Godrej Consumer Products - Annual Report - 2008-2009

GODREJ CONSUMER PRODUCTS LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To The Shareholders,

Your Directors have pleasure in presenting their Report along with the
Audited Accounts for the year ended on March 31, 2009:

Operating Results:

Your Company's financial performance for the year under review has been
encouraging and is summarised below:

This year Previous
Year
Rs. Crore Rs. Crore

Sales (net of excise duty) 1084.3 886.7

Processing income 3.7 1.4

Other Income 45.1 9.7

Total Income 1133.1 897.8

Total Expenditure other than Interest 924.0 702.5
and Depreciation

Profit before Interest, Depreciation 209.1 195.3
and Tax

Depreciation 14.4 15.7

Profit before Interest and Tax 194.7 179.6

Interest and Financial Charges (net) 8.8 10.4

Profit before Tax 185.9 169.2

Provision for tax:

Current tax 21.1 19.3

Deferred tax 3.2 1.1

Fringe Benefit Tax 0.7 0.7

Profit after tax 160.9 148.1

Tax adjustments in respect of 0.6
previous years

Profit after tax and tax 161.5 148.1
adjustments for previous years

Surplus brought forward 73.2 48.5

Amount available for appropriation 234.7 196.6

Appropriation:

Your Directors recommend appropriation as under:

This Year Last Year
Rs. Crore Rs. Crore

Interim Dividend 83.7 73.4

Proposed Final Dividend 19.3 19.4

Tax on distributed profits 17.5 15.8

Transfer to General Reserve 16.1 14.8

Surplus Carried Forward 98.1 73.2

Total Appropriation 234.7 196.6

Rights Issue:

The rights issue of 32,263,440 equity shares of Re. 1 each at a premium of
Rs.122 per equity share which opened for subscription on March 31, 2008 was
closed on April 30, 2008. Against the above issue, the Company received
valid subscription for 32,232,316 equity shares aggregating Rs. 396.5
crore. The balance 31,124 equity shares have been kept in abeyance due to
various suits filed in courts/forums by third parties for which final order
is awaited. The allotment for the shares validly subscribed was made by the
Board on May 17, 2008.

Dividend:

For the year 2008-09, three interim dividends were paid on shares of face
value Re. 1 each - Rs. 0.75 per share on August 14, 2008, Rs. 0.75 per
share on November 14, 2008 and Re. 1 per share on February 16, 2009.

In addition to the above, the Board of Directors has declared a fourth
interim dividend on April 30, 2009 at the rate of Rs. 0.75 per share on
shares of face value Re.1 each. The record date for the same has been fixed
as May 12, 2009.

The Board of Directors has also proposed a final dividend of Rs. 0.75 per
share on equity shares of face value Re.1 each. The payment of the final
dividend is subject to the approval of the shareholders at the Annual
General Meeting.

The total dividend payout for the year ended March 31, 2009 stands at
Rs.4.00 per share (400% on the shares of the face value of Re.1 each).

Review of Operations:

During the year under review, your Company earned Profit After Tax (PAT) of
Rs.160.9 crore and Net Profit (after tax adjustments) of Rs 161.5 crore.
The comparison of the current year's Sales with last year's is given in
Table 1 below.

Sales of Godrej Consumer Products Limited (GCPL) have increased by 22% from
Rs. 886.7 crore in 2007-08 to Rs.1084.3 crore in 2008-09.

A detailed analysis of your Company's performance is contained in the
Management Discussion and Analysis Report.

Table 1: Comparison of Current year sales with last year

(in Rs. Crore)
Particulars Year ended Year ended % Increase
Sales 31-Mar-2009 31-Mar-2008 /(decrease)

Soaps 705.6 566.6 25%
Hair Colour 230.4 204.7 13%
Toiletries 62.0 57.5 8%
Liquid Detergents 42.9 38.5 11%
Contract Manufacturing 8.2 - NA
By-products 35.2 19.4 81%
Total 1084.3 886.7 22%

Trademarks Adjustment:

During the year, your Company undertook financial restructuring in order to
achieve right sizing of the balance sheet. Pursuant to the approval by the
Honourable High Court of Bombay dated December 19, 2008 to the scheme of
Capital Reduction an amount of Rs. 31.3 crore being the written down value
of Intangibles - Trademarks and Brands after deferred tax adjustment has
been adjusted against the Securities Premium account. The adjustment has
streamlined the financial structure by elimination of intangible asset. It
will reflect true shareholder value through appropriate future operating
profitability and a more realistic determination of key financial ratios
like Earnings per share.

Acquisition:

With effect from April 1, 2008, your Company has acquired an 100% stake in
Kinky Group (Proprietary) Ltd., South Africa. 'Kinky', one of the leaders
in the South African Hair Category, is a 36 year old business set up by a
family of entrepreneurs in South Africa and has trademarks registered in
South Africa. Kinky offers a variety of products which include hair, hair
braids, hair pieces, wigs and wefted pieces. Kinky also offers hair
accessories like styling gels, hair sprays and oil free shampoo. This
acquisition gives your Company an opportunity to enter into a new line of
business and diversify its hair product portfolio.

Subsidiary Companies:

Keyline Brands Limited, UK posted a turnover of GBP 25.2 million and a
profit after tax of GBP 2.2 million.

Rapidol (Pty.) Limited, South Africa posted a turnover of ZAR 92.0 million
and a profit after tax of ZAR 12.2 million.

Godrej Global Mideast FZE posted a turnover of AED 9.7 million and a profit
after tax of AED 0.3 million.

Kinky Group (Pty.) Ltd. posted a turnover of ZAR 96.2 million and a profit
after tax of ZAR 10.6 million.

Inecto Ltd. a subsidiary of the Company registered in U.K. was wound up
with effect from August 20, 2008, pursuant to a resolution passed by the
Board of Directors of that Company.

The Company has been granted exemption by the Ministry of Corporate
Affairs, from attaching with its accounts the individual accounts of each
of the subsidiaries. The accounts of the subsidiary companies and the
related detailed information will be made available to any shareholder
seeking such information at any point of time. The accounts of the
subsidiary companies are also available for inspection by any shareholder
at the registered office of the Company or at the registered offices of the
subsidiary companies.

The Consolidated Financial Statements of the Company and its subsidiaries,
prepared in accordance with Accounting Standard 21 issued by the Institute
of Chartered Accountants of India, forms part of the Annual Report and
Accounts.

In accordance with the conditions stipulated by the Ministry of Corporate
Affairs, while granting exemption from attaching the individual accounts of
each of the subsidiaries, a one page financial summary for the above
subsidiaries is disclosed in the consolidated balance sheet.

