DIRECTORS’ REPORT

and Management Discussion and Analysis

To the Members,

Your Company’s Directors are pleased to present the 81st Annual Report of the Company, along with Audited Accounts, for the financial
year ended 31st March, 2014.

1. FINANCIAL PERFORMANCE (STANDALONE)

1.1. Results
(Rs. crores)
For the year ended For the year ended
31st March, 2014 31st March, 2013
Revenue from operations, net of excise 28,019.13 25,810.21
Profit before exceptional items and tax 4,799.71 4,349.48
Profit for the year 3,867.49 3,796.67
Dividend (including tax on distributed profits)* (3,272.97) (4,655.68)
Transfer to General Reserve (386.75) (379.67)
Profit & Loss Account balance carried forward 743.05 535.28
* In the year 2012-13, the Board of Directors declared a Special Dividend of Rs. 8.00 per Equity Share.

1.2. Category Wise Turnover

(Rs. crores)
For the year ended For the year ended
31st March, 2014 31st March, 2013
Sales Others* Sales Others*
Soaps and Detergents 13,460.98 222.43 12,460.96 240.86
Personal Products 7,979.81 141.10 7,309.10 162.56
Beverages 3,275.12 36.74 2,913.67 60.99
Packaged Foods 1,620.75 27.55 1,473.86 31.88
Others (including Exports, Chemicals, Infant Care Products, Water, etc.) 1,071.63 84.67 1,048.79 43.99
TOTAL 27,408.29 512.49 25,206.38 540.28
* Others include service income from operations, relevant to the respective businesses.

30 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

1.3. Summarised Profit and Loss Account

(Rs. crores)
For the year ended For the year ended
31st March, 2014 31st March, 2013
Sale of products less excise duty 27,408.29 25,206.38
Other operational income 610.84 603.83
Total Revenue 28,019.13 25,810.21
Operating Costs (23,543.87) (21,806.46)
Profit Before Depreciation, Interest, Tax (PBDIT) 4,475.26 4,003.75
Depreciation (260.55) (236.02)
Profit Before Interest & Tax (PBIT) 4,214.71 3,767.73
Other Income (net) 585.00 581.75
Profit before exceptional items 4,799.71 4,349.48
Exceptional items 228.68 608.40
Profit Before Tax (PBT) 5,028.39 4,957.88
Taxation (1,160.90) (1,161.21)
Profit for the year 3,867.49 3,796.67
Basic EPS (Rs.) 17.88 17.56

view of the state of affairs of the Company at the end of

2. DIVIDEND the financial year and of the profits of the Company for that
period;
• they have taken proper and sufficient care for the
Your Directors are pleased to recommend a Final Dividend of
maintenance of adequate accounting records in accordance
Rs. 7.50 per equity share of face value of Re. 1/- each for the year
with the provisions of the Companies Act, 1956, for
ended 31st March, 2014. The Interim Dividend of Rs. 5.50 per
safeguarding the assets of the Company and for preventing
equity share was paid on 15th November, 2013.
and detecting fraud and other irregularities; and
The Final Dividend, subject to approval of Members at the Annual • they have prepared the annual accounts on a going concern
General Meeting on 30th June, 2014, will be paid on or after basis.
4th July, 2014 to the Members whose names appear in the
Register of Members, as on the date of book closure, i.e. from
Friday, 13th June, 2014 to Monday, 30th June, 2014 (inclusive of MANAGEMENT DISCUSSION AND
both dates). The total dividend for the financial year, including
the proposed Final Dividend, amounts to Rs. 13.00 per equity ANALYSIS
share and will absorb Rs. 3,272.97 crores, including Dividend In order to avoid duplication between the Directors’ Report and
Distribution Tax of Rs. 461.54 crores. the Management Discussion and Analysis, we present below a
composite summary of performance of the various businesses
and functions of the Company.
3. RESPONSIBILITY STATEMENT

The Directors confirm that: 4. ECONOMY AND MARKETS

• 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; The year witnessed divergent growth globally, led by
strengthening of the US economy, uneven and subdued growth in
• they have selected such accounting policies and applied
the Euro area and Japan coupled with a slowdown in Developing
them consistently and made judgments and estimates that
& Emerging markets.
are reasonable and prudent, so as to give a true and fair

Annual Report 2013-14 Directors’ Report 31

In the domestic market, growth continued to be muted with the In a highly competitive scenario, where new brands and
second successive year of sub 5% GDP growth. The year saw offerings are entering the market almost every quarter, your
steep currency depreciation in an environment where industrial Company delivered competitive growth, driven by innovation,
activity remained in contraction mode, consumption demand sharper in-market execution, competitive marketing and trade
continued to weaken, while lacklustre capital goods production investments behind the brands. Your Company sustained strong
pointed to stalled investment demand. focus on innovation across the portfolio and continued to delight
consumers with a range of exciting offerings launched during the
With sluggish growth across the larger economy, further year. Your Company has also significantly stepped up investment
compounded by high consumer inflation and weak sentiment, in Digital Media, which is expected to be the media channel of
market growth across FMCG categories moderated throughout the future. Your Company continued to leverage and benefit from
the year in both volume and value terms. The discretionary the inputs received from Unilever across various aspects of the
categories and premium segments were particularly under business, including technology, innovation and communication.
pressure. The operating context for the year was challenging,
given the backdrop of a market slowdown, a volatile input cost Volatile and rapidly changing commodity markets, including
environment and heightened competitive intensity. vegetable oil and crude oil, coupled with depreciating currency
markets continued posing a major challenge during the year.
Your Company’s performance for the year 2013-14 has to There were also regulatory changes in the space of media
be viewed in the context of aforesaid economic and market availability, leading to more efficient media buying and better
environment. deployment of non-TV led media. Even in this challenging
environment, your Company delivered profitable growth through
5. PERFORMANCE OF BUSINESSES AND robust cost-saving programmes and judicious pricing, without
CATEGORIES compromising on the competitiveness of brand investments,
both in terms of technology as well as advertising and promotion.
5.1. Home & Personal Care (HPC) 5.1.1. Soaps and Detergents
The Home & Personal Care (HPC) business consists of Soaps, The Soaps and Detergents segment delivered healthy volume
Detergents, Household Care and Personal Products, which led turnover growth of 8.0% during the year. Further, growth
includes categories like Skin Care, Hair Care, Oral Care, Colour during the year was profitable as segmental profit increased by
Cosmetics and Deodorants. During the year, the HPC business 10.5%, through a mix of cost savings, supply chain efficiencies
registered robust growth ahead of market. and judicious pricing.
The opportunity for growth in India continues to be immense Soaps category recorded a very successful year with strong
across all HPC categories. This fact is also reflected in high volume growth in a market which saw an overall decline in
levels of competitive intensity in the marketplace. Your Company volumes. The growth was driven by prompt and decisive pricing
believes that both unwavering focus on competitive growth in actions on Lifebuoy, Lux, Breeze and Dove, which gained
core categories as well as market development to build segments consumer franchise. These actions were supported by consumer
of future are critical for sustained growth and long term value centric activations, effective advertising and sustained high levels
creation. While focusing on the core categories, your Company of distribution. The growth was witnessed not only in the core
has also invested significantly in the segments of future, i.e. the bars business, but also in the liquids portfolio, led by Lifebuoy
segments which are expected to drive future growth. Handwash, where your Company continues to invest behind
developing the market through a mix of building penetration and
Rural continues to be a key area of focus for your Company.
increasing consumption.
During the year, your Company reached out to 8,500 villages
across India with an ambition to improve the health and hygiene Detergents category recorded another year of steady
of children, through school contact and Mohalla programmes. growth with a good balance of price and volume growth.
At the School Contact Programme, your Company’s brands, Notwithstanding a challenging economic environment, where
Lifebuoy and Pepsodent, encouraged and educated children category growth slowed and the rate of premiumisation
on the importance and correct method of handwashing and came off, for your Company the performance in the category
brushing their teeth. In the Mohalla programme, your Company continued to be led by the premium end. Surf continued to lead
demonstrated to consumers the benefits and usage of new and category premiumisation with double digit growth, buoyed by
emerging categories, such as facewash, hair conditioners and the continuing momentum on Surf Excel Easy Wash, since its
fabric conditioners. relaunch in the previous year. The performance in Rin was led
by the bars portfolio while powders were re-launched towards
the end of the year, with an improved product and new thematic

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 Overview Reports Financial Statements Shareholder Information

