FINANICAL ANALYSIS AND REPORTING

PRATICAL.1 : Analysis of an annual report of a listed company

Analysis of Annual Report of Godrej Industries

Name:- Madhura Khedkar

Roll No.;- 9
 Contents

1.Introduction
2.Analysis of Reports
3. Accounting Policies
4.Performance Analysis
5. Ratio Analysis
6.Commonsize Financial Statements
7. Trend Analysis
8.Comparison with Industry
9.Market Analysis
10. Conclusion
1.Introduction

Godrej Consumer Products Ltd.(GCPL) is a major player in the Indian FMCG market
with leadership in personal, hair, household and fabric care segments. The company employs
950 people and has three state-of-the-art manufacturing facilities at Malanpur (M.P.)
Guwahati (Assam) and Baddi (H.P). About Godrej Industries Ltd.
Godrej Industries Ltd., incorporated in the year 1988, is a Mid Cap company (having a market
cap of Rs 12977.49 Crore) operating in Diversified sector.
Godrej Industries Ltd. key Products/Revenue Segments include Personal Care which
contributed Rs 1762.92 Crore to Sales Value (82.22 % of Total Sales), Dividend which
contributed Rs 341.49 Crore to Sales Value (15.92 % of Total Sales), Export Incentives which
contributed Rs 21.66 Crore to Sales Value (1.01 % of Total Sales), Rental Income which
contributed Rs 15.43 Crore to Sales Value (0.71 % of Total Sales) and Scrap which contributed
Rs 2.49 Crore to Sales Value (0.11 % of Total Sales)for the year ending 31-Mar-2019.
For the quarter ended 30-06-2019, the company has reported a Consolidated sales of Rs
2845.06 Crore, down -1.46 % from last quarter Sales of Rs 2887.19 Crore and down -3.60 %
from last year same quarter Sales of Rs 2951.31 Crore Company has reported net profit after
tax of Rs 91.40 Crore in latest quarter.
The company’s top management includes Dr.Ganapati D Yadav, Mr.Adi Godrej, Mr.Aspy
Cooper, Mr.Jamshyd Godrej, Mr.K M Elavia, Mr.K N Petigara, Mr.Mathew Eipe, Mr.Nadir
Godrej, Mr.Nitin Nabar, Mr.Vijay Crishna, Ms.Rashmi Joshi, Ms.Tanya Dubash. Company
has BSR & Co. LLP as its auditoRs As on 30-06-2019, the company has a total of 336,384,367
shares outstanding

The current operating environment of the Company consists of many competitors in this
segment – namely, HUL, Marico, Dabur, ITC, Wipro FMCG, Emami. Since GCPL operates
in the mid-market segment it has not been affected by the current economic crisis. In fact, due
to recession, many consumers would have shifted from premium to next lower segment. That’s
why the company’s Annual Report highlights – ‘’Creating Opportunities in Adversity’.

FMCG Sector: The FMCG sector in India is growing at a fast pace and more and more
companies are diversifying in this sector – the last major one being ITC. So GCPL needs to
formulate new strategies to maintain the growth rate it has enjoyed till date. With the per capita
income rising and the expansion in retail chains, GCPL needs to ensure visibility to consolidate
its position.
Technical: In today’s world business in driven by consumers. Constant Innovation is the way
to improve performance. Extensive R&D in personal care products and technical developments
to minimize costs is something GCPL needs to focus on to deal with global giants.

Legal: The modern day consumer is very conscious and alert about the harmful effect of
chemicals. The raw material input should be as per standards set by the regulatory authority to
avoid any legal action against the company. Legal proceedings can permanently damage the
reputation.

Political Consideration: In the next few years, rural markets, having huge number of
‘prospective consumers’ is going to be the new domain of many FMCG giants. To tap the rural
market, and avoid resistance from small local players in these markets, the company needs to
have political support to grow ahead with its expansion plans, if any.

