past year; changes across IT systems, Supply Chain and operations have been made keeping in mind the sweeping changes that GST would bring in. While there are a few areas that need to be addressed, the Government has announced an intention to go live on GST on 1st July, 2017 and your Company will be ready for this transformative reform.

11.4 Scheme of Arrangement

Subsequent to the approval of the shareholders at the Court Convened Meeting held on 30th June, 2016, to the Scheme of Arrangement for transfer of the balance of '' 2,187 crores standing to the credit of the General Reserves to the Profit and Loss Account, your Company had filed the petition for sanction of the Scheme of Arrangement with the Hon''ble High Court of Mumbai. Upon the Scheme becoming effective, the amount so transferred is proposed to be distributed to the shareholders from time to time, by the Board of Directors, at its sole discretion, in such manner, quantum and at such time, as the Board of Directors may decide.

Consequent to the notification of certain pending sections of Companies Act, 2013 including sections related to the Compromise and Arrangements and National Company Law Tribunal (NCLT), the jurisdiction for sanctioning the Scheme of Arrangement has been transferred to the NCLT from High Court of Mumbai. The Scheme is currently pending with NCLT for sanction.

12. LEGAL, GOVERNANCE AND BRAND PROTECTION

The Legal function of your Company continues to be a valued partner in facilitating the business agenda in the areas of claims management, legislative changes in both emerging and existing regulations, effectively dealing with unfair competition and ensuring regulatory compliance. The Legal function also works closely with different stakeholders like Industry Associations, Regulators, key opinion formers to develop a progressive regulatory environment in the best interest of all the stakeholders.

The focus of the Legal function has been to partner the business on strategic issues that present either areas of opportunities or in mitigating risks besides focusing on core legal work like litigation management, combating unfair competition to protect Company''s brands from counterfeits, look alike and grey imports. One of the activities that the Legal function has engaged itself with across the country is in propagating intellectual property awareness. Your Company believes that it is important to educate students on intellectual property and build awareness and understanding of the subject so that students start respecting intellectual property rights from a young age. Your Company is of the view that the menace of counterfeits can be effectively addressed if enforcement actions are supplemented with building awareness amongst the consumers of tomorrow.

12.1 Update on Kodaikanal Soil Remediation

Your Company had informed the shareholders about the long-standing dispute with the former workers association of the former factory in Kodaikanal. A Memorandum of Settlement was signed towards the end of the last financial year with the association bringing to an end this long-standing issue.

The other issue on this matter, which is pending, pertains to commencement of soil remediation in the premises of the former factory of your Company. Since this issue first came to light in 2001, your Company has actively sought to address it in a responsible and transparent manner. During this year, basis the decision from the Hon''ble Madras High Court, Tamil Nadu Pollution Control Board (TNPCB) in December 2016 granted permission to your Company to commence preparatory work and soil remediation on a trial basis for a period of three months after obtaining applicable local approvals. The grant of consent by TNPCB was challenged in the Southern Bench of the National Green Tribunal (NGT), Chennai. Through an interim order, the NGT has directed that soil remediation should be commenced in accordance with the consent granted by TNPCB. The Company is committed to conduct soil remediation at the factory site at the earliest.

12.2 Corporate Governance

A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.

The extract of annual return in Form MGT-9 as required under Section 92(3) of the Act and Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to this Report.

12.3 Related Party Transactions

In line with the requirements of the Companies Act, 2013 and Listing Regulations, your Company has formulated a Policy on Related Party Transactions which is also available on the Company''s website at https://www.hul.co.in/investor-relations/corporate-governance/. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Arm''s Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013 and Listing Regulations.

All Related Party Transactions entered during the year were in Ordinary Course of the Business and at Arm''s Length basis. No Material Related Party Transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is not applicable.

12.4 Prevention of Sexual Harassment at Workplace

As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (Act'') and Rules made there under, your Company has constituted Internal Committees (IC). While maintaining the highest governance norms, the Company has appointed external independent persons, who have done work in this area and have requisite experience in handling such matters, as Chairpersons of each of the Committees. During the year, one complaint with allegations of sexual harassment was received by the Company and the same was investigated and resolved as per the provisions of the Act.

In order to build awareness in this area, the Company has been conducting programmes in the organisation on a continuous basis.

13. SUSTAINABLE LIVING

Your Company''s Vision is to accelerate growth in the business, while reducing environmental footprint and increasing positive social impact. This vision has been codified in the Unilever Sustainable Living Plan (USLP), launched in 2010, which is your Company''s blueprint for achieving sustainable growth. By spurring innovation, strengthening Supply Chain, lowering costs, reducing risks and building trust, sustainability is creating value for your Company as well as society.

Your Company has made good progress on the three USLP big goals to be achieved globally: To help more than a billion people take action to improve their health and well-being, to halve the environmental footprint of the making and use of the products while growing the business and to enhance the livelihoods of millions of people while growing the business.

Detailed information on the progress of your Company''s USLP initiatives and CSR activities is available in the Annual Report on CSR and Business Responsibility Report which is appended as Annexure to this Report.

14. EMPLOYEE STOCK OPTION PLAN (ESOP)

Details of the shares issued under Employee Stock Option Plan (ESOP), as also the disclosures in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 are uploaded on the website of the Company https://www.hul.co.in/investor-relations/annual-reports/. No employee has been issued share options during the year, equal to or exceeding one per cent of the issued capital of the Company at the time of grant.

Pursuant to the approval of the Members at the Annual General Meeting held on 23rd July, 2012, the Company adopted the ‘2012 HUL Performance Share Scheme'' in place of ‘2006 HLL Performance Share Scheme''. In accordance with the terms of the Performance Share Plan, employees are eligible for award of conditional rights to receive equity shares of the Company at the face value of '' 1/- each. These awards will vest only on the achievement of certain performance criteria measured over a period of three years. The Company confirms that the 2012 HUL Performance Share Scheme complies with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014.

Under the said Plan, eligible Managers were given Conditional Performance Grant of shares of Unilever and the Company in the ratio of 67:33, to mirror your Company''s shareholding, where Unilever held 67% shareholding. During the year, 203 employees, including Whole-time Directors, were awarded conditional rights to receive 135,721 Equity Shares at the face value of '' 1/- each. It comprises conditional grants made to eligible managers covering performance period from 2016 to 2018 and from 2017 to 2019.

The employees of the Company are eligible for Unilever PLC (the ‘holding Company'') share awards namely, the Management Co-Investment Plan (MCIP), the Global Performance Share Plan (GPSP) and the SHARES Plan. The MCIP allows eligible employees to invest up to 100% of their annual bonus in the shares of the holding Company and to receive a corresponding award of performance related shares. Under GPSP, eligible employees receive annual awards of the holding Company''s shares. The awards under MCIP and GPSP plans vests after 3-4 years between 0% and 200% of grant level, depending on the satisfaction of the performance metrics. Under the SHARES Plan, eligible employees can invest in the shares of the holding Company for specified amount and after three years one share is granted to the employees for every three shares invested subject to the fulfillment of conditions of the scheme. The holding Company charges the Company for the grant of shares to the Company''s employees based on the market value of the shares on the exercise date.

15. BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Dev Bajpai, Executive Director, Legal & Corporate Affairs and Company Secretary was appointed as an Additional Director on the Board of the Company with effect from 23rd January, 2017 to hold office till the conclusion of the next Annual General Meeting of the Company. Mr. Dev Bajpai has also been appointed as a Whole-time Director on the Board with effect from 23rd January, 2017, for a period of five years, subject to approval of Members of your Company at the Annual General Meeting.

As per the provisions of the Companies Act, 2013, Independent Directors have been appointed for a period of five years and shall not be liable to retire by rotation. All other Directors, except the Managing Director, will retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-election.

The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013.

The details of training and familiarization programme and Annual Board Evaluation process for Directors have been provided under the Corporate Governance Report.

The policy on Director''s appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director, and also remuneration for Key Managerial Personnel and other employees, forms part of the Corporate Governance Report of this Annual Report.

16. MANAGEMENT COMMITTEE

The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by the Chief Executive Officer and has Functional / Business Heads as its members.

During the year, your Company re-organized the Foods and Refreshments (F&R) business into two separate businesses of Foods and Refreshments. Accordingly, Mr. Sudhir Sitapati, Category Vice President, Refreshments (South Asia & Africa) was appointed as Executive Director, Refreshments and member of Management Committee. Ms. Geetu Verma, who was Executive Director (Foods & Refreshments) was designated as Executive Director (Foods), responsible for the Foods business of your Company.

During the year, Mr. Punit Misra, Executive Director, Sales and Customer Development resigned from the services of the Company. Mr. Srinandan Sundaram was appointed as Executive Director, Sales and Customer Development and member of Management Committee of the Company.

17. AUDITORS

M/s. BSR & Co. LLP were appointed as Statutory Auditors of your Company at the Annual General Meeting held on 30th June, 2014 for a term of five consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors is required to be ratified by Members at every Annual General Meeting.

The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

M/s. RA & Co., Cost Accountants carried out the cost audit for applicable businesses during the year. The Board of Directors have appointed M/s. RA & Co., Cost Accountants as Cost Auditors for the financial year 2017-18.

18. OUTLOOK

The global economy continues to remain under pressure from the ongoing political, policy and economic uncertainties around the world. However, it is expected that the global growth should stabilize in future.

The Indian GDP growth rate continues to be one of the fastest growing large economies of the world. Economic growth is expected to further improve on the strengthening consumer sentiment. The medium to long term secular trends based on urbanization, rising aspirations, low level of penetration for most of our categories and improving consumption levels are positive for the FMCG sector. Your Company, with its brands, talent and investment in capabilities, is well placed to leverage this opportunity.

The enactment of the GST legislation has been a milestone reform that will create a win-win environment for all stakeholders and heralds an integrated and productive economy, and is expected to further boost economic growth. However, there could be temporary transition challenges during the cut-over.

18.1 Cautionary Statement

Statements in the Annual Report, particularly those which relate to Management Discussion and Analysis, describing the Company''s objectives, projections, estimates and expectations, may constitute ‘forward looking statements'' within the meaning of applicable laws and regulations. Although the expectations are based on reasonable assumptions, the actual results might differ.

19. APPRECIATIONS AND ACKNOWLEDGMENTS

Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain as industry leaders.

Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories, in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products and introduction of new products.

The Board places on record its appreciation for the support and co-operation your Company has been receiving from its suppliers, redistribution stockiest, retailers, business partners and others associated with the Company as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be your Company''s Endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co- operation with each other, consistent with consumer interests.

The Directors also take this opportunity to thank all Shareholders, Clients, Vendors, Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued support.

On behalf of the Board

Harish Manwani

Chairman

Mumbai, 17th May, 2017 (DIN : 00045160)


Mar 31, 2015

To the Members,

The Company''s Directors are pleased to present the 82nd Annual Report of the Company, along with Audited Accounts, for the Financial Year ended 31st March, 2015.

1. FINANCIAL PERFORMANCE (STANDALONE)

1.1. Results

(Rs. crores>

For the year ended For the year ended 31st March, 2015 31st March, 2014

Revenue from operations, net of excise 30,805.62 28,019.13

Profit before exceptional items and tax 5,523.12 4,799.71

Profit for the year 4,315.26 3,867.49

Dividend (including tax on distributed profits) (3,881.22) (3,272.97)

Transfer to General Reserve - (386.75)

Profit & Loss Account balance carried forward 1,177.09 743.05

1.2. Category Wise Turnover

(Rs. crores)

For the year ended For the year ended 31st March, 2015 31st March, 2014

Sales Others* Sales Others*

Soaps and Detergents 14,640.66 235.95 13,460.98 222.43

Personal Products 8,865.03 141.50 7,979.79 141.10

Beverages 3,581.31 50.18 3,275.12 36.74

Packaged Foods 1,863.42 28.38 1,620.75 27.55

Others (including Exports, Chemicals, Infant Care Products, Water, etc.) 1,220.29 92.61 1,071.63 84.67

TOTAL 30,170.71 548.62 27,408.29 512.49

* Others include service income from operations, relevant to the respective businesses.

1.3. Summarised Profit and Loss Account

(Rs. crores)

For the year ended For the year ended 31st March, 2015 31st March, 2014

Sale of products less excise duty 30,170.50 27,408.29

Other operational income 635.12 610.84

Total Revenue 30,805.62 28,019.13

Operating Costs (25,597.38) (23,543.87)

Profit Before Depreciation, Interest, Tax (PBDIT) 5,208.24 4,475.26

Depreciation (286.69) (260.55)

Profit Before Interest & Tax (PBIT) 4,921.55 4,214.71

Other Income (net) 601.57 585.00

Profit before exceptional items 5,523.12 4,799.71

Exceptional items 664.30 228.68

Profit Before Tax (PBT) 6,187.42 5,028.39

Taxation (1,872.16) (1,160.90)

Profit for the year 4,315.26 3,867.49

Basic EPS (Rs.) 19.95 17.88

2. DIVIDEND

Your Directors are pleased to recommend a Final Dividend of Rs. 9/- per equity share of face value of Re. 1/- each for the year ended 31st March, 2015. The Interim Dividend of Rs. 6/- per equity share was paid on14th November, 2014.

The Final Dividend, subject to the approval of Members at the Annual General Meeting on 29 th June, 2015, will be paid on or after 3rd July, 2015 to the Members whose names appear in the Register of Members, as on the date of book closure, i.e. from Tuesday, 23rd June, 2015 to Monday, 29th June, 2015 (both days inclusive). The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs. 15/- per equity share and will absorb Rs. 3,881 crores, including Dividend Distribution Tax of Rs. 636 crores.

3. RESPONSIBILITY STATEMENT

The Directors confirm that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- they have prepared the annual accounts on a going concern basis;

- they have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and

- they have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

12.1. Risk and Internal Adequacy

Your Company has an elaborate Risk Management procedure, which is based on three pillars: Business Risk Assessment, Operational Controls Assessment and Policy Compliance processes. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. Some of the identified risks relate to competitive intensity and cost volatility. During the year, your Company has set up a new Risk Management Committee in accordance with the requirements of Listing Agreement to monitor the risks and their mitigating actions. The key risks and mitigating actions are also placed before the Audit Committee of the Company.

The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of operations. These systems are routinely tested and certified by Statutory as wett as Internal Auditor and cover att offices, factories and key business areas. Significant audit observations and fottow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company''s internat controt environment and monitors the imptementation of audit recommendations, inctuding those retating to strengthening of the Company''s risk management poticies and systems.

Foreign Exchange transactions are futty covered with strict timits ptaced on the amount of uncovered exposure, if any, at any point in time. There are no materiatty significant uncovered exchange rate risks in the context of Company''s imports and exports. The Company accounts for mark-to-market gains or tosses every quarter end, in tine with the requirements of Accounting Standard 11. The detaits of foreign exchange earnings and outgo as required under Section 134 and Rute 8(3) of Companies (Accounts) Rutes, 2014 are mentioned betow:

Foreign Exchange Earnings & Outgo

[Rs. crores]

For the year ended For the year ended 31st March, 2015 31st March, 2014

Foreign Exchange earnings 573.43 547.91

Foreign Exchange outgo 3,846.50 3,132.40

13. LEGAL, GOVERNANCE AND BRAND PROTECTION

Your Company continued to focus on the key areas and projects within the Legat, Comptiance and Corporate Affairs functions. The Company has devetoped an in house workftow based comptiance toot ''Setf-Compti'' that tracks comptiances across factories and offices. The toot is one of the best practices and is being exported to other businesses of Unitever. The focus on titigation management continued during the year as atso on combating unfair competition with a series of actions to protect your Company''s Brands from counterfeits, took-atike and grey imports. As part of cascading knowtedge of Competition Law, the Company cottaborated with the Federation of Indian Smatt and Medium Enterprises to conduct Competition Law Awareness Sessions for Smatt and Medium Enterprises.

13.1 Corporate Governance

Your Company is renowned for exemptary governance standards since inception and continues to tay a strong emphasis on transparency, accountabitity and integrity.

The new Companies Act, 2013 and amended Listing Agreement have strengthened the governance regime in the country. Your Company is in comptiance with the governance requirements provided under the new taw and had proactivety adopted many provisions of the new taw, ahead of time. Your Company is committed to embrace the new taw in tetter and spirit. In tine with the requirements of new taw, your Company has constituted new Board Committees. Your Company has in ptace att the statutory Committees required under the taw. Detaits of Board Committees atong with their terms of reference, composition and meetings of the Board and Board Committees hetd during the year, are provided in the Corporate Governance Report.

During the year, your Company has adopted new policies and amended existing policies such as Policy on Related Party Transactions, Policy on Material Subsidiaries, CSR Policy and Whistle Blower Policy in line with new governance requirements. These policies are available on the website of the Company at www. hul.co.in/investorrelations/CorporateGovernance/. The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.

During the year, Secretarial Audit and Secretarial Standards Audit were carried out by M/s S. N. Ananthasubramanian & Co., Company Secretaries, the Secretarial Auditor of the Company for the financial year 2014-15. There were no qualification, reservation or adverse remarks given by Secretarial Auditors of the Company. The detailed reports on the Secretarial Standards and Secretarial Audit are appended as an Annexure to this Report.

The extract of annual return in Form MGT 9 as required under Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as an Annexure to this Report.

A separate report on Corporate Governance is provided together with a Certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Equity Listing Agreement with the Stock Exchange(s). A Certificate of the CEO and CFO of the Company in terms of sub-clause IX of Clause 49 of Equity Listing Agreement, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.

13.2 Related Party Transactions

In line with the requirements of the Companies Act, 2013 and Equity Listing Agreement, your Company has formulated a Policy on Related Party Transactions which is also available on Company''s website at www.hul.co.in/investorrelations/ CorporateGovernance/. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

This Policy specifically deals with the review and approval of Material Related Party Transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Arm''s Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013 and Equity Listing Agreement.

All Related Party Transactions entered during the year were in Ordinary Course of the Business and on Arm''s Length basis. No Material Related Party Transactions, i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements, were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) (h) of the Companies Act, 2013 in Form AOC 2 is not applicable.

13.3 Prevention of Sexual Harassment at Workplace

As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (Act'') and Rules made thereunder, your Company has constituted Internal Complaints Committees (ICC). The Company has designated the external independent member as a Chairperson for each of the Commettees which was beyond the requirements of law. During the year, 2 complaints with allegations of sexual harassment were filed with the Company and the same were investigated and resolved as per the provisions of the Act.

14. SUSTAINABLE LIVING

Your Company has embraced the Unilever Sustainable Living Plan (USLP) since the year 2010 and has made good progress on the goals set by the Plan. The Plan spans your Company''s entire portfolio of brands, has a social and economic dimension and works across the entire value chain; from the sourcing of raw materials to the delivery of products to the consumers.

USLP has three big global goals to achieve:

- I mproving Health and Well-being - By 2020, we will help more than a billion people take action to improve their health and well-being.

- Reducing Environmental Impact - By 2020, our goal is to halve the environmental footprint of the making and use of the products as we grow our business.

- Enhancing Livelihoods - By 2020, we will enhance the livelihoods of millions of people as we grow our business.

Your Company progressed well on its goals. The highlights of progress in the year 2014 are given below:

- The Company reached out to a total of 63 million people through Lifebuoy Handwashing Programme since 2010.

- Pureit in-home water purifier provided 55 billions litres of safe drinking water by the end of 2014.

- All your Company''s children''s ice cream brands now contained, 110 kilocalories or fewer per portion.

- CO2 emission per tonne of production was reduced by 88% compared to 2008.

- Your Company created water conservation potential of nearly 100 billion litres through Hindustan Unilever Foundation partnerships.

- All manufacturing locations of your Company achieved zero non-hazardous waste to landfills.

- A total of 111 tea estates in Assam, West Bengal, Kerala and Tamil Nadu are certified as ''Sustainable Estates''

- A total of 85% of tomatoes used in Kissan Ketchup are now sourced from sustainable sources

- Project Shakti network expanded to include over 70,000 Shakti Entrepreneurs (Shakti Ammas) by the end of 2014.

During last year, the Unilever Sustainable Living Plan was broadened with a more substantive and far reaching ''Enhancing Livelihoods Programme''. The three new commitments under this pillar are:

- Drive Fairness in the Workplace by advancing human rights across the operations and extended supply chain.

- Advance Opportunities for Women by promoting their safety, providing up-skilling and expanding opportunities.

- Develop Inclusive Business to improve the livelihoods of smallholder farmers, improve the incomes of small- scale retailers and increase the participation of young entrepreneurs in the value chain.