Joint Venture with SCA Hygiene Products AB:

In April 2009, your Company has executed a share purchase agreement with
SCA Hygiene Products AB (SCA) for the acquisition of the balance 50% stake
in Godrej SCA Hygiene Ltd., the joint venture company between SCA and your
Company. Post this transaction, Godrej SCA Hygiene Ltd., will become a 100%
subsidiary of GCPL.

Buyback:

The Board of Directors, in their meeting held on November 25, 2008,
approved a proposal for buyback of shares through the open market, pursuant
to the first proviso to Section 77A(2)(b) i.e. under the authority of the
Board, at a maximum price not exceeding Rs. 150/- per share and at an
aggregate consideration not exceeding Rs. 14.9 crore. The Public Notice cum
Public Announcement as per SEBI Buyback Regulations was made on November
27, 2008. The buyback was completed on February 26, 2009. Under the
buyback, the Company bought 1,122,484 shares from the open market at a
total consideration of Rs.14.9 crore.

Employee Stock Option Plan:

The shareholders of the Company vide special resolution passed on March 14,
2007 approved the setting up of Godrej Consumer Products Ltd, Employee
Stock Option Plan (GCPL ESOP) to be administered by a trust set up for the
purpose viz. Godrej Consumer Products Ltd., Employee stock option Trust.
Pursuant to the approvals received in the above meeting and in the meeting
dated April 24, 2008, the Company can grant loans to the trust to enable
the trust to acquire 4,500,000 stock options convertible into 4,500,000
equity shares of the nominal value Re.1 each for the purpose of granting
4,500,000 stock option convertible into 4,500,000 equity shares of the face
value of Re. 1 each to the eligible employees/ Directors of the Company and
of the Company's subsidiaries.

Against the above shareholders consents, the trust has till March 31, 2009
acquired 2,550,000 equity shares of the Company against loans aggregating
Rs. 34.8 crore received from the Company. During the year, out of the
shares acquired as aforesaid, the Compensation Committee has granted
1,050,000 options convertible into 1,050,000 shares of nominal value of
Re.1 each to certain eligible employees of the Company and of the Company's
subsidiaries. As on March 31, 2009, 129 eligible employees of the Company
and of the Company's subsidiaries have been granted a total of 2,505,000
options convertible into 2,505,000 shares of nominal value of Re.1 each.

Date of grant of option No. of options

02-04-07 650,000
12-07-07 110,000
11-12-07 75,000
25-03-08 620,000
05-05-08 150,000
06-06-08 560,000
23-06-08 250,000
05-01-09 90,000
Total 2,505,000

The details of the Options allotted under GCPL ESOP, as also the
disclosures in compliance with Clause 12 of the Securities and Exchange
Board of India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999 are set out in Annexure A to this report.

Since the exercise price of GCPL options is the last closing price on the
stock exchange, there is no compensation cost in FY 09 based on the
intrinsic value of option.

Ratings:

The Company continues to enjoy a Corporate Governance Rating of CGR2+. In
July 2008, ICRA has upgraded the Stakeholder Value Creation and Governance
Rating from SVG2 + (pronounced as SVG 2 plus) to SVG1 (pronounced as SVG
1). The + sign indicates relatively higher standing within the category
indicated by the rating. The above ratings are on a rating scale of 1 to 6,
where 1 is the highest rating.

Directors:

Mr. Adi Godrej was designated as 'Chairman' with effect from April 1, 2009
subject to the approval of the shareholders. He will continue as Whole-Time
director for the remainder of the tenure of his current contract with the
Company till March 31, 2010. The Board proposes to re-appoint him as a
Whole-Time Director designated as 'Chairman' for a further period of three
years with effect from April 1, 2010 subject to the approval of the
shareholders.

Mr. Hoshedar Press was designated as 'Vice-Chairman' with effect from April
1, 2009 subject to the approval of the shareholders. He will continue as
Whole-Time Director for the remainder of the tenure of his current contract
with the Company till April 30, 2010.

In accordance with Article 130 and 131 of the Articles of Association of
your Company, Mr. Jamshyd Godrej, Prof. Bala Balachandran and Mr. Aman
Mehta retire by rotation and being eligible, offer themselves for re-
appointment.

Mr. Dalip Sehgal and Mr. D. Shivakumar who have been appointed as
additional directors with effect from April 1, 2009 will hold office upto
the date of the Annual General Meeting pursuant to Section 260 of the
Companies Act, 1956. Pursuant to Section 257 of the Companies Act, 1956,
the Company has received a notice from a member signifying his intention to
propose the candidatures of Mr. Dalip Sehgal and Mr. D. Shivakumar as
directors in the ensuing Annual General Meeting.

Mr. Dalip Sehgal has been appointed Managing Director with effect from
April 1, 2009, subject to the approval of shareholders.

Accordingly, resolutions for all the aforesaid re-appointments/appointments
are included in the notice of the Annual General Meeting.

Listing:

The shares of your Company are listed at The Bombay Stock Exchange Limited
and The National Stock Exchange of India Ltd. The listing fee for the year
2008-09 has been paid before the due date.

Auditors:

The Auditors, Kalyaniwalla & Mistry, Chartered Accountants, Mumbai, retire
and offer themselves for re-appointment.

Pursuant to directions from the Department of Company Affairs, P M Nanabhoy
& Co. Cost Accountants have been appointed as Cost Auditors for the year
2008-09. They are required to submit the report to the Central Government
within 180 days from the end of the accounting year.

Directors' Responsibility Statement:

Pursuant to the provisions contained in Section 217 (2AA) of the Companies
Act, 1956, your Directors, based on the representation received from the
Operating Management, and after due enquiry, confirm:

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

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

c) that they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of this Act
for safeguarding the assets of the Company for preventing and detecting
fraud and other irregularities;

d) that they have prepared the annual accounts on a going concern basis.

Additional Information:

Annexure B to this Report gives the information in respect of conservation
of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo,
required under Section 217(1)(e) of the Companies Act, 1956, read with the
Companies (Disclosure of Particulars in the Report of the Board of
Directors) Rules, 1988 and forms a part of the Directors' Report.

Information as per Section 217(2A) of the Companies Act, 1956 read with the
Companies (Particular of Employees) Rules,1975 forms part of this Report.
As per provisions of Section 219(1)(b)(iv) of the Companies Act,1956, the
Report and Accounts are being sent to the Shareholders of the Company,
excluding the statement of particulars of the employee under Section
217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining
a copy of the statement may write to the Company Secretary at the
Registered Office of the Company.

The notes to the Accounts referred to in the Auditors' Report are self-
explanatory and therefore do not call for any further explanation.

Group for Interse Transfer of Shares:

As required under Clause 3(1)(e) of the Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
persons constituting 'Group' (within the meaning as defined in the
Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of
availing exemption from applicability of the provisions of Regulation 10 to
12 of the aforesaid Regulations, are given in the Annexure C attached
herewith and forms part of this Annual Report.