communication. Wheel’s performance progressively stepped up skin forayed into the anti-aging segment with the launch of Youth
over the year, with the second half benefiting from the re-launch Infinity skin cream. In addition, under Lakmé, a new Complexion
of the powders portfolio as significant investments were made to Care (CC) cream was introduced, the Perfect Radiance range
deliver a superior formulation resulting in quality enhancement was relaunched and the facial cleansing portfolio was revamped
for the segment. The brand was further supported by a range with the addition of new Clean Up range. Pond’s launched BB+
of impactful activation including the Gold Coin programme, cream in India to leverage on the global beauty trend catering to
which was well received. The emerging market development consumers looking for instant optical radiance.
categories of Machine Wash (with Surf Excel Matic) and Fabric
Conditioners (with Comfort) continued to perform well. Besides, Hair Care delivered a strong year of volume led broad based
your Company also initiated the creation of Detergent Liquid double digit growth. Dove, Sunsilk and Clinic Plus grew in
market in India with the launch of Surf Excel Detergent Liquid. double digits during the year. The TRESemmé proposition of
Your Company will continue to focus on driving innovations, ‘Salon like hair, at home everyday’ has been well received by
exercising cost control across the value chain and delivering consumers. The brand which was introduced in September
effective communication to win in the Detergents category. 2012 has made very good progress and been instrumental in
accelerating the premiumisation agenda. The fact that the brand
Household Care category delivered double digit growth during neared the significant milestone of Rs. 100 crores of annual
the year on the back of robust volumes. Vim, which continues to turnover in its very first full year post launch is an example of
delight consumers through superior product quality and strong efficiently leveraging the global Unilever portfolio to win locally
advertising, is now a Rs. 1000+ crore brand. Innovations, such as with consumers. In addition, your Company launched Toni&Guy,
the Anti-Germ mix (bar and liquids) and the monthly tub pack, another premium brand from the global Unilever hair portfolio.
continue to drive consumption and premiumisation in urban It is the first time that your Company launched the brand through
India. At the same time, strengthening the presence across key e-commerce. Going forward, Toni&Guy will be rolled out in
price points in dishwash bars helped reach new consumers in select stores across India. Your Company continued to focus on
rural India. Domex strengthened the toilet cleaning business market development by investing strongly behind the emerging
through the launch of an innovative product, Domex Zero Stain. high potential hair conditioners segment, thereby growing ahead
The innovation, aimed at hygiene conscious users who have of the market.
high incidence of stain problem in toilets, has helped fuel brand
growth. Domex Toilet Academy (DTA) programme was launched In Oral Care, significant investments were made to sustain
during the year with an aim to eradicate open defecation by competitive position in the category, as competitive intensity
building toilets and improving sanitation facilities. Through the stepped up dramatically in the course of the year. Your Company
right partnerships, DTA is helping promote the importance of continued to focus on strengthening the Oral Care brands and the
safe and hygienic sanitation practices in local communities. portfolio, despite the intense competitive pressure. Pepsodent
Germicheck was re-launched during the year with an improved
5.1.2. Personal Products formulation with better germ attack power. Pepsodent also
Personal Products categories comprise Skin Care, Hair Care, continued to strengthen its expertise and authority credentials
Oral Care, Colour Cosmetics and Deodorants. In a challenging through the Expert Protection range and with a strong dental
market environment, where the growth of discretionary community programme. The growth in Closeup continued to be
categories has been particularly under pressure, the Personal led by a range of exciting activations. Your Company has also
Products segment delivered a healthy turnover growth of 9.2%. significantly revamped its toothbrushes business model by
Segmental profit was up by 6.1%, as your Company continued pruning and sharpening the portfolio during the year.
to invest for competitive growth in its core categories, whilst
In the Deodorant portfolio, through Axe, your Company continued
building the segments of the future.
to deploy exciting innovations and impactful campaigns. The
Skin Care category registered good growth in a slowing market. ‘AXE Blast’ campaign, endorsed by a popular Bollywood youth
Fair & Lovely was re-launched with a new mix - the ‘Best Ever’ icon, was well received by consumers. Your Company has strong
Fair & Lovely - a product that was tailor-made to deliver superior innovation plans for the forthcoming year in this category. Your
skin lightening results in India. Fair & Lovely registered a step Company currently imports a large portion of deodorants in
up in its growth trajectory post the re-launch. Vaseline Healthy the aerosol form. Unilever is in the process of implementing a
White, with a proposition of not just giving moisturisation but also project to establish a world class deodorants manufacturing
instant and lasting skin whitening, was very successful, resulting facility in India. This facility will provide a regular supply of high
in double-digit growth for the brand. Dove and Lakmé also grew quality deodorant products to cater to markets across the world,
very well during the year, powered by strong marketing inputs. including India.
Lakmé delivered a strong performance during the year on the
back of a range of exciting innovations that were launched. Lakmé

Annual Report 2013-14 Directors’ Report 33

Lakmé Colours has had an exceptional year with high double popular price segments, brands grew competitively. Taj Mahal
digit growth. The reinvention of the brand as ‘Pro-stylist’ across and 3 Roses continued to drive premiumisation and Red Label
makeup, skin and salon has brought its expert credentials to the and Taaza offered unbranded tea users a good mix of superior,
forefront through premium innovations in skin care and makeup. great tasting tea and value. Taj Mahal and Lipton continued to
In makeup, your Company has launched the 9 to 5 platform - to grow the tea bags market through market development. Your
address working women, many first to market innovations under Company strengthened its position in every segment of tea bags
Absolute like Gel nails and Face Stylist and limited editions like market, particularly flavoured and green tea.
Pop Tints. The premium segment contribution for makeup has
grown particularly well in the last two years. The Lakmé brand has The Instant Coffee market was challenged for growth in the
seen a step up in investments and all key innovations have been context of steep commodity inflation in the previous year with
executed through the beauty advisory channel, where expansion the accompanying drop in consumption, particularly in the core
of footprint and activation through bringing the brand proposition South markets. In this context, your Company’s focus was to
alive at retail has contributed to the market development. Lakmé drive back lapsers to the category, through enhanced product
has also leveraged the digital communication channel, through experience and market development efforts. Your Company also
‘how to’ videos, to educate consumers on using makeup and continued to drive BRU Gold – a premium offering, targeted at
adopting new regimes in skin care. new age consumers of coffee in the non-traditional markets. BRU
Gold met with good success as the franchise grew competitively
5.2. Foods & Beverages (F&B) ahead of markets.
The Foods & Beverages (F&B) portfolio of your Company
5.2.2. Packaged Foods
comprises Tea, Coffee, Processed Foods, Frozen Desserts, Ice
Creams, Bakery products and Out of Home operations, including The Packaged Foods segment of your Company comprises
BRU World Café. culinary products such as jams, ketchups and squashes under
Kissan; soups, soupy noodles and meal makers under Knorr;
During the year, F&B business delivered strong double digit branded staples (atta and salt) under Annapurna; bakery products
growth in a challenging market context. This was driven by under Modern; and frozen desserts / ice creams under Kwality
a single minded focus on the core brands and driving market Wall’s and Magnum. The segment delivered 10.0% turnover
development across key categories. The Packaged Food category growth with a segmental profit growing by 65.5% during the year,
continues to represent a significant consumer and business as your Company continued to drive efficiencies and mix, while
opportunity, given the shifts in the income pyramid, increase continuing to invest in building this business.
in working women, growing health concerns and the need for
taste with convenience. Your Company is consistently focused Kissan sustained its strong, consistent performance, delivering
on developing newer offerings that can best fulfil existing and another year of double digit growth, driven by impactful activation
emerging consumer needs. Your Company continues to focus around unlocking everyday relevance. A strong insight of the
on driving availability and distribution, alongside building ‘Tiffin-moment’ being a stress point in the mother’s life resulted
salience for its brands and relevance. In addition, your Company in a solution in the form of ‘Kissan Rolls’, where mothers could
is driving upgradation across categories with strong research give their kids healthy vegetables made tastier with Kissan in the
and development support from Unilever and a deep insight into form of a roll. This singular message, along with our reiteration
Indian consumer and customer needs. of the fact that Kissan is made from 100% tomatoes through
‘Kissanpur’, made Kissan the brand of choice. During the year,
5.2.1. Beverages Kissan moved up 70 places in India’s Most Trusted Brands. The
The Beverages segment delivered 12.4% turnover growth in the consumer preference, along with a strong distribution increase
year, well ahead of the market, on the back of a strong double across both Ketchup and Jam, resulted in the business growing
digit performance in Tea. This was accompanied by a significant significantly faster than the market.
step up in segmental profits which increased by 22.4%.
The performance of Knorr in the year was led by Soups, with the
At the onset of the year, the Packet Tea market witnessed steep convenient Instant Soups single serve format doing particularly
commodity inflation which drove market to volume decline. well. Your Company has increased the focus on core soup
Despite this environment, your Company delivered competitive markets and ensured that the brand salience is at its highest in
and profitable growth. The double digit growth across all brands these markets. Your Company also invested behind the instant
was driven by a strengthened mix and focused in-market activities. ‘cup-a-soup’ range, as this portfolio is driving growth for the
soups category, given its consumer offering of tasty and healthier
Your Company drove its five leading brand positions across India, products, at a very affordable price. Knorr Soupy Noodles
with all brands recording healthy volume growth and growing was restaged at the start of the year. The Knorr Meal Maker
across major geographies. Across both the premium and

34 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

portfolio was also re-launched and has met with an encouraging During the year, Pureit’s new product innovations focused on
initial response. driving superior functionality and aesthetics at a lower cost, with
the launch of Pureit Marvella Slim RO, a premium water purifier
During the year, your Company focused on growing the at an affordable price. Pureit Marvella Slim RO has helped Pureit
Annapurna business profitably. Towards achieving this objective, strengthen its position in the electric water purifier segment.
your Company made sharp choices on the brand’s footprint and The launch of ‘Save 3 Gas Cylinders’ communication for
improved its cost structure. As a result, there is a significant storage purifiers was another testimony to Pureit’s pioneering
progress in brand profitability, which now allows your Company innovativeness in terms of driving market development of water
to be competitive and invest back in the brand. purifiers by establishing cost and convenience advantage over
conventional methods of purification. Pureit associated with
Your Company also significantly focused on young nascent Miss India World 2013 winners, to spread awareness about the
experiential marketing. Given that most of the play is in market importance of safe drinking water under its ‘Unilever Pureit
development categories, it is critical that consumers sample Protecting Lives Programme’. During the year, your Company
your Company’s products and discover the great taste and focused on widening its distribution reach for its range of
convenience that the products offer. purifiers in different retail formats across the country. Substantial
progress was made in evolving the Germkill kits business for
Modern Foods, a portfolio of Bakery Foods, continued its
storage purifiers and also improving in-store execution for
momentum delivering strong double digit growth with improved
the premium range of purifiers. The focus on driving category
profitability. Your Company stepped up distribution network in
premiumisation continues with the launch of Pureit Ultima UV +
new geographies and this initiative has yielded encouraging
RO towards the end of the year. The product, which by far is the
results. Key innovations like Oats and Ragi Wheat Bread,
most premium offering from Pureit, offers advanced technology
festive Cakes and Cookies, coupled with improved operational
and superior aesthetics met with a very encouraging response
efficiencies contributed well to the growth and profitability of the
from consumers in the early days since its launch.
Modern Foods business.

During the year, the Frozen Desserts business faced a challenging

5.4. Exports Business
external environment with slowing discretionary spends and FMCG Exports (Unilever India Exports Limited)
a shorter season. But with long term positive outlook, your Unilever India Exports Limited (UIEL) is a wholly owned subsidiary
Company continued investing behind the distribution expansion of your Company, engaged in FMCG Exports business. The focus
and building big brands. Cornetto grew ahead of market on the of the FMCG exports operation is two-fold (a) to develop overseas
back of distribution and strong communication. Cornetto also markets by driving distribution of ethnic brands, such as Kissan,
remained at the forefront of your Company’s digital strategy. BRU, Brooke Bond, Lakmé, Pears among the Indian diaspora
Cornetto’s Facebook page was adjudged as No.1 in India by an in international markets, (b) to effectively provide cross border
advertising magazine. Magnum, Unilever’s most premium ice sourcing of FMCG products to other Unilever companies across
cream brand, was test piloted in Chennai during 2013 and met the world.
with a very good response. Magnum was rolled out to four more
cities in the beginning of 2014. Modern Trade performance has The Home and Personal Care segment in the exports business
been very good in Ice Creams as your Company strengthened its has witnessed a stable year, driven primarily by Soaps and Hair
position in this key channel. During the year, your Company also Care. Brands like Pears have registered healthy growth in the
rolled out Perfect Stores programme, a first for the category and focused markets through strong advertising and activation
the performance across these stores has been leading overall support and have received strong accolades from the consumers
category growth. Availability and visibility are still the core drivers in the UK market. For Unilever sourcing countries, Lifebuoy
of the business and your Company continued investing behind has delivered double digit growth post its launch across Asian
them. Your Company is driving efficiencies in the business, markets. Fair & Lovely and Vaseline Jelly continue to show stable
particularly in asset management and infrastructure, while growth in the key geographies of the Middle East. The Foods &
stepping up investments behind big impulse brands, viz. Magnum, Beverages segment of the business witnessed a modest growth.
Cornetto and Paddle Pop. Instant Tea / Packet Tea and premix witnessed strong double digit
growth, whereas coffee sales remained steady. The profitability
5.3. Water of the overall segment improved significantly with focused cost
Pureit is the world’s largest selling range of water purifiers in reduction programmes.
non-pitcher and non-faucet mount segment. Pureit was ranked
as the most trusted brand in water purifiers in Brand Equity’s 2013 Non-FMCG Exports
Most Trusted Brands Survey. The brand continues to strengthen In the specialty business, which continued to be a part of your
its position in a slowing and weak consumer durables market. Company post the demerger of FMCG Exports business to

