Marico - Annual Report - 2008-2009

MARICO LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Members

Your Board of Directors ('Board') is pleased to present the Twenty First
Annual Report of your Company, Marico Limited, for the year ended March 31,
2009 ('the year under review', 'the Year' or 'FY09').

In line with the requirements of the Listing Agreement with The Bombay
Stock Exchange and National Stock Exchange, your & Company has been
reporting consolidated results - taking into account the results of its
subsidiaries. This discussion therefore covers the financial results and
other development during April 08 - March 09 in respect of Marico
Consolidated comprising Domestic Consumer Products Business under Marico
Limited (Marico) in India, International Consumer Products Business
comprising exports from Marico and operations of its overseas subsidiaries
and the Solutions Business of Kaya in India and overseas. The consolidated
entity has been referred to as 'Marico' or 'Group' or 'Your Group' in this
discussion.

FINANCIAL RESULTS - AN OVERVIEW:

Rs. Crore
Year ended March 31,
2009 2008

Consolidated Summary Financials for the Group
Sales and Services 23884 19050

Profit before Tax 229.6 2050.0

Profit after Tax 188.7 169.1

Marico Limited Financials

Sales and Services 1917.5 1568.8

Profit before Tax 171.0 173.3

Less: Provision for Tax for the current year 18.2 19.2

Profit after Tax for the current year 152.8 154.0

Less: Provision for Deferred Tax Liability /
(Deferred Tax Asset) 32.1 19.5

Less: Excess income tax provision of earlier
years written back - -

Less: Fringe Benefit Tax 2.1 3.6

Less: Minimum Alternative Tax (MAT) Credit (23.5) (12.5)

Profit after Tax 142.1 143.4

Add: Surplus brought forward 151.9 69.5

Profit available for Appropriation 294.0 212.9

Appropriations:

Distribution to shareholders 18.3 39.9

Tax on dividend 3.1 6.8

21.4 46.7

Proposed dividend 21.6 -

Tax on proposed dividend 3.7 -

Transfer to General Reserve 14.2 14.3

Surplus carried forward 233.1 151.9

Total 294.0 212.9

DISTRIBUTION TO EQUITY SHAREHOLDERS:

Your Company's Distribution policy has aimed at sharing your Company's
prosperity with its shareholders, through a formal earmarking /
disbursement of profits to shareholders.

Marico has identified acquisitions as one of its avenues to Pursue growth.
Since April 2005, the Group has consummated 7 acquisitions including two
each in India, Bangladesh and Egypt and one in South Africa, As part of its
growth agenda, Marico would continue to explore new acquisition
opportunities. These would call for additional funding.

As indicated last year, your Company intends to be more conservative in the
quantum of dividend payout in the near future.

Your Company's distribution to equity shareholders during FY 09 comprised
the following:

First interim dividend of 30% on the equity base of Rs. 60.90 Crore

Second interim dividend of 35.5% on the equity base of Rs. 60.90 Crore

The total equity dividend for FY09 at 65.5% is thus the same as that paid
during FY08. The total dividend (including dividend tax) was Rs. 46.7 crore
(about 25 % of the group PAT).

MANAGEMENT DISCUSSION AND ANALYSIS:

An Annexure to this Report contains a detailed Management Discussion and
Analysis, which, inter alia, covers the following:

* Industry structure and development
* Opportunities and Threats
* Risks and Concerns
* Internal control systems and their adequacy
* Discussion on financial and operational performance
* Segment-wise performance Outlook

In addition, a Review of Operations of your Company has been given in this
Report.

REVIEW OF OPERATIONS:

Marico achieved a strong growth of 25% in revenue over the previous year
and registered a topline of Rs 2388 crore during FY09. Almost the entire
growth was organic growth, with volume led growth contributing to 12% while
the remaining came from price increases and sales mix. All its businesses,
those of consumer products in India, international business and solutions
business contributed to the overall growth.

The top line increase was accompanied by a bottom-line growth of 12 %,
after considering the impact of extra-ordinary / exceptional items. Profit
After Tax (PAT) including exceptional / extra-ordinary items during the
year was at Rs 189 crore as against Rs. 169 crore in FY08. The financials
for FY09 include certain extraordinary items (loss on sale of membership
interest in Sundari LLC) of Rs 15.03 crores while the financials of FY 08
include certain extra-ordinary items (exchange gain on loan repayment
Rs.10.6 cr, an additional charge on account of accelerated depreciation Rs
4.3 cr and profit on sale of the Sil business Rs 10.6 cr). Had it not been
for these items, the PAT for FY09 would have been Rs 186 cr, a growth of
21% over FY08 (extraordinary items excluded from the comparable figure in
the previous year).

During the year, Marico extended its record of year to year quarterly
growth.

Q4FY08 was on a Y-o-Y basis:

* The 34th consecutive Quarter of growth in Turnover and

* The 38th consecutive Quarter of growth in Profits

The company has demonstrated steady growth on both the top line and bottom
line. Over the last 5 years, they have grown at a Compounded Annual Growth
Rate of 24% and 28% respectively.

During the year, the Company decided to sell its membership interest in
Sundari LLC, a wholly owned subsidiary operating in the spa products
business, to Wellness Systems LLC, a company promoted by two of the Marico
Group's senior managers who were managing the Sundari business. The sale of
membership interest in Sundari LLC is in line with the Company's decision
to focus on its core businesses in the B2C space in Asia and Africa.

Consumer Products Business: India

In the consumer products business, the flagship brand, Parachute Coconut
Oil grew by 9% in volume over the previous financial year. The focus
segment of the hair-care range (Parachute Jasmine, Parachute Advansed,
Shanti Amla Badam, Nihar Naturals and Hair & Care being the key elements)
grew by 17% in volume. In the Premium Refined Oils market, Saffola, the
company's second flagship, grew by 11% in volume during the year.

In order to generate additional sources of growth in the coming years,
Marico as an FMCG company must create a healthy pipeline of new products.
During the year your company launched new prototypes. These included
Saffola Zest - a healthy baked, not fried snack, Saffola Rice - low Gl
rice, Hair & Care Almond Gold - non sticky hair oil with almond proteins,
Parachute Advansed revitalizing Hot Oil and Revive Strong and White liquid
fabric whitener.

International FMCG Business:

Marico's overall international business grew by 43%. In its traditional
markets, namely the Middle East and Bangladesh, Marico's International FMCG
business continued to grow and record share gains.

During the year, the Company decided to modify its distribution system in
Egypt whereby it made a shift from directly servicing several wholesalers
to dealing with them through a distributor. The resolution of issues,
arising with the transition took longer than expected to resolve and had a
negative impact on the turnover. The transition is however complete and the
business is back on track.

The integration of the South African business acquired in 2007 has been
smoothly completed and the business performed in line with expectations.

Kaya:

Kaya's skin care business achieved revenue of Rs 157 crore during FY09, a
growth of 57% over FY08, During FY09, Kaya Skin Care added 20 clinics,
making the chain 85 clinic strong (74 in India and 11 in the Middle East).
In addition, it introduced new products to add to its. basket of product
offerings to its consumers.

Kaya Life offers customized holistic weight management solutions. Customers
are experiencing effective results on both weight loss and inch loss. We
continue to work on fine tuning the model to increase the pace of customer
acquisition. There are four Kaya Life centres in Mumbai.

OTHER CORPORATE DEVELOPMENTS:

Divestment of entire membership interest in Sundari LLC:

Marico has divested its entire membership interest in its wholly owned
subsidiary Sundari LLC. Sundari LLC is engaged in the manufacturing and
marketing of skincare cosmetics and accessories primarily in the USA and
Europe. A majority of Sundari's revenue is generated from B2B sales to spas
located within luxury resorts and hotels globally.

Growth in Marico's International Business Group has been in the Asian and
African markets. Sundari constitutes a small share of Marico's revenue and
is based in the US which is not a part of Marico's focus geographies for
future growth. With the overall shift in the global business environment,
Marico has decided to focus on its core businesses in Asia and Africa in
the B2C space.

Marico Employees Stock Option Scheme 2007 (ESOS):

In pursuance of shareholders approval obtained on November 24, 2006, your
Company formulated and implemented an Employees Stock Options Scheme (the
Scheme) for grant of Stock Options to certain eligible employees of the
Company and its subsidiaries. The Corporate Governance Committee of the
Board of Directors is entrusted with the responsibility of administering
the Scheme and in pursuance thereof, the Committee has granted 10,044,200
stock options (as at March 31, 2009) comprising about 1.65% of the current
paid up equity capital of the Company. Additional information on ESOS as
required by Securities and Exchange Board of India (Employees Stock Option
Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 is annexed and
forms part of this Report.

None of the Non-executive Directors (including Independent Directors) have
received stock options in pursuance of the above Scheme. Likewise, no
employee has been granted options, during the year equal to or exceeding
0.5% of the issued capital (excluding outstanding warrants and conversions)
of the Company at the time of grant.

The Company's Auditors, M/s. Price Waterhouse, have certified that the
Scheme has been implemented in accordance with the SEBI Guidelines and the
resolution passed by the members at the Extra-Ordinary General Meeting held
on November 24, 2006.

Resignation of Compliance Officer and Appointment of Company Secretary &
Compliance Officer:

Mr. Vinod Kamath, Chief-Finance & IT resigned from the post of Compliance
Officer, with effect from the close of working hours on July 31, 2008.

