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.

Dabur - 2008-2009 Annual Report

DABUR INDIA LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To,
The Members,

Your Directors have pleasure in presenting the 34'' Annual Report on the
business and operations of the Company, together with the Audited Accounts
for the year ended March 31, 2009.

Financial Results:

Financial results are presented in Table 1.

Tablel: Financial results:

(Rs. in crore)
2008-09 2007-08

Turnover (including other income) 2439.23 2111.31

Profit before Tax 425.00 365.18

Add: Provisions of earlier years written back 0 0.68
425.00 365.86

Less: Provision for Taxation - Current 47.48 40.57

Provision for Taxation - Deferred (2.55) 0.75

Provision for Taxation - Fringe Benefit 6.51 7.08

Provision for taxation for earlier year 0.72 1.54

Profit after Tax 372.84 315.92

Add:Balance in Profit & Loss Account brought 323.23 229.15
forward from the previous year

Profit available for appropriation 696.07 545.07

Appropriation to:

General Reserve 90.00 70.00

Capital Reserve 0.01 0.40

Interim Dividend - Paid 64.88 64.80

Final Dividend - Proposed 86.51 64.80

Corporate tax on Dividend 25.73 22.02

Balance carried over to Balance Sheet 428.94 323.05

Total 696.07 545.07

Dividend:

The Company has paid an interim dividend of 75% (Re.0.75 per share) on
February 10, 2009. We are pleased to recommend a final dividend of 100%
(Re.1/- per share of Rupee one each) for the financial year 2008-09. The
final dividend, if approved by the members, will be paid to members within
the period stipulated by the Companies Act, 1956. The aggregate dividend
for the year will amount to 175% (Rs.1.75 per share of Rupee one each) as
against 150% (Rs.1.50 per share of Rupee one each) declared last year. The
dividend payout ratio for the current year, inclusive of corporate tax on
dividend distribution, is at 47.41%. Pursuant to the provisions of Section
205A (5) of the Companies Act, 1956, dividend for the year 2000-01 (final)
and 2001-02 (interim) which remained unpaid or unclaimed for a period of 7
years, amounting to Rs.1502250/-, has been transferred by the Company to
the Investors' Education and Protection Fund.

Operations and Business Performance:

Kindly refer to Management Discussion & Analysis and Corporate Governance,
which form part of this Report.

Acquisition of FEM Care Pharma Ltd.

With a view to increasing its market share in the fast-growing consumer &
personal care business, and strengthening its position in the industry, the
Company proposes to take over FEM Care Pharma Limited (FEM), a FMCG Company
listed on Bombay Stock Exchange, by acquiring controlling stake of 72.15%
from its existing promoters at a cost of Rs. 203.72 crore.

For this purpose, the Company has entered into a Share Purchase Agreement
with the existing promoters of FF.M. Further, as required under the
Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997, the Company is in the process of
acquiring from the public shareholders of FFM up to 2(1% of the fully
diluted voting capital of FFM at a price of Rs.800/- per share aggregating
lo Rs. 56.47 crore. In this regard, requisite Public Announcement has
already been released in newspapers and the Company had received the
clearance for Fetter o( Offer filed with SEBI and the Public offer will
open shortly.

FFM's portfolio of products include bleaches, hair removing cream and
liquid hand soaps, which are marketed under its flagship brand 'FFM'. FFM
also offers fabric care products under the brand name 'Bambi' and herbal
anti-wrinkle cream under the brand 'Botanica'.

Overall, the acquisition is expected to provide substantial revenue and
cost synergies to Dabur, and will be value accretive for its stakeholders.

Corporate Governance:

Dabur has always been devoted to adopting and adhering to the best
Corporate Governance practices recognized globally. The Company understands
and respects its fiduciary role and responsibility towards stakeholders and
the society at large, and strives hard to serve their interests, resulting
in creation of value and wealth for all stakeholders.

The compliance report on Corporate Governance and a certificate from
Auditors of the Company regarding compliance of the conditions of Corporate
Governance, as stipulated under Clause 49 of the Fisting Agreement with the
Stock Exchanges, is attached as Annexure 1' and forms part ot this annual
report.