Your Company continued to put more emphasis on human and labour rights and enhanced the role of women in the value chain while growing the business sustainably and driving social and economic development. During the year, your Company recruited over 50 women to work on shop floors in its factories taking the total number of female employees on shop floors to 100.

As part of Project Prabhat, your Company initiated projects around its manufacturing operations to ensure development of local communities. These focussed on improving health and hygiene, conserving water and enhancing livelihoods. Prabhat''s livelihood programme saw enrollment of over 3,000 candidates across 13 livelihood centers in India.

Your Company''s ''Project Sunlight'' which aims to involve consumers as a part of the USLP, progressed well in 2014. Your Company worked to make sustainability more relevant to the common people by involving children as agents of change. Your Company identified two issues that are important for India to create a brighter future - first, to stop littering and second, to reduce water wastage. Children were the key influencers for both the activations.

Your Company has shared its progress on Unilever Sustainable Living Plan in India which is made available on the website of the Company, www.hul.co.in/sustainable-living-2015/. Your Company has also released the Business Responsibility Report that describes the initiatives undertaken in line with the key principles enunciated in the ''National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of

Business'' framed by the Ministry of Corporate Affairs. The report is made available on your Company''s website, www.hul.co.in, and forms a part of this Annual Report. The Business Responsibility Report shall be kept open for inspection at the Registered Office of the Company. If a Member is interested in obtaining a hard copy of the Business Responsibility Report, they may write to the Investor Service Department at the Registered Office of the Company.

In accordance with the requirements of Section 135 of Companies Act, 2013, your Company has constituted a Corporate Social Responsibility Committee. The composition and terms of reference of the Corporate Social Responsibility Committee is provided in the Corporate Governance Report.

Your Company has also formulated a Corporate Social Responsibility Policy which is available on the website of the Company at www.hul.co.in/investorrelations/ CorporateGovernance/. Annual report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been appended as Annexure to this Report.

15. EMPLOYEE STOCK OPTION PLAN (ESOP)

Details of the shares issued under Employee Stock Option Plan (ESOP), as also the disclosures in compliance with Section 62 of Companies Act, 2013 and Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 and SEBI (Share Based Employee Benefits) Regulations, 2014 and SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 are set out in the Annexure to this Report. No employee has been issued share options during the year, equal to or exceeding 1% of the issued capital of the Company at the time of grant.

Pursuant to the approval of the Members at the Annual General Meeting held on 23rd July, 2012, the Company adopted the ''2012 HUL Performance Share Scheme'' in place of ''2006 HLL Performance Share Scheme''. In accordance with the terms of the Performance Share Plan, employees are eligible for award of conditional rights to receive equity shares of the Company at the face value of Re. 1/- each. These awards will vest only on the achievement of certain performance criteria measured over a period of three years.

Under the said Plan, eligible Managers were given Conditional Performance Grant of shares of Unilever and the Company in the ratio of 67:33, to mirror your Company''s shareholding, where Unilever held 67% shareholding. During the year, 204 employees, including Whole time Directors, were awarded conditional rights to receive 1,58,840 Equity Shares at the face value of Re. 1/- each. It comprises conditional grants made to eligible managers covering performance period from 2014 to 2016 and from 2015 to 2017.

16. BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year, the Board of Directors appointed Ms. Katpana Morparia as an Additional Director with effect from 9th October, 2014, to hold office up to the date of forthcoming Annual General Meeting. Being eligible, Ms. Morparia offered herself to be appointed as the Independent Director of your Company.

As per the provisions of the Companies Act, 2013, Independent Directors are required to be appointed for a term of five consecutive years, but shatt be eligible for reappointment on passing of a special resolution by the Company and shatt not be tiabte to retire by rotation. Att other Directors, except the Managing Director, witt retire at the ensuing Annuat Generat Meeting and, being etigibte, offer themsetves for re-etection. The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149 (6) of the Companies Act, 2013.

The detaits of training and famitiarization programmes and Annuat Board Evatuation process for Directors have been provided under the Corporate Governance Report.

The poticy on Director''s appointment and remuneration inctuding criteria for determining quatifications, positive attributes, independence of Director, and atso remuneration for Key Manageriat Personnet and other emptoyees forms part of Corporate Governance Report of this Annuat Report.

17. MANAGEMENT COMMITTEE

The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overatt superintendence and controt of the Board. The Management Committee is headed by the Chief Executive Officer and has Functionat / Business Heads as its members.

During the year, Mr. Sridhar Ramamurthy, Executive Director, Finance & IT and Chief Financiat Officer was etevated to the position of Senior Vice President, Finance for Gtobat Markets and Mr. P. B. Bataji succeeded him and joined the Management Committee in his capacity as Executive Director, Finance & IT and Chief Financiat Officer with effect from 1st Juty, 2014.

Mr. Hemant Bakshi, Executive Director, Home and Personat Care (HPC) was etevated as CEO of Unitever''s Indonesia business and ceased to be a member of the Management Committee of your Company. Considering the scate of business and requisite focus to further grow the categories in which the businesses operate, it was decided to divide the Home and Personat Care business of the Company into Home Care and Personat Care with separate Executive Directors heading each business. Accordingty, Ms. Priya Nair and Mr. Samir Singh were appointed as members of Management Committee as Executive Director, Home Care and Executive Director, Personat Care, respectivety with effect from 1st October, 2014.

Mr. Manish Tiwary, Executive Director, Sates and Customer Devetopment was etevated as the Managing Director of the Gutf business of Unitever and Mr. Punit Misra, VP, CD Gtobat RTM, TT was appointed as Executive Director, Sates and Customer Devetopment and a member of the Management Committee, in ptace of Mr. Manish Tiwary with effect from 1st November, 2014.

18. AUDITORS

M/s. B S R & Co. LLP were appointed as Statutory Auditors of your Company at the tast Annuat Generat Meeting hetd on 30th June, 2014 for a term of five consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors is required to be ratified by Members at every Annuat General Meeting.

The Report given by the Auditors on the financiat statements of the Company is part of the Annuat Report. There has been no quatification, reservation, adverse remark or disctaimer given by the Auditors in their Report.

M/s N. I. Mehta & Co., Cost Accountants carried out the cost audit for appticabte business during the year. The Board of Directors have appointed M/s R. A. & Co., Cost Accountants for the financiat year 2015-16.

19. OUTLOOK

The gtobat economic ctimate continues to be votatite, uncertain and prone to geo-potiticat risks. The marked stowdown in gtobat markets is expected to continue in 2015. The sharp fatt in growth of emerging markets, notabty China, witt continue to keep commodity prices inctuding oit, which is significantty tower than tast year, votatite. The divergence in devetoped market growths as a resutt of the US recovery is expected to add to the votatitity in the currency markets.

In this gtobat backdrop, India is expected to perform better, aided by improving macroeconomic fundamentats. However, execution of the reform agenda and kick starting the investment cycte witt be key determinants of India''s economic performance. White currentty inftation is benign, upside pressures on inftation from the vagaries of monsoon or sudden changes in the rupee, coutd have a significant bearing on inftation.

FMCG markets are expected to grow. White consumer confidence has increased, this has not yet translated into significant improvement in FMCG market conditions. There are a few green shoots in market growths; however, uncertain global economic environment, inflation and competitive intensity continue to pose challenges. White the near term conditions pose a challenge for the economy, the medium to tong term secular trends based on rising incomes, aspirations, tow consumption levels, are positive and an opportunity for the FMCG sector. Your Company, with its brands, talent and investment in capabilities, is wett placed to benefit disproportionatety from this opportunity

20. APPRECIATIONS AND ACKNOWLEDGMENTS

Your Directors ptace on record their deep appreciation to emptoyees at att tevets for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the emptoyees have enabted the Company to remain as industry leaders.

Your Directors woutd atso tike to acknowtedge the excettent contribution by Unitever to your Company in providing the tatest innovations, technotogicat improvements and marketing inputs across atmost att categories, in which it operates. This has enabted the Company to provide higher tevets of consumer detight through continuous improvement in existing products and introduction of new products.

The Board ptaces on record its appreciation for the support and co-operation your Company has been receiving from its supptiers, redistribution stockists, retaiters, business partners and others associated with the Company as its trading partners. Your Company tooks upon them as partners in its progress and has shared with them the rewards of growth. It witt be the Company''s endeavour to buitd and nurture strong tinks with the trade based on mutuatity of benefits, respect for and co- operation with each other, consistent with consumer interests.

The Directors atso take this opportunity to thank att Investors, Ctients, Vendors, Banks, Government and Regutatory Authorities and Stock Exchanges, for their continued support.

On behatf of the Board Harish Manwani

Mumbai, 8th May, 2015 Chairman

(DIN: 00045160)


Mar 31, 2013

To the Members,

The Company''s Directors are pleased to present the 80th Annual Report of the Company, along with Audited Accounts, for the financial year ended 31st March, 2013.

1. FINANCIAL PERFORMANCE (STANDALONE)

1.1. Results

(Rs. crores)

For the year ended For the year ended 31st March, 2013 31st March, 2012

Revenue from operations, net of excise 25,810.21 22,116.37

Profit before exceptional items and tax 4,349.48 3,350.16

Profit for the year 3,796.67 2,691.40

Dividend (including tax on distributed profits)* (4,655.68) (1,883.90)

Transfer to General Reserve (379.67) (269.14)

Profit & Loss Account balance carried forward 535.28 1,773.96

* During the year, the Board of Directors declared a Special Dividend of Rs. 8.00 per Equity Share, which was paid out of the accumulated Profit & Loss Account balance and exceptional income generated in the first half of the financial year 2012-13.

1.2. Category wise Turnover

(Rs. crores)

For the year ended For the year ended 31st March, 2013 31st March, 2012 Sales Others* Sales Others*

Soaps and Detergents 12,460.96 240.86 10,488.38 147.90

Personal Products 7,309.10 162.56 6,486.45 98.91

Beverages 2,913.67 60.99 2,577.02 40.41

Packaged Foods 1,473.86 31.88 1,341.93 17.53

Others (including Exports, Chemicals, Infant Care Products, 1,048.79 43.99 841.82 55.04 Water, etc.)

Total 25,206.38 540.28 21,735.60 359.79

* Others represent service income from operations, relevant to the respective businesses.

1.3. Summarised Profit and Loss Account

(Rs. crores)

For the year ended For the year ended 31st March, 2013 31st March, 2012

Sale of products less excise duty 25,206.38 21,735.60

Other operational income 603.83 380.77

Total Revenue 25,810.21 22,116.37

Operating Costs (21,806.46) (18,825.03)

Profit Before Depreciation, Interest, Tax (PBDIT) 4,003.75 3,291.34

Depreciation (236.02) (218.25)

Profit Before Interest & Tax (PBIT) 3,767.73 3,073.09

Other Income (net) 581.75 277.07

Profit before exceptional items 4,349.48 3,350.16

Exceptional items 608.40 118.87

Profit Before Tax (PBT) 4,957.88 3,469.03

Taxation (1,161.21) (777.63)

Profit for the year 3,796.67 2,691.40

Basic EPS (Rs.) 17.56 12.46

2. DIVIDEND

Your Directors are pleased to recommend a Final Dividend of Rs. 6.00 per equity share of face value of Re. 1/- each for the year ended 31st March, 2013. The Interim Dividend and Special Dividend of Rs. 4.50 and Rs. 8.00 per equity share, respectively, were paid on 16th November, 2012.

The Final Dividend, subject to approval of Members at the Annual General Meeting on 26th July, 2013, will be paid to the Members whose names appear in the Register of Members, as on the date of book closure, i.e. from Friday, 12th July, 2013 to Friday, 26 th July, 2013 (inclusive of both dates). The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs. 18.50 per equity share and will absorb Rs. 4,655.68 crores, including Dividend Distribution Tax of Rs. 655.69 crores.

3. RESPONSIBILITY STATEMENT

The Directors confirm that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and,

- they have prepared the annual accounts on a going concern basis.

4. CUSTOMER DEVELOPMENT

During the year, your Company ensured that it continues to build on its reputation of a distribution and execution powerhouse with a best in class quality and a vast distribution network of more than 2,500 re-distribution stockists.

Your Company has undertaken some important initiatives during the year to become more customer centric and win in the market place. These initiatives include establishing dedicated call centres for distributors as well as retailers to reach out to the Company. The call centres set up for retailers have helped millions of outlet owners reach out directly to the Company. The calls received from retail outlets provide useful insights and help the Company understand issues and opportunities in the market place better and address them effectively. Your Company has also launched a structured Consumer & Customer License programme, under which Company employees spend time with the customers to understand their needs better. These initiatives have helped in keeping the consumers and customers at the heart of your Company''s business model.

During the year, your Company set up a state-of-the-art Customer Insight and Innovation Centre (CiiC) at Mumbai, the latest among seven such centres across Unilever worldwide. This centre is equipped with the latest technologies to help us work closely with our distributive and modern trade partners to develop sharp and incisive shopper insights and platforms to win with shoppers.

Your Company further strengthened the Perfect Stores programme to drive superior availability and visibility of its products at the market place. The Perfect Stores programme has proven to deliver higher growth and share for the business. Your Company continues to make good progress in covering more stores under the Perfect Stores programme.

Modern Trade, which is the growth channel for the future, continues to be a focus area for your Company. The relentless focus on joint business planning and ensuring best in class on-shelf availability to grow the business together was appreciated by modern trade customers. Your Company was awarded the ''Best Supplier'' by leading modern trade customers for yet another year.

Leveraging the rural distribution network of the Company, the rollout of Telecom Distribution alliance with Tata Teleservices Limited (TTSL) into 13 Telecom Circles nationally for the distribution of telecom products, was completed during the year. The Company is now distributing these products in more than 95,000 telecom outlets through over 720 rural distributors. This distribution alliance has helped the Company further drive rural growth with enhanced earning potential for its channel partners, rural distributors and Shakti entrepreneurs.

5.1. Project Shakti

Your Company continued to drive its rural coverage agenda through Project Shakti, which now has 48,000 Shakti entrepreneurs (Shakti ammas) complemented by over 30,000 Shaktimaans, the male members of Shakti amma''s family. Shakti ammas have proved successful in increasing the Company''s presence in rural areas, building strong local relationships with consumers, thereby encouraging brand loyalty. Shakti ammas are also acting as your Company''s ambassadors to spread awareness of health and hygiene in deep rural India with limited media reach. At the same time, Shaktimaans distribute Company products on bicycles, covering over 135,000 villages in 15 States and serving 3.3 million households.

In order to further strengthen the rural coverage and streamline the supply chain network, your Company has deployed a low cost mobile IT solution for Shakti programme, during the year. This is a mini ERP (Enterprise Resource Planning) package run on an entry level smart phone to help the Shakti entrepreneurs manage their enterprise better. The package is now being used by over 40,000 Shakti entrepreneurs across the country. This solution is available in eight languages and allows the Shakti entrepreneurs to book orders and manage inventory. The application also provides updates on the promotions and offers. The information received through this solution provides business insights which helps recommend categories to be driven in lower population markets. This application will equip your Company to become more organised and scientific in its sales and distribution planning in rural India.

Your Company''s Supply Chain agenda for the year was focused on strengthening five key areas: Customer Service Excellence, Focus on Consumer & Customer Quality, Robust Supply Chain Saving Programme, Turbo-Charging TPM (Total Productivity Management) and Partner to Win through Continuous Improvement, Teaming and Collaboration.

Your Company has made significant progress in its vision to deliver outstanding customer service and enable sustainable growth. The service delivery standards improved steadily with CCFOT (Customer Case Fill on Time) increasing to 93%. The Customer Satisfaction Survey Scores and Best Supplier recognition from customers have been encouraging and suggest that the actions taken by your Company are in the right direction. Modern Trade OSA (On-Shelf Availability) has further improved during the year. Your Company has embedded Sales and Operation Planning Process (S&OP) and Innovation Process Management (IPM) as business enabler and is adding value to the business.

The quality performance measured as Consumer Relevant Quality Standard (CRQS) has shown 50% improvement over last year. Quality continues to be a major focus area, with a thrust on design quality improvement and new quality standards implementation for warehousing and transportation. The consumer care lines have been improved and are being used as channels to engage with consumers.

Your Company has a robust Supply Chain savings programme with continuous focus on end-to-end Supply Chain cost reduction through new technologies, alternative sources of energy, efficient processes and methods. During the year, your Company has delivered 5% saving in Supply Chain cost with sourcing network optimisation, logistic efficiency through improved utilisations, factory production cost reduction through improvement in energy efficiency, technical efficiencies, wastage reduction and yield improvement.

The TPM journey, with strong focus on autonomous maintenance, preventive maintenance, focused improvement and strong circle engagements, has helped the Company improve employee engagement, efficiency and derive competitive advantage. The performance across PQCDSM (Productivity, Quality, Cost, Delivery, Safety, and Morale) is showing sustained improvement.

Your Company has progressed on the long term plan to create capacities through efficiency improvement, speed improvement and high speed technologies to support volume growth while managing costs. Your Company has successfully executed all capacity creation projects on time to ensure smooth delivery during the year.

There has been a 15% improvement in innovation OTIF (On Time in Full) with more than 150 innovation networks being executed during the year touching more than 50% of the product portfolio. The focus on better and faster innovation and capability development has significantly helped the Company launch innovations first time right. Your Company has identified beauty, foods, modern trade and rural as key capabilities to win in the future and the supply chain function has significantly improved capability and skill building in these areas during the year.

The Partner to Win programme with supplier and business partners in procurement function focuses on reducing lead time, decreasing procurement cost, improving reliability and work on new innovation. Your Company leverages benefits of scale and synergy through Unilever''s global buying network.

Your Company continues to derive sustainable benefit from the strong foundation and long tradition of Research & Development (R&D) which differentiates it from many others. New products, processes and benefits flow from work done in various Unilever R&D Centres across the globe as well as in the Research Centres in India. The R&D labs in Mumbai and Bangalore are aligned to Unilever''s global R&D. Many of the projects run out of these centres are of global relevance and have a strong focus on the needs of this region and the overall Developing & Emerging (D&E) world. With the world class facilities and a superior science and technology culture, your Company is able to attract the best talent to provide significant technology differentiation to its products and processes.

Your Company''s R&D programmes are focused on development of breakthrough and proprietary technologies with innovative consumer propositions. The R&D team of over 750 people comprises highly qualified scientists and technologists working in areas of Home & Personal Care, Foods & Beverages and Water Purification. The R&D group also comprises critical functional capability teams in the areas of Regulatory, Clinicals, Patents, Digital R&D, Product & Environment Safety and Open Innovation.

During the year, your Company introduced several innovations in Soaps and Detergents category. In Wheel, a new surfactant was introduced to enhance superior performance and quality. Surf Excel Blue was re-launched with significantly improved efficacy. Household Care launched Domex toilet cleaner in a child safe pouch form to make hygiene more affordable. New water saving rinse aids ''Magic'' and ''Comfort One Rinse'' were introduced in a test market.

In Personal Care category, particularly Skin Care, the key deliveries during the year were PPARs (Peroxisome Proliferation- Activated Receptor) and a new modified sunscreen system. Both of these products were launched as world''s first skin and spot lightening cream sensory, with SPF20 under Pond''s White Beauty. The PPARs, along with next-generation instant optics, were also launched as a part of the new Fair & Lovely Advanced Multivitamin formula.

In Hair Care category, Clinic Plus was re-launched with improved formulation that provides enhanced wet and dry conditioning and a significantly superior hair fall reduction benefit. A colour rescue variant in Dove, specially formulated for care of coloured hair was introduced. TRESemme, an international salon brand, with a formulation tailored for Indian hair and endorsed by salon professionals, was launched for the first time in India. The entire range of Sunsilk was re-launched with enhanced benefits and premium packaging. At the end of the year, premium hair oil under Dove, comprising a special, light and non-sticky nourishing formula with precious oils and real flowers, was launched.

In Oral Care category, Pepsodent Expert Protection was launched in the premium segment with a new regime based claim, ''action of toothpaste, mouthwash and floss in one tube''. Closeup was re-launched with a new anti-malodour agent and new claims, such as 3X more fresh breath for 12 hours.

The year witnessed several new R&D innovations in Beverages category. Brooke Bond Taaza was re-launched with new proposition, packaging and a superior product delivery aimed at enhancing economy of use for consumer. Lipton Iced tea powder mixes were revamped with new product and packaging. Taj Mahal leaf tea range was extended to new geographies with location specific blends.