INDUSTRY STRUCTURE AND DEVELOPMENT

As per The World Economic Outlook (WEO) update, around 120 economies accounting for
three quarters of world Gross Domestic Product (GDP), saw a pickup in growth in year-on-
year terms in 2017, the broadest synchronized global growth upsurge since 2010. Global
output is estimated to have grown by 3.7% in FY17. The International Monetary Fund (IMF)
has raised its growth forecasts for 2018 to 3.9%, expecting the global economy to continue to
recover on the back of buoyant trade and investment.
IMF projected, India to grow at 7.4% of its GDP in FY18 as compared to China’s 6.6%,
making it the fastest growing economy among emerging economies.
The World Bank in its India Economic Update expects the economic growth to accelerate to
7.3% in FY19 and 7.5% in FY20.
In FY18, the first half of the year was impacted by issues such as lingering effects of
demonetization, difficulties in implementation of Goods and Service Tax (GST). However, in
the second half of the year the economy witnessed robust signs of revival. Economic growth
improved, corrective actions were taken, and the global economic recovery boosted exports.
Recent sovereign ratings upgrade and jump in World Bank’s Ease of Doing Business
rankings are endorsements of government reforms and policies. In FY19 also, growth is
expected to be driven by increase in exports due to acceleration in global growth, expected
rebound in private investments and increase in consumption demand. However, persistent
high oil prices (at current levels) remain a key risk, which would adversely affect inflation,
the current account balance, the fiscal position and growth. This will force macroeconomic
policies to be tighter.
Agriculture sector and its allied activities are estimated to have registered a moderate growth
rate of 3.4% in the fiscal year. This was mainly due to the high base effect of FY17 which
saw a very high growth rate as it followed two years of drought. In terms of monsoon, FY18
experienced an overall ‘normal’ monsoon at 95% of long period average (LPA - measured for
the trailing 10 year period).
The Indian Meteorological Department (IMD) in its first monsoon forecast for the season has
predicted a ‘normal’ monsoon for the upcoming FY19, brightening the chances of an
accelerated growth for the sector. Good monsoons help to improve the poor sentiment
prevailing in the rural economy and the sector expects bumper Kharif and Rabi crops.
Further, agriculture and allied sector has also received a lot of impetus in the Union Budget.
Recent endeavor of the Government to formulate a separate exports policy for agriculture is
also a step in the right direction to achieve the dream of doubling farmer incomes. However,
climate change and high dependence on monsoon for sector growth continue to be the key
risks.
Commodity price remained range bound during FY18. There is over capacity for Fatty
Alcohol, however, global manufacturer were running the plants at lower capacity which
helped in protecting the margin. Also good demand of Glycerine helped overall Oleo-
chemical Industry. Indian surfactants demand continues to be robust mainly driven by growth
in detergent, shampoo and hand wash consumption.
According to a report by CREDAI and JLL India, Indian real estate sector is projected to
reach a market size of $180 billion by FY20, a sharp rise from $126 billion in FY15. The
housing sector’s contribution to the Indian GDP is expected to almost double to more than
11% by FY20 up from estimated 5-6%.
Fragmentation in real estate sector is high, not just on a national level, but on a city level too.
However, disruption - starting with demonetization in FY16 and institutionalized via the Real
Estate Regulatory Act (RERA) reform in FY17 has triggered accelerated consolidation.
Customer preferences also have shifted towards better quality and branded developments.
Access to cheaper capital has gained importance as working capital requirements rise. The
organized sector should be able to more than double its market share of the residential
property market, to nearly 20% over the next five to seven years.
Improvement in the current subdued job creation/income growth outlook could lead to even
faster growth. Developers with a scalable business model are better placed to grow market
share in a regulatory environment demands greater accountability and transparency from
developers.
The affordable housing segment is expected to continue to drive the real estate sector in
FY18 with several developers and institutional funds eyeing opportunities in this space.
Various initiatives from the Government of India under Pradhan Mantri Awas Yojona, or
rationalizion of GST rates on affordable and low-cost housing, which attracts a GST of 8%
on the total value of under-construction properties, which is 4% less than the earlier effective
rate of 12% or to set up dedicated affordable housing fund under the National Housing Bank,
to boost demand and supply of low-cost homes. The end-user demand in this segment along
with the government’s thrust through incentives such as granting infrastructure status is
ensuring a rising appetite for such projects across the country.
There is a separate section on Management Discussion and Analysis appended as Annexure
A to this Report, which includes the following:
- Discussion on financial performance with respect to operational performance
- Segment wise performance
- Human Resources and Industrial Relations
- Opportunities and Threats
- Internal Control Systems and their adequacy
- Risks and Concerns
- Outlook
Subsidiary and Associate Companies
Your Company has interests in several industries including animal feeds, poultry, dairy and
agroproducts, oil palm plantation, property development, personal and home care, etc.
through its subsidiary and associate companies.
Godrej Agrovet Limited (GAVL)
GAVL is a subsidiary of your Company and is a diversified agri-business company with
interests in animal feed, crop protection, dairy and oil palm business. GAVL also has a joint
venture with the ACI Group in Bangladesh for the feed business and with Tyson Foods Inc.,
USA for the poultry and processed food business. This year was a landmark year for GAVL,
as it went public through an Initial Public Offer (IPO) and was listed on the stock exchanges.
The IPO was oversubscribed by 96 times.
During FY18, agriculture and allied activities is estimated to have registered a moderate
growth rate of 3.4%. This was mainly due to the high base effect of fiscal 2016-17 which saw
a very high growth rate as it followed two years of drought. In terms of monsoon, fiscal
2017-18 experienced an overall ‘normal’ monsoon at 95% of long period average (LPA -
measured for the trailing 10 year period). Also, crop production business of GAVL remained
robust for FY18 resulting in lower commodity prices during the year.
GAVL recorded consolidated revenues of Rs.5,206 crore during FY18 compared to revenues
of Rs.4,926 crore during FY17, registering a year-on-year growth of 5.7%. Consolidated
profit before tax (excluding the non-recurring and exceptional items) was at Rs.360 crore
during FY18 representing a year-on-year growth of 10.8%. Revenue growth was mainly
driven by crop protection, vegetable oil and dairy business segments.
Animal Feeds:
The animal feed business of GAVL has shown a volume growth of 7.4% during FY18 driven
by cattle feed and layer feed. GAVL was also successful in arresting the volume decline seen
in the past few years in the broiler feed segment, despite intense competition. However, the
volumes in the shrimp feed and fish feed segments saw a decline compared to FY17. GAVL
continues to remain committed to invest in Research & Development in the animal feed space
which will help GAVL in creating differentiated offering in the segment and help in
increasing our market share over the medium-term.
Crop Protection Business:
In FY18, GAVL’s crop protection business has registered a growth of 13.2% in the
standalone revenues. GAVL successfully introduced new products which helped in
increasing the penetration both in strategic crops and in new geographies.
Oil Palm:
In the crude palm oil business, volumes growth remained robust for both crude palm oil and
palm kernel oil. The Oil Palm business clocked a consolidated revenue of Rs.585 crore in
FY18. The business converts the oil palm biomass into value added product and this
contributes to the profitability of the business. Latest technology has been deployed in this
plant which is expected to increase the operational efficiencies.
Astec LifeSciences Limited & Its Subsidiaries:
Astec LifeSciences Limited is a subsidiary of GAVL and operates in the crop protection
segment. In FY18, Astec’s consolidated performance remained robust as it posted revenues
of Rs.371 crore, a growth of 18.6% over the previous financial year. Profit before exceptional
items and tax also increased to Rs.52 crore during FY18 up by 31% on a year-on-year basis.
Creamline Dairy Products Limited (CDPL) & Its Subsidiary:
CDPL is a subsidiary of GAVL and operates in the dairy segment. CDPL focuses on
increasing its market share in the southern states in which it operates. Further, CDPL also
increased the share of value added products in its portfolio. CDPL recorded a revenue growth
of 14.6% during FY18.
Joint Ventures (JVs) & Associates of GAVL:
Godrej Tyson Foods Limited:
The Joint Venture with Tyson Foods Inc., USA, recorded revenues of Rs.434 crore during
FY18 as compared to Rs.446 crore during the previous year. The joint venture continues to
focus on building its current brands namely ‘Real Good Chicken’ and ‘Yummiez’.
ACI Godrej Agrovet Private Limited, Bangladesh:
The joint venture continues to remain among the top four players in Bangladesh in all the
feed categories it operates. ACI posted sales of Rs.675 crore during FY18, registering a year-
on-year growth of 11.8%.
Godrej Maxximilk Private Limited
Godrej Agrovet has 49.9% stake in this associate and GAVL has plans to foray in cattle
breeding under this entity
Godrej Properties Limited (GPL)
Financial Highlights: For FY18, GPLs total income increased by 38% and stood at Rs.2,397
crore, EBITDA increased by 25% to Rs.503 crore, and net profit increased by 14% to Rs.235
crore.
Sales Highlights: This has been the best ever year in GPL’s history in terms of the value and
volume of real estate we have been able to sell. For the first time in its history, GPL has
delivered sales of more than Rs.1,000 crore in each of the four quarters of the financial year.
Also, for the first time, GPL has emerged as amongst the top three developers by value of
real estate sold in each of the four focus markets of Mumbai, NCR, Bangalore, and Pune. In
FY18, GPL was the largest developer in NCR, the second largest developer in Mumbai &
Pune, and the third largest developer in Bangalore by value of real estate sold. GPL sold more
than 1.25 million sq. ft. with a booking value of over INR 800 crore in each of the four focus
markets viz. Mumbai, NCR, Bangalore and Pune. This has largely been possible by
combining our traditional strength in new launches with a strong improvement in sales from
existing inventory, which stood at Rs.2,780 crore in FY18. The total value of bookings in
FY18 stood at Rs.5,083 crore, which represents a 152% year-on-year increase. We are
especially pleased with this sales performance given that sales for the industry as a whole
have declined during the financial year.
Continued success in business development:
FY18 has also been the best ever year for business development in the history of GPL in
terms of the number of new projects added. GPL added 12 new projects with saleable area of
23.5 million sq. ft. More than 80% of the area added in FY18 is in partnership with other real
estate developers and all the projects added are in the four largest real estate markets in India.
Global recognition for sustainability initiatives:
GPL was ranked 2 nd in Asia & 6th globally by GRESB (Global Real Estate Sustainability
Benchmark) - An industry-driven organization which assesses Environmental, Social and
Governance (ESG) performance of real estate assets globally.
Outlook: The Indian real estate sector is on the cusp of a major transformation. India’s
fragmented property sector is witnessing a major change as far-reaching reforms like the
introduction of GST and The Real Estate (Regulation and Development) Act, 2016 (RERA)
drive consolidation. These changes combined with the most affordable house prices in
decades should lead to an improvement in sentiment which is extremely important for the
revival of the sector. High-quality developers, with a greater focus on the residential market,
will benefit disproportionately from this cyclical upturn. With growing transparency and
improving policies, the country’s real estate sector is expected to become more
institutionalized and we expect 2018 to be a year of consolidation and recovery for the
property sector. We strongly believe our focus on building presence in high return markets