Ms. Rachana Lodaya, Legal & Secretarial Manager of the Company, possessing
the required qualification, was appointed as the Company Secretary and
Compliance Officer of the Company with effect from August 1, 2008.

Application to the Central Government for exemption from including Balance
Sheets of the Subsidiary Companies:

Your Company had applied to the Central Government under Section 212(8) of
the Companies Act seeking an exemption from attaching copies of the Balance
Sheet, Profit and Loss Accounts, Directors' Report and Auditors' Report of
its subsidiary companies.

In terms of the approval granted by the Central Government vide order No.
47/268/2009-CL-III; copies of the Balance Sheet, Profit and Loss Account,
Report of .the Board of Directors and the Report of the Auditors of the
Subsidiary Companies have not been attached to the Balance Sheet of the
Company. However, the statement required under section 212 of the Companies
Act, 1956 is attached. The Company will make these documents / details
available upon request by any member of the Company interested in obtaining
the same and same would also be made available on its website. The
Consolidated Financial Statements prepared by the Company pursuant to
Accounting Standard AS-21 issued by the Institute of Chartered Accountants
of India, include financial information of its subsidiaries.

PUBLIC DEPOSITS:

There were no outstanding Public deposits at the end of this or the
previous year. The Company did not accept any public deposits during the
year.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956 (the Act) amended
by the Companies (Amendment) Act, 2000, the Directors confirm that:

In preparation of the Annual Accounts of your Company, the Accounting
Standards, laid down by the Institute of Chartered Accountants of India
from time to time, have been followed.

Appropriate accounting policies have been selected and applied
consistently, and reasonable and prudent judgement and estimates have been
made so as to ensure that the accounts give a true and fair view of the
state of affairs of your Company as at March 31, 2009 and the profits of
your Company for the year ended March 31, 2009.

Proper and sufficient care has been taken for maintenance of appropriate
accounting records in accordance with the provisions of the Act for
safeguarding the assets of your Company and for preventing and detecting
frauds and other irregularities.

The annual accounts have been prepared on a going concern basis.

The observations of the Auditors in their report to the Members have been
adequately dealt with in the relevant notes to the accounts. Hence no
additional explanation is considered necessary.

CORPORATE GOVERNANCE:

A report on Corporate Governance has been provided as a separate part of
this Report.

DIRECTORS:

Mr. Bipin Shah, Mr. Atul Choksey and Mr. Anand Kripalu, Directors of the
Company, retire by rotation as per Section 256 of the Companies Act, 1956
and being eligible offer themselves for re-appointment.

ADDITIONAL STATUTORY INFORMATION:

Information under Section 217(1)(e) of the Act read with the Companies
(Disclosure of Particulars in the Report of the Board of Directors) Rules,
1988 is annexed and forms part of this Report. Information pursuant to
Section 217(2A) of the Act read with the Companies (Particulars of
Employees) Rules, 1975, as amended by the Companies (Particulars of
Employees) Amendment Rules, 1999 forms part of this Report. Although in
accordance with the provisions of Section 219(1)(b)(iv) of the Act such
information has been excluded from the Report and Accounts sent to the
Members, any member desirous of obtaining this information may write to the
Company Secretary at the Registered Office of the Company.

AUDITORS:

M/s. Price Waterhouse, Chartered Accountants and Statutory Auditors of the
Company retire at the ensuing Annual General Meeting and have confirmed
their eligibility for re-appointment.

Aneja Associates, a Chartered Accountant Firm, has been associated with
your Company as its internal auditor. They have been partnering your
Company in the area of risk management and internal control systems. Your
Company has re-appointed Aneja Associates as its internal auditor for the
year 2009-10.

ACKNOWLEDGEMENT:

The Board takes this opportunity to thank all its employees for their
dedicated service and firm commitment to the goals of the Company. The
Board also wishes to place on record its sincere appreciation for the
wholehearted support received from shareholders, distributors, bankers and
all other business associates, and from the neighborhood communities of the
various Marico locations. We look forward to continued support of all these
partners in progress.

On behalf of the Board of Directors

Place: Mumbai HARSH MARIWALA
Date : June 19, 2009 Chairman and Managing Director

ANNEXURE TO THE DIRECTORS' REPORT

Disclosure of Particulars with respect to Conservation of Energy,
Technology Absorption and Foreign Exchange earnings and outgo as required
under the Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988.

A. Conservation of Energy:

Marico continued to emphasize on the conservation and optimal utilization
of energy in every manufacturing unit of the Company. The energy
conservation measures implemented during FY 09 are listed below:

* Launched an initiative in the sustainable development area - 'Think
fresh, Be Green' driven by a special team the Green Group.

* Re-engineered the convey or drive system to reduce power consumption at
Kanjikode Plant.

* Developed a power saving mechanism for expeller cleaning at Kanjikode
Plant.

* Automated power switch off of computer monitors of all idling machines to
conserve power at plants and offices.

* Launched an IT platform for Car pooling to reduce vehicle fuel
consumption.

* Eliminated five conveyors by providing a bypass conveyor at Goa Plant.

* Replaced sodium bulbs with CFL bulbs at Plants.

* Developed real time timer for auto operation of street lights & oil mill
basis weather and timer control for AC

* Installed power saver transformer for factory lighting at Pondicherry
Plant.

* Replaced furnace Oil with High Speed Diesel in Boiler at Pondicherry
Plant.

* Modified shrink tunnel reducing the number of heaters from sixteen to ten
at Goa Plant.

* Right sized bleacher pump by putting 3 HP instead of 12 HP and eliminated
bleacher inlet pump through process change at Jalgaon Plant.

* Installed high efficiency pump in the MIDC water line and saved 4 HP
power at Jalgaon Plant.

* Eliminated 7.5 HP pump by direct transfer of refined oil in the finished
oil tanker at Jalgaon Plant.

* Installed Static Mixer instead of phosphoric acid mixer & M6 mixer at
Jalgaon Plant.

* Developed Boiler blow down heat recovery system at Jalgaon Plant.

Marico continued its journey towards effective utilisation of energy.
Significant reduction in power consumption has been achieved and
rationalisation efforts will continue.

The Details of total energy consumption and energy consumption per unit of
production are given in Enclosure 'A'.

B. Technology Absorption:

I. Research and Development (R&D):

1. Specific areas in which R&D was carried out by your Company:

R&D's main thrust during the year was to strengthen the current portfolio
of products and also to look for new concepts and product platforms to
satisfy consumer needs more effectively. Some of the initiatives during the
year included:

* Development of new technology platforms to support the consumer needs
more effectively.

* Development of competencies in the areas of Hair Care, Skin Care and
Functional Foods.

* Development of new products, line extensions, and new processes based on
consumer insights to meet the unmet consumer aspirations.

* Evaluation of natural herbs for proprietary, patentable hair & skin
products, with sponsorship from Department of Science & Technology (DST).

* Skill building towards evaluation of products sensorials and product
benefits.

* Working with premier research institutions in India and overseas to stay
current on the latest developments in research on Hair Care, Skin Care and
Functional Foods.

* Work on product and process patents.

Your Company has also invested in new infrastructure for evaluation of Hair
and Skin Products and Functional Foods towards providing better performance
based products.

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

* New SKUs were developed under the various categories in which Marico
operates.

* A few domestic launches include:

* Parachute Advansed revitalizing Hot Oil

* Nihar Naturals Coconut Cooling Oil

* Saffola Rice for weight management

* Saffola Zest a low fat high protein, high fiber snack

* Revive Strong and White

New products were launched under the Kaya business to provide effective
solutions in Skin Care. These include;

- A foot care cream

- Revive and Firm anti ageing cream

A complete mens range of products have also been launched including Kaya
Skin Relief After Shave Gel, Kaya Revitalizing Face Wash and Kaya Whitening
Moisturizer.

In the International business, various product and pack developments were
undertaken in the current year to strengthen business. An entry in the hair
dye market in Bangladesh was made through HairCode hair dye. In South
Africa flavoured castor oil was launched under Hercules - a unique concept
to over come the unacceptable taste of castor oil.

Indigenous technologies were developed for manufacturing many of the
existing products locally.

Numerous innovative packaging designs and options to offer greater value to
consumers such as a tamper proof cap for Saffola oil and spray format for
hair oils were developed.

Marico's R&D has filed eight patent disclosures and has been granted two
Patents this year.

3. Future Plan of Action:

Your Company's R&D will work towards continuous innovation in process,
product & packaging technology to offer consumers value for money with
delightful new product concepts, sensorials and product efficacy.

4. Expenditure on R & D:

Rs. Crore Rs. Crore
2008-09 2007-08

a) Capital 0.3 1.6

b) Recurring 5.7 5.2

Total 6.0 6.8

c) Total R&D expenditure as % to Sales & Services 0.3 0.3

d) Total R & D expenditure as % to PBT 3.4 3.0

II. Technology absorption, adaptation and innovation:

1. Efforts, in brief, made towards technology absorption, adoption and
innovation and benefits derived as a result of the same:

Various technologies were adopted in formulations, processes and packaging
towards providing better sensorials, performance, cost optimization, shelf
appeal and usage convenience, e.g.: Hair oils in spray format, Hot oil as a
new concept giving completely different sensorials, Revive with stiffing
and whitening benefit, Saffola rice for weight management, Saffola Zest
with High protein, high fiber and low fat.