Corporate Governance:

Pursuant to Clause 49 of the Listing Agreements, the Management Discussion
and Analysis Report and the Report on Corporate Governance are included in
the Annual Report. The Auditors Certificate certifying the Company's
compliance with the requirements of Corporate Governance in terms of Clause
49 of the Listing Agreement, is attached as Annexure D and forms part of
this Annual Report.

Acknowledgement:

Your Directors wish to place their sincere thanks to the Union Government
and the Governments of Maharashtra, Madhya Pradesh, Assam, Himachal Pradesh
and Sikkim, as also to all the Government agencies, banks, financial
institutions, customers, shareholders, vendors and other related
organisations who, through their continued support and co-operation, have
helped, as partners, in your Company's progress.

For and on behalf of the Board of Directors
Adi Godrej
Chairman

Place: Mumbai,
Date : April 30, 2009.

Annexure A forming part of the Directors' Report

As per the Securities & Exchange Board of India (Employee Stock Option
Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 following
information is disclosed in respect of Godrej Consumer Products Limited
Employee Stock Option Plan:

Heading Particulars

a. Options granted (net) 2,505,000

b. The pricing formula Market Price plus Interest at such a
rate not being less than the Bank
Rate then prevailing compoundable on
an annual basis for the period
commencing from the date of Grant of
the Option and ending on the date of
intimating Exercise of the Option to
the Company.

c. Options vested Nil

d. Options exercised Nil

e. The total number of shares Nil
arising as a result of exercise
of option

f. Options lapsed Nil

g. Variation of terms of options Nil

h. Money realized by exercise of Nil
options

i. Total number of options in 25,05,000
force

j. Employee wise details of
options granted to:

i). senior managerial personnel; }
}
ii) any other employee who }
receives a grant in any one year } As per statement attached
of option amounting to 5% or more }
of option granted during that year;}

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

k. Diluted Earnings Per Share There is no fresh issue of shares
(EPS) pursuant to issue of shares hence, not applicable.
on exercise of option calculated
in accordance with Accounting
Standard (AS) 20 Earnings Per
Share'.

l. Where the Company has The Company has calculated the
calculated the employee employee compensation cost using
compensation cost using the the intrinsic value of stock options.
intrinsic value of the stock Had the fair value method been used,
options, the difference between in respect of stock options granted
the employee compensation cost the employee compensation cost would
so computed and the employee have been higher by Rs.3.8 crore,
compensation cost that shall have Profit after tax lower by Rs.3.8
been recognized if it had used crore and basic EPS would have been
the fair value of the options, lower by Rs.0.15.
shall be disclosed. The impact
of this difference on profits and
on EPS of the company shall also
be disclosed.

m. Weighted-average exercise Exercise price Rs.136.5 plus interest
prices and weighted-average fair as mentioned in pricing formula
values of options shall be Fair Value Rs. 46
disclosed separately for options
whose exercise price either equals
or exceeds or is less than the
market price of the stock.

n. A description of the method The fair value of the options granted
and significant assumptions used has been calculated using Black -
during the year to estimate the Scholes Options pricing formula and
fair values of options, including the significant assumptions made in
the following weighted-average this regard are as follows:
information:

i) risk-free interest rate 5.5%

ii) expected life 4

iii) expected volatility 64%

iv) expected dividends and 2.84% - 3.01%

v) the price of the underlying
share in market at the time of
option grant Rs. 132.75 - Rs. 141.00

Statement attached to Annexure A to the Directors' Report for the year
ended March 31, 2009:

Name of senior managerial persons No. of options
to whom stock options have been granted granted

Dr. R. K. Sinha 110,000
Mr. A. Rangarajan 100,000
Mr. B. S. Sodhi 100,000
Mr. Jimmy Anklesaria 100,000
Mr. Rajesh Tiwari 100,000
Mr. Sumit Mitra 100,000
Dr. Sunder Nurani Mahadevan 50,000
Mr. Raj Shahaney 50,000
Mr. V. Suresh 50,000
Ms. Dirga Lowe 50,000
Mr. Keith Harrison 50,000
Mr. Leonard Buhrer 50,000
Mr. P. Ganesh 50,000

Annexure B forming part of the Directors' Report

INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956, READ
WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF
DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO:

A. Conservation of Energy:

I. (A) Energy Conservation measures undertaken:

1. Provided Variable frequency drive to reduce the inductive load on
following equipments.

a) Wrapping machines.

b) Roll mills.

2. Provided energy efficient pumps for the followings:

a) Brine Chilling plant.

b) SWEP Cooling towers.

c) L.P. Boilers.

3. Provided Energy Efficient Atlas Capco GA 45+' compressor.

4. Unification of FADP # 3 and FSP # 3 cooling towers.

5. Provided Oxygen Analyzers in LP Boiler to improve the combustion
efficiency.

6. Optimum utilization of pumps in Brine chilling/ water chilling plants
and cooling towers.

7. Installation of variable frequency derives wrapping machines.

8. Replacement of lower size motors in cooling tower pump.

(B) Proposed energy conservation measures:

1. Provision of Air Pre Heaters.

2. Provision of VFD for the FD Fan of 16 TPH L.P. Boiler.

3. Right Sizing of cooling tower pumps.

4. Provision of Energy Efficient motors.

5. Provision of VFD in cooling tower fans.

6. Provision of condensate/waste heat recovery system.

II. Impact of measures on reduction of energy consumption and consequent
impact on the cost of production of goods:

Saving in energy costs during the period under consideration.

B. Technology Absorption:

Research and Development (R & D):

Research and Development plays an integral role for GCPL. Your Company has
integrated its R & D practices to operate in tandem with the long-term
strategy and cater to the demands of the market-place. The focus of the R &
D team is to implement knowledge management and drive quality assurance
while maintaining customer centricity in the entire process.

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

1. Hair Care

2. Skin Care

3. Customer Centricity

4. Packaging Development

5. Fabric care

II. Benefits derived as a result of the above R & D efforts:

During the financial year, your Company derived several benefits from its R
& D operations, resulting in the launch and re-launch of several products.

1. Godrej No.1 with Strawberry & Walnut' - New variant.

2. Relaunch of Godrej FairGlow with moisturizing crSme and fruit extracts
in three variants Floral Essence, Rose Wonder and Lily Sensation.

3. Godrej Expert Hair Colour (Powder & Liquid) New range of ammonia free
colours).

4. Ezee Bright & Soft.

5. Cinthol Deo Spray in new packaging.

6. Cinthol Deo Musk Soap and Cinthol Fresh Aqua Soap variants.

7. New products for Rapidol SA.

III. Future Plan of Action:

1. Focus on new categories.

2. Exploration of new technologies in existing categories.

3. Explore a variety of fashion hair colours with added benefits, hair
colour highlights and newer formats for hair colouring.