Certificate of the CEO/CFO, inter alia, confirming the correctness of the
financial statements, compliance with Company's Code of Conduct, adequacy

of the Internal Control measures and reporting of matters to the Audit
Committee in terms of Clause49of the Fisting Agreement with the Stock
Exchanges, is also enclosed as a part of the Annual Report.

Directors:

During the period, H.H. Maharaja Gaj Singh had resigned from the
Directorship of the Company w.e.f. October 30, 2008. The Board places on
record its gratitude for the valuable services rendered and guidance
provided by HH Maharaja Gaj Singh during his tenure with the Company.

Mr Analjit Singh and Mr Albert Wiseman Paterson were appointed as
Additional Non-Executive Independent Directors on October 30, 2008. They
shall hold office upto the date of the ensuing Annual General Meeting of
the Company and, being eligible, offer themselves for appointment.

In terms of Article 103 and 104 of the Articles of Association of the
Company, Mr Sunil Duggal, Dr S Narayan and Mr P N Vijay will retire by
rotation at the ensuing Annual General Meeting, and being eligible, offer
themselves for reappointment in terms of the provisions ol Article 106 of
the Articles of Association of the Company.

The brief resumes of the Directors who are to be appointed/re-appointed,
the nature of their expertise in specific functional areas, names of
companies in which they have held directorships, committee memberships/
chairmanships, their shareholding etc., are furnished in the explanatory
statement to the notice of the ensuing Annual General Meeting.

Your Directors recommend their appointment/ re-appointment at the ensuing
Annual General Meeting.

Directors' Responsibility Statement:

Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956, with respect to Directors' Responsibility Statement, the Directors
confirm:

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

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

iii) That they had taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;

iv) That they had prepared the annual accounts on a going concern basis.

Change in Capital Structure and Listing of Shares:

The Company's shares are listed on the National Stock Exchange of India
Limited (NSE) and Bombay Stock Exchange limited (BSE) and are actively
traded.

In the year under review, the following shares were allotted and admitted
for
trading in NSE and BSE:-

- Equity shares allotted against the options exercised by employees
pursuant to Employees Stock Option Scheme of the Company;

* 939458 equity shares allotted on May 21,2008.
* 113818 equity shares allotted on August 7, 2008.

Auditors and their Report:

M/s G. Basu & Company, Chartered Accountants, Statutory Auditors of the
Company, will retire at the conclusion of the ensuing Annual General
Meeting and, being eligible, offer themselves for reappointment as
statutory auditors for the financial year 2009-10. The Company has received
a letter dated April 7, 2009 from them to the effect that their
reappointment, if made, would be within the limit prescribed under section
224(1B) of the Companies Act, 1956, and that they are not disqualified for
such reappointment within the meaning of Section 226 of the Companies Act,
1956.

The observations of the Auditors, together with the Notes to Accounts
referred to in the Auditors' Report, are self-explanatory and do not call
for any further explanation from the Directors.

Cost Auditors:

M/s Ramanath Iyer & Company, Cost Accountants, were re-appointed as Cost
Auditors to conduct cost audit of the accounts maintained by the Company,
in respect of the Formulations and Cosmetics & Toiletries products for the
financial year 2009-10.

Consolidated Financial Statements:

In compliance with the Accounting Standard 21 on Consolidated Financial
Statements, this Annual Report also includes Consolidated Financial
Statements for the financial year 2008-09.

Consolidated Turnover grew by 19.09% to Rs.2852.27 crore as compared to
Rs.2395.08 crore in the previous year. Similarly, net profit after tax and
after minority interest for the year at Rs.391.21 crore is higher by
Rs.57.10 crore as compared to Rs.334.11 crore in the previous year.

Internal Control System:

The Company has a well placed, proper and adequate internal control system,
which ensures that all assets are safeguarded and protected and that the
transactions are authorised, recorded and reported correctly. The Company's
internal control system comprises audit and compliance by in-house Internal
Audit Division, supplemented by internal audit checks from Price Waterhouse
Coopers Private Limited, the Internal Auditors. The Internal Auditors
independently evaluate the adequacy of internal controls and concurrently
audit the majority of the transactions in value terms. Independence of the
audit and compliance is ensured by direct reporting of Internal Audit
Division and Internal Auditors to the Audit Committee of the Board.

To further strengthen the internal control process, the Company has
developed a very comprehensive legal compliance manual called e-nforce',
which drills down from the CEO to the executive level person who is

responsible for compliance. This process is fully automated and generate
alerts for proper and timely compliance.