2. Imported technology (imported during the last 5 years reckoned from the
beginning of this financial year): Not Applicable

C. Foreign Exchange Earnings and Outgo:

The details of total exchange used and earned are provided in Schedule Q of
Notes to the Accounts of Marico Limited.

On behalf of the Board of Directors
Place: Mumbai HARSH MARIWALA
Date : June 19, 2009 Chairman and Managing Director

Disclosure pursuant to the provisions of the Securities and Exchange Board
of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999.

Marico Employees Stock Option Scheme 2007.

a) Options granted (as at March 31, 2009):

10,044,200 options aggregating to about 1,65% of the paid-up equity capital
of the Company (options, net of lapsed/ forfeited as at March 31 2009:
8,339,600 options aggregating about 1.37% of the paid-up equity)

b) The pricing formula:

The Exercise Price of the options shall be lower of the following:

i) Average of the closing price for last 21 (twenty one) trading session(s)
on National Stock Exchange (NSE) prior to the date on which the Corporate
Governance Committee, grants the specific number of Options to the
employees.

Or

ii) The closing price for the last session on National Stock Exchange (NSE)
prior to the date on which the Corporate Governance Committee, grants the
specific number of options to the employees.

c) Options vested (as at March 31, 2009):

803,200

Options exercised (as at March 31, 2009) -N.A.-

e) The total number of shares arising as a result of exercising of option:

-N.A.-

f) Options lapsed/forfeited:

1,704,600

g) Variation of terms of options: -N.A.-

h) Money realised by exercise of options: -N.A.-

i) Total number of options in force:

8,339,600

j) Employee wise details of options granted to (as at March 31, 2009):

i) Senior Managerial Personnel;

A summary* of options granted to senior managerial personnel are as under:

No. of employees covered - 101 (One hundred and one)

No. of options granted to such personnel -10,044,200 (One Crore forty-four
thousand two hundred).

*Only summary given due to sensitive nature of information.

ii) any other employee who receives a grant in any one year of options
amounting to 5% or more of option granted during the year.

-N.A.-

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.

-N.A.-

k) Diluted Earnings per Share (EPS) pursuant to issue of shares on exercise
of Options calculated in accordance with the Accounting Standard 20 (AS 20)
'Earnings per Share':

Rs. 2.33

I) i) Method of calculating employee compensation cost.

ii) Difference between the employee compensation cost so 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 the profits and on EPS of the
Company;

The Company has calculated the employee compensation cost using the
intrinsic value method of accounting for the Options granted under the
Scheme.

Rs. 4.78 Crore

Had the Company considered 'fair value' method then the additional employee
compensation cost would be Rs. 47,798,486 the Profit Before Tax would be
lower by the same amount and Earning Per Share by Re.0.07

m) Weighted-average exercise price and weighted average fair values of
options (to be disclosed separately for options whose exercise price either
equals or exceeds or is less than the market price of the stock).

Weighted average Exercise Price : Rs. 56.01
Weighted average Fair Value of Option : Rs. 22.59

n) Description of method and significant assumptions used during the year
to estimate the fair values of options:

Intrinsic Value Method.

i) risk - free interest rate As per Annexure I

ii) expected life of options As per Annexure I

iii) expected volatility As per Annexure I

iv) expected dividends As per Annexure I

v) Closing Market price of share As per Annexure I
on date of option grant

Annexure I

23-Apr-08 30-Jun-08
Vesting Vesting Vesting Vesting
1 2 1 2

Risk free Interest Rate (%) 7.71 7.82 9.17 9.31

Expected life of Options (years) 3.52 4.69 3.50 4.50

Expected Volatility (%) 38.36 38.36 38.23 38.23

Expected Dividends (%) 1.39 1.39 1.39 1.39

Closing Price as on Date of 69.25 69.25 53.40 53.40
Grant (Rs.)

21-Oct-08 05-Jan-09
Vesting Vesting Vesting Vesting
1 2 1 2

Risk free Interest Rate (%) 7.58 7.69 4.99 5.04

Expected life of Options (years) 3.53 4.19 3.57 3.98

Expected Volatility (%) 38.28 38.28 38.49 38.49

Expected Dividends (%) 1.39 1.39 1.39 1.39

Closing Price as on Date of 55.00 55.00 60.15 60.15
Grant (Rs.)

ENCLOSURE 'A'

Power & Fuel Consumption

For the year ended
March 31

Note: The numbers given below relate to the own
manufacturing facilities of the Company. 2009 2008

1. Electricity:

a. Purchased units (Kwh) 8621052 10327751

Amount (Rs. Crore) 3.47 3.79

b. Own Generation:

i. Through Diesel Generator (Kwh) 2800841.60 1220521.10

Amount (Rs. Crore) 2.83 1.30

Average Rate (Rs. / Unit) 10.09 10.66

ii. Through Steam Generator (Kwh) - 21176.00

Amount (Rs. Crore) - -

Average Rate (Rs. / Unit) - -

2. Coal - -

3. Furnace oil:

Quantity (KL) 640.56 1137.40

Amount (Rs. Crore) 1.98 2.76

Average Rate (Rs./KL) 30975.27 24258.69

4. Other Internal Generation (excludes HSD
used for electricity generation):

L.D.O/H.S.D. - -

Quantity (KL) 241.64 139.70

Amount (Rs. Crore) 0.74 0.43

Average Rate (Rs./KL) 30463.34 30543.37

5. Baggase Consumption:

Quantity (MT) 12953.00 12495.54

Amount (Rs. Crore) 1.77 1.18

Average Rate (Rs./MT) 1366.48 946.89

Consumption per unit of production of
edible oils:

Unit

Electricity Kwh 119.09 122.17

Coal MT - -

Furnace oil KL 0.01 0.01

L.D.O./H.S.D. KL - -

Baggase KG 0.36 0.39

Consumption per unit of production of
processed foods

Unit

Electricity Kwh - 102.45

Coal MT - -

Furnace oil KL - -

LD.O./H.S.D. KL - 0.11

Consumption per unit of production
of Hair Oils and other formulations:

Unit

Electricity Kwh 49.56 46.49

Coal MT - -

Furnace oil KL - -

L.D.O./H.S.D. KL - -

Consumption per unit of production
of Formulations:

Unit

Electricity Kwh - -

Coal MT - -

Furnace oil KL - -

L.D.O./H.S.D. KL - -

MANAGEMENT DISCUSSION AND ANALYSIS

In line with the requirements of the Listing Agreement with the Bombay
Stock Exchange and National Stock Exchange, your Company has been reporting
consolidated results - taking into account the results of its subsidiaries.
This discussion therefore covers the financial results and other
developments during April '08 - March '09 in respect of Marico Consolidated
comprising Domestic Consumer Products Business under Marico Limited
(Marico) in India, International Consumer Products Business comprising
exports from Marico and the operations of its overseas subsidiaries and
Solutions Business of Kaya in India and Overseas. The Consolidated entity
has been referred to as 'Marico' or 'Group' or 'Your Group' in this
discussion.

Some statements in this discussion describing projections, estimates,
expectations or outlook may be forward looking. Actual results may however
differ materially from those stated on account of various factors such as
changes in government regulations, tax regimes, economic developments
within India and the countries within which the Group conducts its
business, exchange rate and interest rate movements, impact of competing
products and their pricing, product demand and supply constraints.

INDUSTRY STRUCTURE AND DEVELOPMENT:

The Fast Moving Consumer Goods (FMCG) sector, comprising goods of daily use
like soaps and detergents, oral and skin care products, food & beverages,
oils and dairy products is the fourth largest sector in the Indian economy
and is projected to cross USD30 billion in turnover in the next five years.

The FMCG market can be divided into two segments - the urban and rural. The
urban segment is characterized by high penetration levels and high spending
propensity of the urban resident. The rural economy is largely agrarian
directly or indirectly dependent on agriculture as a means of livelihood -
with relatively lower levels of penetration and a large unorganised sector.

On the back of four consecutive years of bountiful harvest, rUral India,
home to about two-thirds of the country's one billion plus population is
witnessing an increase in its income and also in its consumption.

The FMCG Industry caters to the needs of the consumers located across the
country and deep in its heartland through a well-developed and efficient
supply chain model comprising C&F Agents, distributors, wholesalers and
retailers. A significant share of business is still generated through the
'mom and pop' store (kirana) format. With access to the rural economy
gradually improving with investments in physical infrastructure, it is
likely that it shall continue to be the chief point of interface of the
FMCG companies with the retail consumer. Though organized retail comprises
only about 6% of the FMCG business, it is expected to expand its share over
the next few years.

The Indian consumer aspires to reach a level of consumption commensurate
with the consumption pattern of those in more developed economies even as
he is cautious about extravagance and over indulgence. This provides the
FMCG companies with opportunities for growing the market.

Low capital requirements, simple manufacturing processes and sub-
contracting of manufacturing activities are characteristic of the industry.
As a result, several small local and regional brands tend to compete with
well-established ones. FMCG companies have to continuously innovate and
also advertise in order to build the equity of their brands and create
mass pull. Brand building, product innovation and product differentiation
are critical to the survival of FMCG companies.