IV. Expenditure on R & D:

This Year Last Year
Rs. Crore Rs. Crore

(a) Capital 0.4 1.5

(b) Recurring 2.5 2.8

(c) Total 2.9 4.3

(d) Total R & D expenditure as a
percentage of total sales turnover 0.27% 0.48%

Technology absorption, adaptation and innovation:

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

Commenced production at the new Chemical and Soap Noodle Plant at Malanpur.

2. Benefits derived as a result of the above efforts, e.g., product
improvement, cost reduction, product development, import substitution,
etc.: The above efforts helped in cost reduction, customer satisfaction and
top line and bottom line improvements.

3. Imported Technology:

The Company has not imported any technology since incorporation.

C. Foreign Exchange earnings and outgo:

GCPL currently exports to 33 countries. Exports to UAE, Sri Lanka,
Bangladesh, Thailand, Afghanistan, South Africa and Mauritius have done
well. The strengthening rupee to GBP and ZAR has affected fiscal
consolidation.

(Rs. in Crore)
This Year Last Year

I. Foreign exchange used 216.9 184.6
II. Foreign exchange earned 21.5 17.3

Annexure C forming part of the Directors' Report

'Group' for interse transfer of shares under Clause 3(1)(e)of the
Securities & Exchange Board of India (Substantial Acquistion of Shares and
Takeovers) Regulations, 1997.

1. Godrej & Boyce Mfg. Co. Ltd.
2. Godrej Industries Ltd.
3. Cartini India Ltd.
4. Godrej Investments Pvt. Ltd.
5. Godrej Efacec Automation & Robotics Ltd.
6. Godrej Holdings Pvt. Ltd.
7. Godrej Infotech Ltd.
8. Geometric Ltd. (formerly Geometric Software Solutions Co. Ltd.)
9. Mercury Manufacturing Co. Ltd.
10. Prashant Metal Forming Industries Pvt. Ltd.
11. Statomat Special Machines India (Pvt.) Ltd.
12. Godrej (Malaysia) Sdn. Bhd.
13. Godrej (Singapore) Pte. Ltd.
14. J. T. Dragon Pte. Ltd.
15. Godrej Vietnam Company Ltd.
16. Veromatic International BV
17. Veromatic Services BV
18. Water Wonder Benelux BV
19. Build Tough Properties Ltd.
20. Ensemble Holdings & Finance Ltd.
21. Swadeshi Detergents Ltd.
22. Vora Soaps Ltd.
23. Godrej International Ltd.
24. Godrej Properties Ltd.
25. Godrej Reality Pvt. Ltd.
26. Godrej Waterside Properties Pvt. Ltd.
27. Godrej Real Estate Pvt. Ltd.
28. Godrej Developers Pvt. Ltd.
29. Godrej Seaview Properties Pvt. Ltd.
30. Godrej Estate Developers Pvt. Ltd.
31. Happy Highrises Ltd.
32. Tahir Properties Ltd.
33. Godrej Agrovet Ltd.
34. Bahar Agro Chem & Feeds Pvt. Ltd.
35. Golden Feed Products Ltd.
36. Godrej Oil Palm Ltd.
37. Cauvery Palmoil Ltd.
38. Natures Basket Ltd.
39. Wadala Commodities Ltd. (formerly Godrej Commodities Ltd.)
40. Godrej Hicare Ltd.
41. Godrej Sara Lee Ltd.
42. Mr. Adi B. Godrej
43. Mrs. Parmeshwar A. Godrej
44. Mrs. Tanya A. Dubash
45. Ms. Nisa A. Godrej
46. Mr. Pirojsha A. Godrej
47. Mr. Jamshyd N. Godrej
48. Mrs. Pheroza J. Godrej
49. Ms. Raika J. Godrej
50. Mr. Navroze J. Godrej
51. Mr. Nadir B. Godrej
52. Mrs. Rati N. Godrej
53. Master Burjis N. Godrej
54. Master Sohrab N. Godrej
55. Master Hormuzd N. Godrej
56. Mr. Vijay M. Crishna
57. Mrs. Smita V. Crishna
58. Ms. Freyan V. Crishna
59. Ms. Nyrika V. Crishna
60. Mr. Rishad K. Naoroji

MANAGEMENT DISCUSSION AND ANALYSIS:

Overview:

During the year under review, the Indian Economy grew at a much slower
rate. Despite growth rates falling from the over of 9%, recorded over the
last three years, India will still be the second fastest growing economy in
the world next only to China. The robust growth demonstrated by the economy
over the last 5 years has led to the average income of an Indian increasing
vastly, to over Rs. 30,000 p.a. in 2008-09, from a little under Rs. 19,000
p.a. in 2002-03.

As rapid socio-economic changes sweep across India the country is
witnessing the creation of many new markets and an expansion of the
existing ones. Estimates indicate that over 300 million people will move up
from the category of rural poor to rural lower middle class between 2005
and 2025. With this change, rural consumption levels are expected to rise
to current urban levels by 2017.

Such developments in India's markets are expected to create major
opportunities for Indian Consumer Product companies.

According to a study by McKinsey Global Institute (MGI), Indian incomes are
likely to grow threefold over the next two decades and as a result, India
will become the world's fifth largest consumer market by 2025, moving up
from the twelfth position in 2007.

Approximately 315 hyper markets are expected to be operational in tier-1
and tier-2 cities across India by the end of 2011, riding on the organised
retail boom says a joint study by consultancy firm KPMG and industry body
ASSOCHAM. The study states that 212 Indian towns are already capable of
sustaining the development of such hyper markets.

Long-term growth projections aside, it is expected that the momentum in the
economy will be revived by the three stimulus packages announced by the
Union Government. Implementing the recommendations of the recent Pay
Commission will help to increase the spending power of Government
employees. Cuts in the REPO and CENVAT rates should also encourage
spending.

GCPL continues to be amongst the fastest growing companies in the FMCG
sector and has maintained strong growth momentum across its business
categories. Your Company has enhanced its product portfolio over the last
two to three years through a mix of organic and inorganic initiatives and
we are now well established in major FMCG categories such as soap, hair
colour, toiletries and liquid detergents.

During the year we introduced several new products and revamped some of our
current offerings to better suit consumer tastes. During the year under
review, we commenced production at the new Chemical and Soap Noodle Plant
at Malanpur. We launched yet another variant of Godrej No. 1, namely
Strawberry & Walnut'. The Godrej No.1 range now comprises of eight
variants. We re-launched Godrej FairGlow with new variants and improved
packaging and the product now contains moisturizing crSme and fruit
extracts. The Cinthol range was relaunched with new variants namely Cinthol
Deo Musk & Cinthol Fresh Aqua soaps and graphics led by its new brand
ambassador Hrithik Roshan. The year also saw the launch of a new range of
colours in ammonia free powder and liquids under the Godrej Expert Hair
colour' brand. We also launched a new liquid detergent, namely Ezee Bright
and Soft' which protects colours on everyday clothes. Our new range of
Cinthol Deo Sprays launched last year was also extended to compact 75 ml
Cans.

