Dear Shareholders,
We are pleased to inform you that we have ended yet another successful year with satisfactory results. Despite the increasingly challenging environment, we continue to grow our business profitably. This would not have been possible without our people. At Marico, our members are passionate about making a measurable impact in everything we do. It is the power of our people, our unique culture and innovative approach, which helps us deliver enduring results. Marico celebrates and empowers the individuality of each of its members and their unique personalities that have led to the success we have reached today. At Marico, we believe that only when you are empowered with freedom and opportunity, you rise above the task at hand and take complete ownership to make a difference.

FY2017 Overview

Your Company's brands have been able to stand firm in a difficult year. The single biggest event that left its mark on each and every sector of the domestic economy was demonetisation. Coming at a time when the economy was just beginning to look up, the Central Government's decision to demonetise almost 86% of the currency notes in circulation caused severe cash shortage in the domestic economy, where cash is the preferred mode of payments. This cash shortage led to a strain on the consumption demand and business activity for the greater part of the third quarter but your Company was able to pull off a fast recovery in Quarter 4. We firmly believe that this initiative will lead to a long-term gain for the economy and organised players since it will driver greater compliance in the system. The consolidated top line declined by 1% due to price reductions in the Coconut Oil portfolio, on the back of an underlying volume growth of 4%. The consolidated profit after tax grew strongly by 12% compared to last year. During the year, your Company's India business declined by 2% with an underlying volume growth of 4%. We continued to expand our franchise faster than the category resulting in market share gains reflecting the strong equity of our brands. The India business improved operating margins to 24%, led by softer input costs and pullback of ASP spends in a stressed macro environment post demonetisation in Q3 FY17.

The International business grew by 1% in constant currency terms, while sustaining operating margins at 17%, which has structurally shifted from 8-9% four years ago. The severe macro-economic headwinds in the Middle East & North Africa (MENA) region have led to the muted growth in the overall International business this year. Excluding MENA, international geographies grew at a constant currency rate of 5% in FY17. International business growth potential looks encouraging with strategic investments planned in core markets of Bangladesh, Vietnam, MENA and South Africa, coupled with expansion in adjacent markets of South Asia and Indo China region.

Your Company has taken definitive steps in creating an enabling environment to promote diversity. I am happy to inform you that 50% of our talent in consumer facing functions of Technology and Marketing, and 35% of our leadership talent in consumer facing functions of Technology and Marketing are women. We are also actively promoting multi-cultural diversity in our overseas units and driving higher mix of millennials in our managerial talent. I am pleased to let you know that your company has moved up 24 places in the Economic Times & The Great Place to Work 2017 study and is now ranked 40th. Your Company is also among the best companies to work in the FMCG industry. Marico is also amongst the Top 100 companies to work for women in India as per the 2016 study by Working Mother Media & AVTAR.

Building A Responsible Business

We endeavour to make Marico a responsible corporate not only by becoming future-ready for sustainable growth in a VUCA world, but also by making societal value creation the bedrock of our business strategy. During the year, we continued to work on various sustainability initiatives across our different markets in areas like energy management, water management, farm productivity improvement, and sustainable procurement. Our brands with a purpose also drove long-term sustainability, with Saffolalife and Nihar Shanti Amla taking up socially relevant causes in the areas of heart health and education respectively I am also happy to share that your Company is the first in Himachal Pradesh to have bagged a Gold certification under the GreenCo Rating system (accredited by the Confederation of Indian industry (CII) ) for its Baddi unit. The Marico R&D centre located in Suburban Mumbai also received the distinguished Indian Green Building Code (IGBC) certification for innovative and efficient use of energy and water, facility management and health standards. All of this has helped us in aligning our business, social, and environmental objectives. We will continue our journey as a responsible corporate entity and build further momentum on our consistent track record of sustainable, profitable growth. Marico, as a responsible corporate citizen, is fully committed to its purpose to 'Make a Difference'. We are engaging in meaningful dialogue with all our stakeholders, while striving to improve social, environmental and economic performance of our operations.

GST Impact

The new financial year has started on an encouraging note with the Government keenly pushing the implementation of the Goods and Services Tax (GST) from the second quarter of the financial year. GST is the most significant tax reform since independence for what is now Asia's third largest economy. It will be far simpler than the current system, where a good is taxed multiple times and at different rates in different states. It subsumes the messy plethora of indirect taxes, duties, surcharges and cesses into a single tax, thus making the movement of goods cheaper and seamless across the country. We have taken a 360 degree approach towards getting ready for GST. We are working towards making the entire ecosystem ready for this reform, which comprises our sales channel partners, procurement vendors, supply chain & logistics partners, and other business associates. We are educating our business partners through training sessions, and providing all the necessary support for a smooth transition to GST.

Business Outlook

We believe that the soft consumption environment has bottomed out and the performance of the Company will pick up steadily going forward. We will continue to invest behind brand & capability building to secure long-term profitable growth. We will strive to build new vectors of growth while building strong moats around our core. As we move from current tax regime to GST regime, we expect the consumer demand to remain intact in the short-term. While in the long run, GST will be beneficial for organised players, it will bring near term uncertainty that may disrupt trade in H1 FY18. Although the government has come up with the transitional provisions, which appear to be reasonably fair, the wholesalers and retailers may take cautious approach and lower down the stock levels as on the date of transition. However, it will be short lived and business should come back to normalcy in subsequent quarter(s). While macros are stable, good monsoons play a key role in consumption revival. The initial forecasts on monsoon are also encouraging and this gives hope for a strong consumption demand from the rural segment. On the other hand, raw material prices have moved up significantly over the last few quarters, putting pressure on margins. We expect consumption to pick up in the latter half of the year and remain confident of delivering improved volume growth in India, and a constant currency growth in the International business. We will invest in the core & the new products, for which we have an exciting calendar ahead. We remain committed to our long-term objective of building enduring consumer franchises in India and International markets. In our International business, political stability in markets of Egypt, Bangladesh, Saudi Arabia and Nepal would be the key for sustained performance. Our operating margins, which are very healthy, may see a bit of contraction. We believe that focus on franchise expansion with threshold margins will stand us in good stead as we write a long-term profitable growth story.

Vision 2022

By FY2022, your Company aspires to be a leading emerging market MNC with a leadership position in two core categories of nourishment and male grooming in five chosen markets in Asia and Africa, and in the process, double its revenue over FY17. The Company has already initiated definitive steps to meet this aspiration by seeking to win amongst consumers, trade, and talent. Towards this goal, the Company will continue to step up efforts to become future ready in its five areas of Transformation where it will develop top quartile capability and processes. They are Innovation, Go To Market Transformation, Talent Value Proposition, IT & Analytics, and Value Management. While driving growth, we will also continue to retain our focus on best in class governance and risk management. Lastly, I take this opportunity to express my sincere gratitude to our shareholders, Board of Directors, Management, dedicated members, esteemed customers, suppliers, bankers and investors, for their unrelenting dedication, support and commitment to Marico.

With warm regards,

Saugata Gupta
Managing Director and CEO