OPPORTUNITIES AND THREATS:

Demographic profile:

The Indian sub-continent has a population in excess of one billion. This
provides the FMCG companies with a large consumer base. The median age
continues to be in the mid twenties. The youth of today is conscious of the
need to be well groomed and to look good. With increasing focus on
education and empowerment of women, their lifestyle and propensity to
consume is undergoing a change; they are becoming more fashion conscious
and open to experimenting with new products.

Urban economy:

Rapid urbanisation has resulted in large markets getting concentrated in
urban centres. Increasing disposable incomes and exposure to media have
shaped aspirations of the urban consumer while consumerism has led to
satisfaction of wants. Availability of credit and changed mindset towards
consumption has further fuelled the demand for consumables.

The high growth trajectory in the urban economy of the past few years has
shown some slowdown on account of the global economic crisis, particularly
for discretionary spending. However, the impact has been muted for items of
daily consumption.

Rise of the rural economy:

The economic scenario in the country has undergone a change in the recent
past. Nearly two-thirds of the Indian population resides in rural towns and
villages and practices agriculture. Higher realizations for agricultural
output, without an accompanying increase in input costs, increased
employment and the recent waiver of farm loans by the government has led to
a spurt in demand. Rural India now forms a sizeable share of the demand for
FMCG products, consumer durables and consumer discretionary products.

Increased spending power of the rural Indian coupled with a relatively
lower degree of penetration of branded FMCG products in these markets has
provided the industry players with an opportunity to drive growth.
Established brands are tapping into the rural economy to encourage up-
trading by the consumer from unbranded products to branded ones with
assured quality.

RURAL INDIA NOW FORMS A SIZEABLE SHARE OF THE DEMAND FOR FMCG PRODUCTS AND
CONSUMER DURABLES.

Lifestyle and awareness:

The present day consumer is savvy, has higher aspirations and is brand &
lifestyle conscious. They do not mind spending on quality products and
seeks value for money spent. FMCG companies have recognised the opportunity
available by introducing 'value for money' as also 'premium' product
variants aimed at catering to the varying needs of different consumers.

Products aimed at delivering healthy lifestyle solutions have been
introduced to woo health-conscious consumers.

Branded solutions sector:

The increase in the propensity to consume and the increasing consciousness
for adopting healthy lifestyle offerings has led to the development of
branded solutions including leveraging existing brand identities and
creating extensions around them.

The quality-conscious consumer is willing to pay a premium for effective
solutions, improved services and a superior experience.

The focus is to provide consumers with a holistic solution for their needs
in the form of a consolidated offering of various products and services.

RISKS & CONCERNS:

Input costs:

Domestic commodity prices are often linked to international indices, and
volatility in these benchmarks causes fluctuations in the domestic product
prices.

The past 2 years have witnessed a wide fluctuation in the price of
commodities. Crude Oil touched a record high of USD140 per barrel before
crashing to below USD50 per barrel. Similar volatility was experienced in
other commodities. The overall level of uncertainty in the environment has
gone up.

Input costs comprise nearly 60% of the production costs in the FMCG sector.
Inflationary tendencies in the economy directly impact the input costs and
could create a strain on the operating margins of the FMCG companies.
Brands with greater equity may find it easier to adjust prices in line with
fluctuating commodity prices and input costs.

Competition:

The FMCG environment in India and overseas is competition intensive and
companies need to focus on branding, product development, distribution and
innovation to ensure their survival. Advertising and consumer offers are
some of the methods used to combat competition.

Product innovations help to gain market share while advertising creates
visibility for the product. Such expenditures carry the inherent risk of
failure. Counter campaigning by competitors would also reduce the efficacy
of promotions.

Currency risk:

The Marico Group has a significant presence in the Indian Sub Continent
including Bangladesh, MENA (Middle East & North Africa) and South Africa.
The Group is therefore exposed to a wide variety of currencies like the US
Dollar, South African Rand, Bangladesh Taka, UAE Dirham and Egyptian Pound.
Import payments are made in various currencies including but not limited to
the US Dollar, Australian Dollars and Malaysian Ringgit. As the Group eyes
expansion into other new geographical territories, the exposure to foreign
currency fluctuation risk increases. Significant fluctuation in these
currencies will impact our financial performance. The company is however
conservative in its approach and is likely to use simple hedging mechanisms
than resort to exotic derivative products.

Product innovations and new product launches:

Success rate for new product launches in the FMCG sector is low. New
products may not be accepted by the consumer or may fail to achieve the
targeted sales volume or value. Cost overruns and cannibalisation of sales
in existing products cannot be ruled out. Marico has adopted the
prototyping approach to new product introductions that helps maintain a
healthy pipeline and at the same time, limits the downside risks.

Funding costs:

Though the sector is not capital intensive, fund requirements arise on
account of inventory position building or capital expenditure undertaken.
In addition, growth through acquisitions may also contribute towards
leveraging the company's balance sheet. Changes in interest regime and in
terms of borrowing will impact the financial performance of the Group.

Discretionary spending / Down trading:

In situations of economic duress, items which are in the nature of
discretionary spending are the first to be curtailed. This is relevant for
the lifestyle solutions offered by the companies.

In an extended recession, down trading from branded products to non-branded
ones could also occur and affect the financial performance of the company.

Acquisitions:

This may take the form of purchasing the brands or purchase of stake in
another company and is used as a means for getting access to new markets or
categories, of increasing market share or eliminating competition.
Acquisitions may divert management attention or result in increased debt
burden on the parent entity. Integration of operations and cultural
harmonization may also take time, thereby deferring benefits of synergies
of unification. Marico is keen on exploring acquisitions in its core
segments of beauty and wellness where it believes it can add value.

FMCG market in Bangladesh:

Bangladesh has a demographic profile identical to that of India. Population
in excess of 150 million and a developing economy provide the perfect
consumer base for the FMCG sector to flourish. Political instability
witnessed earlier has reduced post elections.

FMCG markets in the Middle East:

The market offers a curious mix of local and expatriate populations who are
not averse to the idea of indulgence / extravagance. This provides FMCG
companies opportunities to offer branded solutions tailored to the needs of
the consumer in the region. After a period characterized by high crude oil
prices and a construction boom, there has been an adjustment in the overall

economic growth following the steep decline in crude oil prices. The impact
on the FMCG companies is however likely to be less severe.

FMCG markets in Egypt:

The Egyptian economy has embraced liberalization in the recent past,
thereby opening the doors for foreign direct investment and paving the path
to economic growth. A steadily growing population, concentrated on the
banks of the river Nile, and a developing economy provide a good base for
FMCG companies. The recent global economic turmoil however, has impacted
the near-term growth prospects. The rate of GDP growth may decline to
between 4% and 5%. In the medium term however, this could revert to a
healthier 6% to 7% with its consequent beneficial impact on FMCG
consumption.

FMCG markets in South Africa:

The South African economy is a productive and industrialized economy that
exhibits many characteristics associated with developing countries,
including a division of labour between formal and informal sectors and an
uneven distribution of wealth and income. The economic measures adopted by
the Government to ensure growth and equitable distribution of wealth have
been effective with the GDP showing a steady growth in excess of 4%. Rising
income levels, especially amongst the middle socio-economic segments, are
likely to result in increased growth opportunities for FMCG marketers.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Marico has a well-established and comprehensive internal control structure
across the value chain to ensure that all assets are safeguarded and
protected against loss from unauthorised use or disposition, that
transactions are authorised, recorded and reported correctly and that
operations are conducted in an efficient and cost effective manner. The key
constituents of the internal control system are:

* Establishment and review of business plans.

* Identification of key risks and opportunities.

* Policies on operational and strategic risk management.

* Clear and well defined organisation structure and limits of financial
authority.

* Continuous identification of areas requiring strengthening of internal
controls.

* Operating procedures to ensure effectiveness of business processes.

* Systems of monitoring compliance with statutory regulations.

* Well-defined principles and procedures for evaluation of new business
proposals/capital expenditure.

* A robust management information system.

* A robust internal audit and review system.

M/s Aneja Associates, Chartered Accountants have been appointed to carry
out the Internal Audit for Marico. The work of internal auditors is
coordinated by an internal team at Marico. This combination of Marico's
internal team and expertise of Aneja Associates ensures independence as
well as effective value addition.

Internal Audits are undertaken on a continuous basis covering various areas
across the value chain like manufacturing, operations, sales and
distribution, marketing, finance etc. Reports of the internal auditors are
regularly reviewed by the management and corrective action initiated to
strengthen the controls and enhance the effectiveness of the existing
systems. Summaries of the reports are presented to the Audit Committee of
the Board.

During the year, the Company continued to track the effectiveness of
controls across all operating centres, using a measure called Control
Effectiveness Index (CEI). CEI is a proprietary methodology developed and
deployed by the Internal Auditors in Marico. Under this system, a score on
CEI is calculated based on status of control in each functional area. This
system has helped strengthen controls in the Company through improved
awareness among the role holders.

The SAP suite of ERP (SAP R/3, SCM, APO) provides a real time check on
various transactions emanating from various business processes of the
Company. Mi-Net, the web-enabled architecture that links Marico to its
biggest business associates, namely its distributors, also helps the
Company exercise similar controls over its sales system.

HUMAN RESOURCE/INDUSTRIAL RELATIONS:

Marico is a professionally managed organization that has built for itself a
stimulating work culture that empowers people, promotes team building and
encourages new ideas.

The organisation believes that great people deliver great results, and lays
emphasis on hiring right and retaining key talent.