The Foods R&D team has continued to focus on delivering winning formulations and product superiority. A new variant called ''Sweet & Spicy'' was launched under Kissan ketchups, which is a winning formulation when compared in blind with other products in the market by consumers. In the Jams portfolio of Kissan, a new pack at an affordable price of Rs. 5/- was introduced to drive penetration in the category. In Frozen Desserts category, a new variant of Cornetto, ''Pistachio'' was also developed and launched. Premium single origin, freeze dried coffee range under BRU was expanded with the launch of a new unique variant, Guatemala. R&D along with supply chain and procurement teams, also focused on developing innovative end-to-end solutions to proactively manage commodity cost pressures.

In Water business, advanced Pureit with significantly enhanced design was launched. A long life battery kit was also launched for Pureit during the year. The year also witnessed the launch of a reverse osmosis based water purifier, Pureit Marvella UV.

R&D has further contributed to the Company''s sustainability agenda by enabling significant reduction in packaging material consumption through several material efficiency initiatives. Your Company''s R&D is also working on novel technologies to help save substantial amount of water.

With strong scientific expertise and the potential to deliver high value technologies, India continues to occupy a premier position in Unilever R&D. Your Company is well placed to meet the challenges emanating from the increased competition intensity and the opportunities to drive faster growth on the back of strong support from R&D as well as brand development capabilities.

Your Company had entered into a Technical Collaboration Agreement (TCA) and a Trade Mark License Agreement (TMLA) with Unilever. The TCA provided for payment of 1% royalty on net sales of specific products, manufactured with technical inputs developed by Unilever. The TMLA provided for the payment of trademark royalty at the rate of 1% of net sales on specific brands, where Unilever owns the trade mark in India. Given that the pace of innovations and the scope of services have expanded over the years and that Unilever''s global resources are providing greater expertise, superior innovations and scale advantage for all Unilever entities, your Company is enjoying the benefits of an increasing stream of new products and innovations, backed by technology and know-how from Unilever. Your Company is also receiving support and guidance to drive functional excellence in marketing, supply management, media buying, IT, etc., which helps your Company to remain competitive and further step-up its overall business performance.

Unilever is committed to ensuring that the support in terms of new products, innovations, technologies and services is commensurate with the needs of your Company and enables it to win in the market place. Given the need for increased levels of service and the consequent additional costs, your Company has entered into a new agreement with Unilever in order to ensure a fair recovery of costs by Unilever. In terms of the new agreement, the existing royalty cost of c. 1.4% of turnover will increase, in a phased manner, to a royalty cost of c. 3.15% of turnover no later than the financial year ending 31st March 2018, i.e. a total estimated increase of 1.75% of turnover.

The details of expenditure on scientific research and development at the Company''s in-house R&D facilities eligible for a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 for the year ended 31st March, 2013, are as follows:

- Capital Expenditure : 1.67 crores

- Revenue Expenditure : 35.66 crores

8. ENVIRONMENT, SAFETY, HEALTH AND ENERGY CONSERVATION

Your Company continues to focus on the vision of being an ''Injury Free'' and ''Zero Environment Incident'' organisation. A behavioural safety programme was deployed across the Company as the core of our safety journey. This has been supplemented by a consistent focus on prevention of hand-in-machine and slip-trip- fall injuries at workplace and multiple initiatives for improving road safety. In 2012, the safety incident rate measured as total recordable frequency rate (TRFR) decreased by 61% over 2008 baseline.

The behavioural safety model has now been customised as BeSafE and will be launched company-wide in latter half of the year. Your Company has taken safety programmes to the families and homes of employees, through ''Beyond Work Safety'' campaigns, which have been very well received. Your Company continues to benchmark itself with the units known for best safety performance in the country and across Unilever. Your Company has received many awards from the Government and independent organisations for its safety practices.

Your Company continues to make excellent contribution to the Unilever Sustainable Living Plan, where Unilever''s vision is to double the size of its business while reducing the overall impact on environment and improving its positive social impact. Your Company has been taking steps to reduce electricity and water consumption in its manufacturing processes as well as control waste generation. The key actions in this direction include:

- Use of biomass fired boilers and hot air generators, which reduce consumption of fossil fuels like coal and furnace oil.

- Use of plant waste / by-products like spent tea leaves and coffee beans as fuel.

- Shift to cleaner sources of energy like natural gas and other renewable sources, wherever available.

- Adoption of energy efficient technology, like LED lights, high efficiency motors, electronic drives / inverters, screw compressors.

Your Company has reduced CO2 emissions (per tonne of production) in India by 22% compared to 2008 baseline. Use of renewable energy has increased to 15% of the total consumption. Your Company has reduced water usage in manufacturing operations by 29% compared to 2008 baseline. Rainwater harvesting has been implemented in 22 units to recharge up to 3,32,000 KL /annum ground water. In addition, rainwater recycling being done at seven sites of your Company has reduced up to 51,000 KL / annum of freshwater usage. Total 31 sites became ''zero-discharge site'' i.e. 79% of our sites do not discharge any liquid effluent.

In all Company units, recyclable waste e.g. packaging material, empty raw material containers, spent lubricants, project scrap, etc. are systematically segregated and tracked for effective recycling. More than 98% of total waste is recycled in environment friendly ways. Total waste per tonne from the manufacturing sites has reduced by 77% against the 2008 baseline.

The information required under Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 with respect to energy conservation is appended hereto and forms part of this Report.

9. HUMAN RESOURCES

Your Company''s Human Resource agenda for the year was focused on strengthening four key areas: building a robust and diverse talent pipeline, enhancing individual and organisational capabilities for future readiness, driving greater employee engagement and strengthening employee relations further through progressive people practices at the shopfloor.

Your Company''s employer brand has been built with high levels of rigour and thoroughness through a large number of student interactions and qualitative and quantitative analysis of the responses. Your Company is widely acclaimed for its people development practices and has reinforced its position in this area. This, coupled with the ability to attract best talent, gives a competitive edge to the organisation. Your Company, for the fourth consecutive year, retained its position as the Dream Employer with students of top business schools. Your Company was voted to this position from a mix of FMCG, Consulting, Financial Services organisations, etc. Your Company has also been voted as the No. 1 Employer for Mid Career recruits in a survey conducted amongst active job candidates in the FMCG sector.

Your Company has a vision to improve its Gender Balance and the roadmap involves a four pronged approach:

- Increasing the number of female talent through proactive market mapping.

- Staying connected with our stakeholders through digital recruitment campaigns.

- Creating a culture of inclusion.

- Leveraging visible leadership role models.

The enablers for these could be as varied as flexi time to agile working to customised solutions for women who come back from maternity breaks. ''Career by Choice'', a unique re-hire programme, provides a platform for women looking for real opportunities to work flexibly and part time for live business projects. With these enablers and focused plans, your Company has witnessed 8% shift in the Gender Balance Ratio over the last two years.

The initial part of the journey for Talent and Organisation Assessment was undertaken successfully. Your Company has now institutionalised the next phase of the Talent and Organisation Assessment charters, which will take-off during 2013 and chart out the best practices for each stream. The aim is to meet the requirements of the current talent pool and to enhance the Company''s future readiness.

In addition to building core capabilities in marketing, sales and distribution, your Company is investing in the areas of beauty, foods, digital, e-commerce, frontline capabilities and crafting brands for life, to win in the future. Your Company has developed comprehensive plans in each of these key areas that are customised to suit the present and future business needs. In addition to building capabilities, your Company has also identified two key behaviours, Bias for Action and Consumer and Customer Centricity that will supplement the capabilities to achieve business goals. In order to drive Bias for Action, your Company has developed Project Sunset which is an online platform for speedy resolutions of issues within the Company and has a satisfaction score of over 88% from internal employees. To drive Consumer and Customer Centricity, your Company has undertaken a number of activities to regularly communicate with and reach out to its consumers and has a well defined programme to capture insights from its consumers.

Your Company undertook intensive training programmes through a combination of face-to-face and virtual learning approaches. Over 41,600 e-learning registrations took place indicating that the spirit of ''learn where you are'' is imbibed in employees of the Company. Your Company is also investing in building capabilities in digital and social media to find new platforms for brands to engage more effectively with Indian consumers.

The Global People Survey is a part of the Unilever Employee Insight Programme, which aims to give a voice to the Company''s people and provides a vehicle to make their views heard. The Survey also provides regular, meaningful and actionable feedback to the leaders in the organisation. It has questions spread across several dimensions in the areas such as Strategic Leadership, Immediate Boss Effectiveness and Engagement. Feedback from this survey forms the basis of holistic engagement plans, which are reviewed regularly. As per Global People Pulse Survey 2012, India features in the top 25 countries across Unilever. An extremely favourable 91% of employees expressed pride to work for your Company. This is in recognition of your Company''s Performance Management and Reward processes, which are geared towards building a performance and execution focused culture.

Your Company has been investing in progressive employee relations practices to ensure that it invests in capability at the grass root level. ''Sparkle'' is a centrally hosted intranet based tool that supports skill mapping, skill assessment, performance assessment, gap analysis and enables training plan identification which is customised to each workman basis priority areas. Sparkle has been a pioneering tool in the area of workmen capability development that promotes higher transparency and focused training intervention linked to individual and business needs. The tool has delivered results for over two years now and your Company has successfully completed appraisals, thereby identifying top performers and completing skill gap analysis of over 10,000 workmen online. ''Sparkle'' has been recognised as a best practice and adopted for a global roll-out. Business Linked Engagement and TPM Edge programmes continued with full focus and rigour during the year and delivered significant improvement in factory operations.

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent excluding the statement containing the particulars to be provided under Section 217(2A) of the Act. Any Member interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy thereof.

10. INFORMATION TECHNOLOGY (IT)

Your Company continues to invest in IT, leveraging it as a source of competitive advantage. The enterprise wide SAP platform, the backbone of IT, encompasses all core business processes in your Company and also provides a comprehensive data warehouse with analytics capability that help in better and speedier decisions. SAP is used to collaborate with the suppliers and customers. Supply Chain optimisation, enabled by the IT capability, remains a source of significant value. Your Company continuously invests in upgrading the SAP platform to leverage the latest functionality and technology enhancements to deliver business efficiencies.

Your Company has institutionalised an extensive IT capability for Customer Development function to support front-end execution. All distributors run a standard distributor management system. The salesmen of the distributors use handheld devices for accepting retail orders, which enable faster tracking and real time sales information. Your Company has used analytics and the existing IT infrastructure to build a capability for an intelligent sales call. This enables your Company to customise sales call for each outlet on a scientific basis, thus helping to significantly improve the effectiveness and efficiency of the sales process.

Your Company is leveraging GIS (Geographic Information System) based mapping technology to aid planning for coverage expansion drives in urban and rural markets. The capability allows field personnel to identify pockets for coverage and also evaluate their attractiveness to help derive coverage plans.

Your Company is further enhancing IT capabilities built for rural expansion to equip Shakti ammas with low cost mobile technology to help them work in a more controlled and efficient manner. This technology now allows your Company to standardise selling processes across the Shakti network and also track outlet sales information which can be leveraged through analytics to further aid the selling process.

Your Company continues to invest in IT infrastructure to support business applications and has made use of India''s expanded telecom footprint to provide high bandwidth terrestrial links to all operating units. Your Company also uses software as a service to provide agile and cost effective IT capabilities in select areas.

As the IT systems and related processes get embedded into the ways of working of the organisation, there is a continuous focus on IT security and reliable disaster recovery management processes to ensure all critical systems are always available. These are periodically reviewed, upgraded and tested for efficacy, adequacy, security and reliability.

11. FINANCE AND ACCOUNTS

Your Company continued to focus on cash generation. The focus on managing optimal levels of inventory, sound business performance, operating efficiencies and cost savings across the organisation helped generate healthy cash flows. Your Company managed investments prudently by deploying cash surplus in a balanced portfolio defined to offer primacy to safety and liquidity of the investments. Capital Expenditure during the year was at Rs. 409.34 crores (Rs. 310.01 crores in the previous year).

The Finance function of your Company has initiated a multi-fold transformation programme, aligned to the ambition to be the Best Finance Team in the Industry. During the year, multiple finance processes across accounting and reporting, controls and information management were reviewed and work streams were defined to implement global best practices. Significant broad-based progress has been made on this agenda during the year. Project ''Parivartan'' delivered a further step up in the efficiency of the Purchase to Pay process along with a corresponding improvement in vendor satisfaction. This is now being driven to the next level of simplifying and centralising end-to-end invoice processing. Project ''My Business Information'' took an ambitious goal of revamping your Company''s information management function. Significant steps are underway towards further exploring this space to get increased information insights to drive growth, margins and cash.

In the initial phase of the project ''Effective Financial Controls and Reporting'' (EFCR), the finance control environment has been streamlined and strengthened with 50% of key controls being automated by further leveraging SAP. Similarly, significant process and technology interventions were taken up to achieve over 25% reduction in time consumed on annual closing processes. The EFCR Project aims to simplify, standardise and automate processes whilst driving value beyond transaction processing. Your Company also focused on simplifying banking processes by driving a reduction in the number of bank accounts operated across the Company. This has helped to streamline banking operations, strengthen controls and optimise cash utilisation. All these initiatives will lead to a transformation of the finance function to world class standards, thereby ensuring operational excellence.

Your Company has not accepted any fixed deposits during the year and there was no outstanding towards unclaimed deposit payable to depositors as on 31st March, 2013. In terms of the provisions of Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, Rs. 3.13 crores of unpaid / unclaimed dividends and interest / redemption of debentures were transferred during the year to the Investor Education and Protection Fund.

Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for the last four years and for the year ended 31st March, 2013, are given below:

Period pndpd Particulars 2009-10 2010-11 2011-12 2012-13 31st March, 2009

Return on Net Worth (%) 103.6* 88.2 74.0 77.7 94.7

Return on Capital Employed (%) 107.5* 103.8 87.5 96.8 109.1

Basic EPS (after exceptional items) (Rs.) 11.46** 10.10 10.58 12.46 17.56

* Annualised numbers for proportionate period.

** For fifteen month period.

Segment-wise Results

Your Company has identified five business segments, in line with the Accounting Standard on Segment Reporting (AS-17), which comprise: (i) Soaps and Detergents, (ii) Personal Products, (iii) Beverages, (iv) Packaged Foods, including Culinary, Branded Staples and Frozen Dessert and (v) Others, including Exports, Chemicals, Water Business, Infant Care Products, etc. The audited financial results of these segments are provided as a part of financial statements.

11.1. Risk and Internal Adequacy

Your Company has an elaborate Risk Management procedure, which is based on three pillars: Business Risk Assessment, Operational Controls Assessment and Policy Compliance processes. Some of the risks relate to competitive intensity and cost volatility. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed with both Management Committee and Audit Committee.

The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key areas of business. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company''s internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company''s risk management policies and systems.

Your Company manages cash and cash flow processes assiduously involving all parts of the business. There was a net cash surplus of Rs. 1,707.89 crores, as on 31st March, 2013. The Company''s low debt equity ratio provides ample scope for gearing the Balance Sheet, should that need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company''s imports and exports. The Company accounts for mark-to-market gains or losses every quarter end, in line with the requirements of AS-11.

12. LEGAL, COMPLIANCE AND BRAND PROTECTION

Your Company continued to focus on the key areas and projects within the legal and compliance functions, which include transiting to a workflow based software tool ''Self-Compli''. This tool enables compliances to be made and tracked by factories and offices of your Company across the country. In the area of Brand Protection, your Company has taken significant actions against counterfeits, fakes and other forms of unfair competition, during the year, under the Company''s programme of Combating Unfair Competition.

13. MERGERS, ACQUISITIONS, JOINT VENTURES AND DISPOSALS

Your Company entered into a Share Purchase Agreement with the promoters of Aquagel Chemicals Private Limited (ACPL) for acquisition of additional 74% of equity share capital of ACPL. ACPL is engaged in the business of manufacturing soaps and detergents. Prior to acquisition, it was a third party manufacturing unit. Your Company earlier held 26% of ACPL''s equity share capital. Consequent to the acquisition of remaining 74% of the equity share capital, ACPL became a wholly owned subsidiary of the Company with effect from 1st April, 2013.

14. SUSTAINABLE LIVING

Sustainability is at the core of your Company''s way of doing business. It guides your Company on the path to achieve long term success in a world where the battle for resources can only escalate. In this direction, Unilever globally has set out the ''Unilever Sustainable Living Plan'' (USLP), which embeds sustainability in its business model. The USLP sets out to decouple growth from environmental impact, while at the same time, increase positive social impact.

USLP has three big goals to achieve by 2020:

- Help more than 1 billion people improve their health and well-being.

- Halve the environmental footprint of our products.

- Source 100% of our agricultural raw materials sustainably and enhance the livelihoods of people across our value chain.

Supporting these goals are seven commitments underpinned by targets spanning your Company''s social, environmental and economic performance across the value chain. In the second year of the Plan, your Company made steady progress to achieve these goals.

In the area of health and hygiene, your Company reached over 17 million people through Lifebuoy Handwashing programmes in 2012. Through continuous and focused efforts under the Handwashing initiative, your Company has reached 47 million people since 2010. Your Company''s Pureit water purifier continued to fight the menace of diarrhoeal diseases. More than 45 million people gained access to safe drinking water from Pureit globally by the end of 2012.

Your Company made good progress under its Nutrition Enhancement Programme to lower the levels of salt, saturated fat, trans fat and sugar in its Foods and Beverages portfolio. By the end of 2012, 66% of Foods portfolio (by volume) was compliant with the 5g per day salt target. Your Company''s portfolio is virtually free from trans fats originating from partially hydrogenated vegetable oil. For example, the Frozen Desserts portfolio is fully compliant and does not use any raw materials containing partially hydrogenated oil. More than 60% of the products in Frozen Desserts for children contain 110 kilocalories or fewer per portion, meeting the interim 2012 target.

In the area of environment impact, your Company worked to further reduce its environmental impact on four priority areas across the value chain - greenhouse gases, water, waste and sourcing. CO2 emissions per tonne of production reduced by 22% compared to the 2008 baseline. This was achieved through several environment friendly initiatives in your Company''s manufacturing operations such as usage of biomass boilers, thermic fluid heaters and hot air generators at factory sites. These projects helped increase the share of renewable energy to 19% by 2012.

Water usage in your Company''s manufacturing operations reduced by 29% compared to the 2008 baseline. Your Company has launched innovations that help consumers use less water in laundry process through products like Magic water saver and Comfort One Rinse fabric conditioner. Magic saves upto three buckets of water per wash while Comfort One Rinse saves two buckets of water per wash.

In the area of waste management, your Company continued to focus on reducing, reusing and recycling waste. Reduction in total waste per tonne from your Company''s manufacturing sites was 77% against 2008 baseline. A total of 31 factories of your Company became 100% zero non-hazardous waste to landfill.

Under the USLP, your Company has committed to source 100% of its agricultural raw materials sustainably. By 2012, your Company sourced 70% of its agricultural raw materials sustainably. All of the palm oil was from sustainable sources and 100% of palm oil volumes of India were covered by ''Green Palm'' certificates by end of 2012. During the year, over 60% of tomatoes used in Kissan Ketchup in India were from sustainable sources. Your Company aims to source 100% of tomatoes from sustainable sources by 2015. Your Company entered into a public-private partnership with the Maharashtra Government for sustainable sourcing of tomatoes locally. For this project, the Government of Maharashtra registered 618 farmers who grow tomatoes over 1,208 acres.

Enhancing livelihoods of hundreds of thousands of people by 2020 is another goal the USLP aims to achieve. Your Company has a wide range of initiatives from sourcing to distribution focused on improving livelihoods of small-scale entrepreneurs. Project Shakti is your Company''s flagship rural distribution initiative that focuses on enhancing livelihoods in small villages. Project Shakti has 48,000 Shakti entrepreneurs (called Shakti ammas) in 15 States. The details of Project Shakti is provided at para 5.1 of this report.

As evident from the above initiatives, your Company''s progress to deliver on USLP has been consistent. However, USLP is ambitious and your Company has much more to do. Your Company continues to strive to deliver the stretching goals.

In April 2013, your Company released Unilever Sustainable Living Plan India Progress Report. This report shares the results of your Company''s journey so far and chronicles the steps taken to deliver growth that is competitive, profitable and sustainable. You can view this report on our website www.hul.co.in.