In our international operations, the Cuticura' Hand Hygiene range was re-
launched in UK featuring new products such as Hand Foamer, Kids Foamer,
Kids Wipes and Crackling Mousse. The Hair colour brand Hint of Tint' was
launched in Canada. In South Africa the two new colours under the Inecto'
Powder Hair Colours have been extremely successful and so has the new
Cinthol Deo Spray launched in the Middle East. Since its acquisition in
April 2008, Kinky has opened 7 more stores across South Africa taking the
total to 22. The acquisition by GCPL of the 50% stake held by SCA Hygiene
Products has been approved by the Board of Directors of GCPL and post this
transaction, the Joint Venture which owns the Snuggy' brand of baby
diapers, will become a 100% subsidiary of GCPL.

GCPL's Sales mix:

Turnover (Rs. crore)
Turnover FY 2008-09 FY 2007-08 Growth (%)

Toilet soaps 705.6 566.6 24.5%
Hair Colour 230.5 204.7 12.6%
Liquid detergents 42.9 38.5 11.4%
Toiletries 62.0 57.5 7.8%
Contract Manufacturing 8.1 - -
By products 35.2 19.4 81.4%
Total 1084.3 886.7 22.3%

Soap:

Toilet soaps:

Your Company registered sales of Rs. 705.6 crore in this category during
the financial year, an increase of 24.5% over the previous year. GCPL
continues to be the second largest toilet soaps player with a market share
of 9.6% for FY 2008-09.

During the year, we introduced a new variant of our Godrej No. 1 soap,
Strawberry and Walnut'. This is the first time that such a combination of
strawberry, walnut and milk cream as ingredients in a soap has been
launched in India. Your Company launched this product in 4 sizes -125 gm
(pack of 4) priced at Rs. 50, 90 gm (pack of 4) priced at Rs. 39, 90 gm
(pack of 3) priced at Rs. 29 and 70 gm (pack of 4) priced at Rs. 29. We
believe that this product will help enhance the performance of the entire
Godrej No. 1 range. This is the eighth variant of this range, with the
other seven variants being Rose, Natural, Jasmine, Ayurvedic, Sandal,
Lavender and Papaya and Lotus. During the year, Godrej No. 1 maintained its
leadership position in Uttaranchal, Punjab, Haryana, Himachal and continues
to be the largest selling Grade 1 soap in the country. During the year
Godrej No. 1 became the market leader in Gujarat. For the first time Godrej
No. 1 is the market leader in a non-northern state.

Godrej No.1 has now increased its share in rural India through several
initiatives launched over the year.

We have also enjoyed robust sales from our flagship brand Cinthol' which
was relaunched last year in a new range of soaps, namely Cinthol Regular,
Fresh and Deo. Cinthol Regular has a deodorant formula with TCC, a special
ingredient recommended by experts while Cinthol Fresh uses an ultra scent
technology which provides long lasting fragrance. The newly launched Aqua
Fresh soap has a skin hydration ingredient for dry skin, which is expected
to do well during summer. The Cinthol Deo soap is available in Cologne,
Classic and Sport variants and the recently launched Musk variant.

The Company has recently re-launched Godrej FairGlow soap in new variants
and improved packaging and the product is performing well. The soap now
contains moisturising crSme and fruit extracts for soft, smooth and fair
skin. The soap is available in 3 variants namely Floral Essence, Rose
Wonder and Lily Sensation in 75 gm and 125 gm sizes.

Commercial production has commenced at the new Chemical and Soap Noodle
Plant at Malanpur.

Going forward, GCPL plans to expand its product offerings further with the
introduction of new and exciting products for the consumer.

Personal Care:

Hair Colours:

In this business, GCPL provides a variety of offerings across product
formats and price points to cater to a large range of consumers. During the
year, GCPL registered sales of Rs. 230.5 crore in this category, an
increase of 12.6% over the financial year 2007-08. GCPL has a market share
of 33.5% for FY 2008-09. Your Company has launched a new range of colours,
in powders and liquids, under the Godrej Expert Hair colour' brand. Godrej
Expert Powder Hair Dye, in improved packaging, has a unique and innovative
Colour Lock formulation wherein the colour is absorbed uniformly in each
and every strand of the hair, thus ensuring a longer lasting, complete grey
coverage. Godrej Expert is available in a convenient powder form with a
wide presence in 25 lakh outlets across the nation. Godrej Expert Hair
Colour offers a unique product especially formulated with five expert
benefits, namely Colour Balance Technology, Shampoo based colour, No
Ammonia, Nourishing conditioner and Perfume. Godrej Expert Hair Colour is
also available in Liquid form as 'Godrej Expert Liquid Hair Colour'. Godrej
Expert Liquid Hair Colour is available in 40 ml pack in 3 colours; Gentle
Black, Natural Brown and Dark Brown. Godrej Expert Powder Hair Colour is
extra safe because of its no ammonia' formulation and ensures 100% grey
coverage. Godrej Expert Powder Hair Colour is available at Rs. 10 per
packet and has been well accepted in distribution and share value.

GCPL's 'Renew' cream hair colour is a unique cream hair colour which
contains aloe and protein conditioners that protect and revitalize your
hair. The product is available in six colours - Natural Black, Natural
Brown, Burgundy, Cinnamon Red, Light Golden Brown and Light Brown. These
are available in different packs of 20 ml and 50 ml. The product has done
well during the year and the Company will look to introduce more colour
variants to further drive growth.

Under the Renew brand, your Company also offers 'Renew Highlights' which is
a home use kit for permanent highlights. It is available in blonde and red
colours. Renew highlights are suitable for consumers of all ages, are non-
drip products and work on coloured as well as uncoloured hair.

Last year, we introduced Godrej Renew Powder Hair Colour' which is a first
of its kind in the hair colour Category and is progressing well. Godrej
Renew Powder Hair Colour is an aqua based, conditioning powder hair colour
enriched with the herbal nourishment of henna and hibiscus. Henna protects
the hair and hibiscus provides nourishment. The powder hair colour is
ammonia free and hence is safe to use. This product is available in
Burgundy, Auburn Red, Natural Dark Brown and Natural Black at a price of
Rs. 20 per sachet in a carton pack containing three sachets. The
advertising spend on this product was also increased.