with a deep focus on execution across our project portfolio puts us in a strong position to
benefit from a robust recovery in the sector and improve market share in the years ahead.
Natures Basket Limited (NBL)
Natures Basket Limited delivered a healthy top line of Rs.291 crore for FY18, a growth of
18% over the previous year.
NBL, during the year, worked on defining the long-term strategy for its business. Mumbai,
Pune and Bangalore continue to be focus markets for NBL from the perspective of both
revenue growth and profitability. NBL’s overall customer base increased by over 13% in
FY18.
NBL would like to excel and be a leading Omni Channel player by focusing strongly on
Instore as well on line business channels in Daily Food Delight space. The online business
clocked a sale of Rs.19 crore in FY18, a growth of 10% over the previous year. NBL
continues to improve its website and App experience through regular updates and
improvements.
During the year, NBL introduced i-Pro, an Operations Excellence initiative, which looks to
improve performance through:
1) Improved Inventory Management
2) Better customer experience
3) Increased staff efficiency.
The brand continues to win awards in forums like Food & Grocery forum, Franchise India
Retail Award for Omni Chanel performance, TRRAIN awards for Customer service etc.
Godrej Consumer Products Limited (GCPL)
Godrej Consumer Products (GCPL), an associate of your Company, has continued to grow
ahead of the overall FMCG sector, as well as the home and personal care categories that it
participates in, despite a challenging macro environment.
On a consolidated basis, GCPL reported a total sales of Rs.9862 crore during the FY18
compared to Rs.9584 crore for FY17. The net profit grew by 25% at Rs.1634 crore as
compared to Rs.1304 crore during FY17.
GCPL is a leading emerging markets company. As part of the 121-year young Godrej Group,
GCPL is fortunate to have a proud legacy built on the strong values of trust, integrity and
respect for others. At the same time, we are growing fast and have exciting, ambitious
aspirations.
Today, the Godrej Group enjoys the patronage of 1.1 billion consumers globally, across
different businesses. In line with its 3 by 3 approach to international expansion, GCPL is
building a presence in 3 emerging markets (Asia, Africa, Latin America) across 3 categories
(home care, personal wash, hair care). It ranks among the largest household insecticide and
hair care players in emerging markets. In household insecticides, it is the leader in India, the
second largest player in Indonesia and are expanding its footprint in Africa. It is the leader in
serving the hair care needs of women of African descent, the number one player in hair
colour in India and Sub-Saharan Africa, and among the leading players in Latin America. It
also ranks number two in soaps in India and is the number one player in air fresheners and
wet tissues in Indonesia.
However, it is very important that besides our strong financial performance and innovative,
much-loved products, GCPL remains a good company. Approximately 23 per cent of the
promoter holding in the Godrej Group is held in trusts that invest in the environment, health
and education. We are also bringing together our passion and purpose to make a difference
through our ‘Good & Green’ approach to create a more inclusive and greener India.
At the heart of all of this, is a talented team. GCPL takes much pride in fostering an inspiring
workplace, with an agile and high performance culture. It is also deeply committed to
recognising and valuing diversity across our teams.
Other Subsidiaries
Godrej International Limited (GINL) is incorporated in the Isle of Man and is a wholly
owned subsidiary of the company. GINL trades worldwide in vegetable oils.
Godrej International Trading & Investments Pte. Ltd. (GITI) is registered and located in
Singapore and trades in palm and soya oil as well as in byproducts.
Vegetable oil markets were affected by adverse factors notably when India raised import
duties in July, then in November 2017 and finally again in March 2018. India is the world’s
biggest importer and casts a huge impact on price behavior. Uncertainty on bio diesel as a
result of Trump Administration wavering and EU protectionism also affected the market. As
a result both GINL & GITI had a modest year. GINL & GITI continued to enjoy a high
reputation in the industry for their market research and their frequent Markey Outlook
releases.
Ensemble Holdings & Finance Limited (EHFL), a wholly owned subsidiary of your
Company, is a Non-Banking Finance Company. The total income of EHFL for FY18 was
Rs.0.62 crore as compared to Rs.0.15 crore in the previous year.
Pursuant to Regulation 16(1 )(c) of the SEBI (Listing Obligations and disclosure
requirements) Regulations, 2015 (Listing Regulations), your Company has formulated a
policy for determining its ‘material subsidiaries’. The said policy has been uploaded on the
Company’s
website: http://www.godreindustries.com/Resources/pdf/ compiiances/materiai_subsidiari
es.pdf
Financial Position
The loan funds at the end of the year stand at Rs.2,704 crore as compared to Rs.2,862 crore
for the previous year. The Net debt equity ratio is 1.47 as compared to 1.76 last year. Your
Company continues to hold the topmost rating of [ICRA] A1 from ICRA for its commercial
paper program (Rs.1000 crore) (previous year Rs.1000 crore). ICRA has reaffirmed an
[ICRA] A1 rating for its short term debt instruments/other banking facilities (Rs.800 crore)
(previous year Rs.800 crore). This rating of ICRA represents highest-credit quality carrying
lowest-credit risk. ICRA also reaffirmed [ICRA]AA rating with stable outlook for long-term
debt, working capital and other banking facilities (Rs.1340 crore) (previous year Rs.1015
crore). The ICRA rating of [ICRA]AA for Non-convertible Debenture programme & MAA
for Public Deposit programme has been discontinued as there is no amount outstanding
against these instruments. In addition to the ICRA rating for commercial paper programme,
CRISIL has also assigned a rating of “CRISIL A1 ” to the commercial paper programme of
Rs.1000 crore. Instruments with these ratings are considered to have very strong degree of
safety regarding timely payment of financial obligations.
Manufacturing Facilities
Your Company has manufacturing units at Ambernath, Valia, Wadala and Dombivli.
The Ambernath factory is ISO-9001:2008, ISO 14001:2004, ISO 18001:2007 certified. Over
the last year the factory also got re-certified for FSSC 22000 (Food safety management
system) for Glycerine and ISO 22716 (Good manufacturing practices) for cosmetics. The
factory has also achieved considerable energy savings over the last year
The Valia factory is ISO-9001:2015, ISO 14001:2015, ISO 18001:2007certified. The Factory
has also got certification from FDA, FSSAI and Kosher GMP B2 for Palmitic acid used as
Animal feed. We are member of RSPO (Roundtable on Sustainable Palm Oil). The Valia
factory has successfully got USP NF certification for fatty alcohol as excipient during the
year 201718. Company has continuously invested in plants for making specialty products.
Vegoils Division (Wadala) manufactures & sells Edible Oils under “Godrej” Brand. This
factory is ISO 22000-2005 (Food safety management system) certified. The factory also has
Kosher and Halal certificate. This is also FSSAI and FDA approved facility with cleanroom
to supply Pharmaceutical grade oils and Vanaspati (IP and BP) Packing facility under factory
partially renovated as per Schedule IV of FSSAI norms. The factory produces variety of
product range of oils & Vanaspati e.g. Sunflower oil, Ground nut oil, Filter Ground nut oil,
Sesame oil, Rice bran oil, Palmolein oil and Vanaspati.
The Dombivali unit has flexibility of producing multiple value added products, mainly fatty
esters and amide, used in personal and home care products.
Research and Development (R&D)
During the year under consideration, our R&D activities have resulted in the innovative
process improvements for existing range of products and also launch of several new products.
Majority of these new products are high value derivatives of fatty acids and fatty alcohols,
with applications in home, personal care products, animal feeds and agricultural products.
Besides our efforts to manufacture and improve the premium quality fatty acids and fatty
alcohols using alternate raw materials, the endeavor to develop new processes through
innovations and advanced technologies will be an ongoing activity. We will also continue to
focus our attention on high value fractionated fatty acids and fatty alcohols for the
applications in polymer, oilfield, lubricant and paper industries. Parallel to all the above oleo
chemicals projects, R&D continues its efforts in developing improved and customized
specialty surfactants, biosurfactants and home & personal care ingredients and their blends,
through inhouse and external consultation routes.
Human Resource Development and Industrial Relations
During the year under review, industrial relations at all plant locations remained harmonious.
Your Company emphasizes on the safety of people working in its premises. Structured safety
meetings were held and safety programmes were organized for them throughout the year.
The total number of persons employed in your Company as on March 31, 2018 were 1129.
Business Responsibility Report
SEBI, vide its circular SEBI/LAD-NRO/GN/2015-16/27 dated December 22, 2015 had
mandated inclusion of Business Responsibility Reports (BRR) as part of the Annual Reports
for top 500 listed entities based on market capitalization as on March, 31 of every financial
year.
A detailed report on your Company’s sustainability initiatives is published in the Business
Responsibility Report, as ‘Annexure B’ and forms a part of this report. The BRR describes
the initiatives taken by the Company from an environment, social and governance
perspective.
Information Systems
Your Company had a smooth implementation of all GST related system changes in our ERP
package - SAP in time thus ensuring compliance with the new tax law.
Your Company implemented Sales and Operations Planning Module in SAP to increase
customer satisfaction and enable better order fulfilment.
Employee Stock Grant Scheme 2011 (ESGS) and Employee Stock Option Plan (ESOP)
During the year, the Nomination and Compensation Committee approved a total of 1,03,828
stock grants equivalent to 1,03,828 equity shares of the Company to eligible employees in
terms of the ESGS 2011 Scheme. The exercise price is Rs.1/- per equity share. As on March
31, 2018 and in terms of the ESGS Scheme, 2011, a total of 1,34,866 grants were vested and
1,32,945 were exercised and allotted.
Disclosure in compliance with Section 62 of the Companies Act, 2013, rule 12 of companies
(share capital and debentures) rules, 2014, SEBI (Share based employee benefits) regulations,
2014 and The SEBI (Employee Stock Options Scheme and Employee Stock Purchase
Scheme) Guidelines 1999 is given in Annexure C attached and forms a part of this report.
Fixed Deposits
Your Company is currently not accepting public deposits. The Company has no overdue
deposits other than unclaimed deposits.
Depository System
Your Company’s equity shares are available for dematerialization through National Securities
Depository Limited and Central Depository Services (India) Limited. As of March 31, 2018,
99.84% of the equity shares of your Company were held in demat form.
Directors
In accordance with the Articles of Association of the Company, the following directors retire
by rotation at the ensuing Annual General Meeting and being eligible offer themselves for
reappointment;
- Mr. V. M. Crishna (DIN: 00066267)
- Mr. N.S.Nabar (DIN: 06521655)
Your Company had appointed following NonExecutive (Independent) Directors pursuant to
Regulation 17 of the Listing Regulations and they are not liable to retire by rotation as per
Companies Act, 2013 (the Act);
- Mr. S.A.Ahmadullah (DIN 00037137)
- Mr. A. B. Choudhury (DIN 00557547)
- Mr. K. K. Dastur (DIN 00050199)
- Mr. K. M. Elavia (DIN 00003940)
- Mr. A.D.Cooper (DIN 00026134)
- Mr. K. N. Petigara (DIN 00066162)
Your Company has received declarations from all the Independent Directors of the Company
confirming that they meet with the criteria of independence as prescribed under sub-section
(7) of Section 149 of the Act.
Your Company has conducted a formal Board Effectiveness Review as part of its efforts to
evaluate, identify improvements and thus enhance the effectiveness of the Board, its
Committees, and Individual Directors. This was in line with the requirements mentioned in
the Act.
The HR team of the Company worked directly with the Chairman and the Nomination and
Compensation Committee of the Board, to design and execute this process which was
adopted by the Board. Each Board Member completed a confidential online questionnaire,
providing vital feedback on how the Board currently operates and how it might improve its
effectiveness.
The survey comprised four sections and compiled feedback and suggestions on:
- Board Processes (including Board composition, strategic orientation and team dynamics);
- Individual Committees;
- Individual Board Members; and
- the Chairman
The following reports were created, as part of the evaluation:
- Board Feedback Report;
- Individual Board Member Feedback Report; and
- Chairman’s Feedback Report
The overall Board Feedback Report was facilitated by Mr. A. B. Godrej, Chairman. The
Individual Committees and Board Members’ feedback was shared with the Chairman.
Following his evaluation, a Chairman’s Feedback Report was also compiled.
On the recommendation of the Nomination & Compensation Committee, the Board had
framed a policy for selection and appointment of Directors, Senior Management and their
remuneration. The details of the Board Appointment Policy are stated below:
The details of Directors familiarization program Pursuant to Regulation 25(7) of the Listing
Regulations is uploaded on the Company’s website. http://www.godrejindustries.com/listing-
compliance.aspx
Key Managerial Personnel
There has been no change in the Key Managerial Personnel of the Company.
Statutory Auditors
Pursuant to section 139 of the Act, your Company has appointed M/s BSR & Co, LLP,
Chartered Accountants (Firm Regn. No. 101248W/W-100022) as Auditors of the Company
to hold office for the period commencing from the conclusion of the 29th Annual General
Meeting on August 11, 2017 until the conclusion of the 34th Annual General Meeting in the
year 2022, on a remuneration that will be approved by the Board.The Auditor’s Report for
FY18 does not contain any qualification, reservation, adverse remark or disclaimer.
Cost Auditors
Pursuant to the provisions of Section 148 and other applicable provisions, if any, of the
Companies Act, 2013, M/s. R. Nanabhoy & Co., Cost Accountants have been appointed as
Cost Auditors of the Company for FY19. They are required to submit the report to the
Central Government within 180 days from the end of the accounting year.
Secretarial Auditors
The Board has appointed M/s. A. N. Ramani & Co., Practicing Company Secretaries, to
conduct Secretarial Audit for FY18. The Secretarial Audit Report for the financial year ended
March 31, 2018 is annexed herewith marked as Annexure ‘G’ to this Report. The Secretarial
Audit Report does not contain any qualification, reservation or adverse remark.
Audit Committee
The Audit Committee, constituted pursuant to the provisions of the Act and the Listing
Regulations, has reviewed the accounts for the year ended March 31, 2018. The members of
the Audit Committee are Mr. K. K. Dastur, Mr. S. A. Ahmadullah, Mr. K. N. Petigara and
Mr. A. B. Choudhury, all Independent Directors.
Policy to Prevent Sexual Harassment at Work Place
Your Company is committed to creating and maintaining an atmosphere in which employees
can work together without fear of sexual harassment, exploitation or intimidation. As
required under the provisions of Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013, your Company has constituted an Internal Complaints
Committee. No complaints were received by the committee during the year under review.
Since the number of complaints filed during the year was NIL, the Committee prepared a NIL
complaints report. This is in compliance with section 22 of the Sexual Harassment of Women
at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Secretarial Standards
The Directors state that applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to
‘Meetings of the Board of Directors’ and ‘General Meetings’, respectively, have been duly
followed by the Company.
Directors’ Responsibility Statement
The Board has laid down Internal Financial Controls within the meaning of the explanation to
section 134 (5) (e) (“IFC”) of the Act. The Board believes the Company has sound IFC
commensurate with the nature and size of its business. Business is however dynamic. The
Board is seized of the fact that IFC are not static and will evolve over time as the business,
technology and possibly even fraud environment changes in response to competition, industry
practices, legislation, regulation and current economic conditions. There might therefore be
gaps in the IFC as Business evolves. The Company has a process in place to continuously
identify such gaps and implement newer and/or improved controls wherever the effect of
such gaps might have a material effect on the Company’s operations.
Pursuant to the provisions contained in Section 134 of the Act, the Directors of your
Company confirm:
a) that in the preparation of the annual accounts, the applicable accounting standards have
been followed along with proper explanation relating to material departures, if any;
b) that such accounting policies have been selected and applied consistently, and such
judgments and estimates have been made 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
profit or loss of the Company for that period;
c) that proper and sufficient care has been taken for the maintenance of adequate accounting
records in accordance with the provisions of this Act for safeguarding the assets of the
Company, for preventing and detecting fraud and other irregularities;
d) that the annual accounts have been prepared on a going concern basis.
e) that the proper policies and procedures have been adopted for ensuring the orderly and
efficient conduct of its business, including adherence to code of conduct and policies, the
safeguarding of assets, the prevention and detection of frauds and errors, the accuracy and
completeness of the accounting records, and the timely preparation of reliable financial
information and that such policies and procedures are adequate and were operating
effectively.
f) that proper systems are in place to ensure compliance of all laws applicable to the
Company and that such systems are adequate and operating effectively.
Corporate Governance
As required by the existing Regulation 34(3) of the Listing Regulations, a detailed report on
Corporate Governance is included in the Annual Report. The Auditors have certified the
Company’s compliance of the requirements of Corporate Governance in terms of Regulation
34(3) of the Listing Regulations and the same is annexed to the Report on Corporate
Governance.
Disclosures and Information under the Companies Act, 2013
Pursuant to section 134 and any other applicable sections of the Act, following disclosures
and information is furnished to the shareholders:
(a) Conservation of Energy, Technology absorption and Foreign Exchange Earnings and
Outgo
‘Annexure D’ to this Report gives information in respect of Conservation of Energy,
Technology absorption and Foreign Exchange Earnings and Outgo, required under Section
134(3)(m) of the Act and forms a part of the Boards’ Report.
(b) Extract of Annual return
The extract of the annual return as provided under sub section (3) of Section 92 of the Act is
given in Form No. MGT 9 as ‘Annexure E’, attached and forms a part of this report.
(c) Board meetings
The Board of Directors of your Company met 5 (five) times during the year under review.
The details of Board meetings and the attendance of the Directors are provided in the
Corporate Governance Report.
(d) Loans, Guarantees & Investments
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of
the Act are given in the notes to the Financial Statements.
(e) Related Party Transactions
All related party transactions entered into by your Company during the financial year were on
an arm’s length basis and were in the ordinary course of business. There were no materially
significant related party transactions made by the Company with related parties. Prior
omnibus approval of the Audit Committee was obtained for those transactions which were of
routine nature. Accordingly, the disclosure of Related Party Transactions as required under
Section 134(3) (h) of the Act in Form AOC- 2 is not applicable. Attention of members is also
drawn to the disclosure of transactions with related parties set out in Note No. 40 of
Standalone Financial Statements, forming part of the Annual Report. None of the Directors
has any pecuniary relationships or transactions vis-a-vis the Company.
The policy on Related Party Transactions is uploaded on the Company’s
website http://www.godrejindustries.com/Resources/ pdf/compliances/Policy-on-Related-
Party-Transaction.pdf.
(f) Particulars of Employees:
Disclosures with respect to the remuneration of Directors and employees as required under
Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 has been appended as Annexure ‘F’ to this Report. The
information required pursuant to Section 197 of the Act read with Rule 5(2) & (3) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect
of employees of your Company is available for inspection by the members at registered office
of the Company during business hours on working days up to the date of the ensuing Annual
General Meeting. If any member is interested in obtaining a copy thereof, such member may
write to the Company Secretary, whereupon a copy would be sent.
(g) Risk Management
Your Company had formed a Risk Management Committee consisting of the Managing
Director and the Whole time Directors. The Committee identifies, evaluates business risks
and opportunities. This Committee has formulated and implemented a policy on risk
management to ensure that the company’s reporting system is reliable and that the company
complies with relevant laws and regulations. The Board of Directors of your Company are of
the opinion that, at present, there are no elements of risks which may threaten the existence of
the Company.
Your Company has a vigil mechanism named Whistle Blower Policy to deal with instance of
fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in
the Corporate Governance Report and also posted on the website of the Company.
(h) Nomination & Remuneration Policy for Senior Management
The details relating to ratio of the remuneration of each director to the median remuneration
of the employees of the Company for FY18 is given in ‘Annexure F’ attached and forms part
of this Report.
The policy of your Company on director’s appointment and remuneration of the directors,
key managerial personnel and other employees including criteria for determining
qualifications, positive attributes, independence of a director, is stated below:
(i) Financials
There are no material changes and commitments affecting the financial position of the
Company which have occurred between the end of the financial year to which the financial
statement relates and the date of the report.
There are no qualifications, reservations or adverse remarks in the Auditors Report and the
Secretarial Audit Report for FY18.
(j) Share Capital
During the year under review your company allotted 1,32,945 equity shares of Rs.1 each
upon exercise of stock option under Company’s Employee Stock Grants Scheme.
Consequently, the paid up share capital of your Company has increased from
Rs.33,61,39,786/- divided into Rs.33,61,39,786 equity shares of Rs.1 each to
Rs.33,62,72,731/divided into 33,62,72,731 equity shares of Rs.1 each.
(k) Significant Court Order received - None
(l) Amalgamation
The Board of Directors of your Company approved the Scheme of Amalgamation of Vora
Soaps Limited with Godrej Industries Limited and their respective Shareholders (‘Scheme’)
in their meeting held on 14th December, 2017. The Scheme was subject to the approval of the
Hon’ble National Company Law Tribunal (‘NCLT’), shareholders and/ or creditors and such
other competent authority as may be directed by the Hon’ble NCLT. Accordingly, the
Scheme was filed with the Stock Exchanges for their approval and upon receipt of their no-
objection letters, the company proceeded with filing an application u/s 230-232 with the
Hon’ble NCLT which was admitted on 17th May, 2018. Pursuant to the directions of the
Hon’ble NCLT, a meeting of the Equity Shareholders of the Company will be held and
convened for the purpose of considering and if thought fit, approving with or without
modifications the Scheme.
Additional Information
The consolidated financial statements of the Company forms a part of this Annual Report.
Accordingly, this Annual Report of your Company does not contain the financial statements
of its subsidiaries. The Audited Annual Accounts and related information of the Company’s
subsidiaries will be made available upon request. These documents will also be available for
inspection during business hours at the Company’s registered office in Mumbai, India. The
subsidiary companies’ documents will also be available for inspection at the respective
registered offices of the subsidiary companies during business hours.
Acknowledgement
Your Directors thank the Union Government, the Governments of Maharashtra and Gujarat
as also all the Government agencies, banks, financial institutions, shareholders, customers,
employees, fixed deposit holders, vendors and other business associates, who, through their
continued support and co-operation, have helped as partners in your Company’s progress.
For and on behalf of the Board of Directors
A. B. Godrej
Chairman Mumbai, May 23, 2018.