Its managerial talent is sourced from the country's premier technical and
business schools, and from amongst those with the country's premier
professional qualifications. The organisation believes in providing
challenge and early responsibility at work which serves to keep team
members enthused and motivated.

A strong business linkage of all Human Resource processes and initiatives
is maintained at Marico. The organisation has created a favourable work
environment that motivates performance. Marico has a process of performance
enhancement through deployment of MBR (Management By Results) to create an
environment of challenge and stretch. It is also linked to a variable
element of performance-based compensation.

Automation of key HR processes this year has helped in streamlining the
back-end processes and increased efficiency immensely. The company's user
friendly intra-net vests power in the individual to track one's own HR
processes such as joining, development planning, transfer movements, loans
and leave. The intranet also provides an ideal medium for internal
communication and brings together members from the different geographies
the organization now has a presence in.

Member's networks are also tapped into for 'hiring right'. A strong
referral mechanism operates under the brand name of 'TAREEF' (Talent
Referred by Mariconians). This benefits the organisation in two ways,
namely, the talent referred is usually of a superior quality to that
sourced independently in the market, and it also translates into
substantial cost savings for the recruitment process.

The organization believes in investing in people to develop and expand
their capability. Marico's strategies are based, inter alia, on processes
of continuous learning and improvement. Personal development plans focus
upon how each individual's strengths can be best leveraged so as to help
each one to deliver to his/her full potential. External training programmes
and cross-functional exposure often provide the extra edge.

In line with our philosophy of valuing internal talent first, a structured
internal job posting mechanism - MINTOS (Marico Internal Talent Opportunity
Scheme) - was launched. This is an internal forum for members to benefit
from opportunities within the organization.

Marico continues to measure and act upon improving the 'engagement levels'
of its teams. The Gallup Survey provides the organization with a measure of
how it is faring at building engagement across the organization as well as
in each of its teams.

MARICO IS A PROFESSIONALLY MANAGED COMPANY THAT HAS BUILT FOR ITSELF A
STIMULATING WORK CULTURE THAT EMPOWERS PEOPLE, PROMOTES TEAM BUILDING AND
ENCOURAGES NEW IDEAS.

Marico had formulated a contemporary set of values three years ago and it
is important that all members in the organization are not only aware but
also consciously practice and 'walk the talk' on all its values. To build
this consciousness and commitment, 'Values Workshops' are held for teams to
identify their focus areas and plan actions accordingly.

An exciting initiative we launched during the year was the 'Popcorn Session
with Harsh'. It is based on the concept of 'Learning through Sharing',
where the members have an opportunity to directly interact with the
Chairman and Managing Director, Harsh Mariwala. The sessions seek to
leverage Marico leaders as mentors and coaches to Mariconians at large. The
format of the Popcorn Session is unique: 8-10 members, including Harsh
engage in conversation on a pre-selected topic. It provides a mutual
learning opportunity for both the leader and the members attending the
session, to gain insights from each other's personal and professional
experiences. So far, 135 members have participated in these sessions.

Member Assistance Program was launched in April 2007 in association with
1 to 1 help.net, a counselling service run by a team of qualified and
experienced counsellors. Member Assistance Program is a service wherein
Mariconians and their immediate family members can avail themselves of
various services like counselling-face to face, telephone and online;
Website Articles and Self Assessment Tests free of cost and in complete
anonymity. This has been institutionalized this year.

Employee relations throughout the year were supportive of business
performance.

As on March 31, 2009, the employee strength of Marico Limited was 934 and
that of the entire Group was 2585.

CORPORATE SOCIAL RESPONSIBILITY:

Every organisation owes its existence and sustained growth to its various
stakeholders: Investors, Customers, Employees and Society at large. An
organisation fulfils its responsibility to the society through various
actions and initiatives which realise returns for it and also result in the
betterment of society.

Corporate Social Responsibility to Marico is an expression of being a
responsible citizen and is defined to include all roles played by it in
the course of discharging its responsibility to all the constituencies from
which the organisation draws strength for conducting its business. Marico's
CSR is based on inter-dependence and it believes in the need for an
efficient business eco-system, where business and the rest of the society
co-exist with respectful inter-dependence.

Marico is a significant buyer of the marketable surplus of safflower
(kardi) crop in India. Over the years, the company has worked on merging
its needs of sourcing safflower seeds with those of the farming community
for crop sustainability. As part of its agri-extension efforts, Marico
actively educates the farmers in improved techniques of farming including
best sowing practices, crop damage control measures and the use of hybrid
seeds. A helpline to facilitate query resolution has been put in place.
These have led to significant improvement in yields and have positively
impacted the livelihood of thousands of farmers in the country. Marico has
also commenced contract farming in kardi. Apart from a price guarantee, the
initiative also envisages providing credit for seeds for sowing and
technical guidance throughout the crop cycle. This initiative has a wide
reach touching the lives of around 20,000 farmers. It has resulted in
productive usage of otherwise fallow land and thus acted as an income
generator.

'Marico's Contract Farming was a boon to us! We got rate guarantee &
technical guidance throughout the crop cycle.'

Chudaman Patil (Maharashtra), Safflower farmer:

'The farmers who have seen the crop here are very enthusiastic about the
crop, and next year, acreage will increase.'

Hanumant Rathod (Rajasthan), Safflower farmer:

Marico is the largest buyer of copra in the country. In order to assist
farmers and convertors from whom it procures copra, the company has set
up farm care centres that disseminate information on best
farming practices. Farmers are given the opportunity to have queries
addressed by experts. In order to improve productivity, training on the
use of coconut tree climbing machines is provided.

The company has also collaborated with the Coconut Development Board (CDB)
which provides free agricultural inputs and advice on farming practices to
improve yield.

'I am very happy to be part of this cluster programme. I extend my deepest
gratitude to CDB and Marico Limited for their efforts'.

'Wherever you go they say no labour is available. They gave us a climbing
machine and trained us to use it, now we are giving training to others in
order to over come the labour crisis.'

Copra farmer in Kerala:

The offices of Marico at various locations, both within India and overseas,
actively participate in various community service activities for promoting
education, art, culture and health, and also provide support for welfare
and relief operations. These include blood donation and free health check
up camps, HIV / AIDS awareness, flood relief.

Sustainability Programme at Marico:

Being green has been an integral part of Marico's culture. Bottles of
Parachute coconut oil, the company's flagship brand, consumes the least
amount of plastic when compared to our competitors in coconut oil. The
company's coconut oil yield from copra crushed is amongst the highest in
the industry. This implies a lower quantity of copra to be transported for
every tonne of coconut oil produced, thus reducing the quantum of fuel
consumed in transporting copra to our factories.

However, to sustain this, one needs continuous fresh thinking and thus the
sustainability programme at Marico is appropriately branded 'Think Fresh
and Be Green'. This initiative is led by a core team consisting of members
drawn from Marico's three businesses and various functions. During FY09, an
energy modelling recommendation has been implemented at all office
locations leading to a 5% to 20% reduction in electricity consumption at
these locations. Such reductions have been sustained. All manufacturing
locations have taken up site specific energy reduction and water
conservation programmes. Many of the identified programmes have been
implemented and regular brainstorming sessions are leading to identifying
more such programmes. Our Jalgaon manufacturing unit has received the Cll
water conservation award and the GOI award for energy conservation. Rain
water harvesting is being piloted at one manufacturing location and will be
rolled out at others.

MARICO AT VARIOUS LOCATIONS, ACTIVELY PARTICIPATES IN VARIOUS COMMUNITY
SERVICE ACTIVITIES FOR PROMOTING EDUCATION, ART, CULTURE AND HEALTH, AND
ALSO PROVIDES SUPPORT FOR WELFARE AND RELIEF OPERATIONS.

In order to make it an initiative that touches a wide section of members in
Marico, the focus for the year included saving on paper. The seasons
greeting cards sent to business associates have been replaced by e-greeting
cards and the hard copies of diaries have been replaced by e-planners. At
the factory locations, tree planting within the premises and outside has
been undertaken. To bring about awareness, sign boards are displayed at all
manufacturing locations as a constant reminder of our responsibilities in
saving energy and conserving water. An intranet website provides
information and features articles on sustainability.

The core group regularly studies the best practices of other industries to
evaluate their applicability to Marico. This year's initiatives have led to
a reduction of CO2 emission by 1300 tons. The company has also initiated
the process of completing the carbon foot print for Marico's consumer
products business and identifying potential projects for reducing the
carbon foot print.

The year 2009 marks a beginning. In the coming years, the company plans to
study and implement options for green formulations and more sustainable
packaging. It hopes to achieve wider participation amongst organization
members as well as its business associates.

Marico Innovation Foundation:

The Marico Innovation Foundation (www.maricoinnovationfoundation.org) is
guided by an eminent board of trustees. The Marico Innovation Foundation
was created in March 2003 with a single mission - to fuel innovation in
India. The aim is to put India on the global map by leveraging Indian
knowledge and know-how. The foundation has armed itself with the belief
that innovation is possible and that it is the only way to leapfrog India
into global business leadership.