Godrej Colour Soft, is a niche brand and has had steady sales in metros. It
has 'Double Conditioners' and no ammonia which gives visible and uniform
colour to the hair. GCPL's other offerings in this category Godrej
Permanent Liquid Hair Dye', Godrej ColourSoft Hair Colour', Godrej Kesh
Kala Oil', Godrej Nupur Mehendi', Godrej Kali Mehendi' and Anoop' have
all shown encouraging performance.

Toiletries:

GCPL offers shaving cream, talcum powder and deodorant spray under this
category.

Shaving creams:

GCPL's deluxe range in shaving cream continues to do well in this category.

Talcum powder:

Talcum powder is available as Cinthol Deo Talc in five variants namely
Sport, Classic, Cologne Smooth Fresh and the newly launched Musk variant.

Deodorant spray:

The Cinthol Deo Spray continues to grow well and is available in four
variants namely Sport, Cologne, Classic and the newly launched Musk which
is performing well in the market.

Liquid detergents:

During the year, GCPL launched Ezee Bright and Soft, a new detergent which
possesses a unique Colour Guard Technology which protects the colours of
clothes. The detergent is available in 3 sizes - 18 gm sachet, 200 gm pack
and a 500 gm pack.

Distribution and supply chain:

This year we substantially expanded our distribution and supply chain by
focusing mainly on rural areas. The result is a marked sales growth in
these areas. Our products are available in 3,000,000 outlets 200,000 of
which were added during the current year. Due to our improved distribution
the acceptance of our new products has increased leading to a wider
existence of our SKUs.

We have also focussed on rural areas through advertising on Doordarshan
which has lead to strong results. Two regions have been selected for rural
organisation, the West and South of India.

The newly launched Expert Powder Hair Colour has also done well during the
year. GCPL distributed the newly launched Cinthol Aqua Fresh, 60 gm packs
through several new outlets in addition to current outlets.

Human Resources:

Commitment to our people and community has been a hallmark of our Company
through the years. This year, we continued to demonstrate our commitment
with our Employee Commitment Surveys showing improved scores. Our Company
was rated 6th in the 'Best Companies to Work for' survey (conducted by
Mercer). GCPL ranked 9th in 'The Great Place to Work Survey' of 2008. GCPL
was ranked in the top 25 company list of the Hewitt - Wall Street Journal
'Best Employees in Asia'. Our ranking of 11th in the 'Best Employers in
India' survey (conducted by Hewitt Associates) underlines our efforts to
provide a consistent, best-in-class environment for our most important
assets, our people.

Notably, this year, the Company launched the new Godrej initiative,
encouraging employee involvement across all levels and locations during the
launch. We conducted various initiatives to enhance employee engagement
around the new brand such as the 'Bedhadak Bolo' contest, career counseling
for our employee's children and preventive health check-ups for all
employees.

This year, the Company continued our emphasis on training and development.
We conducted 'sharper training need analysis' to ensure higher ROI from our
training and development activities, extensively utilized internal
trainers, we launched the Inspirational Leadership program, which is
branded 'Torchbearers'.

Our continued commitment to providing better opportunities for the socially
and economically underprivileged has led to the creation of our 'Equal
Opportunities statement' to provide leadership commitment to the cause. We
believe that providing an inclusive culture to people from Scheduled
Castes/ Scheduled Tribes as well as the physically challenged creates an
uplifting and diverse environment which will have a positive impact on our
operations and our business as a whole. As a part of this initiative, we
have recruited over 30 people belonging to the Scheduled Castes/Scheduled
Tribes or physically challenged in various parts of the organization. The
Company has been active in the training and development of Scheduled
Castes/Scheduled Tribes students, shown in our tie-up with the 'Centre for
Entrepreneur Development', Madhya Pradesh. Our enhanced relationship with
the 'Dr. Ambedkar Institute of Technology for Handicapped, Kanpur' has been
instrumental in our recruitment of physically challenged persons.

Our integration of our overseas subsidiaries, Keyline (UK), Rapidol (SA),
GGME (UAE) and Kinky (SA), has led to a strengthening of their Management
team. These companies provide expatriation opportunities for Indian
managers which benefit the subsidiary and provide unique exposure to the
manager.

Information Technology:

We have signed a 10-year strategic IT transformation services contract with
Hewlett Packard (HP). HP will help us transform initiatives, grow our
business and maintain a competitive edge. HP will implement software
specifically designed for GCPL.

HP will lead a comprehensive infrastructure outsourcing and transformation
project that will provide us with a scalable and reliable service delivery
structure based on Information Technology Infrastructure Library (ITIL)
standards.

HP will deliver infrastructure solutions, along with consulting and
outsourced services, which include management for SAP, PeopleSoft and other
critical business applications. We expect great synergies and significant
saving in the cost of operation due to the use of such robust tools.

In fact these initiatives are already showing results through efficiency
enhancements across people and operations and more competitive vendor
costs.

Research & Development:

Research and Development has always played an integral role for GCPL. We
have integrated our R & D practices to operate in tandem with our long-term
strategy and cater to the demands of the market place. The focus of our R &
D team is to implement knowledge management and drive quality assurance
while maintaining customer centricity in the entire process. We encourage
innovation in specific areas of development including Hair Care, Skin Care
and Packaging.

During the financial year, your Company derived several benefits from its R
& D operations, resulting in the launch and re-launch of several products.
The Cinthol product range of soaps and talc has been re-launched with
modified aesthetics and improved packaging. With that, new variants of
Cinthol namely Cinthol Fresh Aqua & Cinthol Deo Musk soaps have been
launched. The Cinthol deodorant range has also been restaged with local
manufacturing bringing lower costs and improved efficiencies. Godrej No.1
soap has launched a new variant, namely Strawberry and Walnut. The year
also saw the launch of three new variants of FairGlow soaps, these are
Floral Essence, Rose Wonder and Lily Sensation.

Bright and Soft liquid fabric detergent was introduced into the market,
formulated to protect the colour of garments. Keshkala re-launched with a
new fragrance in order increase its desirability amongst consumers. 'Godrej
Expert Hair Colour' launched a new range of colours, in ammonia free
powders and liquids.

Going forward, your Company will seek to produce a variety of fashion hair
colours with added benefits, hair colour highlights and newer formats for
hair colouring. We will also explore new variants of soaps.

Your Company is working hard to keep itself inline with changing consumer
tastes. With that regard we undertake in-depth consumer studies to gauge
feedback on our new products. We then use the feedback to improve the
product in line with the tastes of the consumer. In order to understand
consumer experience, we are also exploring product recycling.

International Operations:

GCPL currently exports to 33 countries and export income for FY09 was Rs.
19.4 crore.

Exports to UAE, Sri Lanka, Bangladesh, Thailand, Afghanistan, South Africa
and Mauritius have done exceedingly well.