2. Analysis of Reports
In this section, an analysis of the statements of the top management is presented.

Chairman’s Statement
From the Chairman’s Statement, it can be seen that even though the global recession has hit
almost every sector, the Indian FMCG sector has not been hit and has in fact posted increased
growths. Due to this, there is a huge scope for investors feeling safe to invest in the Indian
FMCG sector. As far as GCPL is concerned, there is a need to innovate and come up with
products that are relevant to the consumers and this will help GCPL to differentiate itself from
the other players in the sector. The Chairman also feels that Godrej has been very successful
with the launches of new brands and with the increase in sales and hence it is in a good position
to address the effects of the economic downturn.
Management Discussion and Analysis
The management feels that due to the rapid economic growth of India over the last few years,
rural consumption levels are bound to rise and hence this presents major opportunities for
Indian Consumer Product companies. Over the current year, GPCL has launched a wide variety
of new products across all its product categories. As part of improving the efficiency of its
operations, GCPL has entered into a 10 year contract with Hewlett Packard (HP) who are
expected to provide IT solutions and products specially designed for GCPL’s needs. Owing to
the uncertainties in the international market due to the recession and strengthening of the rupee
compared to currencies like GBP (British Pound) and ZAR (South African Rand), the
international operations of GCPL don’t seem to be upto the mark and hence they have adopted
a ‘wait and watch’ policy in this regard.

As far as the financials are concerned, the major factor is that the company has been involved
in a rights issue and the cash generated through this operation has been utilised to repaying
high cost debt and the remaining has been deposited into fixed deposits with banks. What the
company is planning to do with this huge cash reserve is not very clear. The major strategies
that the company seems to be adopting for the immediate future is to achieve reductions in
expenditures, without having to sacrifice in the quality of its goods and services, as well as
getting involved in acquisitions as a means of improving the market share. It is this, which the
company is counting on to help it get across these recessionary times. So, on the whole the
company has a very positive outlook for the next year.

Directors’ Report
The Directors feel that the overall performance of the company is encouraging. It can be noted
in the Director’s report that GCPL has adjusted the book value of intangibles like Trademarks
and brands, worth 31.3 crores, against the securities premium account. The directors feel that
this gives a better picture of the company’s operating performance. The company was also
granted permission by the Ministry of Corporate Affairs to exclude showing the accounts of its
subsidiaries in its accounts. The Stakeholder’s Value Creation and Governance Rating of
GCPL has been upgraded to SVG2+ to SVG1.

3.Accounting Policies
The accounting policies of GCPL seem to be inline with its operations and no major
discrepancies have been found. The only point worth noting is that though the company has a
policy of amortising trademarks and other intangible assets for a period not exceeding 10 years,
it has taken an exception in the case of Rapidol, for which the amortisation is provided over a
period of 20 years.