Annual Report 2013-14 Directors’ Report 35

UIEL, Rice maintained a flat performance, while continuing to To participate effectively in this growth opportunity, KCL aims
focus on expanding geographies, seeding opportunities and to bring in regular innovations to the market through sustained
marketing/ brand building initiatives to accelerate growth in the and appropriate investments in the short to medium term. As a
coming years. Joint Venture partner, your Company remains committed to this
business.
Leather (Pond’s Exports Limited)
The Leather business performed well with improved operating
profitability and robust double digit sales growth. This 6. CUSTOMER DEVELOPMENT
performance was achieved through new product designs,
excellent customer service, world class quality and cost
innovations. During the year, your Company has undertaken and delivered
several ambitious initiatives to reaffirm its position as a
5.5. Beauty & Wellness (Lakme Lever Private Limited) preferred channel partner for over 2,500 redistribution stockists
Lakme Lever Private Limited (LLPL), a wholly owned subsidiary and millions of retailers across the country.
of the Company, has 225 salons, of which 57 are Company
owned / managed and 168 are franchisee salons. LLPL delivered Your Company has always strived to expand distribution to
double digit salon growth for the fourth consecutive year, connect the shoppers and brands as widely as possible. During
although the market slowed down by consumers pulling back on the year, your Company took an ambitious challenge of adding
discretionary spends. Net expansion improved from 8 salons in more outlets under its coverage expansion programmes and
the previous year to 36 salons in this financial year. Innovations deployed innovative means, such as tele-calling to ensure
like the Perfect Radiance and Youth Infinity facial rituals have sustainability of coverage and profitability of redistribution
delighted consumers and driven growth. The flagship Lakmé stockists. This resulted in improving the reach and distribution of
Absolute Salon, which magnifies the backstage experience with the products, making brands more accessible to the shoppers.
professional styling expertise and bespoke beauty rituals, was These initiatives would contribute significantly to the aim of
launched in Mumbai. Your Company will continue to support winning in the marketplace in the years to come.
LLPL to drive growth in this attractive market opportunity.
Your Company also undertook the initiative of expanding the number
5.6. Hindustan Unilever Network of stores compliant to the Perfect Stores programme, thereby
significantly enhancing the quality of execution in the marketplace.
Hindustan Unilever Network business consists of three major The Perfect Stores programme has delivered business benefits in
brands, Aviance (Personal Care), Lever Ayush (Health Care) and terms of faster growth, and your Company continues to expand the
Lever Home (Detergents, Household Care and Toothpaste). reach of the programme and strengthen the benefits delivered.
The year has been extremely challenging for the entire direct Your Company believes that winning with customers is a key
selling industry, including for your Company, due to ambiguity enabler for winning in the marketplace and has a strong
on acceptable norms for direct selling in India. As responsible customer agenda in place to deliver high engagement levels
corporate citizens, your Company has always conducted its with the customers. To invoke and scale the entrepreneurial
business within the framework of Indian law and has recently spirit of customers and embed it into the ways of working, your
re-launched its compensation plan to be more competitive. Your Company launched a dedicated programme to identify, fund and
Company is reviewing the strategy for this business. rollout innovative business practices of customers. To take this
programme further, there are events to provide a common forum
5.7. Kimberly Clark Lever Private Limited (KCL)
for all customers to interact with the senior leadership of the
KCL is a Joint Venture between your Company and Kimberly- Company, leading to a powerful exchange of ideas and a deep
Clark Corporation, USA, with infant care diapers as its primary understanding of the customer at all levels in the organisation.
product category. The year witnessed a strong growth delivery by
Huggies brand led by Huggies Wonder Pants. The re-launched Your Company runs dedicated call centres for distributors as
Huggies Wonder Pants with improved product features and well as retailers, which enable them to connect directly with
performance had a good growth momentum throughout the the Company anytime, thereby achieving world class customer
year. The low penetration levels in India’s infant care diapers service with a tremendous opportunity for getting customer
markets offer significant growth potential for this category. This insights. A mandatory customer immersion for Customer
growth opportunity has attracted increased levels of competitive Development team gives them the opportunity to spend more
intensity in the recent past with multinationals making significant than 50 hours with a variety of distributors and retailers, observing
investments in India. and interacting with them in their milieu to understand their
needs better. These various initiatives have helped to keep the

36 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

needs of the customer the guiding force for all your Company’s (IPM) to respond with speed and agility to the volatile market
activities. demands.

Modern Trade, the growth channel for future, continues to be a Your Company delivered quality improvement across the supply
focus area for your Company. Continuous focus on Joint Business chain by focusing on better product design and implementing
Planning, ensuring best in class On Shelf Availability and various quality improvement programmes. This resulted in
delivering clutter breaking product launches, was appreciated 50% reduction in consumer complaints. Levercare helpline
by Modern Trade customers. Your Company was once again capabilities were improved to engage better with consumers.
awarded the ‘Best Supplier’ by leading Modern Trade customers.
Your Company has a strong supply chain savings programme,
The year marked the first full year of operation for your Company’s which is driven by various cross functional teams, such as R&D,
rural distribution alliance with Tata Teleservices for distributing Procurement, Manufacturing and Logistics. The robust savings
their telecom products through the extensive distribution programmes were driven through workshops, rigorous monthly
network of your Company. This alliance has helped in driving your reviews, project trackers and a strong ideas’ funnel.
Company’s rural coverage expansion by enhancing the earning
Your Company has started using renewable biomass as a fuel.
potential of our channel partners, including Shaktiammas. Your
Your Company is using locally available agri-waste like paddy
Company is now nationally distributing telecom products to
straw, cotton stalks, sawdust and rice husk as fuel. These
75,000 telecom outlets through 550 rural distributors.
are helping local farming community to realise value out of
Your Company had set up a state of the art Customer Insight and material, which was otherwise wasted and burnt in fields,
Innovation Centre (CiiC) last year to use insights and technology causing pollution. Besides, small local industries have come up
to gain a deeper understanding of shopper and customer needs. to convert the biomass into briquettes.
The CiiC was set up leveraging the knowledge and learnings Your Company continues to focus on water conservation by
from Unilever CiiC operations, set up previously in other parts reducing ground water abstraction. This is done by lowering
of the world. Using technologies like interactive meeting rooms, process related consumption and reuse of treated effluent
smartboard, virtual reality, retail lab, eye tracking technology through Reverse Osmosis and secondly recharging of ground
and mobile virtual reality solutions, your Company developed water table through Rain Water Harvesting, installed at all units.
and executed differentiated channel and format strategies for These initiatives, collectively, are helping to improve availability of
both traditional channels and Modern Trade. CiiC set up by your water for the communities around your Company’s sites.
Company is a unique centre for gathering insights, catering to
both General and Modern Trade. Your Company progressed well in implementing its long term
manufacturing strategy, with efficient capacity creation and
Your Company continues to focus and drive Project Shakti, introducing new technologies to support volume growth. To
the initiative for driving social responsibility and sustainability, achieve manufacturing excellence, your Company has embarked
aimed at enhancing livelihoods and building opportunities for on the journey of World Class Manufacturing. This is an initiative
small scale entrepreneurs. launched across Unilever and your Company is drawing
and executing learnings from the global programme, which
focuses on identification, root cause analysis and elimination of
7. SUPPLY CHAIN non- value adding activities. This will lead to further improvement in
efficiencies and cost performance. In the sites where the Company
Your Company’s supply chain agenda remained focused on has already introduced World Class Manufacturing Programme, it
improving performance on service, quality and cost. This was has identified significant cost reduction opportunity in production
delivered with speed and agility in a Supply Chain set-up, with the costs, which are converted into projects and monitored closely.
highest standards of safety and positive environmental impact. There has been a 20% improvement in innovation OTIF (On Time
in Full) with more than 100 innovation networks being executed
Your Company made significant progress in its vision to deliver
during the year, touching about 60% of the product portfolio. The
customer service excellence and enable sustainable growth.
focus on bigger and faster innovation and capability development
The service delivery standards improved steadily with CCFOT
has significantly helped the Company launch innovations first
(Customer Case Fill-On-Time) increasing to 94% and Modern
time right.
Trade OSA (On-Shelf Availability) touching an all time high of
96%. The customers have acknowledged this performance and The Partner to Win programme, developed by Unilever globally,
have rewarded your Company with the best supplier recognitions. aims at developing Joint Business Plans with suppliers and
Your Company continued to strengthen the Sales and Operation business partners. It has resulted in reduced lead time and costs
Planning process (S&OP) and Innovation Process Management and improved reliability and new innovation delivery.