Fixed Deposits:

During the year under review, the Company has not accepted any fixed
deposits from the public, and as on March 31, 2009 the Company had no
unclaimed deposits or interest thereon due to any depositor. During the
year, the Company has repaid a sum of Rs. 194552/- towards unclaimed
deposits and interest thereon, and has deposited a sum of Rs.792744/-
towards unclaimed deposits and interest thereon in the Investors' Education
& Protection Fund, pursuant to the provisions of Section 205C of the
Companies Act, 1956.

Nature of Business:

There has been no change in the nature of business of the Company and any
of its subsidiary companies during the year.

Subsidiaries:

As required under the provisions of Section 212 of the Companies Act, 1956,
a statement of the holding company's interest in the subsidiary companies
is attached as Annexure 2' and forms part of this report.

In terms of approval granted by the Central Government under Section 212(8)
of the Companies Act, 1956, copies of 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 with the Balance Sheet of
the Company The Company will make available these documents/details upon
request by any shareholder of the Company or subsidiary interested in
obtaining the same.

The annual accounts of the subsidiary companies are also available for
inspection by the shareholders at the Registered Office of the Company and
also that of its respective subsidiaries. However, pursuant to Accounting
Standard AS-21 issued by the Institute of Chartered Accountants of India,
Consolidated Financial Statements presented by the Company include the
financial statements of its subsidiaries. The Financial Statements of each
subsidiary shall also be available on Company's website www.dabur.com.

The following information in aggregate for each subsidiary is also being
disclosed (a) capital (b) reserves (c) total assets (d) total liabilities
(e) details of investment (except in case of investment in subsidiaries)
(f) turnover (g) profit before taxation (h) provision for taxation (i)
profit after taxation (j) proposed dividend. The said information is given
in 'Annexure 3' and forms part of this report.

Employees Stock Option Plan:

During the year, 563472 options in 4 tranches were granted to eligible
employees of the Company in terms of Employees Stock Option Plan (Dabur
ESOP 2000). During the year, 1053276 options were exercised by the
employees after vesting. Accordingly, the Company made the allotment of
939458 equity shares on May 21,2008 and 113818 equity shares on August 7,
2008, against the options exercised by the employees.

The particulars of options issued under the said Plan as required by SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 are appended as 'Annexure 4' and forms part of this
report.

Particulars of Employees:

Particulars of employees as required under Section 217(2A) of the Companies
Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as
amended are given in 'Annexure 5' and forms part of this report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings
and Outgo

A. Conservation of energy:

a) Energy conservation measures taken:-

Various energy conservation projects were initiated at large scale and
successfully implemented. Consequently, the energy bill got reduced by
13.8% on absolute basis (from Rs.36 cr to Rs.31cr) between 2007/08 and
2008/09. This was despite a 8-9% volume increase in manufacturing and an
average increase of 11.7% in cost of key input fuels like HSD and Furnace
oil. Some of the key initiatives were as follows-

* Conversion of Oil Fired 6 TPH Boiler to Solid Bio Fuel Fired Boiler to
conserve energy and save environment.

* Combined ETP Facility, utilization of Organic Load (Herbs) through ETP to
generate Biogas which is burned in Boiler to conserve energy and save
environment.

* Retrofitting of pet coke boiler.

* Alternative fuel (Bio Diesel) used in Boilers.

* Replacement of Efficient Air Compressor - 'Nirvana' energy efficient Air
- Compressor installed to reduced Power consumption. Saving of around
20,000 units of Power on monthly basis.

* Shampoo Cold process for Energy Conservation.

* Process Change in Chyawanjunior conversion from Steam to Hot water for
energy conservation.

* Use of Centrifuge before Tray drier to reduce drying time in Bhasma by
70%.

* Synchronization of production load resulting in lower FO Consumption per
unit production.

b) Additional investments and proposals, if any, being implemented for
reduction of consumption of energy:-

* Additional investment of Rs.301.87 lac has been made during the year for
implementing further energy conservation measures at manufacturing plants.

c) Impact of measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:-

* The energy conservation measures taken during the year have resulted into
yearly saving of approximately Rs.560 Lacs and thereby lowered the cost of
production. These measures have also lead to reduction in effluent, reduced
maintenance time and cost, improved hygienic condition and consistency in
quality and improved productivity.

d) Total energy consumption and energy consumption per unit of production
as per Form A

- Attached herewith as 'Annexure 6'

B. Technology Absorption:

Efforts made in technology absorption as per Form B is attached herewith as

'Annexure 7.'