Profit & Loss - Godrej Industries Ltd.Rs (in Crores)

Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

12Months 12Months 12Months 12Months 12Months

INCOME:

Sales Turnover 2143.99 1986.32 1602.17 1398.37 1547.79

Excise Duty .00 27.99 102.08 88.86 93.15

NET SALES 2143.99 1958.33 1500.09 1309.51 1454.64

Other Income 41.7900 33.4300 46.8800 28.2300 37.6200

TOTAL INCOME 2185.78 1991.76 1546.97 1337.74 1492.26

EXPENDITURE:

Manufacturing Expenses 93.72 90.50 77.14 81.63 112.84

Material Consumed 1307.74 1311.07 1091.79 832.89 979.03

Personal Expenses 130.17 133.55 116.25 140.56 127.60

Selling Expenses 1.62 1.80 1.71 3.89 .00

Administrative Expenses 205.65 184.56 145.14 161.16 163.90

Expenses Capitalised .00 .00 .00 .00 .00

Provisions Made .00 .00 .00 .00 .00

TOTAL EXPENDITURE 1738.90 1721.48 1432.03 1220.13 1383.37

Operating Profit 405.09 236.85 68.06 89.38 71.27

EBITDA 446.88 270.28 114.94 117.61 108.89

Depreciation 54.30 68.58 52.43 44.37 28.59

Other Write-offs .00 .00 .00 .00 .00

EBIT 392.58 201.70 62.51 73.24 80.30

Interest 239.59 212.43 207.86 191.98 147.74

EBT 152.99 -10.73 -145.35 -118.74 -67.44

Taxes -.07 15.25 -.11 -7.06 -16.64

Profit and Loss for the Year 153.06 -25.98 -145.24 -111.68 -50.80

Non Recurring Items -244.39 267.10 -1.92 268.98 199.61

Other Non Cash Adjustments .00 .00 .00 .00 .00

Other Adjustments .60 .28 1.92 .00 .00

REPORTED PAT -90.73 241.40 -145.24 157.30 148.81

KEY ITEMS

Preference Dividend .00 .00 .00 .00 .00

Equity Dividend 57.09 57.70 .00 46.83 46.83

Equity Dividend (%) 169.70 171.57 .00 139.37 139.41

Shares in Issue (Lakhs) 3363.84 3362.73 3361.40 3359.89 3358.82

EPS - Annualised (Rs) -2.70 7.18 -4.32 4.68 4.43

Rs (in Crores)

Cash Flow

Rs (in Crores)

Particulars Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

Profit Before Tax -90.80 256.65 -145.35 150.24 132.17

Net Cash Flow from Operating Activity 450.88 284.50 247.64 .00 -123.78

Net Cash Used in Investing Activity -215.73 169.98 -226.03 .00 -298.16

Net Cash Used in Financing Activity 218.00 -406.42 -16.69 .00 455.67

Net Inc/Dec In Cash and Cash Equivalent 453.15 48.06 4.92 -91.32 33.73

Cash and Cash Equivalent - Beginning of the Year 61.03 12.01 7.09 98.43 64.70

Cash and Cash Equivalent - End of the Year 514.18 60.07 12.01 7.11 98.43
Rs (in Crores)

BalanceSheet - Godrej Industries Ltd.

Rs (in Crores)

Particulars Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 39.33 33.63 33.61 33.60 33.59

Reserves & Surplus 1592.36 1766.93 1581.82 1725.88 1624.69

Net Worth 1631.69 1800.56 1615.43 1759.48 1658.28

Secured Loan 2911.58 .61 .26 22.76 1.93

Unsecured Loan .00 2087.63 2422.43 2307.93 1793.22

TOTAL LIABILITIES 4543.27 3888.80 4038.12 4090.17 3453.43

Assets

Gross Block 1685.35 1649.88 1616.81 1667.13 998.94

(-) Acc. Depreciation 202.58 156.00 90.34 366.34 351.14

Net Block 1482.77 1493.88 1526.47 1300.79 647.80

Capital Work in Progress 8.72 7.66 3.99 209.72 666.96

Investments 2696.08 2828.22 2785.29 2494.54 2377.78

Inventories 300.86 299.91 296.62 226.47 166.34

Sundry Debtors 177.03 117.89 121.71 205.45 104.30

Cash and Bank 516.29 61.79 15.07 11.63 107.30

Loans and Advances 138.58 160.86 128.13 241.26 200.29

Total Current Assets 1132.76 640.45 561.53 684.81 578.23

Current Liabilities 763.46 1069.54 829.18 588.89 731.78

Provisions 13.60 11.87 9.98 10.80 85.56

Total Current Liabilities 777.06 1081.41 839.16 599.69 817.34

NET CURRENT ASSETS 355.70 -440.96 -277.63 85.12 -239.11

Misc. Expenses .00 .00 .00 .00 .00

TOTAL ASSETS(A+B+C+D+E) 4543.27 3888.80 4038.12 4090.17 3453.43

The Yearly Results page of Godrej Industries Ltd. presents the key annual result items, its comparison with the
sector peers and its Annual Results for the last five years.
TOTAL INCOME

9.74%
2,185.78Cr.
Rs

PEER RANGE
1.88

380,438.00
EBIT

94.63%
Rs 392.58Cr.
PEER RANGE
-6.96

57,118.00
PAT

-137.58%
Rs -90.73Cr.
PEER RANGE
-861.98

35,163.00

Yearly - Godrej Industries Ltd.

Rs (in Crores)

Mar'19 Mar'18 Mar'17 Mar'16 Mar'15

INCOME

Net Sales Turnover 2143.99 1958.33 1500.09 1302.95 1454.64

Other Income 41.79 33.43 46.88 25.47 37.62

Total Income 2185.78 1991.76 1546.97 1328.42 1492.26

EXPENSES

Stock Adjustments 7.65 13.29 -46.05 -5.66 26.13

Raw Material Consumed 1289.35 1278.94 1111.86 829.00 942.41

Power and Fuel .00 .00 .00 .00 .00

Employee Expenses 130.17 133.55 116.25 135.05 127.60

Administration and Selling Expenses .00 .00 .00 .00 .00

Research and Development Expenses .00 .00 .00 .00 .00

Expenses Capitalised .00 .00 .00 .00 .00

Other Expenses 311.73 295.70 249.97 251.37 287.23

Provisions Made .00 .00 .00 .00 .00

TOTAL EXPENSES 1738.90 1721.48 1432.03 1209.76 1383.37

Operating Profit 405.09 236.85 68.06 93.19 71.27

EBITDA 446.88 270.28 114.94 118.66 108.89

Depreciation 54.30 68.58 52.43 44.37 28.59

EBIT 392.58 201.70 62.51 74.29 80.30

Interest 239.59 212.43 207.86 200.24 147.74

EBT 152.99 -10.73 -145.35 -125.95 -67.44

Taxes -.07 15.25 -.11 -25.95 -16.64

Profit and Loss for the Year 153.06 -25.98 -145.24 -100.00 -50.80

Extraordinary Items .00 .00 .00 .00 .00

Prior Year Adjustment .00 .00 .00 .00 .00

Other Adjustment .00 .00 .00 .00 .00

Reported PAT -90.73 241.40 -145.24 34.21 148.81

KEY ITEMS

Reserves Written Back .00 .00 .00 .00 .00

Equity Capital 33.64 33.63 33.61 33.60 33.59

Reserves and Surplus 1592.36 1766.93 1581.82 1725.88 1624.69

Equity Dividend Rate 115.00 175.00 175.00 175.00 175.00

Agg. Non-Promoter Share(Lakhs) .00 .00 .00 .00 845.46

Agg. Non-Promoter Holding(%) .00 .00 .00 .00 25.17

Government Share .00 .00 .00 .00 .00

Capital Adequacy Ratio .00 .00 .00 .00 .00

EPS(Rs.) NaN NaN NaN NaN 4.43

Rs (in Crores)
4. Performance Analysis
In this section, the performance of GCPL is analysed by comparing current financial ratios with
the previous financial year. Details of the different ratios are provided in Appendix. 1