The Innovation for India - Marico Foundation has sponsored studies for
Challenger Innovation cases in the spaces of Business and Social Life. It
made a first-hand study of diverse Indian organisations that achieved
quantum growth in the face of heavy odds. Organisations that dared to
question well entrenched paradigms, and created uniqueness for themselves.
Their innovation journeys were traced through painstaking insight
dialogues, not by gleaning from published literature. These studies bring
out live examples of how Challenger Leadership can bring about a
transformation and lead to quantum shifts in results. A unique feature of
these transformational cases is the durability of the transformation: even
after the challenger leader moves away from the scene, the transformation
is sustained. The Innovation Foundation has converted these successful
missions into lighthouses that show how it is possible to make a quantum
impact in a short time span, and to inspire many others to lead and support
such innovative initiatives. In addition, the studies generate insight into
'what differentiates challenger leaders' and proposes a process to inspire
and cultivate challenger leaders in all sectors and thereby make a quantum
jump in our capacity as a nation.

One of the Foundation's objectives is to be a catalyst and initiate
creation of content and multiplication of knowledge through learning
platforms. One such initiative involving years of effort in identifying
genuine breakthrough innovations from within India and then uncovering
insights into what these innovators did differently to make the impossible
happen, culminated in the publication of a book 'Making Breakthrough
Innovation Happen: How 11 Indians Pulled Off The Impossible', by Porus
Munshi. It shows how world-class innovation is now happening in India and
how we can all do in our own fields what the 11 Indian people and
organisations featured in the book did. It is hoped that this will give a
big boost to the concept and practice of innovation in India.

In an effort to equip the leaders of tomorrow, the Foundation has commenced
promoting education of innovation by collaborating with leading educational
institutions in the country. This envisages creating of course content on
innovation as well as training of faculty.

In order to showcase successful innovations and thus propagate and
encourage a culture of innovation, the Foundation has institutionalised
'Innovation for India Awards' for Business and Social Innovation. Based on
the criteria of uniqueness, impact and scalability, 'India's Best
Innovations' are declared at these Awards. These include projects and
businesses that make a real difference to the country and community at
large. Over the last 3 years, 23 such innovators have been recognized at
the Innovation for India Awards.

MARICO GROWTH STORY:

Marico posted a topline growth of 25% and recorded a turnover of Rs.2388
crore. Almost the entire growth during the year was attributable to organic
growth of which volume growth comprised 12%.

Profit before tax (PBT) for the year was Rs.229 crore a growth of 12% over
FY08. However during FY08, the company made a one time profit of Rs.10.6
crore on the sale of its Sil business. Moreover in FY09, the company has
booked a one-time extraordinary loss of Rs.15.03 crore on the sale of its
Sundari business (more details are included in the latter part of this
note). If we ignore these one-time items, the PBT for the year would be
Rs.245 crore, a growth of 30% over that in the previous year. Profit After
Tax (PAT) during the year was Rs.188.7 crore, a growth of 11.6% over FY08.
However, the growth net of extraordinary items was 21%.

Q4 FY 09, in Y-o-Y growth terms, was the:

* 34th consecutive quarter of growth in turnover, and

* 38th consecutive quarter of growth in profits.

Over the past 5 years, the top line and bottom line have grown at 24% and
28% respectively.

A FEW BRAND STORIES Parachute & Nihar:

Marico's flagship brand, Parachute maintained its momentum of growth in
line with expectations. Parachute coconut oil in rigid packs, the focus
part of the portfolio, grew by 9% in volume over FY08. During the 12 months
to February '09, it maintained its volume market share of 48% in the
Rs.1500 crore branded coconut oils category, indicating resilience against
potential down trading in the current economic downturn. Meanwhile, Nihar's
share in the category stood at 6% during the 12 months to February '09 with
the brand registering 11 % growth in volume during the year backed by
infrastructure augmentation in Bihar. Marico's coconut oil franchise
comprising Parachute, Nihar and Oil of Malabar had a market share of 55%
during the 12 months to February '09.

During the year, the prices of copra (dried coconut kernel) the raw
material input for Parachute coconut oil were about 25% higher than in
FY08. The company took price increases to pass on most of this increase to
consumers. The input prices have declined from their peak levels in Q2 & Q3
of FY09 towards the end of the year.

Parachute is likely to maintain its margins per unit volume in a tight
band. The company expects to be able to continue to grow volumes at 6% to
8% by focussing on conversions to branded usage from the approximately
Rs.1000 crore loose coconut oil market.

Saffola:

Saffola, Marico's second flagship brand, is positioned strongly on 'good
for the heart' equity The incidence of heart-related ailments in India is
high and a cause for concern. The cases of diabetes, high cholesterol,
blood pressure, obesity etc, are disproportionately high. Saffola supports
the efforts of consumers to adopt and sustain a healthy lifestyle. Over the
years, Saffola Healthy Heart Foundation has worked towards raising
awareness levels through its advertising campaigns and programmes such as
blood check-up camps. Saffola constantly urges consumers to adopt a healthy
lifestyle (its 'Walk' campaign) and building it into a movement. It
supports their efforts through unique services like 'Dial a Dietician'.

Saffola has been innovating to come'up with products to support the trend
of an improved lifestyle that consumers want to adopt. In the past, it was
the first refined oils brand to introduce blends in the country to offer a
balance of PUFA and MUFA (poly-unsaturated fatty acids and mono-unsaturated
fatty acids). The ingredients of its most recent refined oil blend
introduction, Saffola Active provide Omega-3 and oryzanol. The blends also
enable the company to price Saffola more attractively for consumers, so
that a much wider franchise of consumers can access the brand.

Saffola is expected to ride the trend in health consciousness and the
increasing awareness levels with respect to heart-related ailments in
India. In the medium term, the company hopes to transition the brand from a
healthy refined edible oils product to a lifestyle brand offering a range
of functional foods.

During FY09, Saffola's turnover still comprised primarily of refined edible
oils. The oils franchise of Saffola grew by 11% over FY08. The growth
during the second half of the year was rauch slower, even though the growth
rate picked up to 5% during Q4FY09. Saffola retails at a significant
premium to other refined edible oils in the market However, during H2FY09,
this premium shot up to unsustainable levels owing to relatively higher
levels ot prices of safflower oil, one of the Saffola oils range's key
ingredients. The brands growth was also partly impacted by some down-
stocking of all inventory levels implemented by organised retailers (Modern
Trade).

With the arrival of the new safflower crop in April 2009, it is expected
that the safflower oil prices will see a signiffcant, decline as compared
to FY 09. In anticipation of lower average prices of safflower and other
oils during FY10, the company has taken some price reductions in Saffola
(Saffola Gold from Rs.120 to Rs.110, Saffola Tasty from Rs.99 to Rs.94 and
Saffola Active from Rs.99 to Rs.89 (all prices per litre)). This will lower
the premium of Saffola over other branded oils and the range pricing
starting with Saffola Active is expected to encourage consumers to come
into the Saffola fold at a faster pace. The company expects that it can
achieve a volume growth of over 10% during the year.

India is the largest producer of safflower. It is a hardy crop that grows
in arid / poorly irrigated areas. Marico's agri-extension team has been
working over the years to increase the acreage under safflower (kardi), on
land that may otherwise lie fallow, thus improving the farmers' return from
the land. Marico educates farmers on best sowing practices, crop damage
control measures, and has a helpline for query resolution. More recently,
the company has commenced a contract farming programme under which it
provides credit for seeds, technical guidance through the crop cycle and
guarantees a price for buyback.

Saffola ad campaigns have been recognized at various forums for their
creativity and impact.

Hair Oils:

The Rs.2200 crore Hair Oils category has been experiencing healthy growth.
During FY09, Marico's hair oils in rigid packs grew 17% in volume over the
previous year.

During the 12 months ended February '09, Marico's basket of hair oils
including Parachute Jasmine, Nihar perfumed hair oils, Hair & Care and
Shanti Badam Amla increased its market share to about 22%. This has been
achieved by increased micro marketing efforts in select markets. Moreover,
the launch of a new variant Hair & Care Almond Gold in Q2FY09 also
bolstered the volume growth.

During the year, Parachute Advansed introduced a revitalising Hot Oil with
the goodness of coconut oil and other herbs.

The cooling oils segment of the hair oils category is amongst its faster
growing segments. Marico has begun prototyping a cooling oil brand, Nihar
Naturals Coconut Cooling Oil - cooling oil with the added benefit of
coconut nourishment.

Male Hair Grooming:

Marico is present in the Rs.100 crore hair cream and hair gels market
through Parachute Advansed hair creams and hair gels. Though small, the
hair cream and gel category is growing at a modest pace in India. During
the year, Marico's Parachute After Shower creams and gels have grown by 6%
in volume over the previous year. Its share in the category during the 12
months ended February '09 was about 19%.

Other Prototypes and New Launches:

In order to generate additional sources of growth in the coming years,
Marico as an FMCG company must create a healthy pipeline of new products.
To identify scalable marketing and product propositions, Marico has been
following a prototyping approach to test a few hypotheses in a low-cost
fail-fast model before any decision to scale up is taken.

To support its new product initiatives, Marico follows a Strategic Funding
(SF) approach. Marico defines SF as the negative contribution a product
makes after providing for material costs, variable manufacturing and
distribution costs and advertising & sales promotion expenditure for the
product. Each year the company budgets for a certain percentage of its PBT
to be available towards strategic funding for new products and businesses.
All new products would have to fight for these resources. As the company's
bottom line grows, the SF pie grows larger. This provides sufficient
investments towards creating future growth engines and at the same time
puts an overall ceiling to the SF at the group level.