Annual Report 2013-14 Directors’ Report 37

 Oral Care witnessed the launch of Pepsodent Germicheck,
8. RESEARCH & DEVELOPMENT superior power toothpaste with breakthrough technology
that maximises the bioavailability of Triclosan in plaque, thus
providing 130% germ attack power compared to benchmark.
Your Company continues to derive sustainable benefit from the This product delivers a benefit similar to a premium product, but
strong foundation and long tradition of Research & Development at an affordable price. Clinical study supporting this technology
(R&D), which differentiates it from many others. New products, has been published in the ‘Journal of Clinical Dentistry’ and
processes and benefits flow from work done in various Unilever an application for grant of a patent has also been filed. In the
R&D centres across the globe, as well as in the Research toothbrush segment, Pepsodent Flexi Action was re-launched
Centres in India. The R&D labs in Mumbai and Bengaluru are with level filaments in different colours and a new variant,
aligned to Unilever’s global R&D. Many of the projects executed Pepsodent Sensitive was introduced with tapered filaments.
out of these centres are of global relevance, and have a strong
focus on regional needs and the overall Developing & Emerging In Hair Care category, the Dove hair care range was re-launched;
(D&E) world. With world class facilities and a superior science in particular, the Intense Repair variant was re-launched
and technology culture, your Company is able to attract the best with keratin actives to provide superior damage repair and
talent to provide a significant technology differentiation to its significantly smoother hair. A new split ends rescue variant of
products and processes. Dove shampoo and conditioner was launched that helped reduce
split ends formation by four times. New variants of TRESemmé
Your Company’s R&D programmes are focused on the and Sunsilk shampoo and conditioner were launched with novel
development of breakthrough and proprietary technologies with technology to specifically address problems of frizz and shape
innovative consumer propositions. The R&D team of over 750 retention. TRESemmé range was made more accessible to
people comprises highly qualified scientists and technologists consumers through the launch of a lower price sachet format.
working in areas of Home & Personal Care, Foods & Beverages A premium variant of Clinic Plus oil was launched in the market,
and Water Purification. The R&D group also comprises critical the product was designed with the right combination of oils,
functional capability teams in the areas of Regulatory, Clinicals, including almond oil, to be light and non-sticky and at the same
Digital R&D, Product & Environment Safety and Open Innovation. time provides intense nourishment through rapid penetration
into the scalp and hair fibre.
During the year, your Company introduced several innovations
in Soaps and Detergents category. In Detergents category, In Deo category, two new variants of Axe deodorant and one new
Wheel and Rin were re-launched with enhanced and superior variant of Lux deodorant were launched to widen the fragrance
performing product in mass and mid-tier segment, respectively. choice for consumers.
Surf Excel launched the liquid detergent for fabric cleaning,
thus initiating the creation of another sub-category of future. In Water business, your Company launched a reverse osmosis
Comfort, the liquid fabric conditioner, continues to do well. based purifier for the mass market ‘Marvella Slim RO’. Your
In Household Care, Vim liquid launched a new premium anti- Company also launched Pureit Ultima RO+UV, a highly premium
bacterial technology offering consumers with dual benefit of RO and UV based water purifier with a graphic (electronic)
superior cleaning and assurance of hygiene in dishwashing. display of total dissolved solids level in input and output water
Domex launched its acid based variant under the name of Domex and superior aesthetics.
Zero Stain with superior claims like ‘7x Thicker formula’. The
category also continues striving efforts to improve health and The Foods R&D team focused on achieving a significant increase
hygiene through various market development activities across of the profitability of the Foods product portfolio in combination
product platforms. with a quality increase of product performance as experienced
by consumers. This was achieved by applying new technologies
In Skin category, Fair & Lovely successfully defended its 5-crore and selection of superior raw materials, while maintaining
challenge campaign, demonstrating its product superiority cost levels as same or lower. Two key highlights were: first, the
and was re-launched with a ‘Best Ever’ formula, leveraging its implementation of new tomato ketchup technology under Kissan
advanced multivitamin technology. In addition, a new SPF15 (India being the first country within Unilever to implement this);
vanishing cream variant, based on breakthrough sunscreen second, the top two most selling Knorr soups were reformulated,
dispersion technology developed in-house, was launched for resulting in an increased margin and scoring significantly
the first time under Fair & Lovely brand in a revolutionary pump superior in consumers’ preference.
tube – a first at this price point in the market. Vaseline Healthy
White was re-launched with a new breakthrough multivitamin The year saw key strategic launches under tea brands
plus optics formula giving 4X instant whitening. Rexona was also contributing to good business growth. Improved product and
re-launched with a new winning formula, based on superior skin new packaging were developed for Taaza tea re-launch. A
feel and lathering.

38 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

new masala variant ‘Taaza Masala Chaska’ was launched with buying and IT, among others, which helps your Company to
a product containing a unique spice mix that received very remain competitive and further step-up its overall business
positive consumer feedback in testing. Taj Mahal tea blend performance. Unilever is committed to ensuring that the support
was developed to meet the consumer expectations of ‘perfect in terms of new products, innovations, technologies and services
balance of strength and flavour’. A specially designed fresh green is commensurate with the needs of your Company and enables it
tea product was introduced under Lipton ‘feel light and active’ to win in the marketplace.
proposition. Lipton ice tea powders were restaged in the market
with new claims on being more natural, made with real tea and The details of expenditure on scientific research and development
real fruits. In coffee, premium single origin, freeze dried coffee at the Company’s in-house R&D facilities eligible for a weighted
range under BRU was expanded with the launch of a new unique deduction under Section 35(2AB) of the Income Tax Act, 1961 for
variant, Guatemala. Product improvement for BRU Instant was the year ended 31st March, 2014, are as follows:
implemented. Through R&D initiatives, cost savings were also • Capital Expenditure : Rs. 5.64 crores
delivered to manage commodity inflation. • Revenue Expenditure : Rs. 31.22 crores
In Ice Cream category, global iconic brand Magnum was
launched in a test market in Chennai with three flavour variants 9. ENVIRONMENT, SAFETY, HEALTH AND
– Classic, Almond, and Chocolate Truffle. In the Frozen Desserts
ENERGY CONSERVATION
category, several new variants were launched. These included
Fruttare - Apple and Mixed Berry, Carte D’or – Rajbhog and Gajar
Your Company has a vision of being an ‘Injury Free’ and ‘Zero
Halwa, Creamy Delights – Pineapple and Litchi and Paddle Pop
Environment Incident’ organisation. The Compass, your
Jiggly Jelly.
Company’s strategic framework, integrates Safety as a non-
R&D has further contributed to the Company’s sustainability negotiable value. Over the past many years, your Company has
agenda by enabling significant reduction in packaging material been progressing well in terms of reducing injury frequency rates
consumption through several material efficiency initiatives. and has improved the safety record in factories and facilities.
Packaging material usage was reduced by around 115 tonnes
The Company has developed safer systems and procedures for
across Beverages and Ice Creams. Your Company’s R&D is also
work by implementing Core Design principles (e.g. in projects,
working on novel technologies to help save substantial amount
in facilities design, in process safety, etc.) rolling out up-to-date
of water.
engineering standards and investing in hardware and safety
With strong scientific expertise and the potential to deliver infrastructure across sites.
high value technologies, India continues to occupy a premier
Your Company also recognises that design and procedures
position in Unilever R&D. Your Company is well placed to meet
are effective only when people choose to maintain and follow
the challenges emanating from the increased competition
them. To achieve this objective, a behavioural safety programme
intensity and the opportunities to drive faster growth on the back
BeSafE is being rigorously deployed across the Company. This
of a strong support from R&D as well as brand development
programme is at the core of your Company’s safety journey and
capabilities.
has been created as a customised behavioural safety framework
Your Company had entered into a Technical Collaboration for Unilever, building upon the earlier DuPont model, which
Agreement (TCA) and a Trade Mark License Agreement (TMLA) your Company had pioneered a decade ago in India. The safety
with Unilever. The TCA provided for payment of royalty on net incident rate measured as total recordable frequency rate (TRFR)
sales of specific products, manufactured with technical inputs was 66% of 2008 baseline.
developed by Unilever. The TMLA provided for the payment
Your Company actively promotes safety beyond the workplace
of trademark royalty, as a percentage of net sales on specific
through extensive ‘Safe Travel’ and ‘Beyond Work Safety’
brands, where Unilever owns the trade mark in India. Given that
initiatives, involving the employees’ families across all sites.
the pace of innovations and the scope of services have expanded
Several prestigious awards have been conferred upon your
over the years and that Unilever’s global resources are providing
Company by national and international organisations of
greater expertise, superior innovations and scale advantage for
repute, both from government and non-government sectors in
all Unilever entities, your Company is enjoying the benefits of an
recognition of your Company’s efforts in the sphere of Safety.
increasing stream of new products and innovations, backed by
technology and know-how from Unilever. From sourcing to manufacturing or logistics, sustainability is
embedded across all operations of your Company. The Company’s
Your Company is also receiving support and guidance to drive
environmental footprint is being monitored closely for all
functional excellence in marketing, supply management, media
aspects of the manufacturing process. Benchmarking is done

Annual Report 2013-14 Directors’ Report 39

for resources consumed (like water, energy) and gaseous, liquid engagement and strengthening employee relations further
and solid emissions (like carbon dioxide, sulfur oxides, COD, solid through progressive people practices at the shopfloor.
waste). Your Company has worked on the following key areas:
Your Company is widely acclaimed for its people development
•  ossil fuels are being replaced by biogenic fuels, wherever
F
practices and has reinforced its position in this area. This, coupled
available, through investment in biomass fired boilers, hot
with the ability to attract best talent, provides a competitive edge
air generators and thermic fluid heaters. This has reduced
to the organisation. According to the Campus Track Business
furnace oil, diesel and coal usage in units.
School Survey 2013, conducted by Nielsen, your Company has
• The biogenic fuels also includes the use of plant waste / been chosen as the preferred employer across all sectors for the
by-products like spent tea leaves and coffee beans as fuel. 2014 graduating batch of B-School students. Your Company has
This enables disposal cost savings besides reducing fossil also retained its position as the Dream Employer with students
fuel usage. of top business schools for the fifth consecutive year.
• Tie-ups with potential suppliers of renewable sources of
energy are being explored. Diversity and Inclusion is an important aspect of sustainable
business growth and is referred to as Winning Balance. Over
• Latest generation, energy efficient technology, like auto
the last three years, there has been considerable momentum
sensors, solar powered systems, LED lamps, high efficiency
on this aspect through better appreciation of the business case
motors, inverter drives, screw compressors are being used.
and greater leadership involvement and engagement. Tools
• Rain Water Harvesting is in place at all manufacturing and capabilities like day care, technology that supports agile
sites and the Company is now installing Rain Water Reuse working, flexible work arrangements through part time working
facilities in several sites to further reduce water usage. and career by choice programme and inclusiveness workshops
have been embedded to enable and drive the Winning Balance.
Your Company has reduced CO2 emissions (per tonne of
During the year, a Winning Balance Council was also established
production) in India by 27% approximately, when compared
in the Company, comprising male and female leaders across
to 2008 baseline. The use of renewable energy has increased
functions, who champion and lead the plans. Your Company
to over 20% of the total consumption. Water consumption
recognises men and women role models, who create a simple,
in manufacturing operations is reduced by over 37%, when
respectful and flexible work environment for their teams, which
compared to 2008 baseline.
inspires others to emulate them. With these enablers and
Waste generation is minimised through the application of reduce, focused plans, your Company has witnessed a 10% shift in the
reuse and recycle principles across units. Recyclable waste, such gender balance ratio over the last three years.
as packaging material, empty raw material containers, spent
The Talent and Organisation Assessment was undertaken
lubricants, batteries, e-waste, project scrap, etc. are systematically
successfully in 2013 and key business charters based on findings
segregated and recycled/ reused. Simple but effective facilities
have been institutionalised. These charters are owned by your
like installation of high pressure water jet setup for washing of
Company’s leadership team and will take off during 2014. These
empty chemicals drums ensure full recovery of material besides
interventions will allow your Company to have a robust people
safe recycle. Over 99% of total waste is recycled in environment
plan to guide your Company not just for immediate performance,
friendly ways. Total waste per tonne from manufacturing sites has
but to also ensure that the Company is future ready.
reduced by 84% vis-a-vis 2008 baseline.
In addition to building core capabilities in marketing, sales
The information required under Section 217(1)(e) of the
and distribution, your Company is investing in the areas of
Companies Act, 1956, read with the Companies (Disclosure of
beauty, foods, rural, digital, e-commerce, customer/ shopper
Particulars in the Report of the Board of Directors) Rules, 1988
marketing and market development, to win in the future. Your
with respect to energy conservation is appended hereto and
Company has developed comprehensive plans in each of these
forms a part of this Report.
key areas that are customised to suit the present and future
business needs. Besides, your Company has also identified
three key behaviours, Growth Mindset, Bias for Action and
10. HUMAN RESOURCES Consumer and Customer Centricity that will supplement the
capabilities to achieve business goals. To drive Bias for Action,
your Company has been driving a change in the way it makes
Your Company’s Human Resource agenda for the year was
decisions by (i) Generating insights, where attention is required
focused on strengthening four key areas: building a robust and
(ii) Getting the right leadership attention to road blocks and
diverse talent pipeline, enhancing individual and organisational
(iii) Facilitating faster decision making. Project Sunset is an
capabilities for future readiness, driving greater employee
online platform for speedy resolutions of road blocks within the

