Well-validated financial discipline

The value of efficient allocation and utilisation of resources was particularly accentuated in the challenging business environment during 2019-20. While offtake growth in most of our categories was difficult to come by, we prudently invested in our brands, distribution and capabilities. Advertising and promotion spends as a percentage of sales, was about 9.9% in FY20, up 90 bps than last year. We backed an extensive number of new launches in the last 18 months, while continuing to support the core. This disciplined approach has helped in further improvement in the capital efficiency ratios during the year.

Maintaining liquidity and cash flow

Cash generated from operations at `1,218 crore in FY 2020, remained the primary source of liquidity. Net surplus at the end of the year was at `607 crore, largely maintaining the year-ago levels. Cash accruals are used for various purposes such as reinvestment in the business towards fixed assets and working capital requirements, dividend payments, and repayment of loans on the books, while building adequate reserves for any potential acquisition opportunities. During the year, we incurred a capital expenditure of `194 crore for capacity expansion and maintenance of existing manufacturing facilities.

Maintaining efficiency

While borrowings are mainly for working capital requirements, we actively explore opportunities to optimise borrowing costs and maximise yield on investments while maintaining conservative guardrails on safety, liquidity and returns. We ensure adequate access to funding and leverage the surplus to meet operating needs and strategic objectives while managing cash flows in a cost-efficient manner.

It’s pertinent to note that even amidst the pandemic-induced lockdown, there has been no major impact on our liquidity position. Our ability to service debts and financing obligations on time remains unaffected and are in a comfortable position to meet all our commitments.

We continue to drive a profitable business and enjoy a secure net cash surplus situation. We are also implementing stringent cost control measures across the organisation to conserve cash in order to address any concerns arising post the lock-down. Moreover, in case any exigencies arise in future affecting the liquidity position, the Company would be in a comfortable position to borrow capital given that it enjoys AAA credit rating and has a favourable debt equity ratio. As on March 31, 2020, its Debt/EBITDA was extremely comfortable at 0.23.