During Q3 FY 09, Marico launched Parachute Advansed Revitalising Hot Oil, a
coconut oil enriched with warming oil, rosemary, thyme and patchouli.
Parachute Advansed Hot Oil is positioned as a pre-wash product for winter
and is priced at Rs.65 for 170 ml. The initial response to the product has
been positive.

During January 2009, Saffola extended its journey in the health foods
space. Saffola Zest, a salty baked snack, combines strong health benefits
with great taste to give consumers a novel healthful snacking experience.
Being baked, it contains half as much fat as other namkeen, and its
ingredients are heart friendly. It also contains a high proportion of
protein and fibre, making it an ideal snack for the entire family.

Saffola Zest comes in three tasty flavours - tangy tomato, chatpata masala
and mast masala. Each is available in three SKUs (stock keeping units)
priced at Rs 10, 25 and 45. The initial response, though still very early,
has been positive.

As in any food snack product, the feedback on taste has been immediate.
While individual tastes can vary significantly, the company has taken
action on some of the early feedback.

In Q4 FY 09, the company commenced the prototype of Saffola Rice - low Gl
rice that helps in weight management.

Marico has commenced a prototype in the state of Andhra Pradesh and in
Mumbai. The brand is available in 1 kg and 2.5 kg packs priced at Rs.59
and Rs.140 respectively. The product has generated interest, though a
better sense of the response will take some more time.

Revive Strong & White is a liquid fabric whitener that offers a unique
double action of making clothes white together with making them strong to
last longer. The product is currently being prototyped in West Bengal.

Modern Trade:

Modern Trade comprises about 6.5% of domestic sales, up from about 5% a
year ago (with the share of Saffola and some of the company's newer
products being higher). In recent months however, the pace of new store
openings has come down. Organised retailers are consolidating and closing
some unprofitable store locations. In addition, they are attempting to
improve cost structures through rationalizing manpower and inventory
levels. The company will provide a thrust towards servicing the top end of
general trade so as not to lose out by way of any potential slow down in
growth in modern trade (organised retail).

IT Initiative in Sales:

In the past, Marico has focussed on building a strong distribution network
which would be a source of competitive advantage not only in terms of
retail reach but also in the quality of its sales network. The company had
already established IT connectivity with distributors through whom a
majority of its sales are done. This has enabled a vendor-managed inventory
system whereby sales are effected based on stock levels at the distributor
- a pull rather than a push system. Sales targets within the organisation
are also tracked on secondary sales and not on primary sales to the
distributor.

In order to enhance the productivity of the distributor sales
representatives (DSR), Marico has now rolled out the use of Personal
Digital Assistants (PDA) in large cities. This provides the DSR with
focussed information on each outlet, thus improving the quality of his
interaction with the retailer. Outlet-wise history and ordering patterns
are used to prompt the DSR to focus on specific SKUs and the quantities of
each during a sales. call. Through the PDA, Marico's sales managers can now
drive channel-specific plans. The use of information technology has
obviated the need for time-consuming manual work. The data readily
available has also enabled the system to be less person dependent and a new
DSR can be brought up to speed in a much shorter time. As the company's
brands and SKUs continue to grow in numbers, the PDA is expected to expand
the DSRs capacity to handle them and at the same time improve productivity.

International FMCG Business:

Marico's international business, its key geographies being Bangladesh, MENA
(Middle East and North Africa) and South Africa, comprised about 19% of the
group's turnover during FY09. As a whole, the international business
turnover grew by 43% over FY08.

In Bangladesh, Parachute coconut oil has focussed on growing the branded
market by encouraging conversions from loose oil. Advertising campaigns
highlighted the superior quality of branded coconut oil over that of loose
oil. Affordable price points were used to drive conversions. These
initiatives together with a drive to expand distribution and leveraging
other on-ground opportunities such as 'haats' (weekly markets) have helped
to firmly establish the brand as a leader in the coconut oil market in
Bangladesh. Its market share during the 12 months ended February '09 was
72.7%. Parachute was recognised as the 6th Most Trusted Brand in Bangladesh
by The Global Brand Forum and AC Nielsen (2008).

During FY09, Bangladesh witnessed high inflation during the first half 'of
the year, necessitating price increases. Some of the cost push pressures
have eased towards the end of the year. The company would try and retain
some of this benefit in order to improve its margin structure. Given the
higher base, therefore, the volume growth of Parachute in Bangladesh during
FY10 is likely to be modest.

The company will focus on using its market leadership stature to enhance
the brands imagery across consumer segments through thematic campaigns.
Meanwhile Hair Code hair dye, the company's new product launched during
FY09, has been responding well in the market.

In the Middle East, Parachute cream has been making steady progress on the
strength of its 'nourishment plus protection from harsh water' positioning.
Its market share in the GCC (Gulf Cooperation Council) countries has
increased to 23% during the 12 months ended February '09. During the Year,
Marico also increased its share in the hair oils market to 22.5%.

The company has commenced the process of extending its footprint in the
Middle East region by entering new countries.

The performance in Egypt during FY09 was negatively impacted by the
company's decision to modify the distribution structure whereby it made a
shift from directly servicing several wholesalers to dealing with them
through a distributor. This distribution transition is expected to bring
more efficiency to the supply chain in Egypt. While this has now been
completed, the resolution of issues during execution took longer than
initially anticipated. Besides, the economic environment in Egypt also
witnessed high levels of inflation which exceeded 20%, putting pressure on
business growth. Both these resulted, in a contraction of sales in Egypt
during the year FY09. With the transition completed and inflationary
pressure having eased towards the end of the financial year, the Egyptian
business is now poised to show an improving trend in the coming quarters.

Apart from a recovery following the settling down of the new supply chain,
the Egyptian business is expected to get a boost with the restage of Hair
Code in new packaging. The company has also begun seeding new markets such
as Libya.

The performance in South Africa has been in line with expectations. In the
initial period, the company has focussed on a smooth integration of the
acquisition. The response to the launch of new flavours in Hercules
castor oil and the restaging of the brand Caivil is
positive. The market shares in the company's hair care portfolio are
showing an upward trend. During FY10, Marico South Africa will
continue to build upon this. The company has also, commenced
work on developing differentiated products to add to its basket of
offerings. In addition, the company would also make a beginning
towards taking the South African brands into neighbouring countries
during FY10.

While growing its international business operations, the company has
commenced taking supply chain initiatives to improve margins in the
business. In Bangladesh, the company has done backward integration by
crushing copra locally. Marico has commissioned a new factory in Egypt for
hair creams through which it intends servicing the MENA region, and this is
expected to result in supply chain efficiencies.

Kaya:

Kaya Skin Clinic entered the business of offering dermatology led cosmetic
skin care solutions in India in 2003. As an organized player, Kaya has a
large first mover advantage in introducing cosmetic dermatology in the
country. Through specialized skin services (beauty enhancement, problem-
solution and anti ageing) using world-class FDA approved technology adapted
for relevant skin types, Kaya has been able to offer its consumers highly
efficacious solutions and a refreshing experience. Kaya has become the
leading skin care services brand with 74 clinics in India across 21 cities
and 11 clinics in the Middle East. During FY09, Kaya added 20 new skin
clinics. Over 500,000 customers have availed of services at Kaya Skin
Clinic. Kaya now has over 250 dermatologists associated with it.

During FY09, Kaya's skin care business achieved a turnover of Rs.157 crore,
a growth of 57% over the previous year.. Apart from revenue contributed by
new clinics, the existing clinics also recorded a growth of 18%. With the
overall slow down in the economy and Kaya's offering being largely in the
nature of discretionary spends, this rate of growth was lower in the second
half of the year at about 10%.

The company plans to continue to open 12-15 new clinics each year. In the
existing cities, the company still sees potential to add clinics in new
catchment areas. As customers usually avail of a package of services that
requires them to come to a clinic 3 to 4 times, a short driving distance is
important. Simultaneously, the company is also working on increasing the
revenues from existing clinics. This is being planned through advertising
campaigns to increase footfall, cross selling services to existing clients,
launching maintenance packages and the introduction of new products, Kaya
Care is an Annual Membership Program designed to inculcate a habit of
regular skin care amongst clients through a personalized skin care
calendar.

The company has recently introduced three new products for its male
customers - Kaya Skin Relief After Shave Gel, Kaya Revitalizing Face Wash
and Kaya Whitening Moisturizer. Products currently comprise about 13% of
Kaya's turnover.

The Kaya skin business made a loss of Rs.1.6 crore during the year. This is
primarily on account of the new clinics opened during the year, which is
yet to achieve break-even. During FY10, the company expects Kaya's skin
care solutions business to contribute positively to the bottom line as it
now has a sufficient base of existing clinics to absorb the losses that the
new ones will incur in the initial phase. On reaching critical mass in the
medium term, the company expects Kaya to achieve operating margins of over
20%,

No Kaya Skin Clinic has been closed since Kaya's inception.

Kaya Life:

Kaya Life offers customized holistic weight management solutions. Customers
are experiencing effective results on both weight loss and inch loss.
However, action standard in terms of number of customers, is yet to be
achieved.

The team is working on the model to increase the pace of customer
acquisition. A fourth centre has been opened (located at Vashi, near
Mumbai) to try a model without therapy machines which makes it possible to
have a more compact clinic layout. These modifications to the model will be
tested before a full-fledged roll out of Kaya Life is undertaken.