40 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

Company. Your Company also launched ‘Sunset Talks’, a two being sent excluding the statement containing the particulars
weeks intensive idea generation campaign on simplification that to be provided under Section 217(2A) of the Act. Any Member
received overwhelming employee participation and response. interested in obtaining such particulars may inspect the same
To drive Consumer and Customer Centricity, your Company at the Company’s Registered Office or write to the Company
has undertaken multiple initiatives to regularly communicate Secretary for a copy thereof.
with and reach out to its consumers and has a well defined
programme to capture consumer insights.
11. INFORMATION TECHNOLOGY (IT)
Your Company undertook intensive training programmes through
a combination of face-to-face and virtual learning approaches.
Over 28,000 man-days invested in classroom training and about Your Company continues to invest in IT, leveraging it as a source
38,000 e-learning registrations, indicate that the spirit of ‘learn of competitive advantage. The enterprise wide SAP platform, the
where you are’ is imbibed in employees of the Company. Your backbone of IT, encompasses all core business processes in your
Company is also investing in building capabilities in digital and Company. It also provides a comprehensive data warehouse with
social media to find new platforms for brands to engage more analytical capability that facilitates better and faster decisions.
effectively with Indian consumers. Your Company has leveraged the SAP platform to aid business
priorities and improve efficiencies both within the Company as well
The Global People Survey is a part of the Unilever employee as by collaborating with suppliers and customers. Your Company
insight programme, which aims to give voice to the Company’s is also using latest technology offerings like in-memory computing
people and provides a vehicle to make their views heard. The to significantly improve process efficiencies and unlock time of
Survey also provides regular, meaningful and actionable feedback employees.
to the leaders in the organisation. It has questions spread across
several dimensions in the areas, such as Strategic Leadership, Your Company has institutionalised an extensive IT capability for
Immediate Boss Effectiveness and Engagement. Feedback Customer Development function to support front-end execution.
from this survey forms the basis of holistic engagement plans, All distributors run a standard distributor management system.
which are reviewed regularly. As per the Global People Pulse The sales representatives and field based sales personnel have
Survey 2013, engagement in your Company has witnessed a been equipped with mobility devices for effective and efficient
3% improvement over the last year. There has been recognition on-ground execution. The available data is mined using analytical
of your Company’s People Management and Reward and tools to fine tune the selling process at each and every outlet.
Recognition practices, which are geared towards building a This capability, which has been used for the urban markets has
performance focused culture. also been extended to rural markets. The existing technology
backbone was leveraged to provide for a low cost mobile phone
Your Company has been investing in progressive employee based solution that significantly saved distribution costs.
relations practices to build capability at the grassroot level.
‘Sparkle’ is a centrally hosted intranet based tool that supports Your Company is investing in capabilities that will help reach
skill mapping, skill assessment, performance assessment, out and engage with end consumers, using low cost mobile
gap analysis and enables training plan identification, which is technology. These capabilities will not only increase the number
customised according to the priority areas of each workman. of consumers that can be reached, especially in rural areas, but
Sparkle has been a pioneering tool in the area of workmen also dramatically change the way in which your Company engages
capability development that promotes higher transparency and with them in a personalised manner using mobile telephony
focused training intervention linked to individual and business as a medium. Capabilities that have been built in this area will
needs. The tool has delivered results for over three years, and help your Company learn more about the end users across
your Company has successfully completed appraisals, thereby multiple brands as well as communicate with them directly about
identifying top performers and completing skill gap analysis customised offers.
of over 10,000 workmen online. Sparkle has been recognised
as a best practice and adopted for a global roll-out. Business IT tools and solutions are being used across the organisation to
Linked Engagement and TPM Edge programmes continued with make employees more productive and efficient. Employees have
full focus and rigour during the year and delivered significant been equipped with personal computing tools and technologies
improvement in factory operations. that allow them to communicate and collaborate more efficiently
and in a more agile manner.
Information as per Section 217 (2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, Your Company continues to invest in IT infrastructure to support
1975, forms part of this Report. However, as per the provisions business applications and has leveraged India’s expanded
of Section 219(1)(b)(iv) of the Act, the Report and Accounts are telecom footprint to provide high bandwidth terrestrial links to all

Annual Report 2013-14 Directors’ Report 41

operating units. Your Company also uses software as a service Record to Report Transformation project aims at creating one
to provide agile and cost effective IT capabilities in select areas. financial reporting excellence centre at Bengaluru. Your Company
has already taken the first step in this journey. Your Company is
As the IT systems and related processes get embedded in confident of making significant progress in the times to come,
the ways of working of the organisation, there is a continuous thereby future proofing the organisation. This project will enable
focus on IT security and reliable disaster recovery management faster reporting and accelerate results release to the market.
processes to ensure all critical systems are always available.
These are periodically reviewed, upgraded and tested for efficacy, My Business Information initiative is a stepping stone to the next
adequacy, security and reliability. generation information analytics. This goes with the principle of
converting data into information and information into insights
seamlessly, at a click, to expedite business decision making.
12. FINANCE AND ACCOUNTS This year, your Company took a giant leap of moving from a
multitude of ad hoc reports at multiple places to one centralised
information repository, thereby ensuring one version of a report.
Your Company continued to focus on cash generation. The In parallel, your Company achieved standardisation of reports
focus on managing optimal levels of inventory, sound business and over 90% reduction in the number of reports. This means
performance, operating efficiencies and cost savings across the fewer and better quality reports and more time released for
organisation helped generate healthy cash flows. Your Company investment on value added analysis. Such information on-the-go
managed investments prudently by deploying cash surplus in a makes business partnering more effective, simpler and a richer
balanced portfolio defined to offer primacy to safety and liquidity role for finance, while providing relevant information for speedy
of the investments. business decision making.

The finance function of the Company took a significant Your Company continued with various simplification initiatives
step forward by consolidating the work done on Finance commenced last year by disproportionately investing in IT. This
Transformation last year to further build capabilities and to get has resulted in release of time occupied by non-value adding
the business future ready. Your Company’s success depends tasks while giving significant savings in audit efforts.
upon being able to decouple transaction volume growth from
business growth and thereby reduce the cost, complexity and While driving the transformation agenda, your Company’s
time of transaction processing. The key building blocks to the finance team also continued to focus on delivering excellence
transformation programme were Procure to Pay, Zero Based on Financial Accounting and Reporting. This year, your Company
Controls, Record to Report Transformation and My Business won the esteemed ‘Silver Shield’ from the Institute of Chartered
Information Projects. Accountants of India for excellence in financial reporting for the
Annual Report 2012-13. Your Company is committed to increase
Procure to Pay project aimed to move the needle on services to the efficiency and effectiveness of the finance function in general
suppliers from vendor satisfaction to vendor delight. This year, and core areas of accounting, reporting and controls in particular.
your Company standardised and centralised invoice processing, This appreciation further strengthens the resolve to raise the bar
query management and payments processing from more than 40 and set higher standards of excellence, transparency and ease
locations to one payment excellence centre, thereby delighting in reporting.
business partners. The programme also delivers a capability
to steer continuous improvement programmes from the global Capital Expenditure during the year was at Rs. 526.50 crores
centre of excellence in Bengaluru, thereby landing a six sigma (Rs. 409.34 crores in the previous year).
level efficiency in transactional processes.
During the year, your Company has not accepted any fixed
Zero Based Controls project completely revamped the traditional deposits and there was no outstanding towards unclaimed
control monitoring methods to a cutting edge automated deposit payable to depositors as on 31st March, 2014. In terms
cockpit flagging exceptions to the control environment. This of the provisions of Investor Education and Protection Fund
enables exception based monitoring, while tightening the cost (Awareness and Protection of Investors) Rules, 2001, Rs. 3.57
of control. This year, your Company standardised the financial crores of unpaid / unclaimed dividends were transferred during
controls across geographies, leveraged technology to automate the year to the Investor Education and Protection Fund.
more than half of the key controls and set up a leading edge
monitoring and reporting capability in Bengaluru. This now
enables a focused review of the risk areas and a constructive
effort to remediate the exceptions, if any.