Review of Operations
Company’s performance during the year as compared with that during the previous year is
summarized below:
(Rs. Crore) Year (Rs. Crore) Year
Ended March 31 Ended March 31
Particulars 2018 2017
Revenue from Operations 1,986.32 1,602.17
Exceptional Items 267.38 -
Other Income 33.43 46.88
Total Income 2,287.13 1,649.05
Total Expenditure other than Finance Costs and
Depreciation and Amortisation 1,749.47 1,534.11
Profit before Finance Costs, Depreciation and
Amortisation and Tax 537.66 114.94
Depreciation and Amortisation Expense 68.58 52.43
Profit before Finance Costs and Tax 469.08 62.51
Finance Costs (net) 212.43 207.86
Profit before Tax 256.65 (145.35)
Provision for Current Tax 13.48 -
Provision for Deferred Tax 1.77 (0.11)
Net Profit 241.40 (145.24)
Remeasurment of Defined Benefits Plans (0.28) (1.92)
Total Comprehensive Income 241.12 (147.16)
Surplus brought forward 541.87 689.03
Profit after Tax available for appropriation 782.99 541.87
\Appropriation
Dividend on equity shares 58.85 -
Tax on Distributed Profit 1.15 -
Transfer to General Reserve - -
Surplus Carried Forward 722.99 541.87
Total appropriation 782.99 541.87
5.Ratio Analysis

Profitability Ratios
It can be seen from the ratios that Profit margin has decreased in spite of 22% increase in
income from net sales. This is mainly because, in this period, operating expenses have
increased by 30%. ‘Other income’ in the P&L Statement includes a huge chunk of interest
income earned, which does not seem to be a consistent source of income. If this is taken into
consideration, Profit margin is bound to decrease further. Since such interest income cannot be
considered as part of operating income, NOPAT profit margin has fallen by more than 4%.

Asset turnover and operating asset turnover have both fallen considerably. This is because
though assets have increased by 45%, sales have increased only by 22%. A possible
explanation could be that an enormous amount of cash, more than 50% of operating assets have
been locked up in deposit accounts. As a result, this cash doesn’t seem to be used for operating
activities. Thus it can be reasoned that the company is not making good use of its available
assets.

Due to all this the Return on Assets has fallen considerably by 6.64% compared to last year.
On analysing this using Du-Pont Analysis, it can be observed that there is an almost equal
contribution of both Profit margin and Asset turnover in this fall of ROA.

It can also be observed that Return on Equity and Earnings per Share have shown declines
due to a rights issue during the year. A total sum of 393 crores seems to have been raised.
However, this amount seems to have been transferred to deposit accounts, thus increasing the
cash balance, rather than on any other investment. So, it is possible that GCPL has some
plans of expansion in the coming year, for which it needed some cash reserves and this it
raised by issuing shares.

CURRENT RATIO

A current ratio is used to determine the short term solvency of the company .
According to industrial standards the current ratio should be 1 for a financially
sound company
 (Amount in crore)

Year Mar-19 Mar-18 Mar-17 Mar-16 Mar-15

Current assets

Capital Work in Progress 0 0 0 0 0

Investments 290587.88 242200.24 214463.34 163885.77 166459.95

Inventories 0 0 0 0 0

Sundry Debtors 0 0 0 0 0

Cash and Bank 81347.64 122915.08 48952.1 38918.84 36331.45

Loans and Advances 868575.17 695211.79 596798.02 502697.8 384589.94

Total Current Assets 949922.81 818126.88 645750.12 541616.64 420921.39

Current Liabilities

Current Liabilities 55108.29 45763.72 56709.32 36725.13 32484.46

Provisions 0 0 0 0 0

Total Current Liabilities 55108.29 45763.72 56709.32 36725.13 32484.46

Current Ratio 17.237385 17.8771935 11.3870193 14.7478481 12.9576231

 NET WORKING CAPITAL RATIO
The net working capital ratio is the net amount of all elements of working
capital. It is intended to reveal whether a business has a sufficient amount of
net funds available in the short term to stay in operation. Use the following
formula to calculate the net working capital ratio:

Current assets - Current liabilities = net working capital ratio

This measurement only provides a general idea of the liquidity of a business,

for the following reasons:

• It does not relate the total amount of negative or positive outcome to the
amount of current liabilities to be paid off, as would be the case with a real
ratio.

• It does not compare the timing of when current assets are to be liquidated to
the timing of when current liabilities must be paid off. Thus, a positive net
working capital ratio could be generated in a situation where there is not
sufficient immediate liquidity in current assets to pay off the immediate
requirements of current liabilities.

A net working capital ratio is looked as the company’s ability to weather financial
crises. The net working capital should be a positive amount
 (Amount in crore)
Year Mar-19 Mar-18 Mar-17 Mar-16 Mar-15
Total Current Assets 949922.81 818126.88 645750.12 541616.64 420921.39
Total Current Liabilities 55108.29 45763.72 56709.32 36725.13 32484.46
NET WORKING CAPITAL
RATIO 894814.52 772363.16 589040.8 504891.5 388436.94

EQUITY RATIO

The shareholder equity ratio shows how much of the company's assets are funded
by equity shares. The lower the ratio result, the more debt a company has used to
pay for its assets. It also shows how much shareholders would receive in the event
of a company-wide liquidation.

The ratio, expressed as a percentage, is calculated by dividing total shareholders'

equity by total assets of the firm, and it represents the amount of assets on which
shareholders have a residual claim. The figures used to calculate the ratio are
taken from the company balance sheet

The ratio indicates proportion of owners fund to total fund invested in the
company . Traditionally it is believed that higher the owner’s fund lower is the
degree of risk

(Amount in crore)

Year Mar-19 Mar-18 Mar-17 Mar-16 Mar-15

Share Capital 544.66 519.02 512.51 505.64 501.3

Reserves &
Surplus 148661.69 105775.98 88949.84 72172.13 61508.12

Net Worth 149206.35 106295 89462.35 72677.76 62009.42

Secured Loan 117085.12 123104.97 74028.87 53018.47 45213.56

Unsecured Loan 923140.93 788770.64 643639.66 546424.19 450795.64

TOTAL LIABILITIES 1189432.4 1018170.61 807130.87 672120.43 558018.62

Equity ratio 0.12544332 0.10439802 0.11083996 0.10813205 0.11112428

The equity ratio is calculated as total shareholder’s equity / capital employed.

The company has more have borrowed funds than own funds.

Liquidity Ratios
At first glance, current ratio and quick ratio look very favourable and indicate a high degree
of liquidity. However, this is due to huge increase in cash (Deposit Accounts) which was raised
through a rights issue during the courts of the year. So we cannot assume that the company's
ability to pay off debts has increased, as most probably the company might be planning to
invest this cash in some kind of long term investment or fixed assets. So, there is a high
opportunity cost to the kind of current assets that Godrej is holding now. It could also be to pay
off long term debt. This can also be inferred from the Vice Chairman's statement.

Both debtor turnover and inventory turnover have improved compared to last year.
However, the effectiveness of these ratios can be gauged completely only by comparing them
with industry averages, which is presented in Section 6.

Solvency Ratios
It can be observed that Debt-Equity ratio has decreased significantly. This is because the
company has cleared off some loans and also due to the huge increase in equity due to the
rights issue. It is possible that Godrej has made a conscious decision to reduce their Debt-equity
ratio as they perceived wide fluctuations in the market. So, GCPL seems to be getting prepared
for difficult economic times by reducing debt and raising equity.

Current liabilities to equity ratio has also decreased due to this funds raised through issue of
shares. Interest cover has increased, though this could be due to the fact that total debt has
also decreased significantly.

So, on the whole, though raw numbers indicate that GCPL might be having good numbers to
attract investors, it has to be understood that GCPL has actually cleared off many of its high
cost debts through the cash raised from the rights issue and not due to any great performances
in its core business.

6. Common Size Financial Statements

Common size financial statements have been prepared for the recent most two years. Common
size P&L statements have been prepared by comparing every item with the total income earned
by the company.

The comparisons are as shown below.