COST STRUCTURE FOR MARICO GROUP:

% to Sales & Services (net of excise) FY09 FY08

Material Cost (Raw + Packaging) 53.5 51.5
Advertising & Sales Promotion (ASP) 10.5 12.9
Personnel Costs 6.9 6.7
Other Expenses 16.5 16.1
PBDIT Margins 12.6 12.9
Gross Margins (PBDIT before ASP) 23.1 25.8

The year saw a significant increase in two of the company's key raw
material prices. Copra, the input for coconut oil, which accounts for about
40% of the company's raw material cost, ruled at about 25% higher than in
FY08. Similarly, market prices of safflower oil, comprising about 13% of
the company's raw material cost, were about 35% higher than in the previous
year. It is expected that for both these raw materials, lower prices than
in FY09 will prevail during FY10. Marico's packing material costs to sales
are currently about 8%.

ASP as % of sales was lower during the year, mainly on account of phasing
the new prototype launches towards the end of the year. Moreover, during
FY09, the ASP appears lower owing to a change in the accounting policy to
now reducing consumer offer amounts from both revenue and ASP expenditure.
Had it not been for this change, the ASP to Sales would have been 10.8%. We
expect ASP as % of sales to be in the region of 12% during FY10.

Personnel cost as % of sales is higher because the contribution of Kaya in
the group topline is increasing over the quarters. Being a service oriented
model, personnel costs are higher as compared to the consumer products
business. Higher clinic expansion in Kaya (20 clinics were added during the
year) has also meant additional head count ahead of revenue picking up in
these clinics.

The company's pricing strategy attempts to pass on the input cost increases
so as to maintain margins on a unit volume basis. This is based on the
belief that it is easier to regain margins than to recover lost customers.
In an inflationary scenario therefore the margins on a percentage to sales
basis may be squeezed, owing to the higher turnover value.

CAPITAL UTILISATION:

Over the years, Marico has been maintaining a healthy return on its capital
employed (ROCE). Given below is a snapshot of various capital efficiency
ratios for Marico:

Ratio FY09 FY08

Return on Capital Employed (%)
* Marico Group 37.4 40.3

Return on Net Worth (Group) (%) 49.1 66.7

Working Capital Ratios (Group)
* Debtors Turnover (Days) 15 14

* Inventory Turnover (Days) 46 46

Net Working Capital Turnover (Days) 45 34

Debt: Equity (Group) 0.95 1.20

Finance Costs to Turnover (Group) (%) 1.5 1.6

* Ratios computed on average balances

Inventories are higher partly on account of higher raw material costs and
partly owing to some raw material position building.

Net Fixed Assets increased by Rs.54 crore during the year. This comprised
mainly investments in an R&D Centre in Mumbai, 20 new Kaya clinics and a
new factory in Egypt apart from normal capital expenditure.

As on March 31, 2009, the Marico Group has a net debt of Rs.270 crore
(Gross Rs.375 crore). Of the gross debt, about Rs,200 crore is denominated
in US Dollars. About Rs.100 crore of the USD debt is repayable within a
year. A little over Rs.100 crore debt denominated in Indian Rupees is
payable within a year. The average cost of the debt is about 8%. The
company may roll over some of the loans when they fall due during the year.
It is expected however, that the net debt level will be lower at the end of
FY10. Marico has adequate cash flows to maintain healthy debt service
coverage.

SHAREHOLDER VALUE:

Pay out - distribution of profit to shareholders:

Over the past 4 years, the company had made acquisitions and financed the
same through issue of fresh equity, borrowings from banks and internal cash
generation. Marico has been focussed on deploying its resources in avenues
which will result in maximization of share holder value. Continuing with
this policy, the Board of Directors of the Company has decided to follow a
conservative dividend policy, as compared to the past, unless the company
is unable to deploy the funds in attractive growth opportunities. The broad
direction is to maintain the absolute amount of dividend as paid out in the
previous year. On a growing profit base, the pay out ratio would be lower.

Dividend declared:

At its meeting held in October 2008 and April 2009, the Board of Directors
had declared interim dividends of 30% and 35.5% respectively. With this,
the cumulative dividend declared is 65.5%, the same as the percentage
declared in FY07 and FY08. Consequently, on a higher profit base, the
dividend payout ratio is lower at 25% (inclusive of dividend distribution
tax).

OTHER DEVELOPMENTS:

Sundari divestment:

Marico Limited (Marico) had acquired the spa products business under the
brand 'Sundari' through the acquisition of a controlling interest in
Sundari LLC, a Company domiciled in the United States, in February 2003.
Over the years, Marico increased its shareholding, eventually making
Sundari LLC a wholly owned subsidiary.

Marico has made investments to grow the business. Lead times in the
business, primarily in the nature of B2B are however long and the revenue
generated has remained modest, despite extremely favourable customer
feedback and reviews on the product range. With the overall shift in the
global business environment, Marico has decided to focus on its core
businesses in Asia and Africa in the B2C space.

Marico has sold its Sundari business to Wellness Systems, a limited
liability company promoted by two of the Marico Group's senior managers who
were managing the' Sundari business. As part of the terms of the agreement,
Wellness Systems has acquired the business at a consideration based on a
valuation report by an independent agency and free of any liabilities. The
Marico Group's consolidated accounts therefore show a one-time
extraordinary impact-of Rs. 15.03 crore during FY09. Based on legal advice
received, the company has treated the loss on non-recoverable advances and
interest thereon as a business loss in its computation of tax provision for
the year. Consequently, the profit after tax of the company is not
negatively impacted.

OUTLOOK:

The company has been keeping a cautiously optimistic outlook on the near
future. The current global economic environment continues to remain
uncertain. However, with Marico's product offerings being largely in the
area of items of daily consumption in which one-time outlays are not
significant, the impact of any slowdown on the company's operations is
expected to be limited. Inflationary pressures in India, in crude oil as
well as edible oils, have eased. Based on the extent of the decline in
input costs and factors such as the competitive environment and potential
down-trading, the company would take a call on pricing changes and
investments in advertising and sales promotion, to grow its consumer
franchise. It expects to make some improvement over its operating margins
in FY09.

During the last year or so, there has been significant inflation in input
prices for FMCG companies. Given Marico's strategy of attempting to
maintain the absolute unit margins across its portfolio, it has taken price
increases both in India and its international markets. While the company
believes that its brands will continue to show volume growth, the revenue
growth in FY10 will have to take into account the base effect. Moreover,
should the INR appreciate sharply in FY10 against the USD, Bangladeshi Taka
and South African Rand, then the revenue growth in INR could get depressed.

The company would continue to focus on long-term sustainable growth. Apart
from expanding existing franchises through investments in ASP (advertising
and sales promotion) and innovating to enhance the value of its offerings
such as the Parachute Advansed Champi pack (hair oil with massager) or
Parachute Advansed Revitalising Hot Oil, the company will also launch and
prototype new products. The launch of Hair & Care Almond Gold for instance,
would bring more consumers into the brand's fold, and the introduction of
Saffola Zest and Saffola Rice are expected to tap into the health foods
category.

In the recent past, Marico's international business introduced Hair Code
hair dye in Bangladesh, and new flavours under Hercules castor oil in South
Africa. Besides these, the restaging of Hair Code in Egypt and Caivil in
South Africa are expected to contribute towards growth in the international
business.

In Kaya; Marico will continue to open 12 to 15 clinics a year, work at
reducing the time to scale up revenues in new clinics, improve capacity
utilizations in existing ones and add to its range of service and product
offerings.

The competitive environment in the flagship brands Parachute and Saffola
remains largely unchanged and there are sufficiently strong barriers.

On behalf of the Board of Directors

Harsh Mariwala
Chairman and Managing Director

Place: Mumbai
Date : June 19, 2009

ECONOMIC VALUE ADDED ANALYSIS:

Economic Value Added (EVA) represents the value added by a business
enterprise to its shareholders by generating post tax operating profits in
excess of the cost of capital employed in the business.

EVA is based on the idea that a business must cover both the operating
costs and the capital costs. EVA is an estimate of true 'economic' profit,
that is, the amount by which the operating earnings exceed or fall short of
the required minimum rate of return for shareholders and lenders at
comparable risk.

This concept is increasingly being deployed to understand and evaluate
financial performance of companies the world over.

For the year ended March 31, 2009, Marico's Economic Value Added was Rs.144
crore as compared to Rs.132 crore in the previous year.

Over the past 5 years, Marico's Economic Value Added has grown at a
compounded annual growth rate (CAGR) of 33%.

SUSTAINABLE WEALTH CREATION:

Investment Through Shares Value Indexed
(in Rs.) Value
April 1996-Original
Purchase IPO 100 17,500 100

August 2002 Bonus (Equity 1:1) 100 - -

September 2002 Bonus (Preference 1:1) 200 - -

May 2004 Bonus (Equity 1:1) 200 - -

February 2007 Share Split (10:1) 4000 - -

Holdings and Cost as
on March 31, 2009 4,000 17,500 100

March 31, 2009 Markel value 4000 269,000 1,537

March 2004 Redemption proceeds of 200 4,000 23
Bonus Preference shares

April 1996-March 2009 Dividend Received** 21,058 120

Gross Returns 294,058 1,680

Compound Annual Return
since IPO 27% 27%

* Dividends are inclusive of those received on Bonus Preference Shares.

# Subject to taxes as applicable.