42 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

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, 2014, are given below:

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14

Return on Net Worth (%) 88.2 74.0 77.7 94.7 104.1
Return on Capital Employed (%) 103.8 87.5 96.8 109.1 130.2
Basic EPS (after exceptional items) (Rs.) 10.10 10.58 12.46 17.56 17.88

Segment-wise Results
Your Company has identified five business segments, in line with 13. LEGAL, COMPLIANCE AND BRAND PROTECTION
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 Your Company continued to focus on the key areas and projects
Staples, Frozen Dessert and Ice Cream and (v) Others, including within the legal and compliance functions, which include
Exports, Chemicals, Water Business, Infant Care Products, etc. transiting to a workflow based compliance software tool
The audited financial results of these segments are provided as ‘Self-Compli’. This tool enables compliances to be made and
a part of financial statements. tracked by factories and offices of your Company across the
country. In the area of Brand Protection, during the year, your
12.1. Risk and Internal Adequacy Company has taken significant actions against counterfeits, fakes
and other forms of unfair competition, under the Company’s
Your Company has an elaborate Risk Management procedure,
programme of Combating Unfair Competition. The focus on
which is based on three pillars: Business Risk Assessment,
litigation management continued this year with significant
Operational Controls Assessment and Policy Compliance
number of disposal of litigation recorded, as in past years, and
processes. Some of the risks relate to competitive intensity
fewer litigations added during the year.
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
14. MERGERS, ACQUISITIONS, JOINT VENTURES
Management Committee and Audit Committee.
AND DISPOSALS
The Company’s internal control systems are commensurate
with the nature of its business and the size and complexity of its Consequent to the approval of shareholders in the year 2007, the
operations. These are routinely tested and certified by Statutory Company has transferred Marine Exports business to M/s. Gadre
as well as Internal Auditors and cover all offices, factories and Marine Exports Private Limited, as a going concern, pursuant to
key business areas. Significant audit observations and follow a Business Purchase Agreement entered between the parties in
up actions thereon are reported to the Audit Committee. The July 2013.
Audit Committee reviews adequacy and effectiveness of the
Company’s internal control environment and monitors the
implementation of audit recommendations, including those 15. OPEN OFFER
relating to strengthening of the Company’s risk management
policies and systems.
On 30th April, 2013, Unilever PLC as Acquirer along with Unilever
Your Company manages cash and cash flow processes NV as person acting in concert made an announcement for Open
assiduously, involving all parts of the business. There was a net Offer for acquiring 48.70 crore shares, aggregating to 22.52%
cash surplus of Rs. 2,220.97 crores, as on 31st March, 2014. The of the total Share Capital of the Company, from the public
Company’s low debt equity ratio provides ample scope for gearing shareholders at the offer price of Rs. 600 per share.
the Balance Sheet, should the need arise. Foreign Exchange
transactions are fully covered with strict limits placed on the In accordance with the requirements of SEBI (Substantial
amount of uncovered exposure, if any, at any point in time. There Acquisition of Shares and Takeovers) Regulations, 2011, a
are no materially significant uncovered exchange rate risks in Committee of Independent Directors was constituted by the
the context of Company’s imports and exports. The Company Board, comprising all Independent Directors of the Company,
accounts for mark-to-market gains or losses every quarter end, for providing reasoned recommendation on the Open Offer to
in line with the requirements of Accounting Standard 11. the shareholders of the Company. The Independent Directors

Annual Report 2013-14 Directors’ Report 43

Committee made its recommendation to the shareholders on Company made a good progress in its journey to provide safe
18th June, 2013 and the same was published in the newspapers drinking water through Pureit water purifier. Nearly, 57.5 million
in accordance with requirements of the regulations. lives were protected by Pureit globally by the end of 2013.

The tendering period of the Open Offer was from 21st June, 2013 In the area of nutrition and health, your Company made a good
to 4th July, 2013. At the end of the tendering period, Unilever progress on lowering the levels of salt, trans fat and calories
acquired additional 31,95,63,398 shares in the Open Offer, thereby in its portfolio. In 2013, 70% of your Company’s Foods portfolio
increasing the shareholding in the Company from 52.48% to (by volume) was compliant to 5 gm salt per day target. Currently,
67.25% of the total Share Capital of the Company. all the Kissan ketchup variants and Knorr soups meet the interim
target of 6 gm salt per day.

In the area of environmental impact, CO2 emissions per tonne of

16. SUSTAINABLE LIVING production reduced by 27% in 2013 compared to the 2008 baseline.
Water usage per tonne in your Company’s manufacturing
Sustainability is at the core of your Company’s way of doing operations reduced by 37% compared to the 2008 baseline. In
business. It guides your Company on the path to achieve long term 2013, of the total 38 sites, 33 sites became zero-discharge sites,
success in a world where the battle for resources is escalating. an addition of three sites compared to that of last year. Reduction
In this direction, Unilever globally has set out the ‘Unilever in total waste per tonne from our manufacturing sites was more
Sustainable Living Plan’ (USLP), which embeds sustainability in than 84% over 2008 baseline. More than 99% of total waste was
its business model. The USLP sets out to decouple growth from recycled in environment friendly ways.
environmental impact, while enhancing positive social impact.
Under sustainable sourcing, your Company continued to work
USLP has three big global goals to achieve: with suppliers, local government and farmers to sustainably
source agricultural raw materials. A total of 86 tea estates in
• Improving Health and Well-being - By 2020 we will help Assam, Darjeeling and Tamil Nadu were certified ‘Sustainable
more than a billion people take action to improve their Estates’ by the Rainforest Alliance™ by the end of 2013. Your
health and well-being. Company made good progress on sustainable sourcing of fruits
• Reducing Environmental Impact - By 2020 our goal is to and vegetables and sourced 80% of tomatoes used in Kissan
halve the environmental footprint of the making and use of Ketchup from sustainable sources in India. 100% of palm
our products as we grow our business. oil volumes procured for India was covered by ‘Green Palm’
• Enhancing Livelihoods - By 2020 we will enhance the certificates.
livelihoods of millions of people as we grow our business.
The water conservation initiatives of Hindustan Unilever
The Plan is distinctive: Foundation (HUF) resulted in the creation of collective and
cumulative water potential of more than 24 billion litres. More
• It spans the entire portfolio of brands and all countries in
than 95,000 man-days of labour was created directly due to HUF
which Unilever sells its products.
projects and agriculture production enhanced by more than
• It has a social and economic dimension – your Company’s 3,500 tonnes.
products make a difference to health and well-being and its
business supports the livelihoods of many people. Project Shakti, your Company’s initiative which aims to empower
•  hen it comes to the environment, your Company works
W underprivileged women in rural areas has further increased
across the entire value chain – from the sourcing of raw livelihood opportunities for over 17,000 new Shakti Entrepreneurs
materials to the delivery of products to the consumers. (Shaktiammas) appointed during the year. Your Company now
has 65,000 Shakti Entrepreneurs complemented by over 50,000
In the third year of the Plan, your Company made steady progress Shaktimaans, the male members of Shaktiamma’s family. Your
to achieve the big goals. Your Company also involved consumers Company continues to empower Shaktiammas, while increasing
this year to become a part of the USLP community through Project their family household income. Your Company provided training
Sunlight www.projectsunlight.co.in launched globally. on basic accounting, selling skills, health & hygiene and relevant
In the area of health and hygiene, your Company reached IT skills to Shakti Entrepreneurs and equipped them with
58 million people through Lifebuoy Handwashing Programme since smartphones which have been enabled with a mini Enterprise
2010. In area of sanitation, your Company launched Domex Toilet Resource Package (ERP). The application provides updates on
Academy programme with an aim to eradicate open defecation by promotions, offers and facilitates selling to the small retailers,
building toilets and improving sanitation facilities. The academy using relevant business insights. These insights help retailers to
made Junapani, a village in Wardha district in Maharashtra, free stock in their outlets suitable products. The initiative has helped
of open defecation by setting up 80 toilets by the end of 2013. Your Shaktiammas to take and bill orders, manage inventory and drive

44 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

better distribution efficiencies in driving their business. These award of conditional rights to receive equity shares of the Company
Shakti Entrepreneurs cover over 160,000 villages in 16 states and at the face value of Re. 1/- each. These awards will vest only on
serve over 4 million households. the achievement of certain performance criteria measured over a
period of three years.
In 2013, your Company launched ‘Prabhat’ (Dawn) - a USLP linked
programme, which is a part of its long term effort to engage with Under the said Plan, eligible Managers were given Conditional
and contribute to the development of local communities around Performance Grant of shares of Unilever and the Company in
its manufacturing sites. Prabhat focuses on health and hygiene, the ratio of 52:48, to mirror the shareholding of the Company,
livelihoods and water conservation initiatives, which are fully where Unilever held 52% shareholding. During the year, the
aligned to the USLP priorities. Prabhat was launched in nine Nomination and Remuneration Committee and the Board of
manufacturing locations across India – Haridwar, Pondicherry, Directors approved the consequential change in ratio of share
Silvassa, Khamgaon, Goa, Nasik, Orai, Chhindwara and Etah. grant to reflect the new shareholding pattern post open offer
by Unilever. The ratio of reward based on performance was
As evident from the above initiatives, your Company’s progress to accordingly revised to 67:33 instead of 52:48.
deliver on USLP has been consistent. In 2013, Unilever undertook an
in-depth review with every product category and business function During the year, 209 employees, including Whole time Directors,
and identified actions that will help drive sustainable growth. This were awarded conditional rights to receive 2,87,573 Equity
year, your Company has expanded Enhancing Livelihoods to cover Shares at the face value of Re. 1/- each. It comprises conditional
three big themes under the pillar – Fairness in the Workplace, grants made to eligible managers covering performance period
Enhancing Women’s Lives and Inclusive Business. from 2013 to 2015 and from 2014 to 2016.

Your Company has shared its progress on Unilever Sustainable

Living Plan in India which is made available on the website of
18. CORPORATE GOVERNANCE
the Company, www.hul.co.in. Your Company has also released
the Business Responsibility Report that describes the initiatives
undertaken in line with the key principles enunciated in the Your Company is renowned for exemplary governance standards
‘National Voluntary Guidelines on Social, Environmental and since inception and continues to lay a strong emphasis on
Economic Responsibilities of Business’ framed by the Ministry transparency, accountability and integrity. In 2011, your Company
of Corporate Affairs. The report is made available on your received the National Award for Excellence in Corporate
Company’s website, www.hul.co.in, and forms a part of this Governance instituted by the Institute of Company Secretaries
Annual Report. The Business Responsibility Report shall be kept of India, in recognition of its Corporate Governance practices.
open for inspection at the Registered Office of the Company. If a In 2012, Investor Relations Global Rankings (IRGR) ranked your
Member is interested in obtaining a hard copy of the Business Company amongst the top five companies across the globe for
Responsibility Report, they may write to the Investor Service Best Corporate Governance. In 2013, at the Asian Centre for
Department at the Registered Office of the Company. Corporate Governance and Sustainability Awards, your Company
won the award for Best Audit Committee.