The Securities and Exchange Board of India (SEBI) vide its circular dated 13th August, 2012, has mandated the top 100 listed companies, as on 31st March, 2012, to submit a Business Responsibility Report as part of the Annual Report of the Company. The Business Responsibility Report describes the initiatives taken by the Company in line with the key principles enunciated in the ''National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business'' framed by the Ministry of Corporate Affairs (MCA). In line with Green Initiative, the Business Responsibility Report of the Company for the year 2012-13 is made available on the website of the Company www.hul.co.in and forms part of this Annual Report. The Business Responsibility Report shall be kept open for inspection at the Registered Office of the Company. The Company will also make available a printed copy of the Business Responsibility Report upon request by any Member of the Company interested in obtaining the same. A Member interested in obtaining the hard copy may write to the Investor Service Department at the Registered Office of the Company.

15. EMPLOYEE STOCK OPTION PLAN (ESOP)

Details of the shares issued under Employee Stock Option Plan (ESOP), as also the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure to this Report. No employee has been issued share options, during the year, equal to or exceeding 1% of the issued capital of the Company at the time of grant.

Pursuant to the approval of the Members at the Annual General Meeting held on 23rd July, 2012, the Company adopted the ''2012 HUL Performance Share Scheme'' in place of the existing ''2006 HLL Performance Share Scheme''. The Scheme has been registered with the Income Tax authorities, in compliance with the relevant provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. In accordance with the terms of the Performance Share Plan, employees are eligible for award of conditional rights to receive equity shares of the Company at the face value of Re. 1/- each. These awards will vest only on the achievement of certain performance criteria measured over a period of 3 years. During the year, 204 employees, including Wholetime Directors, were awarded conditional rights to receive 4,19,408 Equity Shares at the face value of Re. 1/- each. It comprises conditional grants made to eligible managers covering performance period from 2012 to 2014 and from 2013 to 2015.

16. CORPORATE GOVERNANCE

Your Company is renowned for exemplary governance standards since inception and continues to lay a strong emphasis on transparency, accountability and integrity. In 2011, your Company received the National Award for Excellence in Corporate Governance instituted by the Institute of Company Secretaries of India, in recognition of its Corporate Governance practices. In 2012, Investor Relations Global Rankings (IRGR) ranked your Company amongst top five companies across the globe for Best Corporate Governance. In 2013, at the Asian Centre for Corporate Governance and Sustainability Awards, your Company won the award for Best Audit Committee.

A separate report on Corporate Governance is provided at page no. 50 of this Annual Report, together with a Certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange(s). A Certificate of the CEO and CFO of the Company in terms of sub-clause (v) of Clause 49 of Listing Agreement, inter alia, confirming the correctness of the financial statements, adequacy of the internal control measures and reporting of matters to the Audit Committee is also annexed.

The Ministry of Corporate Affairs, Government of India, introduced the Corporate Governance Voluntary Guidelines, 2009. These guidelines have been issued to provide Corporate India a framework to govern themselves voluntarily as per the highest standards of ethical and responsible conduct of business. The recommendation of the Voluntary Guidelines pertaining to separation of offices of the Chairman and the CEO, constitution of Audit Committee and Nomination and Remuneration Committee, Risk Management framework, are already practised by your Company. Your Company has been in substantial compliance of these guidelines.

During the year, Secretarial Audit and Secretarial Standards Audit were carried out. The detailed reports on the same are given at page nos. 66 to 67 of this Annual Report.

17. OUTLOOK

Global economic activity remains subdued amidst signs of diverging growth paths across major economies. While near term risks to global financial stability are retreating, the global economic climate continues to be volatile and uncertain.

For India, economic activity is expected to show a modest improvement over last year, with a pick-up likely only in the second half of the year. Conditional upon a normal monsoon, agricultural growth could return to trend levels while the outlook for industrial activity remains subdued. Accordingly, the RBI projects a baseline GDP growth for 2013-14 at 5.7%. Upside pressures on inflation, both at wholesale and retail levels, remain high stemming from elevated food inflation, ongoing administered fuel price revisions and volatility in exchange rates.

FMCG markets are expected to grow; however, uncertain global economic environment, inflation and competitive intensity continue to pose challenges. While the near term conditions pose a challenge for the economy, the medium to longer term secular trends based on rising incomes, aspirations, low consumption levels, etc. are positive and an opportunity for the FMCG sector in general and for your Company in particular.

17.1. Cautionary Statement

Statements in this Report, particularly those which relate to Management Discussion and Analysis, describing the Company''s objectives, projections, estimates and expectations, may constitute ''forward looking statements'' within the meaning of applicable laws and regulations and actual results might differ materially from those either expressed or implied.

18. SUBSIDIARY COMPANIES

As a part of the initiatives in the area of Corporate Social Responsibility, your Company had promoted a Section 25 Company ''Hindustan Unilever Vitality Foundation'' now known as ''Hindustan Unilever Foundation'' (HUF) to work in the areas of social, economic and environment development. During the year, your Company acquired additional equity share capital of HUF to make it a subsidiary of the Company.

Pursuant to the Share Purchase Agreement entered into with the promoters of Aquagel Chemicals Private Limited (ACPL), as detailed in Para 13, ACPL has become a wholly owned subsidiary of the Company with effect from 1st April, 2013.

A statement pursuant to Section 212 of the Companies Act, 1956, relating to Subsidiary Companies, is attached to the Accounts. In terms of General Exemption, under Section 212(8) of the Companies Act, 1956, granted by Ministry of Corporate Affairs vide its circular no. 02/2011 dated 8th February, 2011, and in compliance with the conditions enlisted therein, the Audited Statement of Accounts, Auditors'' Reports thereon and the Reports of the Board of Directors of the Company''s subsidiaries for the financial year ended 31st March, 2013, have not been annexed. The Annual Accounts and related documents of the Subsidiary Companies shall be kept open for inspection at the Registered Office of the Company. The Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. However, as directed by the said circular, the financial data of the subsidiaries have been furnished under ''Subsidiary Companies Particulars'' forming part of this Annual Report (refer page no. 150). Further, pursuant to Accounting Standard (AS-21) issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company in this Annual Report include the financial information of its subsidiaries.

Dr. Sanjiv Misra was appointed as an Additional Director on the Board of the Company with effect from 8th April, 2013, in accordance with Section 260 and Article 111 of Articles of Association of the Company. Pursuant to Section 257 of the Companies Act, 1956, notices have been received from Members, together with necessary deposits, proposing the appointment of Dr. Sanjiv Misra as a Non-Executive Independent Director on the Board of the Company.

Dr. R. A. Mashelkar has attained the age of seventy years and in accordance with the Company policy, will be retiring at the conclusion of the ensuing Annual General Meeting by not offering himself for re-appointment as a Director. Dr. Mashelkar was appointed as an Independent Director of the Company in April 2008 and has served as a member of the Audit Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee of the Company. The Board places on record its deep appreciation for the distinguished service rendered by Dr. Mashelkar during his tenure as a Director of the Company.

In accordance with the Articles of Association of the Company, all other Directors, except for the Managing Director, will retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-election.

20. MANAGEMENT COMMITTEE

The day-to-day management of the Company is vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by Mr. Nitin Paranjpe, as the Chief Executive Officer, and has Functional / Business Heads as its members.

During the year, Ms. Leena Nair, Executive Director, Human Resources was elevated to the position of SVP Leadership and Organisation Development, Unilever PLC. Mr. B. P. Biddappa joined the Management Committee of the Company as Executive Director, Human Resources in place of Ms. Leena Nair. Mr. B. P. Biddappa joined the Company in 1992 and has worked in a variety of roles within Unilever. Before joining the Management Committee of the Company, Mr. Biddappa was the Vice President, Human Resources - Supply Chain, Asia, Africa and Russia.

M/s. Lovelock & Lewes, Statutory Auditors of the Company retire and offer themselves for re-appointment as the Statutory Auditors of the Company, pursuant to Section 224 of the Companies Act, 1956.

22. APPRECIATIONS AND ACKNOWLEDGEMENTS

Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain as industry leaders.

Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing the latest innovations, technological improvements and marketing inputs across almost all categories, in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products and introduction of new products.

The Board places on record its appreciation for the support and co-operation your Company has been receiving from its suppliers, redistribution stockists, retailers, business partners and others associated with the Company as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be the Company''s endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and co-operation with each other, consistent with consumer interests.

The Directors also take this opportunity to thank all Investors, Clients, Vendors, Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued support.

On behalf of the Board

Harish Manwani

Mumbai, 29th April, 2013 Chairman


Mar 31, 2012

The Company's Directors are pleased to present the 79th Annual Report of the Company, along with Audited Accounts for the financial year ended 31st March, 2012.

1. FINANCIAL PERFORMANCE (STANDALONE)

1.1 Results (see para 1.4)

Rs. Crores

for the year ended for the year ended 31st March, 2012 31st March, 2011

Revenue from operations, net of excise 22,116.37 19,735.51

Profit before exceptional items and tax 3,350.16 2,730.20

Profit for the year 2,691.40 2,305.99

Dividend (including tax on distributed profits) (1,883.90) (1,641.96)

Transfer to General Reserve (269.14) (230.60)

Profit & Loss Account balance carried forward 1,773.96 1,235.60

1.2 Category wise Turnover (see para 1.4)

Rs. Crores

for the year ended for the year ended 31st March, 2012 31st March, 2011 Sales Others* Sales Others*

Soaps and Detergents 10,488.38 147.90 8,683.88 117.18

Personal Products 6,746.95 98.91 5,750.68 99.71

Beverages 2,577.02 40.41 2,309.23 37.27

Packaged Foods 1,341.93 17.53 1,162.28 16.15

Others (including Exports, Chemicals, Water etc.) 581.32 55.04 1,474.94 64.37

Total 21,735.60 359.79 19,381.01 334.68

* Others represent service income from operations, relevant to the respective businesses.

1.3 Summarised Profit and Loss Account (see para 1.4)

Rs. Crores

For the year ended For the year ended 31st March, 2012 31st March, 2011

Sale of products less excise duty 21,735.60 19,381.01

Other operational income 380.77 354.50

Total Revenue 22,116.37 19,735.51

Operating Costs (18,825.03) (17,057.12)

PBDIT 3,291.34 2,678.39

Depreciation (218.25) (220.83)

PBIT 3,073.09 2,457.56

Other Income (net) 277.07 272.64

Profit before exceptional item 3,350.16 2,730.20

Exceptional Item 118.87 206.83

PBT 3,469.03 2,937.03

Taxation (777.63) (631.04)

Profit for the year 2,691.40 2,305.99

Basic EPS (Rs.) 12.46 10.58

1.4 Demerger of FMCG Exports Business

In order to fully exploit the opportunity in exports market and to provide necessary focus, flexibility and speed to the business, the Board of Directors had approved in-principle a Scheme of Arrangement for transfer of the FMCG Exports Business Division (demerged business undertaking) of the Company into its wholly owned subsidiary, Unilever India Exports Limited (UIEL'), on 9th May, 2011 which subsequently was approved by the shareholders on 28th July, 2011. The Hon'ble High Court of Bombay sanctioned the said Scheme with the appointed date of 1st April, 2011. Accordingly, the financial results of the demerged business undertaking do not form part of the audited results of the Company for the year ended 31st March, 2012. However, the audited results of the Company for the year ended 31st March, 2011 included the results of the said demerged business undertaking and hence, to that extent, previous year figures are not comparable with the current year figures. The results of the Company excluding the results of the demerged business undertaking for both the years are given below:

Rs. Crores

for the for the year ended year ended 31st March, 31st March, 2012 2011

Revenue from operations, net of excise 22,116.37 18,796.24 Profit before exceptional items and tax 3,350.16 2,654.48 Profit for the year 2,691.40 2,246.19

2. DIVIDEND

Your Directors are pleased to recommend final dividend of Rs. 4.00 per equity share of face value of Re.1/- each for the year ended 31st March, 2012. The interim dividend of Rs. 3.50 per equity share was paid on 22nd November, 2011.

The final dividend, subject to approval of shareholders at the Annual General Meeting on 23rd July, 2012, will be paid to the shareholders whose names appear in the Register of Members as on the date of book closure i.e. from Friday, 6th July, 2012 to Friday, 20th July, 2012 (inclusive of both dates).

The total dividend for the financial year including the proposed final dividend amounts to Rs. 7.50 per equity share and will absorb Rs. 1,883.90 Crores including Dividend Distribution Tax of Rs. 262.96 Crores.

3. CHANGE Of THE REGISTERED Office

In January 2010, your Company inaugurated the new Corporate Office named 'Campus' at Andheri, Mumbai. The Board of Directors at their meeting held on 31st October, 2011, approved the change of Registered Office of the Company to Unilever House, B. D. Sawant Marg, Chakala, Andheri East, Mumbai 400 099 from the earlier office at 165/166 Backbay Reclamation, with effect from 1st January, 2012.

4. RESPONSIBILITY STATEMENT The Directors confirm that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

- they have prepared the annual accounts on a going concern basis.

5. CUSTOMER MANAGEMENT

In 2011-12, your Company has built on the initiatives of the previous years and has further strengthened its reputation as an execution and distribution powerhouse. One of the key thrusts during the year was coverage expansion in the rural markets. The Shakti network has been leveraged to enroll 30,000 Shaktimaan who distribute in 100,000 new villages. The Company has added a million stores over the last two years to its coverage, thus doubling its direct coverage and tripling its rural coverage. Your Company has now built a clear distribution advantage with a direct reach of more than 2 million outlets.

The Perfect Store programme aimed at improving availability and visibility of Company's products at the point of purchase continued making good progress with over a million retail outlets being enrolled under this programme across urban and rural India. With a single minded focus on the Perfect Store programme, your Company converted 500,000 enrolled outlets into Perfect Stores during the year. It is now established that stores which are consistently Perfect grew sales well ahead of average retail growth and had higher market share growth for your Company's overall portfolio compared to overall share growth.

Your Company believes that the end consumer can be better served if the capabilities of the front-end resources on the ground get enhanced. With this objective in mind, work on a project to build a Human Resource Information System (HRIS) for 20,000 plus third party associates, who work in the market, was completed. This project is in the direction of improving the systems and processes and the capabilities of our associates and reaffirms your Company's commitment towards its customers and consumers.

The year also saw greater focus on customers to drive growth and ensure seamless working relationship with the partners. cross functional 'Customer Care' teams were deployed for the Modern Trade customers to drive higher levels of customer service and engagement, which resulted in overall customer delight. This initiative has given very good results and your Company was awarded the best supplier by almost all leading Modern Trade customers in this year. Your Company also developed Best-in-Class' sustainability initiatives with Wal-Mart and Metro that helped bring alive the Unilever Sustainable Living Plan (USLP). The learning's of Modern Trade were extended to General Trade and a Joint Business Planning process with top customer was institutionalized under the umbrella of Unistar', a comprehensive customer reward and recognition program.

Your Company launched Customer Credo' across 2300 plus distributors to further improve customer connect and faster resolution of issues. Under this initiative, the Company proactively engaged with distributors and trade to get into the shoes of the customer and experience issues from their lens. This was supported with a resolution mechanism using Levercare', the customer helpline, taking customer centricity to the next level. The programme was christened Happy 2 Help' and is planned to be repeated once every quarter.

During the year, your Company piloted an alliance with Tata Teleservices Limited (TTSL) for the distribution of telecom products, leveraging its rural distribution footprint. The Company has scaled the distribution alliance with TTSL to four states covering over 150 channel partners. This distribution arrangement is aimed at accelerating rural growth by enabling the Company to go deeper into rural India due to improved viability for channel partners. This initiative not only helps the Company build more stable Shakti entrepreneurs but also enables it to increase rural investments thereby unlocking growth in this channel.

6.1 Project Shakti

During the year, your Company further strengthened the Shakti initiative by extending the relationship with Shakti Amma to her family, through project Shaktimaan. Project Shaktimaan enrols the unemployed / under employed male members of the family to sell your Company's products into the satellite villages of Shakti. The initiative serves two convergent purposes - enhances the livelihood opportunity of the Shakti family and improves the quality and depth of your Company's distribution network. This initiative strengthens the philosophy behind Shakti, which comprises of:

- Leading market development

- Establish a suitable livelihood for the underprivileged

- Creating a self-sustaining business model

- Accessing markets beyond the reach of traditional distribution models

By the end of this year, the Shakti network has been leveraged to enroll 30,000 Shaktimaan who distribute in 100,000 new villages and the Shakti programme had spread to 500,000 outlets, adding another dimension to your Company's distribution and contributing to tripling the rural footprint.

7. SUPPLY CHAIN

During the year, your Company has made significant progress towards its vision of delivering outstanding customer service and enabling sustainable growth. The service delivery standards showed steady improvement with CCFOT (Customer Case Fill on Time) maintained at 90% and loss reduction by 20% in comparison to last year. The Customer Satisfaction (eQ) survey scores have been encouraging and suggest that the actions taken by the Company are in the right direction. With the help of a sustained improvement program, the Modern Trade OSA (On-Shelf Availability) has seen further improvement with a loss reduction of 25% in comparison to last year. Your Company has embedded Sales and Operation Planning Process (S&OP) ways of working as part of the organization culture and this is adding value to the business.

The Quality performance measured as CCPMU (Consumer Complaints Per Million Units) has shown 12% reduction over last year. Quality continues to be a focus area with thrust on design quality improvement and new quality standard implementation for warehousing and transportation.

Your Company has a robust Supply Chain savings programme with continuous focus on end-to-end Supply Chain cost reduction with new technologies, processes and methods. During the year, your Company has delivered 6% saving in Supply Chain cost with factories delivering more than 8% saving with quantum improvement in technical efficiencies, wastage reduction and yield improvement.

The renewed focus on TPM (Total Productivity Management) and visible leadership commitment toward turbo charging TPM, through strong focus on autonomous maintenance, strong circle engagement, loss analysis and reduced losses to improve PQCDSM (Productivity, Quality, Cost, Delivery, Safety and Morale), have helped the Company to improve employee engagement, efficiency and derive competitive advantage.

In order to support the volume growth, your Company has progressed on the long-term plan to create capacities in line with demand so as to enable growth while managing costs. Your Company has successfully executed all capacity creation projects on time to ensure smooth delivery during the year. A number of projects on sustainable energy (bio-mass boilers), rain water harvesting and waste reduction projects like sludge digesters and vermi-composting have been initiated and commissioned across manufacturing sites.

There has been significant improvement in Innovation OTIF (On Time in Full) with more than 100 innovation networks being executed during the year. This ability of execution powerhouse is supporting business to delight consumers and customers and catering to growth.

The Procurement function of the Company has focused on Partner to Win' programme with supplier and business partners to reduce lead time, procurement cost, improving reliability and working on new innovation. Your Company also leverages benefits of scale and synergy through Unilever's global buying network.

8. RESEARCH, DEVELOPMENT AND INNOVATION

Your Company continues to benefit from the strong foundation and long tradition of Research & Development (R&D) which differentiates us from many others. These benefits flow not only from work done in Research Centres in India, but also from the centres of Unilever's global research work. With the world class facilities and a superior science and technology culture, we are able to attract the best of talent to provide significant technology differentiation to our products and processes.

The R&D labs in Mumbai and Bangalore are aligned significantly to Unilever's global R&D. Many of the projects which are run out of these centers are of global relevance and with a strong focus on needs of this region and the overall Developing & Emerging (D&E) world.

The R&D programmes of your Company are focused on development of breakthrough and proprietary technologies with innovative consumer propositions. The R&D team of over 750 people comprises highly qualified scientists and technologists working in the areas of Health and Hygiene, Laundry, Household Care, Skin Care, Water Purification, Beverages, Frozen Dessert and Naturals. The R&D group also comprises critical functional capability teams in the areas of Regulatory, Clinical, Patents, Information Technology, Safety and Open Innovation functions.

On the back of strong R&D inventions, close to hundred new products were launched successfully in the market in 2011-12. In Skin Care, Vaseline Men range products with improved moisturizing and skin lightening benefits were re-launched with distinctive packaging and formats. Fair & Lovely Spot Corrector Pen, Ponds White Beauty daily spot-less lightening cream with proprietary photo protection technology delivering SPF 20 PA and Fair & Lovely Anti-Marks were also introduced during the year. In Skin Cleansing, improved Lux and Hamam soaps, including a new variant on Lux (Lux Fresh) were launched with improved consumer benefits. Luxliquid hand wash and body wash were also introduced in the market along with a range of facial cleansing products of Pond's, Fair & Lovely, Vaseline and Dove.

New variants of Dove hair care range, including shampoo, conditioner and other post wash formats, were launched to meet the needs of different segments of the hair care market.