Performance by our International Operations has been encouraging though
considering the macro environment we have adopted a wait and watch
approach. The strengthening Rupee to the GBP and ZAR has affected fiscal
consolidation.

Keyline Brands Ltd.:

Keyline brands Ltd. has posted better performance this year despite a
challenging economic environment. The Cuticura' Hand Hygiene range was re-
launched during the year featuring new products such as Hand Foamer,
Crackling Mousse and Kids Wipes which are individually wrapped in 10 per
pack, available in Squeezy Orange and Juicy Apple variants. Other new
launches include Kids Foamer with moisturizing Aloe Vera which is available
in 50 ml, Squeezy Orange and Juicy Apple variants. The hair colour brand
Hint of Tint' was launched in Canada. Bio Oil achieved a Signature Brand
Status' in Boots, one of the highest rated qualifications for a product
finding excellent consumer franchise. P20 is the largest selling sun-care
product to be sold in Duty Free stores.

The Aapri brand, established in 1985, was re-launched in an advanced range
at higher price points. Aapri is a genuine skincare classic' that has
evolved over the years for all kinds of skins exfoliation needs for women
of all ages. Aapri's product range provides the goodness of Apricots in

fresh and innovative formats like dual cleansing and exfoliating pillows
and consists of five products: Aapri Scrub Cream, Aapri Scrub Gel, Aapri
Dual Cleansing and Exfoliating Pillows, Aapri Blackhead Clearing Scrub and
Aapri Micro-Dermabrasion Exfoliator. Aapri has proven its expertise by
making expensive salon formats like Micro- Dermabrasion products available
to consumers at very affordable prices.

Rapidol (Pty.) Ltd.:

Rapidol's sales grew by 12%, despite the worldwide economic slowdown
impacting South Africa also. Inecto Powder Hair Colour and Henna, launched
in 2007-08 are doing exceedingly well. Inecto Colour Range is available in
10 variants and Inecto Plus in 7 variants. Inecto - Super Black, the
largest selling hair colour sub-brand in Rapidol portfolio, launched its 30
Years Birthday celebration promotions achieving a record growth in sales
and launched two new variants under the 'Inecto' Powder Hair Colours (PHC)
range namely, Natural Brown and Auburn, both of which have been extremely
successful.

Godrej Global Mideast FZE:

Godrej Global Mideast FZE (GGME), distributes soaps, hair colours and
toiletries in UAE and other GCC (Gulf Co-operation Council) countries. The
newly launched Cinthol Deo Spray is doing well in GCC and the Middle East
and is being listed in retails chains. The Company's sales grew by 11%
despite the huge slowdown in the Gulf economy in this fiscal. GGME's sales
in the hair colour category grew by 55% and its toilet soap sales by 28%.

Kinky Group (Pty.) Ltd.:

Kinky offers a variety of products, which include hair, hair braids, hair
pieces, wigs and wefted pieces. Kinky also offers hair accessories like
styling gels, hair sprays and oil free shampoo. On acquisition Kinky had a
presence of 15 Owned stores. During the year GCPL opened an additional
seven stores, taking the total to 22 stores in all. We are confi dent this
enhanced presence will help to drive up sales and provide an effective
platform for the rollout of new products. All Kinky products are
manufactured at plants located in South Africa, Durban and final products
are sold through Kinky owned stores as well as Cash-n-Carry outlets.

Social and Environmental Initiatives:

GCPL, Malanpur has adopted 'Singwari' Village near Malanpur factory. The
following Corporate Social Responsibility (CSR) activities are carried out
at Singwari village:

* A Scholarship scheme has been implemented for SC & ST students from class
V to VIII of the Singwari middle school.

* Provision of financial support to the school at Singwari for activities
such as celebration of national festivals.

* Distribution of meritorious awards to students in classes I to VIII.

* Organized factory visits as well as visits to historical places at
Gwalior for Singwari Middle School students.

* Computer awareness training programs have been organized for the school
teachers and students.

* Organized sports and cultural activities for Primary and Middle school
children.

* A four day empowerment program for Women was organized at Singwari
Village with the association of Central Board for Workers Education,
Gwalior.

We have also organized competitions for poetry, posters, slogans and essays
for 55 children of our employees on World Environment Day 5th June, 2008.

To increase environmental awareness among locals and the society in
general, advertisements were published in all local newspapers and banners
were displayed on buses and other prominent places. We also held a rally
which was attended by employees, employees' children and contract workers.
The rally was organized at Malanpur and Singwari Village. Other initiatives
include a tree plantation in both the factory premises and at Singwari
Village School. Further environmental initiatives included a guest lecture
titled 'Towards a low carbon economy'. The seminar was organized by M. P.
Pollution Control Board.

At our Thana & Katha factories, several new initiatives have been
implemented. Added importance has been given to the recruitment of
individuals from the under privileged categories. At the Thana factory, 24%
of our employees fall under the SC/ST categories and at Katha, 41% of our
blue collared employees fall in the SC/ST category. While recruiting your
Company gave preference to the SC/ST and physically challenged categories.
Both units at Thana and Katha are certified for Integrated Management
System covering environmental Management and Safety Management by Bureau
Veritas Certification (formerly known as BVQI).

In order to increase the awareness of social evils like Tobacco and Alcohol
and on infections like HIV-AIDS your Company organised a series of street
plays.

Financials (Consolidated):

Abridged Profit & Loss Statement:

All figures in Rs. crore
FY 2008-09 FY 2007-08

Sales 1393.0 1102.6
Other income 43.6 6.0
Total income 1436.6 1108.6
Material costs 769.5 518.0
Staff costs 86.5 72.5
Advertising & sales promotion 137.9 131.0
Other expenditures 195.4 166.6
Total expenditure 1189.3 888.1
PBDIT 247.3 220.5
Depreciation 19.2 18.2
PBIT 228.10 202.3
Interest and financial Charges 18.9 14.8
PBT 209.2 187.5
Provision for taxation 36.6 28.3
PAT 172.6 159.2
Tax adjustment of previous year 0.6 -
Net Profit 173.2 159.2

GCPL's net sales in FY 2008-09 were Rs. 1393 crore, representing a growth
of 26% over FY 2007-08.

GCPL has consistently registered high growth rates. Profit before Interest,
depreciation and tax (PBIDT) increased by 12% to Rs. 247.3 crore.

Your Company generated a Profit before tax (PBT) of Rs. 209.2 crore and a
Net Profit after tax (PAT) of Rs. 172.6 crore, displaying a 11.6% and 8.4%
growth respectively over the Company's FY 2007-08 performance.