17. EMPLOYEE STOCK OPTION PLAN (ESOP) A separate report on Corporate Governance is provided at page
no. 54 of this Annual Report, together with a Certificate from the
Auditors of the Company regarding compliance of conditions
Details of the shares issued under Employee Stock Option Plan of Corporate Governance as stipulated under Clause 49 of the
(ESOP), as also the disclosures in compliance with Clause 12 of the Listing Agreement with the Stock Exchange(s). A Certificate
Securities and Exchange Board of India (Employee Stock Option of the CEO and CFO of the Company in terms of sub-clause(v)
Scheme and Employee Stock Purchase Scheme) Guidelines, of Clause 49 of Listing Agreement, inter alia, confirming the
1999 (SEBI (ESOP) Guidelines), are set out in the Annexure to correctness of the financial statements, adequacy of the
this Report. No employee has been issued share options, during internal control measures and reporting of matters to the Audit
the year, equal to or exceeding 1% of the issued capital of the Committee, is also annexed.
Company at the time of grant.
The Ministry of Corporate Affairs has made majority of the
Pursuant to the approval of the Members at the Annual General provisions of the Companies Act, 2013 effective from 1st April, 2014.
Meeting held on 23rd July, 2012, the Company adopted the The new act is a positive step towards strengthening corporate
‘2012 HUL Performance Share Scheme’ in place of ‘2006 HLL governance regime in the country. Your Company is already in
Performance Share Scheme’. The Scheme has been registered substantial compliance of most of the governance requirements
with the Income Tax authorities, in compliance with the relevant provided under the new law. Your Company has proactively adopted
provisions of SEBI (ESOP) Guidelines. In accordance with the provisions related to formation of Nomination and Remuneration
terms of the Performance Share Plan, employees are eligible for

Annual Report 2013-14 Directors’ Report 45

Committee and Corporate Social Responsibility Committee, ahead Registered Office of the Company. The Company will also make
of implementation of the new law. Your Company is committed to available these documents upon request by any Member of the
embrace the new law in letter and spirit. Company interested in obtaining the same. However, as directed
by the said circular, the financial data of the subsidiaries have
During the year, Secretarial Audit and Secretarial Standards been furnished under ‘Subsidiary Companies Particulars’
Audit were carried out. The detailed reports on the same are forming part of this Annual Report (refer page no. 164). Further,
given at page nos. 74 and 75 of this Annual Report. 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
19. OUTLOOK include the financial information of its subsidiaries.

Global economic indicators are expected to improve, led by positive

prospects in advanced economies. Despite a strengthening 21. BOARD OF DIRECTORS
external demand, uncertainty continues to loom large on the
economic horizon of some emerging economies owing to
domestic fragilities. The global economic climate continues to be Consequent to his elevation as President, Home Care, Unilever,
volatile, uncertain and prone to geo-political risks. Mr. Nitin Paranjpe stepped down as Managing Director and
Chief Executive Office of your Company. Mr. Sanjiv Mehta was
For India, economic activity is expected to improve modestly, appointed as the Managing Director and Chief Executive Office
driven by global economic revival and moderation in inflation. of your Company to succeed Mr. Nitin Paranjpe with effect from
Upside pressures on inflation and consumption, hinge on the 10th October 2013. Mr. Sanjiv Mehta was appointed as an
vagaries of the monsoon and the pace of revival of the investment Additional Director on the Company’s Board with effect from 1st
climate will determine to a very large extent India’s economic October, 2013 and the Managing Director and Chief Executive
performance, going forward. Officer with effect from 10th October, 2013, after obtaining
requisite approvals of the Members and the Central Government.
FMCG markets are expected to grow; however, uncertain global
economic environment, inflation and competitive intensity continue The Board places on record its deep sense of appreciation for
to pose challenges. While the near term conditions pose a challenge the outstanding contribution made by Mr. Nitin Paranjpe as the
for the economy, the medium to longer term secular trends based Managing Director and Chief Executive Office of the Company.
on rising incomes, aspirations, low consumption levels, etc. are
positive and an opportunity for the FMCG sector, in general and for Mr. Sridhar Ramamurthy, Executive Director, Finance & IT and
your Company, in particular. Chief Financial Officer, has been elevated as the Senior Vice
President, Finance for the Global Markets and he will be part
19.1. Cautionary Statement of the Global Markets Executive of Unilever. Consequently,
Statements in this Report, particularly those which relate to Mr. Sridhar Ramamurthy will cease to be a Director of the Company
Management Discussion and Analysis, describing the Company’s with effect from 30th June, 2014 and will not offer himself for re-
objectives, projections, estimates and expectations, may appointment at the forthcoming Annual General Meeting. It is
constitute ‘forward looking statements’ within the meaning of proposed to appoint Mr. P. B. Balaji as Executive Director, Finance
applicable laws and regulations and actual results might differ & IT and Chief Financial Officer with effect from 1st July, 2014 to
succeed Mr. Sridhar Ramamurthy subject to obtaining requisite
approvals of the Members and the Central Government.
materially from those either expressed or implied.
20. SUBSIDIARY COMPANIES The Board places on record its appreciation for the distinguished
service and contribution made by Mr. Sridhar Ramamurthy as
Executive Director, Finance & IT and Chief Financial Officer of
A statement pursuant to Section 212 of the Companies Act, 1956, the Company.
relating to Subsidiary Companies, is attached to the Accounts.
In terms of General Exemption, under Section 212(8) of the As per the provisions of the Companies Act, 2013, Independent
Companies Act, 1956, granted by Ministry of Corporate Affairs Directors are required to be appointed for a term of five
vide its circular no. 02/2011 dated 8th February, 2011, and in consecutive years and shall not be liable to retire by rotation.
compliance with the conditions enlisted therein, the Audited Accordingly, resolutions proposing appointment of Independent
Statement of Accounts, Auditors’ Reports thereon and the Directors form part of the Notice of the Annual General Meeting.
Reports of the Board of Directors of the Company’s subsidiaries All other Directors, except the Managing Director, will retire at
for the financial year ended 31st March, 2014, have not been the ensuing Annual General Meeting and, being eligible, offer
annexed. The Annual Accounts and related documents of the themselves for re-election.
Subsidiary Companies shall be kept open for inspection at the

46 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

22. MANAGEMENT COMMITTEE 24. APPRECIATIONS AND ACKNOWLEDGEMENTS

The day-to-day management of the Company is vested with Your Directors place on record their deep appreciation to employees
the Management Committee, which is subjected to the overall at all levels for their hard work, dedication and commitment. The
superintendence and control of the Board. The Management enthusiasm and unstinting efforts of the employees have enabled
Committee is headed by the Chief Executive Officer and has the Company to remain as industry leaders.
Functional / Business Heads as its members.
Your Directors would also like to acknowledge the excellent
During the year, Mr. Nitin Paranjpe, Managing Director, Chief contribution by Unilever to your Company in providing the
Executive Officer was elevated to the position of President, Home latest innovations, technological improvements and marketing
Care, Unilever and Mr. Sanjiv Mehta succeeded him and joined inputs across almost all categories, in which it operates. This
the Management Committee in his capacity as Managing Director has enabled the Company to provide higher levels of consumer
and Chief Executive Officer with effect from 10th October, 2013. delight through continuous improvement in existing products
and introduction of new products.
Mr. Sridhar Ramamurthy, Executive Director, Finance & IT and
Chief Financial Officer, has been elevated to the position of The Board places on record its appreciation for the support
Senior Vice President, Finance for the Global Markets in Unilever and co-operation your Company has been receiving from its
and Mr. P. B. Balaji will join the Management Committee when suppliers, redistribution stockists, retailers, business partners
he joins the Company as Executive Director, Finance & IT and and others associated with the Company as its trading partners.
Chief Financial Officer with effect from 1st July, 2014 to succeed Your Company looks upon them as partners in its progress
Mr. Sridhar Ramamurthy. 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
23. AUDITORS co-operation with each other, consistent with consumer
interests.

The term of office of M/s. Lovelock & Lewes, as Statutory Auditors The Directors also take this opportunity to thank all Investors,
of the Company will expire with the conclusion of forthcoming Clients, Vendors, Banks, Government and Regulatory Authorities
Annual General Meeting of the Company. M/s. Lovelock & Lewes and Stock Exchanges, for their continued support.
has been Statutory Auditors of your Company since 1997.
On behalf of the Board
The Board of Directors of the Company have, subject to approval
of the Members, decided to make a change in the Statutory
Auditors. This change is in order to remain at the forefront of
good governance and in recognition of regulatory changes in
India. This change is also in line with the change in auditors for Harish Manwani
Unilever globally. A special notice has, accordingly, been received
Mumbai, 28th April, 2014 Chairman
from Unilever PLC in its capacity as Member of the Company,
proposing a resolution at the forthcoming Annual General
Meeting for appointment of M/s. BSR & Co. LLP as Statutory
Auditors of the Company in place of the M/s. Lovelock & Lewes,
being the retiring Auditor.

A resolution proposing appointment of M/s. BSR & Co. LLP as

the Statutory Auditors of the Company pursuant to Section 139
of the Companies Act, 2013 forms part of the Notice.

M/s. Lovelock & Lewes, over many years, have successfully

met the challenge that the size and scale of the Company’s
operations pose for auditors and have maintained the highest
level of governance, rigour and quality in their audit. The Board
place on record its appreciation for the services rendered by
M/s. Lovelock and Lewes as the Statutory Auditors of the
Company.

Annual Report 2013-14 Directors’ Report 47

Annexure to the Directors’ Report
Disclosure of Particulars with Respect to Conservation of Energy

Canned and processed

Tea
fruits and vegetables

For the year For the year For the year For the year
ended ended ended ended
31st March, 31st March, 31st March, 31st March,
2014 2013 2014 2013
A POWER AND FUEL CONSUMPTION
1 Electricity
(a) Purchased
Unit Lakh KWH 70.70 65.97 34.73 38.94
Total Cost Rs. lakhs 557.71 524.08 254.16 286.83
Rate / Unit Rs. 7.89 7.94 7.32 7.37
(b) Own Generation
(i) Through own generator
Unit Lakh KWH 1.29 1.78 3.68 4.14
Unit per ltr of diesel oil KWH 2.50 2.49 2.94 2.49
Cost per unit Rs. 13.98 18.49 18.78 14.59
(ii) Through steam turbine / generator NIL NIL NIL NIL
2 Furnace Oil
Quantity KL 1,129.86 930.60 - -
Total Cost Rs. lakhs 579.23 407.93 - -
Rate / Unit Rs./ KL 51,265.67 43,834.56 - -
3 Other / Internal Generation
Natural Gas
Quantity ('000 Scm) - - 34,795.00 20,645.35
Total Cost Rs. lakhs - - 25.52 14.22
Rate / Unit Rs./('000 Scm) - - 73.34 69.00
Agro Waste
Quantity (Tonnes) 1,429.13 1,249.87 - -
Total Cost Rs. lakhs 80.79 67.22 - -
Rate / Unit Rs./ Kg 5.65 5.38 - -
B CONSUMPTION PER UNIT OF PRODUCTION
Electricity (Kwh/Tonne) 164.75 195.72 23.37 31.21
Furnace Oil (Lts/Tonne) 26.33 27.61 - -

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

1. Specific areas in which R&D carried out by the Company

- New product / process development
- Quality enhancement to achieve International Standards
- Technology Upgradation
- Speciality ingredients from natural sources
- Development and evaluation of alternative raw materials
- Project of Global relevance

48 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

2. Benefits derived as a result of the above R&D and future plans of action:
The benefits and future plan of action have been been discussed in details in the Director’s report

3. Expenditure of R&D Rs. crores

For the year ended For the year ended
31st March, 2014 31st March, 2013
(a) Capital 17.30 8.07
(b) Recurring 73.64 104.39
(c) Total 90.94 112.46
(d) Total R& D Expenditure as a percentage of total turnover 0.32% 0.44%

TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION

1. Efforts, in brief, made towards technology absorption, adoption and innovation:

The Company maintains interaction with Unilever internationally.
This is facilitated through a well co-ordinated management exchange programme.