Clear shampoo was re-launched with a superior formula and a separate range for men and women. Pepsodent Germicheck was re-launched with improved formulation during the year. Peps dent Gumcare strengthened its position by highlighting the mechanism of action in communication. Fire-Freeze, the new dual-sensation extra-freshness variant of Closeup was introduced during the year.

During the year, Surf and Wheel range of detergents were re-launched with improved product propositions. New designs of Pureit, developed by R&D to the cater to needs of the mass market and premium consumers, were also launched during the year.

Foods R&D made significant contribution in 2011-12 to the Company's Foods & Beverages portfolio by delivering several innovations in the market. Among them were an exciting range of instant soups under Knorrwith the great taste of soups and crunch of croutons. In the Instant Coffee segment, R&D delivered two major product and packaging innovations - Bru Gold, a premium agglomerated 100% instant coffee and Bru Exotica, a range of single origin freeze dried coffee, both packed in an innovative triangular glass bottle design. R&D contributed towards the re-launched formulation and packaging of Kssan tomato ketchups and Jams. In the Frozen Dessert segment, Unilever's flagship brand Fruttare made with real fruits was launched. A premium range of Selection Tubs was launched with a global packaging design and 3 new flavors'. R&D made a significant contribution in developing a premium range of flavored tea bags under the Taj Mahal brand and a range of ready to drink and ready to prepare ice tea under the Lipton brand.

R&D has further contributed to the sustainability agenda of the Company by enabling significant reduction in packaging material consumption through several material efficiency initiatives.

The continuous stream of innovative and technically advanced products launched in the market was a result of significant R&D investments and the scientific talent that the Company can attract and retain. With its strong scientific expertise and potential to deliver high value technologies, India continues to occupy a premier position in Unilever R&D. With the strong support from R&D as well as the brand development capabilities, your Company is well placed to meet the challenges arising from the increased competition intensity and the opportunities to drive faster growth. Your Company is working towards further strengthening the in-house scientific capabilities of the Indian R&D function and building new expertise bases to retain the competitive edge in the market place.

The details of expenditure on scientific research and development at the Company's in-house R&D facilities eligible for a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 for the year ended 31st March, 2012 are as under:

- Capital Expenditure : Rs. 1.88 Crores

- Revenue Expenditure : Rs. 22.91 Crores

9. ENVIRONMENT, Safety, HEALTH AND ENERGY CONSERVATION

Your Company continues to focus on the vision of being an 'Injury Free' and 'Zero Environment Incident' organization. The behavioral safety programme is in place for more than seven years now. With increased focus on road safety campaigns, defensive driving training, hand in machine and other campaigns across units your Company has reduced accidents, measured as Total Recordable Frequency Rate (TRFR), significantly over the last 4 year period. The TRFR has come down by 46% in 2011 (in comparison to 2008 baseline) with 10.8% reduction in 2011 (in comparison to the previous year).

In line with targets of the Unilever Sustainable Living Plan (USLP), where Unilever's vision is to double the size of its business while reducing the overall impact on environment, your Company has steadily taken steps to reduce CO2 emissions. In 2011, the CO2 emission in Company units has reduced by 9.9% over 2010 and 14.7% over 2008 baseline. With respect to energy consumption, the Company's operations achieved 12% improvement over 2010 and 21.7% improvement over 2008 baseline. Your Company has also increased the use of renewable resources like bio-mass fuel. The renewable energy proportion has reached 13.7% of total energy consumption in 2011. With respect to water usage, your Company's operations achieved reduction of 10.1% over 2010 and by 21.5% over 2008 baseline. Rain Water Harvesting (RWH) has been implemented in more than 50% of the manufacturing units and 5 units of your Company have created the RWH potential to return more water to the ground than their water consumption and 33 manufacturing sites have been made zero discharge sites.

Your Company pursues a three pronged approach in waste management; Reduce, Reuse and Recycle.

- Reduce waste generation through technical interventions and optimization of processes like CIP (Cleaning in Place), sludge digester and filter press at Effluent Treatment Plants.

- Reuse waste using new technologies of co-processing with cement manufacturers and generating fuel from waste.

- Recycle waste through initiative like vermi-composting project. This has been initiated at three sites to treat the Effluent Treatment Plant waste into manure. The manure is being used as fertilizer in the garden which is effective in disposing waste in a sustainable manner. In 2011, over 96% of waste generated was liquidated through sustainable recycling.

The information required under Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 with respect to energy conservation is appended hereto and forms part of this Report.

10. HUMAN RESOURCES

Your Company's Human Resource agenda for the year was focused on strengthening four key areas: building a robust and diverse talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement and strengthening employee relations further through progressive people practices at the shop floor.

Your Company's employer brand has been built with high levels of rigor and thoroughness that has gone into making its consumer brands and reaching out to its customers. Your Company is widely acclaimed for its people development practices and has reinforced its position in this area in 2011-12. This, coupled with its ability to attract the best talent, gives a competitive edge to the organization. Your Company, once again, retained its position as the No. 1 Employer Brand with campus students of top business schools in 2011 and was voted to this position from a mix of FMCG, Consulting, Financial Services organizations, etc.

Your Company has a vision to improve its Gender Balance, which requires an overhaul of your Company's policies and programmes to ensure alignment and support to our Gender Balance agenda. The roadmap involves a combination of bringing in women in adequate numbers and creating enablers to ensure a culture of inclusion. These enablers could be as varied as flexi time to agile working, to more open and visible leadership models. 'Career by Choice' is one such initiative which is a unique re-hire programme that will provide a platform for women looking for real opportunities to work flexibly and part time for live business projects.

The initial part of the journey for Talent and Organization Assessment was undertaken successfully in 2010. Keeping in mind the needs and requirements of the current talent pool and also enhancing the Company's preparedness for the future, your Company has now institutionalized the next phase of the Talent and Organization Assessment charters by charting out the best practices for each stream.

Your Company has identified Beauty, Foods, Modern Trade, Rural and Water as key capabilities in order to win in the future and our investment in capability building is focused on these in addition to our core capabilities in Marketing, Sales and Distribution. Your Company has also launched a programme in mid 2011 with an aim to build capability, manage performance and augment the levels of engagement for 3P sales associates to enable active presence at the Point of Purchase (PoP), which will be a source of sustainable competitive advantage in the long run. Your Company undertook intensive training programmes through a combination of face-to-face and virtual learning approaches. Over 35,000 e-learning registrations took place indicating that the spirit of 'learn where you are' is imbibed in employees of the Company. Your company is also investing in building capability in digital and social media to find new platforms for brands to engage with consumers in India more effectively.

The Global People Survey is a part of the Unilever Employee Insight Programme which aims to give a voice to the Company's people throughout the organization and provide a vehicle to make the views of everybody heard, as also to provide leaders with regular, meaningful and actionable feedback. It has 112 questions spread across 20 dimensions in the area of Strategic Leadership at Unilever level, Strategic Leadership at Organisation level, Immediate Boss Effectiveness and Engagement. Feedback from this survey forms the basis of holistic engagement plans which are reviewed consistently. Global People Pulse Survey (2011) confirmed that India scores featured in the top 25 countries across Unilever. An extremely favorable 94% of employees said that they were proud to work for your Company. This was on account of a number of proactive and innovative initiatives to engage our employees, the most significant being continuous and consistent business linked engagement, a vision for the future of the business and clarity and transparency to individuals on their own careers. This is also in recognition of your Company's Performance Management and Reward processes which are geared towards building a performance and execution focused culture.

Your Company has been investing in progressive employee relations practices to ensure that it invests in capability at the grass root level. 'Sparkle' is a centrally hosted intranet based tool that supports skill mapping, skill assessment, performance assessment, gap analysis and enables training plan identification which is customized to each workman basis priority areas. The tool has been a pioneering tool in the area of workmen capability development and promotes higher transparency, focused training intervention linked to individual and business needs. The tool has delivered results for over a year now and your Company has successfully completed appraisals thereby identifying top performers and completed skill gap analysis of over 10,000 workmen online. Business Linked Engagement and TPM Edge programmes continued with full focus and rigout during the year and delivered significant improvement in factory operations.

Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent excluding the statement containing the particulars to be provided under Section 217(2A) of the Act. Any member interested in obtaining such particulars may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy thereof.

11. INFORMATION TECHNOLOGY

Your Company continues to invest in Information Technology, leveraging it as a source of competitive advantage.

The enterprise wide SAP platform forms the backbone of IT and encompasses all core business processes in the Company and also provides a comprehensive data warehouse with analytics capability that helps in better and speedier decisions. SAP is now used for collaboration with the suppliers and customers. Integrating systems with the key customers has allowed your Company to partner much more closely, leading to better customer service. Supply Chain optimization, enabled by the IT capability, remains a source of significant value.

Your Company has institutionalized an extensive IT capability for customer development function to support execution in the front-end. All distributors run a standard distributor management system. The distributors' salesmen use handheld devices for accepting retail orders which enable faster tracking and real time sales information. Your Company has used analytics and the existing IT infrastructure to build a capability for an intelligent sales call. This gives your Company, the ability to customize the sales call for each outlet on a scientific basis. This has helped improve the effectiveness and efficiency of the sales process significantly.

Your Company is further enhancing IT capabilities built for rural expansion to equip Shakti Ammas using low cost mobile technology in order to make their market working more controlled and efficient. This is one of the key enablers that will allow to leverage our rural distribution to other partnerships in the future.

Your Company continues to invest in IT infrastructure to support business applications and has made use of India's expanded telecom footprint to provide high bandwidth terrestrial links to all operating units. Your Company also used software as a service to provide agile, cost effective IT capabilities in select areas.

As the IT systems and related processes get embedded into the ways of working of the organization, there is a continuous focus on IT security and reliable disaster recovery management processes to ensure all critical systems are always available. These are periodically reviewed and tested for efficacy and adequacy.

12. FINANCE AND ACCOUNTS

Your Company's continued focus on cash generation resulted in a strong operating cash flow during the year; driven by good business performance, efficiencies and cost savings across the Supply Chain and continued focus on working capital management. Your Company managed investments prudently by deploying cash surplus in a balanced portfolio of safe and liquid instruments. Capital Expenditure during the year was at Rs. 310.01 Crores (last year - Rs. 311.31 Crores). This was primarily in the areas of capacity expansion, consolidation of operations, information technology, energy and other cost savings.

The finance team of your Company has undertaken a programme to strengthen the processes across transactions, accounting, reporting and information to support the Company's growth plans. One of the significant projects that has been implemented during the financial year is Project Parivartan' which was aimed at transforming the payment process. This project, aimed at simplifying the payments process and improving payment efficiency, has been implemented and rolled out across all units of the Company and has shown a significant improvement in efficiency levels. Similar projects are underway in the area of accounting, reporting and information management which will move the Company's processes to world class levels and support the growth plans of the Company. These programmes are aligned with the overall finance programme within Unilever.

The Company has not accepted any fixed deposits during the year. There was no outstanding towards unclaimed deposit payable to depositors as on 31st March, 2012.

In terms of the provisions of Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, Rs. 7.76 Crores of unpaid / unclaimed dividends and interest / redemption of debentures were transferred during the year to the Investor Education and Protection Fund.

Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for the last four years and for the year ended 31st March, 2012 are given below:

Period ended

2007 31st March,2009 2009-10 2010-11 2011- 12

Return on Net Worth (%) 80.1 103.6* 88.2 74.0 77.7

Return on Capital Employed (%) 78.0 107.5* 103.8 87.5 96.8

Basic EPS (after exceptional items) (Rs.) 8.73 11.46** 10.10 10.58 12.46

* Annualised numbers for proportionate period ** for fifteen month period

Segment-wise results

Your Company has identified five business segments in line with the Accounting Standard on Segment Reporting (AS-17), which comprise: (i) Soaps and Detergents, (ii) Personal Products, (iii) Beverages, (iv) Packaged Foods, including culinary, branded staples and frozen dessert and (v) Others, including Exports, Chemicals and Water. The audited financial results of these segments are given as part of financial statements.

12.1 Risk and Internal Adequacy

Your Company manages cash and cash flow processes assiduously involving all parts of the business. There was a net cash surplus of Rs. 1,830.04 Crores as on 31st March, 2012. The Company's debt equity ratio is very low which provides ample scope for gearing the Balance Sheet, should that need arise. Foreign Exchange transactions are fully covered with strict limits placed on the amount of uncovered exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Company's imports and exports. Company accounts for mark-to-market gains or losses every quarter end in line with the requirements of AS-11.

The Company's internal control systems are commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all offices, factories and key areas of business. Significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee reviews adequacy and effectiveness of the Company's internal control environment and monitors the implementation of audit recommendations including those relating to strengthening of the Company's risk management policies and systems.

Your Company has an elaborate process for Risk Management. This rests on the three pillars of Business Risk Assessment, Operational Controls Assessment and Policy Compliance processes. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed with both Management Committee and Audit Committee. Some of the risks relate to competitive intensity and cost volatility.

13. DEMERGER

Consequent to the approval of the Members in the Court Convened Meeting held on 28th July, 2011 and approval of the Hon'ble High Court at Bombay, the Scheme of Arrangement for transfer of certain assets, liabilities and properties of FMCG Exports Business Division of the Company to its wholly owned subsidiary, Unilever India Exports Limited was made effective 1st January 2012.

14. CORPORATE SOCIAL RESPONSIBILITY

Sustainability has always been integral to your Company's way of doing business. In November 2010, Unilever launched the Sustainable Living Plan, which puts sustainability at the heart of its business strategy. The central objective of the Unilever Sustainable Living Plan is to decouple growth from environmental footprint, while at the same time increasing your Company's positive social impacts. The Unilever Sustainable Living Plan (USLP) has three significant outcomes by 2020:

- Help more than a billion people to improve their health and well-being

- Halve the environmental footprint of our products

- Source 100% of our agricultural raw materials sustainably

Underpinning these three broad goals are around 60 time bound targets spanning our social, economic and environmental performance across the value chain - from the sourcing of raw materials all the way through to the use of products in the home.

The Unilever Sustainable Living Plan represents a long term goal and progress in 2010-11 has already been encouraging. By the end of 2011, for example, almost two-thirds of the palm oil used in products globally was being purchased from certified sources. In India, 60% of tomatoes are sourced sustainably.

Pure it in-home water purifier delivers safe water, without requiring running water or electricity, and at a low cost, to over 30 million people in India. In 2010-11, Lifebuoy' shygiene programme reached more than 30 million people in India, spreading hygiene awareness and encouraging behavior change.

Your Company has taken steps to ensure that the food brands have a better nutritional profile. Around 60% of the major food and beverage brands, viz. Brooke Bond, Bru, Knorr, Kissan and Kwality Wall's, comply with the 'Healthy Choice' guidelines as on date.

In 2011, your Company reduced CO2 emissions by 14.7% (per tonne of production over 2008 baseline); water use by 21.5%; and waste by 52.8% in factories in India. Your Company has improved CO2 efficiency in transportation by 17.8% despite significant increase in volumes. During the year, the Frozen Dessert business has deployed over 23,775 environment friendly HC-based freezers in its fleet.

Your Company has extended the Shakti initiative by adding 30,000 Shaktimaan (male family members of existing Shakti entrepreneurs who have enrolled for the programme), to sell the products by visiting the surrounding villages on bicycles.

Even though the Company is making changes across the length and breadth of its business, much remains to be done. The Company has to develop products and processes that enable growth in a resource stressed world, and encourage behavior and habits that help people live sustainably. While your Company has an ambitious and challenging agenda, it certainly doesn't have all the answers. What it knows, is that it requires all of us to work together for achieving a sustainable future.

Your Company is also working in partnership with governments and NGOs to implement water conservation projects in more than 180 villages in 17 districts of India. By 2015, your Company aims to create water conservation capacity of a hundred billion liters to enable a better future for a million people.

In April 2012, your Company has released India progress report on Unilever Sustainable Living Plan as well as a report on your Company's community water conservation projects.

15. EMPLOYEE STOCK OPTION PLAN (ESOP)

Details of the shares issued under ESOP, as also the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in the Annexure to this Report.

No employee has been issued share options, during the year, equal to or exceeding 1% of the issued capital of the Company at the time of grant.

Pursuant to the approval of the Members at the Annual General Meeting held on 29th May, 2006, the Company adopted the '2006 HLL Performance Share Scheme'. The Scheme has been registered with the Income Tax authorities in compliance with the relevant provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. As per the terms of the Performance Share Plan, employees are eligible for the award of conditional rights to receive equity shares of the Company at the face value of Re. 1/- per share. These awards will vest only on the achievement of certain performance criteria measured over a period of 3 years. During the year 168 employees, including Whole time Directors, were awarded conditional rights to receive a total of 4,12,633 equity shares at the face value of Re. 1/- each. The above mentioned comprises of conditional grants made to eligible managers covering performance period 2012-14.

The '2006 HLL Performance Share Scheme' was introduced as a measure to reward and motivate employees as also to attract the talent and retain the key employees. On a review of the operating experience of the said scheme and bearing in mind the charges in the global trends on management rewards, it is proposed to revise the approach of award of share options under the scheme by adopting a revised 2012 HUL Performance Share Scheme'.

16. CORPORATE GOVERNANCE

Your Company is renowned for exemplary governance standards since inception and continues to lay a strong emphasis on transparency, accountability and integrity. In the year 2011 your Company received the ICSI National Award for Excellence in Corporate Governance, in recognition of its Corporate Governance practices.

A separate report on Corporate Governance is provided at page no. 50 of this annual report together with a Certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange(s). A certificate of the CEO and CFO of the Company in terms of sub-clause (v) of Clause 49 of Listing Agreement, inter alia, confirming the correctness of the financial statements, adequacy of the internal control measures and reporting of matters to the Audit Committee is also annexed.

The Ministry of Corporate Affairs, Government of India introduced the Corporate Governance Voluntary Guidelines, 2009. These guidelines have been issued with the view to provide Corporate India a framework to govern themselves voluntarily as per the highest standards of ethical and responsible conduct of business. The recommendation of the Voluntary Guidelines pertaining to separation of offices of the Chairman and the CEO, constitution of Audit Committee and Remuneration Committee, Risk Management framework, are already practiced by your Company. Your Company has been in substantial compliance of these guidelines.

During the year Secretarial Audit and Secretarial Standards Audit were carried out. The detailed reports on the same are given at page nos. 67 to 69 of this annual report.

17. OUTLOOK

The fiscal year 2011-12 witnessed slowdown of economic activities particularly industrial output. Inflation also remained at elevated level throughout the fiscal year. Private investment has declined in its pace of growth considerably affecting the growth rate of the economy. Higher spending on subsidies on account of oil and fertilizers widened the fiscal deficit of the centre more than the budget estimates.

The RBI has projected a GDP growth of 7.2% for 2012-13 whereas the Economic Survey 2011-12 projected a GDP growth of 7.6%. All these projections point to continuation or improvement over the pace of economic activity of the previous year. Combined with a lower inflation rate, the prognosis for the new financial year is one of improved performance on growth front. Stable external conditions and a favorable monsoon would be critical to the realization of these projections. The growth prospects for agriculture in 2012-13 will hinge on the performance of monsoon.

FMCG markets are expected to grow, however uncertain global economic environment, inflation and adverse impact of rupee depreciation and competitive intensity continue to pose challenges for the future. While the near term conditions pose a challenge for the economy, the medium to longer term trends based on rising incomes, aspirations, low consumption levels, etc. are positive and an opportunity for the Company.

17.1 Cautionary Statement

Statements in this report, particularly those which relate to Management Discussion and Analysis, describing the Company's objectives, projections, estimates and expectations, may constitute 'forward looking statements' within the meaning of applicable laws and regulations and actual results might differ materially from those either expressed or implied.

18. SUBSIDIARY COMPANIES

A statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies is attached to the accounts.

In terms of General Exemption, under Section 212(8) of the Companies Act, 1956, granted by Ministry of Corporate Affairs vide its circular no. 02/201 1 dated 8th February, 2011 and in compliance with the conditions enlisted therein, the Audited Statement of Accounts, Auditors' Reports thereon and the Reports of the Board of Directors of the Company's subsidiaries for the financial year ended 31st March, 2012 have not been annexed. The Annual Accounts and related documents of the Subsidiary Companies shall be kept open for inspection at the Registered Office of the Company. The Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. However, as directed by the said circular, the financial data of the Subsidiaries have been furnished under 'Subsidiary Companies Particulars' forming part of the Annual Report (refer page no. 150). Further, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company in this Annual Report includes the financial information of its subsidiaries.