P&L Statement 2008-09 2007-08

Income
Sales (gross) 99.42% 102.16%
Excise Duty -3.73% 95.69% -3.39% 98.77%
Processing Income 0.32% 0.16%
Other Income 3.98% 1.08%
Total Income 100% 100.00% 100.00% 100.00%

Expenditures
Materials consumed
and purchase of goods 53.05% 48.12%
Expenses 26.65% 31.68%
Interest and financial
charges 0.78% 1.16%
Depreciation 1.27% 1.75%
Inventory change 1.85% 83.59% -1.56% 81.15%

Profit Before Tax 16.41% 18.85%

Provision for taxes

Current taxes 1.86% 2.15%
Deferred taxes 0.28% 0.12%
 Fringe benefit taxes 0.07% 2.21% 0.08% 2.35%
Tax adjustments 0.06% 0.00%
Profit after Tax 14.26% 16.50%

The common size Balance Sheet has been prepared by comparing every item in the Balance
Sheet with the total sources of funds. The comparisons are as shown below.

Balance Sheet 2008-09 2007-08

Sources of Funds
Shareholder's Funds Share Capital 4.25% 7.68%
Reserves and Surplus 84.64% 88.90% 43.48% 51.16%
Loans Secured Loans 2.47% 13.80%
Unsecured Loans 7.95% 10.41% 31.96% 45.75%
Deferred Tax Liability 0.69% 3.08%
Total Sources of Funds 100% 100%

Application of Funds
Fixed Assets Gross Block 44.13% 90.28%
Depreciation 16.02% 37.73%
Capital Work in
Progress 0.41% 28.53% 24.33% 76.88%
Investments 16.21% 26.38%
Current Assets, Loans
and Advances Inventories 20.97% 56.06%
Sundry Debtors 1.63% 4.15%
Cash and Bank
Balances 57.05% 6.75%
Other Current Assets 1.49% 0.00%
Loans and Advances 19.01% 21.73%

Less: Current Liabilities

and Provisions Current Liabilities 39.44% 82.54%
Provisions 5.45% 55.27% 10.38% -4.24%

Miscellaneous
Expenditure 0.00% 0.00% 0.00% 0.97%
Total Application of
Funds 100% 100%

Major analysis of the above mentioned figures is provided in the next section.
7. Trend Analysis
The sales have increased by 86% over the past 5 years while fixed assets have increased by
69%. Therefore it can be said that over the past 5 years, the company is making good use of its
assets in generating sales. However Operating Expenses have increased at a faster pace than
sales have indicating a need to control the expenses better while generating sales. Net Profit
has increased by more than 80% over the past 5 years and has kept up with sales increase (86%)
indicating that the company is doing a fairly good job at keeping over-all expenses in control
over the past 5 years in comparison to sales. The interest expense has not kept up with the long
term debt suggesting that interest rates could have changed for different borrowings
significantly.

However, a closer look at the analysis reveals a jump in current assets particularly over the
past year. The company’s balance sheet also reveals a huge increase in cash reserves. A look
at the vertical analysis indicates that cash and cash equivalents form 57% of the current assets.
Perhaps this cash can be better utilized by the company in investments or in paying off current
liabilities. The long term liabilities of the company has reduced significantly from the past year
and perhaps the cash could be used to pay this off some more if the opportunity costs have been
analyzed correctly. The amount of unsecured loans has reduced both as an absolute value and
as a percentage of the source of funds from 32% last year to 8% this year. The gap in funding
has been made up by the vast increases in the company’s reserves.

While overall sales have increased, the company’s costs have increased more, thereby reducing
profit margins over the past 2 years. The company was better at cost control last year than this
year. This can mainly be attributed to the increase in purchases of goods consumed, perhaps
due to an increase in the price of these goods consumed. All other expenses have declined as a
percentage of sales over the period indicating that the company needs to cut back on inventory
purchased for consumption in order to maintain the same expense-as-percentage-of-sales ratio
as the previous year.

. Trend Analysis over past 5 years

2009 2008 2007 2006 2005

Sales (gross) 186.6901 151.9788 132.0142 114.6591 100

Total Income 199.118 157.7567 134.2191 116.7232 100

Expenditures 199.2781 153.2693 132.4176 112.1291 100

PBT 198.3063 180.5072 143.3524 140.0147 100

PAT 180.3153 165.3241 147.5118 135.2862 100

Shareholders funds 1076.954 301.8714 222.4517 152.7506 100

Loans 1025.274 2194.209 1839.985 79.46038 100

Fixed Assets 169.8869 223.0088 185.3225 78.7704 100

Investments 195.7197 155.1773 143.5432 100 0

Current Assets 586.7025 253.0016 188.5265 117.3199 100

Liabilities 192.8598 194.4202 158.174 116.084 100

8. Comparison with the Industry

In this section, the performance of GCPL has been compared with other Indian companies in the Personal
Care industry. The industry ratios have been acquired from the Capitaline database. Appendix 2.
Comparison of ratios with industry

Financial Ratios Godrej Ratio Industry Ratios Inc/Dec

Key Ratios
Debt-Equity Ratio 0.12 0.54 Dec
Long Term Debt-Equity Ratio 0.01 0.28
Current Ratio 2.23 1.13 Inc
Turnover Ratios
Fixed Assets 6.29 3.56 Inc
Inventory 6.44 6.97 Dec
Debtors 98.32 15.18 Inc

Interest Cover Ratio 22.07 8.42 Inc

PBIDTM (%) 19.29 15.85 Inc
PBITM (%) 17.96 13.75 Inc
PBDTM (%) 18.47 14.22 Inc
 FIGURE 1: COMPARISON OF FINANCIAL RATIOS WITH INDUSTRY

From the comparison it is evident that GCPL is doing much better compared to others in the
industry in most counts. Even though some of them could be due to the huge increase in
GCPL’s share capital, it can be argued that GCPL does have resources to count on in the
fluctuating economic conditions.

So on the whole, GCPL might be able to beat out its Indian peers, but it will be severely tested
by competition from the MNC giants in the industry like Colgate-Palmolive, HUL, P&G etc.
9. Market Assessment
The relevant capital market ratios used to analyse the standing of GCPL in the market are
shown in Appendix 1. Following are the main aspects that can be observed from these ratios.

The share prices of Godrej have fallen over the last year and the difference is quite significant
compared to the BSE Sensex average. This, and the fact that there was an issue of shares, has
had the greatest influence on capital market ratios. The P/E ratio has decreased by a small
amount which means that investors are willing to spend lesser price per rupee of earning of the
company. Dividend Yield has increased although the Dividend has remained the same for the
recentmost two years. This increase is also because the Average Stock Price had fallen.

The Book Value of share has increased drastically due to the rights issue, as there has been a
great increase in capital. Due to this the P/B ratio has decreased significantly because the
average stock price has also decreased.

The total return for the shareholder, which takes into account the gains for the shareholder
in terms of change in stock price and dividend earned, is very diminutive for the year. This is
because the dividend offered per share has not been able to offset the losses due to fall in share
price.

The total return to the shareholder is calculated to be 0.16%. From the annual report it can be
seen that value of cost of equity estimated by GCPL is as high as 13.2%. This means that
GCPL expects its shareholders to anticipate returns at the rate of 13.2 % on their investments.
Comparing this to the actual return that GCPL has been able to offer, which is 0.16%, does not
put GCPL in a good stand. GCPL has not been able to live up to the expectations of its
shareholders over the previous year.

Due to all this, investors would not see GCPL as a good investment.
10. Conclusion
The major focus on the reports from the top management has been on how to deal with the
unpredictable economic conditions. In this aspect, though GCPL has managed to record a
healthy growth in its sales, the increase in its expenses has been much higher and hence
affecting profit margins. Though the company has been successful in raising a huge amount of
cash using an issue of rights, most of these funds have been locked up in fixed deposits and it
is not clear what the company is planning to do with this money in the long term. In spite of all
this the company’s performance compared to the industry is very good. On the whole, the
company doesn’t seem to be utilising its cash inflows effectively.

However, the company’s performance in the share market has not been good and shareholders
will not feel justified at the returns that they are getting from GCPL’s stock. So, investors will
not be looking up to invest in GCPL unless there is a marked improvement in the company’s
core operations.

Overall, even though the performance of the company has been good over the last 5 years,
compared to previous year, the company’s performance has not been upto the mark. However
GCPL does have the resources needed to turn this trend around next year and its major focus
has to be to use its assets more effectively.