Profitability Perspective:

FY 2008-09 FY 2007-08

PBDIT/Sales 15.3% 19.8%
PBT/Sales 15.0% 17.0%
PAT/Sales 12.4% 14.4%
RoCE 23% 55%
RoNW 30% 93%
EPS (Rs.) 6.8 7.1
EVA (Rs. crore) 124.7 134.8

In May 2008, your Company completed a rights issue. The total amount raised
through this issue was Rs. 396 crore. As part of the issue, an additional
32,232,316 shares were issued and upon completion, the total amount of
shares outstanding are 258,076,392 equity shares. Of the total proceeds,
around Rs. 65 crore has been deployed towards repaying high cost debt. The
unutilised issue money amounting to around Rs. 329 crore is temporarily
invested by the Company in fixed deposits with Banks. The Rights
Entitlement Ratio decided upon by the Company was the issue of 1 equity
share of face value of Re.1 each to be issued for every 7 equity shares of
the face value of Re.1 each. The record date for this rights issue was
March 19, 2008. The Rights were priced at Rs.123 per equity share of face
value Re.1 including a premium of Rs.122 per share.

Internal control systems and their adequacy:

Your Company has a proper and adequate system of Internal Controls, to
ensure that all assets are safeguarded and protected against loss from
unauthorized use or disposition and that transaction are authorized,
recorded and reported correctly.

Your Company's Corporate Audit & Assurance Dept. which is ISO 9001: 2000
certified, issues well documented operating procedures and authorities with
adequate built-in controls at the beginning of any activity and any time
during the continuation of the process, if there is a major change.

The internal control is supplemented by an extensive programme of internal,
external audits and periodic review by the management.

The system is designed to adequately ensure that financial and other
records are reliable for preparing financial information and other data and
for maintaining accountability of assets.

During the year the Corporate Audit & Assurance Department was involved in
leveraging the benefit of SAP so as to ensure that the existing processes
are adequately captured with in-built control mechanisms.

Information Security:

Your Company has accorded adequate importance to the security of its
information assets. To ensure that this initiative gets the desired focus
and attention, a Chief Information Security Officer, who is attached to the
Corporate Audit & Assurance Dept., is entrusted with the task of ensuring
that your Company has the requisite security posture.

Your Company has in place, all the procedures and practices that are in
line with the ISO Security Standard. It is in the process of getting the
reputed ISO 27001 Security Certification and towards this end, has
successfully completed Phase I of this Certification for its Head Office at
Vikhroli, Mumbai.

Awards & Recognitions:

GCPL received three recognitions during the year. These were 6th in the
'Best company to work for in India' survey done by Mercer Consulting and
Business Today, 9th in the 'Great place to work survey' for 2008. and
ranked 11th in the 'Hewitt Best Employers in India' and ranked one of the
25 Best Employers in Asia in a study conducted by Hewitt India.

ICRA has upgraded GCPL's rating of stake holder value and governance
practices from SVG2 + to SVG1. This rating implies that, in ICRA's current
opinion the rated Company belongs to the highest category on the composite
parameters of stake holder value creation and management, as also corporate
governance practices. ICRA has also reaffirmed the CGR2+ rating to the
Corporate Governance practices of GCPL. This rating implies that in ICRA's
current opinion the rated Company, has adapted and follows such practices,
conventions and codes as would provide its financial stake holders a high
level of assurance on the quality of corporate governance.

GCPL, Malanpur factory has received 25 awards at the National Convention of
Quality Circles-2008 held at Baroda. The Malanpur plant also received the
first prize for the case study presented in the 10th National Suggestions
Summit, organized by the Indian National Suggestion Scheme Association in
New Delhi.

Risks and Concerns:

As a global organization, your Company is subject to a diverse set of risk
areas. These risks can adversely affect and influence the financial
position, operating results, cash fl ows and stability of GCPL. These risks
have been considered and the Company is aware of the potential for these
risks to occur. Utmost care is being taken to plan and mitigate known risks
as well as proactively identify new risks that may occur.

The key risks that affect the functioning of the Company and are actively
considered for risk management activities are:

* Seasonal Fluctuations

* Political risks associated with unrest and instability in countries where
the Company has a presence or operates

* Economic depression and inflation

* Labour shortages and attrition of key staff

* Exchange rate fluctuation and arbitrage risk

* Increasing costs of raw material, transport and storage

* Competitive market conditions and new entrants to the market

* Compliance and regulatory pressures including changes to tax laws

* Supplier and distributor relationships and retention of distribution
channels

The Company has a defined risk management strategy in place which includes
a Risk Committee that identifies risks, creates mitigation plans and
monitors the occurrence of risk. Appropriate mitigation plans for different
risks are created and operationalised across the Company.

Exploring opportunities in adversity - frugality, efficiency & growth:

In the light of domestic and global financial hardship, your Company has
taken several steps to strengthen its position and seek out opportunities
in adversity. With this in mind the approach has been on containing costs
and growing brands and franchises. The Company has been taking measures to
keep its brands relevant to the consumer as also ensuring that they remain
competitively priced. It is also exploring all possible avenues to reduce
costs of inputs and raw materials without compromising on the quality of
the end product. This year the price increases taken have been at a lag to
competition. With the quest to become a truely global FMCG player your
Company is constantly investing and driving acquisitions, increasing its
market share and evolving its product line. In the Domestic market your
Company is expanding its distribution with added focus on rural areas with
amplified marketing and advertising initiatives.

In addition to investing and maintaining competitiveness, GCPL has taken
many cost reduction initiatives to help preserve margins. It is
rationalising fixed and variable costs through measures like video
conferencing, entering into reverse auctions to get best prices from
vendors and looking at alternative means like railways for transportation
of goods, which has proved to be more cost effective. Besides this, the use
of SAP to centralise functions like purchase, accounting etc. is making
your Company more efficient and would help reduce turnaround time and drive
down costs. With the help of such initiatives your Company is on a strong
footing to deliver enhanced profitability going forward.

Outlook For FY 2009-2010:

GCPL is well positioned to create and enhance value despite a challenging
macro environment. Several new offerings and other growth initiatives give
the Company that confidence. On an operational front, raw material and
input prices have also declined. Our endeavour to drive organic growth is
driven by a two pronged strategy. Firstly, we are focusing on expanding the
number and variety of products offered to customers across categories based
upon focused research and consumer feedback. Secondly, our thrust is on
enhancing distribution and presence both internationally and in the
country. Additionally we continue to identify opportunities for accretive
and value creating acquisitions.

Cautionary Statement:

Some of the statements in this Management Discussion and Analysis,
describing the Company's objectives, projections, estimates and
expectations may be forward looking statements' within the meaning of
applicable laws and regulations. Actual results may differ from those
expressed or implied. Important developments that could affect the
Company's operations include a downtrend in the domestic industry,
significant changes in political and economic environment in India, tax
laws, import duties, litigation and labour relations.