19. BOARD OF DIRECTORS

Mr. Deepak Parekh, Independent Director and Chairman of the Audit Committee of the Company, stepped down from the Board of the Company with effect from 27th December, 2011, after a tenure lasting more than 14 years. The Board acknowledges and places on record its deep appreciation for the contribution made by Mr. Deepak Parekh as an Independent Director and the Chairman of the Audit Committee of the Company.

Mr. Gopal Vittal, Executive Director, Home & Personal Care resigned from the Board of the Company with effect from 20th January, 2012, to pursue opportunities outside Unilever. The Board acknowledges and places on record its appreciation for the contribution made by Mr. Gopal Vittal as a Whole time Director on the Board of the Company.

Mr. O. P. Bhatt was appointed as an Additional Director on the Board of the Company with effect from 20th December, 2011, in accordance with Section 260 and Articles of Association of the Company. Notices have been received from Members pursuant to Section 257 of the Companies Act, 1956 together with necessary deposits proposing the appointment of Mr. O. P. Bhatt as Non-Executive Independent Director on the Board of the Company.

The Members of the Company in the Extraordinary General Meeting held on 4th April, 2008 had appointed Mr. Nitin Paranjpe as a Managing Director and Chief Executive Officer (CEO) of the Company for a period of five years, with effect from 4th April, 2008. The current term of office of Mr. Nitin Paranjpe as a Managing Director and CEO of the Company is due to expire on 3rd April, 2013. It is proposed to re-appoint Mr. Nitin Paranjpe as the Managing Director and CEO for a further period of five years commencing from 4th April, 2013.

In accordance with the Articles of Association of the Company, all other Directors, except for Managing Director, will retire at the ensuing Annual General Meeting and being eligible offer themselves for re-election.

20. MANAGEMENT COMMITTEE

The day-to-day management affairs of the Company are vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by Mr. Nitin Paranjpe, as the Chief Executive Officer, and has Functional / Business Heads as its members.

During the year, Ms. Geetu Verma joined the Management Committee of the Company as Executive Director - Foods to succeed of Mr. Shrijeet Mishra, who resigned from the services of the Company.

Mr. Hemant Bakshi, who earlier held the position of Executive Director - Sales and Customer Development, was appointed as Executive Director - Home & Personal Care of the Company. Mr. Hemant Bakshi has succeeded Mr. Gopal Vittal, Executive Director - Home & Personal Care, who ceased to be the member of the Management Committee consequent to his resignation.

Mr. Manish Tiwary was appointed as a member of the Management Committee as Executive Director - Sales and Customer Development. Before being appointed to the Management Committee, Mr. Manish Tiwary was Vice President, Modern Trade of the Company.

21. AUDITORS

M/s. Lovelock & Lewes, Statutory Auditors of the Company retire and offer themselves for re-appointment as the Statutory Auditor of the Company pursuant to Section 224 of the Companies Act, 1956.

22. APPRECIATIONS AND ACKNOLLEDGEMENTS

Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the Industry.

Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing with the latest innovations, technological improvements and marketing inputs across almost all categories in which it operates. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products and introduction of new products.

The Board places on record their appreciation for the support and co-operation your Company has been receiving from its suppliers, redistribution stockists, retailers, business partners and others associated with the Company as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be Company's endeavor to build and nurture strong links with the trade based on mutuality of benefits, respect to and co-operation with each other, consistent with consumer interests.

The Directors also take this opportunity to thank all investors, clients, vendors, banks, regulatory and government authorities and stock exchanges, for their continued support.

On behalf of the Board

1st May, 2012 Harish Manwani

Mumbai Chairman


Mar 31, 2011

The Companys Directors are pleased to present the 78th Annual Report of the Company, along with Audited Accounts for the financial year ended 31st March, 2011.

1. FINANCIAL PERFORMANCE (STANDALONE)

1.1 Results

Rs. Crores

For the year ended For the year ended 31st March, 2011 31st March, 2010

Turnover, net of excise 19,401.11 17,523.80

Profit before tax 2,730.18 2,707.07

Net profit 2,305.97 2,202.03

Dividend (including tax on distributed profits) (1641.96) (1,655.97)

Transfer to General Reserve (230.60) (220.20)

Profit & Loss Account balance carried forward 1235.60 802.19

1.2 Category wise Turnover

Rs. Crores

For the year ended For the year ended 31st March, 2011 31st March, 2010

Sales Others* Sales Others*

Soaps and Detergents 8,683.88 107.68 8,180.29 85.35

Personal Products 5,750.68 93.42 4,969.36 78.54

Beverages 2,309.23 34.74 2,119.44 22.99

Processed Foods 890.33 12.24 713.97 16.81

Ice creams 271.95 2.63 228.94 2.06

Exports 1093.12 6.53 1000.15 5.10

Others 401.92 36.11 315.50 31.22

Less: Inter segment revenue - (3.85)

Total 19,401.11 293.35 17,523.80 242.07

* Others represent service income from operations, relevant to the respective businesses.

1.3 Summarised Profit and Loss Account

Rs. Crores

For the year ended For the year ended 31st March, 2011 31st March, 2010

Net sales 19,401.11 17,523.80

Other operational income 334.09 201.53

Total 19,735.20 17,725.33

Operating Costs and expenses (17,035.90) (14,975.36)

PBDIT 2,699.30 2,749.97

Depreciation (220.83) (184.03)

PBIT 2,478.47 2,565.94

Interest Income (net) 251.71 141.13

PBT 2,730.18 2,707.07

Taxation (576.93) (604.39)

PAT (before exceptional items) 2153.25 2,102.68

Exceptional/Extraordinary items (net of tax) 152.72 99.35

Net profit 2,305.97 2,202.03

Basic EPS (Rs.) 10.58 10.10

2. DIVIDEND

Your Directors are pleased to recommend a final dividend of Rs.3.50 per equity share of the face value of Re.1/- for the year ended 31st March,2011. The interim dividend of Rs.3.00 per equity share was paid on 15th November, 2010.

The final dividend, subject to approval at the AGM on 28th July, 2011, will be paid to the shareholders whose names appear in the Register of Members as on the date of book closure i.e. from Tuesday, 12th July, 2011 to Wednesday, 27th July, 2011 (inclusive of both dates).

The total dividend for the financial year including the proposed final dividend amounts to Rs. 6.50 per equity share and will absorb Rs. 1,641.80 Crores including Dividend Distribution Tax of Rs. 231.34 Crores.

3. BUY-BACK OF EQUITY SHARES

The Board of Directors in their meeting held on 11th June, 2010 approved the buy-back of Companys fully paid-up equity shares of Re. 1/- each, at a price not exceeding Rs. 280/- per equity share, up to an aggregate maximum amount of Rs. 630 Crores, i.e. within the limit of 25% of the total paid-up equity share capital and free reserves of the Company as on 31st March, 2010. The approval of the shareholders for the buy-back was obtained through postal ballot, the results of which were declared on 26th July, 2010.

The buy-back was made out of free reserves and the share premium account of the Company through open market purchases through the Bombay Stock Exchange Limited and National Stock Exchange of India Limited using their nationwide electronic trading facilities, as per the provisions contained in the SEBI (Buy Back of Securities) Regulations, 1998. The buy-back offer was open from 23rd August, 2010 to 28th March, 2011.

The cumulative number of Equity Shares bought back under the scheme is 2,28,83,204 equity shares for a total consideration of Rs. 625.30 Crores, at an average price of Rs. 273.26 per share. The paid-up capital of the Company after the extinguishment of shares bought back under the scheme stood at Rs. 215.94 Crores comprising of 2,15,94,36,598 equity shares of Re.1/- each.

4. RESPONSIBILITY STATEMENT

The Directors confirm that:

# in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

# they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;

# they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and they have prepared the annual accounts on a going concern basis.

15. SUBSIDIARY COMPANIES

During the year, the Board of Directors agreed to divest 43.31% stake in Hindustan Field Services Private Limited (HFS) in favor of Smollan Group (the JV partner). Your Company will continue to hold 7.69% shareholding in HFS. HFS will, accordingly, cease to be a subsidiary of the Company post completion of the divestment.

A statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies is attached to the accounts.

In terms of General Exemption under Section 212(8) of the Companies Act, 1956 granted by Ministry of Corporate Affairs vide its circular no. 02/2011 dated 8th February, 2011 and in compliance with the conditions enlisted therein, the Audited Statement of Accounts and the Auditors Reports thereon for the financial year ended 31st March, 2011 along with the Reports of the Board of Directors of the Companys subsidiaries have not been annexed. The Annual Accounts and related documents of the Subsidiary Companies shall be kept for inspection at the Registered Office of the Company. The Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. However, as directed by the said circular, the financial data of the Subsidiaries have been furnished under Subsidiary Companies Particulars forming part of the Annual Report (Refer page no. 146). Further, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the

Company in this Annual Report includes the financial information of its subsidiaries.

16. CORPORATE SOCIAL RESPONSIBILITY

Your Companys strategy is to integrate the social, economic and environmental agenda in the fabric of its business and operations. This requires the business, to identify the relevant impact areas and define strategies that drive consumer preference, and in parallel, address these issues i.e. strategies that do well by doing good. The reasons for growing the business sustainably are compelling and your Company sees no conflict between promoting sustainable development and business growth.

Your Companys vision is to increase the positive impact in the social agenda by improving health and well being, reduce the environmental impact from greenhouse gases, water and waste and work towards prosperity of India and business by enhancing livelihoods amongst farmers through sustainable sourcing and expanding our small distributor model.

During the year, Unilever launched the Unilever Sustainable Living Plan globally. The Unilever Sustainable Living Plan (USLP) has three significant outcomes by 2020:

# Help more than a billion people take action to improve their health and well-being

# Halve the environmental impact of the making and use of Unilever products

Enhance the livelihoods of thousands of people in Unilevers supply chain

The first outcome is to help more than a billion people to take action to improve their health and well-being. Our everyday use products like soap, spreads and toothpaste can make a meaningful difference to peoples lives. The Lifebuoy handwashing education programme has already reached over 124.7 million people in India and South Asia. Clinical trials reveal that washing hands at key moments helps in significantly reducing the risk of diarrhoeal disease - one of the biggest reasons for fatalities among children.

Today, nearly 1 billion people do not have access to safe drinking water. The UN estimates that nearly one-and-a-half million children die each year from water related diseases. A few years ago your Company decided that there had to be a better, cheaper, more sustainable way to provide safe drinking water. The product developed to address this is Pureit, a water purification system. The water it produces is as safe to drink as boiled water, tastes a whole lot better than water purified with chlorine based sachets, and is a fraction of the price of bottled water. It is easy to operate and safe to use.

To make this product affordable to low income groups, your Company works with NGOs and Womens Self-Help Organisations to facilitate the availability of low-interest micro-loans. Today, Pureit is protecting around 20 million people with clean, safe drinking water. After the success of the product in India, Unilever has decided to introduce Pureit across other countries in South - East Asia, Latin America and sub-Saharan Africa.

The second outcome is to halve the environmental impact of the making and use of our products. This means halving water, waste and greenhouse gases across the lifecycle of the products. The Company has reduced water usage in manufacturing operations by 36% since 2004 (measured on per tonne basis). Fifty six percent of our own manufacturing sites now have rainwater harvesting facilities and five of the sites have potential to return more water to the ground than their consumption.

The products/business life cycle impact analysis shows that your Companys direct impact is relatively small; it is the sourcing of raw materials and usage of the products that accounts for a much larger impact. This means that the Company has to design products, which allow consumers to get better results with less energy and less water consumption.

The third outcome is to enhance the livelihoods of thousands of people in Unilevers supply chain. Your Company works with many small holding farmers, small-scale distributors and micro- entrepreneurs (for example Project Shakti in India) helping them improve their skills and increase productivity.

The outcomes that Unilever has committed to itself are ambitious and challenging and each person at Unilever is willing to stretch, given the excitement for and the belief that it is the right way to go; for our business, for the society and for the environment.

Our products touch the lives of 2 out of 3 Indians everyday, hence changes made to the way the products are designed, sourced and used will have a far reaching impact in making consumption sustainable.

Your Company released its first Sustainable Development Report at the Annual General Meeting held on 27th July, 2010. Your Companys Sustainable Development Report presented the Companys Corporate Responsibility (CR) framework which integrates the social, economic and environmental agenda with business priorities. An update on progress on our commitments made under the CR strategy of the Company is provided at page no. 17 of the Annual Report.

17. BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE

There are no changes in the Board of Directors and Management Committee of the Company during the year.

In accordance with the Articles of Association of the Company, all other Directors, except for Managing Director, will retire at the

ensuing Annual General Meeting and being eligible offer themselves for re-election.

The day-to-day management affairs of the Company are vested with the Management Committee, which is subjected to the overall superintendence and control of the Board. The Management Committee is headed by Mr. Nitin Paranjpe, as the Chief Executive Officer, and has functional/business heads as its members.

18. AUDITORS

M/s. Lovelock & Lewes, Statutory Auditors of the Company retire and offer themselves for re-appointment as the Statutory Auditor of the Company pursuant to Section 224 of the Companies Act, 1956.

19. APPRECIATIONS AND ACKNOWLEDGEMENTS

Your Directors place on record their deep appreciation to employees at all levels for their hard work, dedication and commitment. The enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the Industry.

Your Directors would also like to acknowledge the excellent contribution by Unilever to your Company in providing with the latest innovations, technological improvements and marketing inputs across almost all categories in which we operate. This has enabled the Company to provide higher levels of consumer delight through continuous improvement in existing products and introduction of new products.

The Board places on record their appreciation for the support and co-operation your Company has been receiving from its suppliers, redistribution stockists, retailers, business partners and others associated with the Company as its trading partners. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be Companys endeavor to build and nurture strong links with the trade based on mutuality of benefits, respect to and co-operation with each other, consistent with consumer interests.

The Directors also take this opportunity to thank all investors, clients, vendors, banks, regulatory and government authorities and stock exchanges, for their continued support.

On behalf of the Board Mumbai Harish Manwani

9th May, 2011 Chairman


Mar 31, 2010

The Companys Directors are pleased to present the 77th Annual Report of the Company along with Audited Accounts for the financial year ended 31st March, 2010.

1. FINANCIAL PERFORMANCE

1.1 Results Rs. Crores

Twelve Months Fifteen Months period ended period ended 31st March, 2010 31st March, 2009

Turnover, net of excise 17,523.80 20,239.33

Profit before tax 2,707.07 3,025.12

Net profit 2,202.03 2,496.45

Dividend (including tax on distributed profits) (1,655.97) (1,912.29)

Transfer to General Reserve (220.20) (250.00)

Profit & Loss Account balance carried forward 802.19 531.66

1.2 Category wise Turnover

Rs. Crores

Twelve Months period ended Fifteen Months period ended 31st March, 2010 31st March, 2009 Sales Others* Sales Others*

Soaps and Detergents 8,180.29 85.35 9,770.26 114.37

Personal Products 4,969.36 78.54 5,272.31 112.22

Beverages 2,119.44 22.99 2,272.29 27.22

Foods 713.97 16.81 791.25 17.05

Ice creams 228.94 2.06 229.44 5.88

Exports 1,000.15 5.10 1,567.29 8.79

Others 315.50 31.22 344.41 14.13

Less : Inter segment revenue (3.85) (7.92)

Total 17,523.80 242.07 20,239.33 299.66

* Other revenue represents service income from operations, relevant to the respective businesses.

1.3 Summarised Profit and Loss Account

Rs. Crores (except EPS)

Twelve months Fifteen months period ended period ended 31st March, 2010 31st March, 2009

Net sales 17,523.80 20,239.33

Other operational income 201.53 384.17

Total 17,725.33 20,623.50

Operating Costs and expenses (14,975.36) (17,583.31)

PBDIT 2,749.97 3,040.19

Depreciation (184.03) (195.30)

PBIT 2,565.94 2,844.89

Interest Income (net) 141.13 180.23

PBT 2,707.07 3,025.12

Taxation : (604.39) (524.41)

PAT (before exceptional items) 2,102.68 2,500.71

Exceptional items (net of tax) 99.35 (4.26)

Net profit 2,202.03 2,496.45

Basic EPS (Rs.) 10.10 11.46

On a like to like basis i.e. comparing the results for the financial year ended 31st March 2010 with the unaudited results for the 12 months period ended 31st March 2009, your Company registered an overall turnover growth of 6.4% and improved operating margin by 10 bps. Net Profit (after Exceptional Items) grew by 4.1%. Basic Earnings Per Share for the period 2009-10 was Rs. 10.10.

2. DIVIDEND

Directors are pleased to recommend a final dividend of Rs.3.50 per equity share of the face value of Re.1/- for the year ended 31st March, 2010. The interim dividend of Rs.3.00 per equity share was paid on 23rd November, 2009.

The final dividend, subject to approval at the AGM on 27th July, 2010, will be paid to the shareholders whose names appear in the Register of Members with reference to the book closure from Saturday, 10th July, 2010 to Monday, 26th July, 2010 (inclusive of both dates).

The total dividend for the financial year including the proposed final dividend amounts to Rs. 6.50 per equity share and will absorb Rs. 1655.88 crores including Dividend Distribution Tax of Rs. 238.02 crores.

3. CORPORATE OFFICE & RESEARCH CENTRE

With the need to consolidate the multiple office locations burgeoned across Mumbai to accommodate growing teams and businesses of your Company and in order to drive synergies, the new Corporate Office of your Company was inaugurated in January, 2010.

The new Corporate Office named as Campus is located at Andheri; and has marked the completion of the journey of bringing together your Company, physically and culturally under one roof. A journey which started with the Brookefields, Bangalore office merging into the office at Backbay Reclamation, Mumbai in the last quarter of 2006 and ending with five other locations in Mumbai coming together at Andheri in January, 2010.

The Campus not only physically brought together different teams that were sitting apart, but also created an environment of oneness towards the goal of performing better and seeing the organisation soar to newer heights. The Campus aims to create a flexible, open and vibrant work space, which enables every employee to perform better. It leverages technology and progressive workplace practices to meet the needs of todays business environment.

The new Campus is designed keeping in mind the new trends and emerging needs of todays talent and boosts the employer brand of your Company to attract and retain talent.

As an organisation committed towards sustainability, various energy saving systems and technologies have been incorporated in the design of the office to drive 100% recycling of water and save energy consumption. In design and spirit, the new Corporate Office truly symbolises Companys vision to work as one and leverages its collective strength to win in the market.

4. RESPONSIBILITY STATEMENT

The Directors confirm that:

in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from same;

- they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;

- they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

- they have prepared the annual accounts on a going concern basis.

5. MANAGEMENT DISCUSSION AND ANALYSIS

In order to avoid duplication between the Directors Report and Management Discussion and Analysis, we present below a composite summary of performance of the various businesses and functions of the Company.

5.1 Economy and Markets

Over the last two years, India has limited the impact of the global slowdown on its growth. The GDP growth rate in the first three quarters of the financial year 2009-10 has been 6.7%. The downward pressure on GDP growth came in the form of poor monsoons which impacted the Kharif (crops grown in June-September period) agricultural produce this year. While the services sector has been growing at a rate of over 7.9%, the industrial growth accelerated sharply from 2% to 11.6% over the last four quarters. Towards the end of the fiscal year, export growth has returned to positive territory on revival in global demand, after 13 consecutive months of de-growth.

Though the overall GDP growth rates are encouraging, food price inflation has been a major cause of worry for over a year. Food inflation, along with firming up of global commodity prices, has spilled over into prices of domestic commodities and services as well with the overall consumer inflation rate hovering at over 15% for several months. The wholesale price inflation touched 9.9% in February 2010, surpassing Reserve Banks estimate of 8.5% by March end.

The FMCG markets in India continue to be attractive and have grown during the year under review. In the context of the global slowdown, the Indian market has become even more attractive and many new competitive entries have been witnessed leading to a significant increase in the overall competitive intensity. At the same time, the increased levels of inflation have had a somewhat dampening impact on the market growth of some of the categories, particularly in the second half of the year. Commodity prices have also been fairly volatile, particularly in the first half of the year.

Your Companys good performance in the year 2009-2010 has to be viewed in the context of the above economic and market environment.

PERFORMANCE OF BUSINESSES AND CATEGORIES

Some highlights are given below in respect of each of the business categories of the Company. Increase/growth percentages refer to the comparison of the financial year ended 31st March, 2010 with the 12 months period ended 31st March, 2009.