2. Benefits derived as a result of the above efforts:

The benefits have been covered in the Directors’ Report.

3. Imported Technology:
(a) Technology imported
(b) Year of import
(c) Has technology been fully absorbed } Continuous Import from Unilever under technical collaboration agreement

FOREIGN EXCHANGE EARNINGS & OUTGO Rs. crores

For the year ended For the year ended
31st March, 2014 31st March, 2013
Foreign exchange earnings 547.91 654.80
Foreign Exchange outgo 3,132.40 3345.38

Annual Report 2013-14 Directors’ Report 49

Annexure to the Directors’ Report
Disclosure Pursuant to the Provisions of Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

2001 HLL Stock Option Plan

2001 2002 2003 2004 2005

a)  Options granted 24,75,100 equity 32,33,601 equity 42,76,090 equity 16,30,450 equity 15,47,700 equity
shares of Re. 1/- each shares of Re. 1/- each shares of Re. 1/- each shares of Re. 1/- each shares of Re. 1/- each
valued at valued at valued at valued at valued at Rs. 20.44
Rs. 53.82 crores Rs. 68.02 crores Rs. 58.16 crores Rs. 20.95 crores crores

b)  The pricing formula Closing market Closing market Closing market Average of highs and Closing market price,
price as on the date price as on the date price as on the date lows for two week prior to the date of
of option grant - of option grant - of option grant - period preceding the meeting of the Board of
24.07.2001 23.04.2002 24.04.2003 date of option grant - Directors in which the
30.06.2004 options were granted
- 26.05.2005

Rs. 217.45 Rs. 210.35 Rs. 136.00 Rs. 128.47 Rs. 132.05

c)  Options vested Options vested after Options vested after Options vested after Options vested after Options vested after
three years from date three years from date three years from date three years from date three years from date of
of grant (24.07.2001) of grant (23.04.2002) of grant (24.04.2003) of grant (30.06.2004) grant (27.05.2005)

d)  Options exercised (as at 15,90,600 equity 23,21,221 equity 36,44,320 equity 12,24,750 equity 11,55,600 equity
March 31, 2014) shares of shares of shares of shares of shares of
Re. 1/- each Re. 1/- each Re. 1/- each Re. 1/- each Re. 1/- each

e)  The total number of 15,90,600 equity 23,21,221 equity 36,44,320 equity 12,24,750 equity 11,55,600 equity
shares arising as a result of shares of shares of shares of shares of shares of
exercise of option Re. 1/- each Re. 1/- each Re. 1/- each Re. 1/- each Re. 1/- each

f)  Options lapsed 8,84,500 equity shares 9,12,380 equity shares 6,31,770 equity shares 3,36,800 equity shares 2,75,700 equity shares
(as at March 31, 2014) of of of of of
Re. 1/- each Re. 1/- each Re. 1/- each Re. 1/- each Re. 1/- each

g)  Variation of Reduction in Reduction in Reduction in NA NA

terms of options exercise price by exercise price by exercise price by
Rs. 8.76 per share Rs. 8.76 per share Rs. 8.76 per share

h)  Money realised Nil Nil Nil Rs. 0.86 crores Rs. 0.65 crores
by exercise of options during
the year

i)  Total number of options in Nil equity shares of Nil equity shares of Nil equity shares of 68,900 equity shares 1,16,400 equity shares
force (as at March 31, 2014) Re. 1/- each Re. 1/- each Re. 1/- each of Re. 1/- each of Re. 1/- each

50 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

2012 HUL Performance

2006 HUL Performance Share Scheme
Share Scheme

2006 2007 2008 2009 2010 2011 2012 2013 2014

a) Options Conditional Conditional Conditional Conditional Conditional Conditional Conditional Conditional Conditional
granted grant of grant of grant of grant of grant of grant of grant of grant of grant of
3,49,750 2,35,950 2,13,098 3,38,731 3,22,568 3,55,573 4,71,465 3,93,441 2,62,155 equity
equity shares equity shares equity shares equity shares equity shares equity shares equity shares equity shares shares of Re.
of Re.1/- of Re.1/- of Re. 1/- of Re. 1/- of Re. 1/- of Re. 1/- of Re. 1/- of Re. 1/- 1/- each valued
each valued each valued each valued each valued each valued each valued each valued each valued at
at Rs. 3.49 at Rs. 2.35 at Rs. 2.13 at Rs. 3.39 at Rs. 3.23 at Rs. 3.56 at Rs. 4.71 at Rs. 3.93 Rs. 2.62 lakhs
lakhs lakhs lakhs lakhs lakhs lakhs lakhs lakhs

b)  The pricing Book value of Book value of Book value of Book value of Book value of Book value of Book value of Book value of Book value of
formula Re. 1/- Re. 1/- Re. 1/- Re. 1/- Re. 1/- Re. 1/- Re. 1/- Re. 1/- Re. 1/-

c) Options 2,55,166 2,66,180 1,64,303 2,19,977 2,86,039 3,55,555 Options will Options will Options will
vested options options options options options options vest after 3 vest after 3 vest after 3
vested vested. vested vested vested vested years from years from years from the
the date of the date of date of grant
grant grant

d) Options 2,55,166 2,64,530 1,60,800 2,19,977 2,86,039 NIL NIL NIL NIL
exercised (as at equity shares equity shares equity shares equity shares equity shares
March 31, 2014) of Re. 1/- of Re. 1/- of Re. 1/- of Re. 1/- of Re. 1/-
each each each each each

e)  The total 2,55,166 2,64,530 1,60,800 2,19,977 2,86,039 NIL NIL NIL NIL
number of equity shares equity shares equity shares equity shares equity shares
shares arising of Re. 1/- of Re. 1/- of Re. 1/- of Re. 1/- of Re. 1/-
as a result of each each each each each
exercise of
option

f) Options NIL 1,650 equity 3,503 equity NIL NIL NIL NIL NIL NIL
lapsed (as at shares of shares of
March 31, 2014) Re. 1/- each Re. 1/- each

g) Variation NA NA NA NA NA NA NA NA NA
of terms of
options

h) Money 0 0 0 0 Rs. 1.08 NIL NIL NIL NIL

realised by lakhs
exercise of
options during
the year

i)  Total number NIL NIL NIL NIL NIL Conditional Conditional Conditional Conditional
of options in grant of grant of grant of grant of
force (as at 41,282 equity 4,01,877 3,72,902 2,62,155 equity
March 31, shares of equity shares equity shares shares of
2014)* Re. 1/- each of Re. 1/- of Re. 1/- Re. 1/- each
(5,836 shares each (69,588 each (20,539
forfeited shares shares
due to forfeited forfeited
resignation) due to due to
resignation) resignation)
* Adjusted for options forfeited

Annual Report 2013-14 Directors’ Report 51

Annexure to the Directors’ Report
Disclosure Pursuant to the Provisions of Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

DETAILS OF OPTIONS GRANTED DURING THE YEAR ENDED 31ST MARCH, 2014

j) Employee wise details of options granted to:

i) Senior managerial personnel: Refer Note iii

ii) any other employee who receives a grant in any one Under Performance Share Plan 2014, Sanjiv Mehta - Managing
year of option amounting to 5% or more of option Director & CEO was awarded Nil shares (nil%) and Sridhar
granted during that year; Ramamurthy - Executive Director (Finance & IT) and CFO was
awarded 6,285 shares (2.40%).

iii) Identified employees who were granted option during any Nil
one year, equal to or exceeding 1% of the issued capital
(excluding outstanding warrants and conversions) of the
Company at the time of grant.

k) Diluted Earnings Per Share (EPS) pursuant to issue of Rs. 17.87

shares on exercise of option calculated in accordance with
Accounting Standard (AS) 20 ‘Earnings Per Share’.

l) i) Method of calculation of employee compensation cost The Company has calculated the employee compensation cost using
the intrinsic value method of accounting to account for Options
issued under the “2012 HUL Performance Share Scheme”.

ii)
Difference between the employee compensation cost so Gain of Rs. 1.03 crores
computed at (i) above and the employee compensation
cost that shall have been recognised if it had used the
fair value of the Options

iii)
The impact of this difference on profits and on EPS of The effect of adopting the fair value method on the net income and
the Company earnings per share of 2013-14 is presented below:

Net Income Rs. crores

As reported 3,867.49

Add: Difference between Intrinsic 1.03

value and Fair Value Calculation

Adjusted Net Income 3,868.52

Earnings Per Share (Basic & Diluted) (Rs.)

Basic EPS Diluted EPS

-As reported 17.88 17.87

-As adjusted 17.89 17.88

52 Directors’ Report Hindustan Unilever Limited

 Overview Reports Financial Statements Shareholder Information

DETAILS OF OPTIONS GRANTED DURING THE YEAR ENDED 31ST MARCH, 2014

m) Weighted average exercise price and weighted average Exercise Price is Re. 1/-
fair value

n) Fair value of Options based on Black Scholes methodology

Assumptions

Risk free rate 7.79% for 2013 and 8.85% for 2014

Expected life of options 3.125 years for each plan

Volatility 23.38% for 2013 and 25.56% for 2014

Expected Dividends Rs. 11.50 per share

Closing market price of share on date of option grant Rs. 458.60 for 2013 and Rs. 557.25 for 2014

Notes:
(i) Pursuant to approval of the Members at the Annual General Meeting of the Company held on 23rd July, 2012, the Company had
adopted a revised Scheme “2012 HUL Performance Share Scheme”.

(ii) The Pricing Formula adopted by the Company for ‘Employees Stock Option Plan’ for the years 2001 to 2005, was based on the
“Market Price” as defined in SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, and
Maximum number of options to be issued per employee in a fiscal year did not exceed 0.01% of the outstanding issued share capital,
as expressed in Clause 11 of the ‘2001 HLL STOCK OPTION PLAN’ in the line with Clause 6.2(h) of SEBI (Employees Stock Option
Scheme and Employee Stock Purchase Scheme) Guideline 1999.

(iii) Details of Options granted to senior managerial personnel.

Name of the Manager Performance shares awarded

Sanjiv Mehta Nil
Sridhar Ramamurthy 6,285
Pradeep Banerjee 3,451
Hemant Bakshi 6,285
Dev Bajpai 4,313
Geetu Verma 3,451
Manish Tiwary 4,313

Annual Report 2013-14 Directors’ Report 53