5.2 Home & Personal Care Business (HPC)

The HPC Business consists of Fabric Wash, Household Care, Personal Wash and Personal Care categories which includes products such as toothpaste, shampoo, skin care, deodorants and colour cosmetics. During the year, the HPC business delivered sales growth of 6.6%. While the underlying volume growth was higher, aggressive price reductions were effected in the market place linked to significant reduction in commodity prices over the previous year. Further, competitive intensity increased substantially in most categories, especially in the second half of the year, evidenced by many new competitive entries as well as a step up in media spend levels. During the year, your Company introduced several innovations across the portfolio and stepped up the level of brand investments to drive growth. Your Company continued to receive significant technology and brand development inputs from Unilever which played a key role behind the various innovations launched during the year. As a result of these efforts, the growth momentum of the HPC business accelerated through the year with double digit volume growth in the last quarter of the year under review. This growth was broad based across categories and was delivered in the context of significant increase in competitive intensity, both from existing and new players.

Given the low levels of per capita consumption in India, there is potential for strong growth in all categories of the Home and Personal Care market. These favourable market conditions have attracted a host of international and domestic competitors to participate in the Indian market. Your Directors believe that making sustained investments behind the Companys brands, by way of technology led innovations, consumer communication and continued focus on developing the markets, will benefit the business in creating long term value.

5.2.1 Soaps & Detergents

Soaps and Detergents category recorded modest turnover growth of 1.5%. The growth of the Soaps and Detergents category needs to be viewed in the context of a very high base in the previous year which saw high price increases linked to commodity cost inflation. During the year under review, the prices of products, particularly in the Detergents segment, were reduced taking into account the reduction in commodity prices. The segmental margin of this category was lower by 100 bps linked to the volatility in commodity costs in the initial part of the year and the actions taken to defend the Companys leadership position in the face of heightened competitive intensity.

Fabric Wash category had a mixed performance. The first half of the year was impacted by the volatility in pricing linked to commodity costs while the second half of the year recorded good volume growth. The improved performance in the second half of the year, despite intense competitive activity, was driven by brand innovations (Wheel) and price corrections across the portfolio. The Surf franchise continued to perform well. The pricing on Rin Powder was strategically reduced to drive upgradation from the mass markets with encouraging initial response. Wheel has been re- launched with better formulation, improved packaging and fresh communication; initial response has been very positive. The category witnessed significant competition and your Company responded in a determined manner to defend its market share. The media spend on the fabric segment was also augmented to communicate the value proposition to consumers more effectively. Cost effectiveness programs have been stepped up and have yielded good results.

Your Company continues to place particular focus on the Fabric Wash category as it constitutes a significant proportion of the business volumes, and has been and will be a significant value creator, despite the short term pressures arising from the intense competition in this category.

Household Care category performed well during the year recording double digit growth. After the re-launch in 2009, the dish washing product, Vim liquid recorded another year of stellar growth. The Vim bar variant continues to perform well, especially after making price corrections linked to falling input costs. The Domex line continued on its journey to provide cleaner and germ free toilets to the Indian consumer. A first of its kind in India, the Company also successfully launched the cream variant of Cif for surface cleaning. It has demonstrated a high degree of relevance and special appeal in the marketplace as the product experience has successfully demonstrated the products strong ability to clean tough stains and grime.

Personal Wash category recorded good growth during the year with significant step-up in growth rates in the latter part of the year. While the competition from existing players continued to be strong, the Company deployed its full portfolio effectively with re-launch of most of the brands on the back of high quality innovations and intensive consumer activation. Growth was led by the premium segment brands, with Dove, Pears and Liril registering strong growth. The Lifebuoy brand was re-invigorated through its re-launch, bolstering its health credentials with its strong ability to kill germs. The Lux franchise was also re-launched with improved fragrance and beauty oils for soft and smooth skin. Furthermore, tactical activations and communications strategy have helped the brand improve its image within the target group. Your Company is also maintaining its focus on cherished regional brands such as Hamam and Rexona and will continue to promote them aggressively well into the future. While your Company is the undisputed market leader in this category, it continues to focus on the challenge of winning back its lost market share in this important category.

5.2.2 Personal Products

The Personal Products category of the Company comprise of Hair Care, Skin Care, Oral Care, Deodorants and Colour Cosmetics. The Personal Products category grew by 16.2% overall with good growth in profits.

Hair Care category continues to be an attractive category given the potential for increase in per capita consumption. Despite the significant increase in competitive heat in this category, your Company improved its leadership position during the year. Bolstered by additional variants introduced during 2009, the Dove shampoo and conditioners range continued to deliver high growth momentum with a sizeable gain in market share. In addition to innovation, the growth was driven by a combination of high quality and compelling advertising and field activation during the year. During the year, Clinic Plus was also successfully re-launched with good results by re-emphasising the value proposition of being ideal for long hair. Clinic Plus continued to grow well and strengthened its position as the single largest shampoo brand. The Sunsilk range was also re-launched in October 2009 with superior product quality and packaging with the proposition of a shampoo that is co-created by experts. The product credentials of Clinic All Clear has been strengthened and was supported through a high decibel Zero Dandruff campaign in the last quarter of the year. This is expected to reverse the trend of falling shares in this brand. The business also continued to grow in the nascent but emerging hair conditioners segment, which has a high growth potential as more and more consumers discover the value of using conditioners regularly.

Skin care category achieved double digit growth during 2009 despite strong competition and rapid market fragmentation of this category. In the mass skin lightening category, Fair & Lovely continued to grow by increasing its relevance and consumption across a range of price points. Ponds White Beauty witnessed robust growth through the year due to a highly successful media campaign on acquiring spot free fairness. Vaseline also grew well on the back of increased traction in the Vaseline Body Lotion core as well as the introduction of a new Healthy White variant that offers protection against skin darkening. Talcum powders saw good growth during the year and your Company continues to maintain its leadership position.

In Oral Category, your Company took actions to drive growth through highly attractive value offerings in the up-grader packs to bring quality oral care within the reach of the mass consumers. This strategy has started yielding positive results and the category has started to see increased volume growth in the latter part of the year. The germ kill credentials of Pepsodent were further enhanced and the freshness credentials of Close up continues to do well. Your Company has put in place robust plans to accelerate the growth of its oral care business in the coming periods through both of its flagship brands Close up and Pepsodent.

The Lakme range of colour cosmetics achieved stable growth for the year. New innovations such as the lip duo attractive summer collections coupled with high quality advertisement and trade and consumer activations helped in ensuring growth momentum. Lakme Fashion Week saw another successful run and continues to be a signature campaign for the brand.

The Deodorant category continued to witness high growth momentum with its flagship brand of Axe. This category has significant potential of future growth and your Company is well poised to capitalise on its existing strong presence in this emerging category.

Kimberly Clark Lever Private Limited (KCLL)

KCLL is a Joint Venture between your Company and Kimberly-Clark Corporation, USA. The Infant Care business of KCLL continued to grow solidly with double digit growth registered during the year. New packs were introduced across the portfolio as the business focused on driving affordability and building acceptability in this category. The re-launch of Huggies Care and Huggies Dry Comfort, supported by a new mix during the year, met with good results and has been gaining momentum. In Feminine Care, the business rationalised a part of its portfolio and focused on building an innovation pipeline aligned to its long term strategic direction for this category. During the year, your Company received a dividend of Rs. 2.54 Crores from the Joint Venture.

5.3 Foods

The Foods portfolio of your Company comprises of Beverages (Tea and Coffee), Processed Foods (Kissan, Knorr and Annapurna range of products), Ice Creams and Bakery products (Modern Foods).

The business has delivered strong double digit growth. This growth has been broad based across the portfolio and has been driven through a deep understanding of consumer and customer needs translated into relevant innovations. The growth in the Foods business has been achieved in the face of some key challenges :

- High competitive intensity from national as well as local players in many categories. Your Company has responded through increased brand investments and value enhancing innovations.

Significant food inflation across the spectrum leading to market slowdown and downtrading in some categories as the year progressed. Your Company has responded to this challenge through a combination of consumer centric value packs and judicious price increases combined with aggressive cost saving programmes.

Product freshness continues to receive the highest attention with significant investments made over the years. This is now showing results and going forward the Company intends to sustain these investments.

Beverages such as Tea and Coffee are well entrenched habits amongst Indian consumers. Your Company is focusing on micro marketing initiatives to increase penetration and consumption and drive growth across the spectrum.

In addition, your Company is driving upgradation through the tea bags packaging concept. Further, your Company has expanded its portfolio in packet tea by launching a new brand to participate in the mass segment with differentiated offering.

Processed Foods, Ice Creams and Out of Home consumption offer huge potential for growth with LSM 5+ leading consumption in top 35 cities. This segment is being addressed through developing products which combine taste, nutrition and provide cooking convenience.

Annapurna and Modern range are uniquely positioned to capture the growing consumption in rural areas and capture the opportunity at the bottom of the pyramid.

5.3.1 Processed Foods

Kissan continues to remain one of the most trusted brands amongst Indian consumers and continues to register solid and sustained growth. Consumer friendly innovations such as Jams Squeezee tubes and Ketchup plastic bottles have been well received in the market and have enhanced the overall product experience.

Your Company is a clear value leader in the Soups segment. Knorr was re-launched during the year with 100% real vegetables and without any MSG. The launch was supported through comprehensive communication and activation in both Modern and General Trade. This has lead to overall market growth and category expansion. The Ready to Cook range of Knorr launched last year is seeing steady volumes with strong repeat purchases being experienced.

In February 2010, your Company has entered the high growth instant noodles category through its Soupy Noodles portfolio which provides wholesome nutrition to childrens snacking moments. The product was launched in the Modern Trade channel across the country and in all channels in South India, with excellent consumer response.

The staples business under the brand Annapurna (iodised salt and wheat flour) posted good growth during the year with significant improvement in profitability.

Your Company continued its focus on foods sales to institutions such as restaurants and hotel chains. Although at its nascent stage, yet the business is making good progress by leveraging Supply Chain efficiencies and product development capabilities of the Foods Division.

5.3.2 Beverages

For three consecutive years, inflation in the Te a commodity continues unabated, driven by strong global demand and local crop shortages. This has resulted in down trading and the overall growth in the discounted segment of the market, becoming the major portion of the portfolio.

Notwithstanding such a competitive context, the business has registered strong turnover growth whilst maintaining satisfactory volumes. Increasing costs continued to put pressure on margins but these were mitigated through pricing and Supply Chain cost savings. Market shares during the year came under pressure due to lack of a strong presence at the discount end of the market. During the year, your Company has launched Brooke Bond Sehatmand at the mass end of the market offering combined benefits of health with immunity. This Tea delivers 50% of RDA of Vitamin B through 3 cups a day to lower income families that are otherwise unable to afford such nutrition. The brand is poised for national roll out in 2010.

3 Roses continued to perform exceptionally well and has shown significant growth, maintaining its competitive standing in South India. Taaza has gained market share, and the brand has strengthened its equity with consumers exceptionally well. Taaza was the Global Brand of the Year Award for Beverages within Unilever, which is another testimony to its success. Lipton Yellow Label was re-launched with the Stay Sharp proposition, with Theanine as the ingredient. Taj delivered commendable results at the premium end and registered good growth in the tea bags segments. Tea bags consumption was encouraged through media campaigns and a large sampling initiative carried out with Jet Airways.

During the year under review, Coffee markets have decelerated significantly in comparison to earlier years due to adverse climatic and weather conditions. Through key innovations, your Company was able to register strong volume growth in the second half of the year. The re-launch of Bru was amplified with the Aroma proposition (through aroma lock) and improved sensorials. This was backed by strong media campaigns and trade activation programs. Your Company continues to focus on driving growth in the instant coffee and premiumisation of the portfolio. In conventional coffee, your Company re-launched the product with benefits of second decoction, which received excellent response in markets such as Andhra Pradesh.

The Out of Home business was impacted by the economic slowdown experienced in the early part of the year but has since picked up pace as the year progressed. This channel continues to hold the promise of high growth and appropriate investments are being made to leverage this opportunity. Lipton and Bru Café models were tested during the year in key locations and results thus far have been encouraging.

5.3.3 Ice Creams

The year under review has been an excellent year, with strong growth in both the impulse and take home segments. Growth has been driven by the three key platforms Cornetto, Selection and Paddle Pop. Significant inflation in input prices put tremendous pressure on the margins of the business. Your Company has been able to maintain the margins by driving operational efficiencies, improved mix and leveraging economies of scale.

Cornetto Black Forest Flirt launch has been a resounding success, with the SKU becoming the largest selling Cornetto in the first year itself. In Paddle Pop, your Company launched four exciting flavours, driving growth in the Kids range. In the Selection range, three new fruit flavours were launched in summer 2009 (Strawberry Currant, Choco Coconut and Litchi Bites), building on the theme of celebrating weekend family moments. The fact that a scoop of this Ice Cream is less than 99 cal was successfully communicated in this launch. The Selection range was received exceedingly well in the market. Building Ice Cream consumption occasions is a key driver for growth. The Diwali activation on Viennetta was implemented with great success. To further drive in-home consumption, the business also rolled out value offerings in the west region, producing results significantly ahead of previous action benchmarks.

Significant investments are being made by your Company in front end assets and for leveraging IT for enhanced scalability and asset productivity. Going forward these are expected to provide the Company a competitive advantage.

5.3.4 Bakery (Modern Foods)

Bakery (bread and cakes) sustained its growth momentum and continued to deliver strong underlying profits improved from enhanced scale and better operational efficiencies. New unified packaging was introduced during the year which was well received in the markets.

5.4 Exports Business

Following the global recession, international markets turned adverse during the year with reduced consumer demand. Despite this, your Company managed to achieve a turnover of Rs. 1,000 crores with good profits and strong cash delivery. The non-value adding commodity exports were rationalised resulting in improved Gross Margins. Cash generation was significantly enhanced by placing specific focus on the reduction of Working Capital through improved inventory management and debtors reduction, while simultaneously enhancing customer service.

In the Home & Personal Care exports segment, despite the difficult environment, the turnover in existing product-customer channels was maintained to previous year levels. The Pears franchise grew handsomely by double digits, notably in the United Kingdom and the Emirates.

The ongoing Foods & Beverages exports business delivered a growth of 6% in an environment with challenging market conditions. The packet tea business grew strongly by 48% in the US market; as did the bulk tea business by 6%. Instant tea sales to Europe registered a strong growth of 32% while Instant coffee sales, primarily to CIS countries, grew by 31% in the latter half of the year after overcoming initial concerns relating to payment security. The tea bags business presents promising prospects in the coming years.

The marine exports business remained profitable despite a tough external environment emanating out of global recessionary trends and the strengthening of the Indian Rupee. Due to high commodity prices and a poor fish catch, surimi sales were lower by 39%. This was made up by higher sales growth in the value added crabstick segment (+19%), which benefited from a regular flow of orders from a widened customer base. This resulted in attaining highest production of crabstick in our Chorwad factory since inception. Rice exports were impacted by lower customer demand. Significantly, both marine and rice businesses added value to the bottomline despite the challenging environment.

Leather (Ponds Exports Limited)

The Leather business returned to operating profitability during the year after a focused restructuring exercise, despite severe recessionary trends in the EU. China continues to attract large volumes from the EU and the USA due to its well developed components market and significant cost advantages compared to Indias advantages of good quality leather and ability to service small/complex orders. In order to drive synergy, both upper and shoes divisions of the business were successfully combined to focus on cost competitiveness and provide better customer services.

5.5 Water

Pureit is a unique in-home drinking water purification solution that offers protection to children and families from waterborne diseases. Pureit runs with a unique Germ Kill Kit that removes all harmful viruses, bacteria and parasites to give drinking water that is as safe as boiled water. Leading national and international medical, scientific and public health institutions have tested Pureits performance. Most notably, Pureit meets the Germ Kill criteria of the Environmental Protection

Agency (EPA), the key drinking water regulatory agency in the USA. It provides this protection without the need for boiling, and without electricity or continuous tap water supply. It has a unique End of battery life indicator and Auto shut-off, which ensures that consumers do not get unsafe water.

In the course of the year, Pureit leveraged its safety credentials and launched the One Crore Safety Challenge campaign which educated consumers on the safety features that they must consider before purchasing a water purifier. The brand developed new distribution capabilities and established a national level presence in the consumer durable outlets. A new model, Pureit Auto Fill that connects directly with the tap and offers dual filling option (inline and manual) was launched towards in the second half of the year.

In line with Pureits mission of protecting lives from waterborne diseases, your Company believes that drinking water with highest safety standard is the fundamental right of every individual. Pureit was launched nationally in 2008 at an extremely affordable price, so that access to safe water does not remain confined to the affluent sections of society. In the past few years, Pureit has helped in creating mass awareness about the need for safe drinking water. In January 2010, your Company achieved another milestone in its mission of making safe drinking water available to every Indian. Pureit Compact was launched at a price point of Rs. 1,000. This will enable your Company to protect lives in the segment of society with lower purchasing power, where incidence of waterborne disease is the highest.

Pureit has already protected more than three million homes covering 1500 towns and cities across India in just two years of its national launch. The business received a number of awards during the period, reflecting the continued high regard held by the scientific community and by the public at large. Key amongst these is the prestigious British Government award for Consumer Product Innovation 2009 - 2010. The business is making good progress in line with plan.

5.6 Hindustan Unilever Network

The strategy of the network was redefined in line with its vision of empowering modern Indian woman by serving her with superior beauty and health care products through customised and professional services.

In the last one year, your Company has successfully transformed the Network into a Premium Personal- Care and Health Care channel. However, the key challenge for the business remains scale which needs to be enhanced significantly in order to improve the profitability of the business. Your Company is evaluating appropriate plans in this regard.

5.7 Beauty & Wellness Division

The growing disposable income and changing lifestyles in urban India has led to a greater awareness about personal grooming, health and wellness. These trends augur well for the Beauty and Wellness services sector, presenting a large and exciting opportunity. The Company currently operates in the Beauty and Wellness services segment largely through a network of franchised Lakme Beauty Salons. During the year, your Companys own Lakme Beauty Salons were transferred to Lakme Lever Private Limited (LLPL), a subsidiary of your Company. LLPL commenced operations during the course of the year with the objective of achieving excellence in execution by a specialised and dedicated team, passionate about beauty services and with a view to create and nurture a service mindset. The Company launched the Lakme Studio, a premium salon format commencing with Delhi which has shown early signs of success. Similarly, Lakme Studio have also been recently rolled out in Mumbai, Chennai, Hyderabad and Bangalore.

6. CUSTOMER MANAGEMENT

The year under review has been a landmark year in terms of customer management across channels with the roll out of new-age “Go to Market” model in 32 cities across the country. This model was successfully piloted in the Mumbai metro area featuring an efficient back end; a world class front-end; delivering innovations and activation schemes at a much faster pace to the market. Coupled with the Zero Inventory Plan, the “Go to Market” model has yielded significant dividends in terms of customer service and satisfaction. Customers today handle your Companys consolidated general trade business, with the ability to leverage scale with high efficiencies.

Your Company has also made great strides in expanding its rural distribution network, with significant investment made in expanding the infrastructure. Across the country, rural markets were brought under direct coverage, enabling better servicing and control. The ability to reach out into the corners of the rural market gives your Company a distinct competitive advantage. This has allowed us to offer the right assortment of packs to rural consumers, keeping up with rapidly changing needs and wants. The number of distributors in rural markets has been scaled up and rural salesmen are now being equipped with Hand Held Terminals to facilitate the order taking process and billing.

The Company has also deployed next generation technology in urban markets, with analytics based recommendations making selling campaigns more intelligent, and through Hand Held Terminal based applications, making selling more scientific and assortments more relevant to an outlet. It is henceforth possible to customise the range and quantity sold to every outlet.

Apart from investing in infrastructure and setting up IT enabled processes, your Company has embarked upon an enormous coverage expansion project, in both the rural and urban businesses. This expansion has been a scientifically driven process, facilitated by know-how such as digital maps to identify potential markets to be brought under coverage. Commencing with this initiative from the end of 2009, the Company expects to triple its rural coverage and improve urban coverage by 15%.

6.1 Project Shakti

Shakti is an initiative which focuses on reaching out to consumers in very small villages that typically have a population of less than 5,000 individuals. It is a great example of Doing Well by Doing Good as it serves two purposes simultaneously; it provides livelihood opportunities to women in rural areas and enhances the quality and depth of your Companys distribution.

The objectives of Shakti as a program are:

- leading market development efforts through consumer education programmes

- establishing a suitable livelihood opportunity for women irrespective of their background

- creating a self sustaining business model

- accessing markets beyond the reach of traditional distribution models

The Shakti programme is essentially built on two pillars: the Shakti Entrepreneurship program and the Shakti Vani program. The Shakti Entrepreneur program is a classic case of a win-win model involving a variety of stakeholders - the Company, women seeking livelihoods, women from Self Help Groups, Micro Finance Institutions and NGOs. The win-win model comes alive when an investment results in a sustainable business opportunity with little requirement for advanced business skills. The strength of the model lies in its simplicity wherein any woman who is interested in earning a livelihood can participate in the programme. Linkages such as microfinance facilitates working capital to start such businesses. Your Company makes significant investments in capability building through on-the-job training and classroom training programmes through a large and dedicated field force exclusively for Shakti Entrepreneurs. This helps build confidence and develop the business acumen necessary to run a micro- enterprise. Rural consumers also benefit by having access to some of Indias most trusted brands at their doorstep at affordable prices.

The Pureit pilot under the Shakti programme, which was launched in Andhra Pradesh, has been further scaled up to Orissa and Maharashtra. The objective of this initiative was to enhance the income of the Shakti Ammas enabling them to offer a high quality water purifying product to rural consumers at affordable prices. The Pureit addition is just the first step in increasing the bouquet of products which the Shakti Ammas can offer to her customers.

The Shakti Vani program focuses on building awareness about health and hygiene in the rural community. Vanis are trained communicators who target congregations such as village schools and mohallas and engage with key opinion leaders of villages like the sarpanch and the school teachers.

During the year, your Company piloted a new version of Vani where technology has been used to communicate with rural consumers. Animated films explaining the story of health and hygiene using the platform of our brands have been made accessible through hand held DVD players provided to the Vanis. Your Company is developing a model which can be scaled across larger geographies to impact a wider audience.

By the end of the year 2009, the Shakti network comprised 45,000 Shakti Ammas covering 1,00,000 plus villages across 15 states in the country and reaching over 3 million households every month.

7. SUPPLY CHAIN

Your Company has made significant progress in achieving the vision of delivering outstanding customer service while supporting sustainable growth for the Company. Improving service levels to ensure availability of products at all points in the Supply Chain was a key focus area during the year. Supply Chain service levels as measured by CCFOT (Customer Case Fill On Time) were the highest achieved in the recent past. IT solutions based on SAP application systems led to significant improvements in planning and logistics efficiencies.

The factories made significant progress in increasing plant and operational efficiencies and helped deliver innovations on time while working on improving product quality. The Companys initiative Levercare, focusing on connecting with customers and consumers, gave valuable inputs on product performance which helped to understand consumer behaviour and to improve the quality of certain products in design and manufacturing.

Continued focus was maintained through cross functional teams to drive cost effectiveness throughout the Supply Chain by identifying opportunities for eliminating waste. This helped the business achieve significant Supply Chain savings. Energy conservation activities through all our manufacturing sites have helped reduce specific energy consumption. Use of sustainable alternative bio-fuels has become the norm at many of our major manufacturing sites which has helped reduce fuel costs and carbon emissions. We also executed appropriate capital expenditure investments in creating fresh capacity in all categories. These investments have facilitated growth and de-bottlenecked capacities of existing assets. The principles of Total Productive Maintenance were applied and progress tracked across all the manufacturing sites. This has resulted in an increase in asset productivity levels.

Our buying function also delivered improved efficiencies and reduction in procurement costs, fully leveraging benefits of scale and synergy through Unilevers global buying network.

8. RESEARCH AND DEVELOPMENT

This is the 51st year of Research and Development (R&D) of your Company. Your Company has continued to build on this heritage by further strengthening the R&D Units in Bangalore and Mumbai with stronger integration with Unilever Global R&D. The R&D programmes are geared towards delivering bigger, better and faster innovations with a robust pipeline of radically new technologies with innovative consumer propositions. R&D in India continues to focus on Water Treatment, Health and Hygiene, Laundry, Skin Care, Tea, Ice Cream and Ayurveda.

Your Company continues to benefit from the strong linkages with the Global R&D organization of Unilever. This has become even more critical in the context of entry of many global players in the attractive Indian FMCG market. These players are keen to get a slice of the large and fast growing FMCG market in India. With the strong support from Unilever R&D as well as the brand development capabilities, your Company is well placed to meet the challenges arising from the increased competition intensity.

Your Company had entered into a Technical Collaboration Agreement (TCA) in August 1999 with Unilever PLC, which provided a non-exclusive license to manufacture specified products in accordance with and using the Technical Documentation, Information and Know-how in consideration of payment of royalty at the rate of 1% (net of tax) both on domestic and export sales of the specified products. In December 2009, the Board of Directors of the Company have approved amendments to the said TCA to include additional product categories where technical inputs are provided by Unilever as well as products of specified categories manufactured by third party manufacturers where technical inputs developed by Unilever are made available to the third party manufacturer. In addition, the Board have approved a trademark license agreement with Unilever which provides for payment of trademark royalty at the rate of 1% of net sales on specific brands where Unilever owns the trade mark and your Company is the licensed user. Both these amendments are well within the Government of India Guidelines for payment of royalty.

On the back of strong R&D initiatives, a number of new products were launched successfully in the market. Pureit, a breakthrough innovation of your Companys R&D, was launched with additional technical features such as Auto Shut-Off and Auto Fill that enhance its safety and convenience. A winter variant of a skin lightening formulation was developed and launched as Fair & Lovely Winter Fairness Cream. Also, during the year Lifebuoy was re-launched with clinically proven hygiene benefits.

Foods R&D continue to focus on delivering healthy options with superior taste and flavours. In 2009, Knorr soups were re-launched with new formulations without MSG and with 100% real vegetables. The Ice Cream business grew on the back of several successful innovations such as Cornetto variants - Strawberry Tease Cake and Black Forest. During the year, Beverages introduced a premium Green Tea, Lipton Clear Green and launched a new blend of Lipton Yellow Label with higher levels of Theanine. Your Company also re-launched a superior Bru Coffee with improved aroma.

The continuous stream of innovative and technically advanced products launched in the market was a result of significant R&D investments and the scientific talent that your Company can attract and retain.

India continues to occupy a premier position in Unilevers R&D initiatives with a significant share of Global Programmes backed by strong in-house scientific expertise. Your Company has been working aggressively towards building these expertise bases further to address emerging needs of our consumers and to retain our competitive edge in the market place.

The details of expenditure on Scientific Research and Development at the Companys in-house R&D facilities eligible for a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 for the year ended 31st March, 2010 are as under :

- Capital Expenditure : Rs. 1.05 crores

- Revenue Expenditure : Rs. 27.55 crores

Report of the Auditors in this regard is annexed at page no. 104 of the Annual Report.

9. ENVIRONMENT, SAFETY AND HEALTH AND ENERGY CONSERVATION

Your Company continues another significant year with focus on the vision of an Injury Free and Zero Environment Incidents organisation. During the year, your Company followed a three pronged strategy to achieve the vision. While continuing the safety journey through behavioral safety initiative as per the DuPont model, we renewed our focus on safety systems and processes, and an extensive road safety programme covering all employees was carried out.

The behavioral safety programme has now been in place for more than five years and continues to deliver better safety statistics and the leading indicators are becoming more rooted than ever before. Several measures have been implemented to revitalise safety systems and processes especially across the extended Supply Chain operations - in co-packing locations and in distribution centres.

Road risk assessments were conducted in key units and Road safety was taken as key thrust area during the year. Employees across the Company were extensively trained and educated on defensive driving and road safety measures. These efforts have led to a substantial improvement in safety performance across the Company.

Our environment agenda is marked by taking a progressive stance on several environmental issues that include launching voluntary initiatives to reduce GHG emissions, waste optimisation, and water conservation. During the year, 5 sites recorded water positive status and 28 sites became zero discharge units by re-using the treated ETP water within the factory premises. This was achieved through a combination of water conservation through optimisation of usage, plugging the wastage source, rain water harvesting and water recycling. In reviewing the environmental strategy in 2009, it was determined to retain focus on the fundamental priorities of managing environmental impacts of the operations, with a particular focus on key issues; driving continuous improvement; and complying with applicable laws and regulations.

On the energy conservation front your Company achieved substantial savings by carrying out energy audits across most units and implementing key projects to save energy. The use of bio-mass fuel has now been adopted by four units and many additional units are now exploring this option as an alternate fuel.

10. HUMAN RESOURCES

The Human Resources (HR) agenda for the year focused on strengthening four key areas - completing the final phase of the HR Transformation (HRT) programme that had been initiated in 2007; building organisational and individual capabilities; significantly enhancing people productivity to drive sustainable business growth and driving harmonious employee relations through progressive people practices at the shop floors.

HRT has been a business change programme that has impacted how we work across the organisation. At the core of this programme was world class IT enabled processes to efficiently manage Human Resources transactions. The programme also aligned HR systems and processes in a similar way across Unilever. The technology applications have been made available on a self service portal which has increased the productivity of every line manager and HR manager by freeing up their time from managing routine and transactional workload. The year marked the completion of this exercise as the HR transactions were successfully transferred to Accenture with high standards of delivery and performance.

The belief that great people create great organisations has been at the core of the Companys approach to its people. We continued to make significant investments for training in the areas of marketing excellence, customer service and building capabilities for organised retail trade. Many training programmes were delivered through classrooms, new capability building courses and external learning sessions. Our e-learning platform offers a bouquet of 3000+ courses via internet. Nearly 20,000 course registrations took place in 2009 providing access to learning anywhere, anytime.

Our ability to attract the best talent in the market has been a key factor of our success, thus the endeavour to sustain and fortify our employer brand. As per AC Neilsen study, the HUL employer brand made significant progress in 2009 and we continue to retain our top spot as the Dream Employer on all top B-School campuses.

In our factories, the TPMedge programme continued in full focus during the year and delivered significant improvement in factory operations. Education and training are important components of our approach to people and in consonance a License to Operate programme was created for Supply Chain officers which resulted in every officer undergoing at least three e-learning courses during 2009.

Our focus on proactive and employee focused shop floor practices, quick grievance resolution mechanisms and alignment to overall business goals ensured that there was practically no loss of man days due to industrial issues in 2009. Seven productivity linked long term settlements were signed through the process of collective bargaining involving over 2,200 employees. All these settlements were signed with zero disruption to business activity reflecting the maturity of workmen collectively. The process of rehabilitation was undertaken with utmost concern for our people. One unit went through a process of consolidation and there were some separations in the field force and Head Office. The process of separations was handled with the utmost care and sensitivity to our peoples needs.

An important development during the year was the resolution of the pending Sewree factory issue. Your Company signed an amicable settlement, with the Union representing erstwhile workers of the Sewree factory, with regard to all the pending issues and cases, including closure of the factory. The settlement, which benefited about 800 workers, was achieved by rebuilding high level of trust between the ex-employees, union and management, and was signed in the presence of the Labour Secretary, Government of Maharashtra. As per the settlement, the erstwhile workers will receive benefits of the VRS offered at the time of closure of the factory.

11. INFORMATION TECHNOLOGY

Your Company continues to invest in Information Technology and leverage it as a source of competitive advantage.

As part of the backbone IT capability for Sales and Customer Development, we successfully established a common transaction system that is used by all Redistribution Stockists and that is fully integrated with Companys systems. Distributor salesmen use a Hand Held Terminals as an aid for taking retail orders. In 2009, we have enhanced this capability for analytics and intelligent sales calls. As part of the thrust of further improving our direct coverage in rural areas, we are leveraging geospatial aids extensively. We have also established an IT enabled consumer interaction centre for addressing complaints and suggestions.

An enterprise wide SAP platform was a significant capability created over the last few years. This forms the foundation for all business processes in the Company and for collaboration with our suppliers and customers. It provides a comprehensive data warehouse with analytics capability that helps in better and speedier decisions. Supply Chain optimisation, enabled by this IT capability, is a source of significant value.

We continue to invest in IT infrastructure to support business applications. We have leveraged the expanded telecom footprint in the country to provide high bandwidth terrestrial links to all operating units. Video conferencing is extensively used to collaborate across locations while reducing travel costs.

As the IT systems become more sophisticated and mission critical, there is continuous focus on IT security and on reliable disaster recovery management processes. These are periodically reviewed and tested to provide reassurance on their efficacy and adequacy.

12. FINANCE AND ACCOUNTS

Focus on cash generation continued and we delivered a strong operating cash flow during the year; this was driven by the business performance, efficiencies and cost savings across Supply Chain and greater focus on working capital management. Your Company managed the investments prudently by deployment of cash surplus in a balanced portfolio of safe and liquid instruments. Capital Expenditure during the year was at Rs. 572 crores (during the 15 months period ended 31st March, 2009 - Rs. 609 crores) and was in the areas of capacity expansion, consolidation of operations, information technology, energy and other cost savings.

The Company has not accepted any fixed deposits during the year. There was no outstanding towards unclaimed deposit payable to depositors as on 31st March, 2010.

In terms of the provisions of Investor Education and Protection Fund (awareness and protection of investors) Rules, 2001, Rs. 2.67 crores of unpaid/unclaimed dividends, interest on debentures and deposits were transferred during the year to the Investor Education and Protection Fund.

Return on Net Worth, Return on Capital Employed and Earnings Per Share (EPS) for the last four years and for the year ended 31st March, 2010 are given below:

For the year 2005 2006 2007 Period ended 2009 - 10 31st March, 2009

Return on Net Worth (%) 61.1 68.1 80.1 103.6* 88.2

Return on Capital Employed (%) 68.7 67.0 78.0 107.5* 103.7

Basic EPS (after exceptional items) (Rs.) 6.40 8.41 8.73 11.46** 10.10

*Annualised numbers for proportionate period

** for fifteen month period

Key figures for 12 months comparison

As indicated earlier, the full year audited results for the period ended 31st March, 2009 were for a 15 months period. Hence, these are not comparable with the full year audited results for the year ended 31st March, 2010. However, on a memorandum basis, for comparative purposes, the audited results for year ended 31st March, 2010 along with the un-audited results for the 12 months period ended 31st March, 2009 are given below:

- Net Sales for 2009-10 at Rs.17,523.80 crores (2008-09: Rs.16,476.75 crores) grew by 6.4%.

- Profit from Operations before Interest and Exceptional items for 2009-10 at Rs.2,565.94 crores (2008-09: Rs. 2,396.06 crores) grew by 7.1%.

- Profit after Tax from ordinary activities before exceptional items for 2009-10 at Rs.2,058.71 crores (2008-09:Rs. 2,065.20 crores) declined marginally by 0.3%.

- Net Profit for 2009-10 at Rs. 2,202.03 crores (2008- 09: Rs. 2,115.50 crores) grew by 4.1%.

Segment-wise results

Your Company has identified seven business segments in line with the Accounting Standard on Segment Reporting (AS-17). These are: (i) Soaps and Detergents, (ii) Personal Products, (iii) Beverages, (iv) Foods, including culinary and branded staples, (v) Ice Creams, (vi) Exports, and (vii) Others, including Water. The audited financial results of these segments are given as part of financial statements.

13. MERGERS, ACQUISITIONS, JOINT VENTURES AND DISPOSALS

13.1 Divestment of 49% shareholding in Capgemini Business Services (India) Limited to Cap Gemini SA

In October 2006, your Company divested its 51% controlling stake in Unilever India Shared Services Limited, now known as Capgemini Business Services (India) Limited (CGSL) to Cap Gemini SA. Your Company believed that the business would benefit from the systems and processes brought in by a leading player in the BPO space. Cap Gemini SA had a call option for the balance 49% stake in CGSL.

Consequent to the exercise of the call option by Cap Gemini SA in March 2010, the balance stake of 49% in the business held by the Company has been sold to Cap Gemini SA for a consideration of Rs. 91.1 crores.

13.2 Merger of Bon Limited with the Company

Bon Limited a wholly owned subsidiary of your Company was not engaged in any significant business activity since 2003. During the year 2005, your Companys undertaking at Sewree (Mumbai) was transferred to Bon Limited pursuant to Section 293(1)(a) of the Companies Act, 1956 to facilitate transparent understanding and review of viability of the unit costs and productivity on a standalone basis.

Despite all efforts by your Company, the undertaking could not be revived and was eventually closed after following the due process of law in July 2006. All legal issues with relation to the undertaking have been settled and Bon Limited was not having any operations. Therefore, for the purpose of administrative simplification, the Board of Directors of your Company, subject to the necessary approvals, decided in January 2010 to merge Bon Limited with your Company with effect from 1st April, 2009.

The Honble High Court of Bombay has, vide its order dated 16th April, 2010, approved the scheme of amalgamation of Bon Limited with the Company. The appointed date for the above mentioned scheme was 1st April, 2009 and the scheme has been made effective from 28th April, 2010 i.e. from the date of filing certified copy of order of Honble High Court with the Registrar of Companies, Mumbai.

14. EMPLOYEE STOCK OPTION PLAN (ESOP)

Details of the shares issued under ESOP, as also the disclosures in compliance with Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in the Annexure to this Report.

No employee has been issued share options, during the year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant.

Pursuant to the approval of the Members at the Annual General Meeting held on 29th May, 2006, the Company adopted the 2006 HLL Performance Share Scheme. The Scheme has been registered with the Income Tax authorities in compliance with the relevant provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. As per the terms of the Performance Share Plan, employees are eligible for the award of conditional rights to receive equity shares of the Company at the face value of Re. 1/- per share. These awards will vest only on the achievement of certain performance criteria measured over a period of 3 years. 192 employees, including Wholetime Directors, were awarded conditional rights to receive a total of 6,16,121 equity shares at the face value of Re. 1/- each. The above mentioned comprises of conditional grants made to eligible managers for calender years 2009 and 2010 covering performance periods 2009-2012 and 2010-2013 respectively.

15. CORPORATE GOVERNANCE

Your Company has been practising the principles of good Corporate Governance over the years and lays strong emphasis on transparency, accountability and integrity. A separate section on Corporate Governance is given on page no. 44 of the Annual Report and a Certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange(s) and a certificate of the CEO & CFO in terms of sub-clause (v) of Clause 49 of Listing Agreement, inter alia, confirming the correctness of the financial statements, adequacy of the internal control measures and reporting of matters to the Audit Committee is annexed to the Corporate Governance Report.

The Ministry of Corporate Affairs, Government of India, during the year introduced the Corporate Governance Voluntary Guidelines, 2009. These guidelines have been issued with the view to provide Corporate India a framework to govern themselves voluntarily as per the highest standards of ethical and responsible conduct of business. The recommendation of the Voluntary Guidelines pertaining to separation of offices of the Chairman and the CEO, constitution of Audit Committee and Remuneration Committee, Risk Management framework, are already practised by your Company. Your Company, while in substantial compliance of these guidelines, had initiated appropriate action for implementation of these guidelines.

15.1 Risk and Internal Adequacy

Your Company manages cash and cash flow processes assiduously involving all parts of the business. There was net cash surplus of Rs. 1,892.21 crores as on 31st March, 2010. The Companys debt equity ratio is very low which provides ample scope to gear up the Balance Sheet should that need arise. Foreign exchange transactions are always fully covered with strict limits placed on the amount of exposure, if any, at any point in time. There are no materially significant uncovered exchange rate risks in the context of Companys imports and exports. Company accounts for mark to market gains or losses at every quarter end in line with the requirements of AS-11. These are being highlighted separately every quarter.

Companys internal control systems are well commensurate with the nature of its business and the size and complexity of its operations. These are routinely tested and certified by Statutory as well as Internal Auditors and cover all the offices, factories and key areas of business. Significant audit observations and follow up actions thereon are reported to the Audit Committee.

Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations including those relating to strengthening of the Companys risk management policies and systems.

Your Company has an elaborate process for Risk Management. This rests on the three pillars of Business Risk Assessment, Operational Controls Assessment and Policy Compliance at all levels through a Positive Assurance Process. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed with both Management Committee and Audit Committee. Some of the risks relate to competitive intensity, pressure on margins and slower market growth and/ or downtrading.

15.2 Outlook

It is believed that Indias GDP will continue to witness strong growth in the future. However, managing growth and inflation will be a key challenge for India in the near term. The agricultural growth is expected to pick up in the last quarter of the fiscal year 2009-10 on account of a good Rabi crop. As global trade continues its recovery, Indian industry is expected to continue its strong growth, since over 1/3rd of Indias manufacturing output is exported. Export growth has been positive since November 2009, which is an encouraging sign for the manufacturing sector.

Indias improving growth prospects, augurs well for the economy as a whole and for the FMCG sector in particular. The FMCG categories in which your Company operates have significant growth potential given

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