C. Foreign Exchange earnings and outgo:

i) Activities and initiatives relating to exports;

The Company's key markets for international business are the Middle East,
North Africa, West Africa and South East Asian geographies, with sourcing
from plants located across these regions. The Company also has a private
label business in USA and UK, along with Guar gum exports, which takes
place from its Indian plants.

Export business:

The Company undertakes exports of Guar Gum and also undertakes private
label exports to UK and US from India.

The Company has recorded a growth of 26.2% in Guar Gum export business from
Rs.38 crore in the year 07-08 to Rs.48.27 crore in the year 08-09. Growth
has been registered by increasing the customer base by focussing on the
existing China and USA markets. Direct business with customers has been
increased and dependency on brokers reduced.

Private label business in USA has grown from Rs. 17.33 crore in the year
07-08 to Rs.27.62 crore in the year 2008-09. Export of certain other
products is also being planned for the US markets.

The Company's International Business Division, recorded an impressive sales
growth of 39.5% from Rs.376 crore in 2007-08 to Rs.525 crore in 2008-09,
contributing to 18.5% ot overall consolidated Dabur's Business.

Robust sales growth in international markets was possible due to:

- Sharply defined Brand portlolio strategy in sync with the Company's brand
architecture.

- Higher levels of localization.

- Leveraging the 'naturals wave' to market Dabur products.

- Geographical expansion.

The Company has built a strong and robust brand architecture with two mega
brands for international business across all geographies - Dabur and Vatika
and most of its offerings are under either of these two brands.

The Vatika franchise has grown by 73% over last year and is now a 1NR 136
crore franchise, built from a negligible base over the last three years in
the Arab belt.

Following on the successful launch of Vatika Olive & Cactus Oils, the
Company launched another two variants Vatika Almond & Vatika Coconut,
extending the Vatika brand equity. This range of Vatika Hair Oils has
registered a 101% growth in value across the Middle hast and North African
region.

The Company had launched its new range ot Dabur Vatika Naturals styling
hair cream, across the MENA region in mid 2006. The brand has gained 11.1%
Volume Market share (overall) and a 13.3% Volume MS (Modern Trade) in Saudi
Arabia, despite aggressive competition from established brands.

The Amla franchise has been extended to the Hair ('ream Category with the
launch ot Dabur Amla Hair Cream in February 09.

Implementing the open innovation strategy the Company had outsourced
Italian technology and launched a range of intensive hair treatment masks
Vatika Naturals Haiiuim Zaith, which has been a big success and has become
a dominant brand in the portfolio just two years alter launch.

The key contributing markets to the international business growth have been
CCC, Egypt, Nigeria, Algeria, Morocco, Libya, Yemen, Syria and South
Africa.

GCC, the largest market in the International Business Division, has
registered a strong 45.6%) year on year value growth fuelled by innovations
and new product launches in the Hair are and Oral Care business.

Dabur Lgypt Limited is one of the top performers of the international
business with 99.4% year on year value growth. Vatika Naturals Styling Hair
Cream range has established itself as a key brand in the category, with a
9.5% value share within two years of launch.

African Consumer Care Ltd., Nigeria, which has been identified as one of
the key markets for future growth for Dabur in Africa, has grown by 36%>
over the last year, aided by the growth of Dabur Herbal Toothpaste and
Dabur Herbal Gel in the Oral ('are category.

Asian Consumer Care Pvt. Ltd., Bangladesh, has performed well with a growth
of 36.7%) during the fiscal 2008-09. The growth has been led by increased
distribution penetration and locussed brand approach.

Dabur Nepal Pvt Limited, which generates sales of Rs.272 crore and is one
of the largest geographies in the international division recorded a steady
growth of 11.1%.

The new manufacturing facility which has been set up in the Emirates of Ras
-al-Khaima was commissioned during the year and has become one ot major
manufacturing locations for Dabur's International Business.

ii) Development of new markets for Products & Services:

A significant contributor to the growth of the division during FY09 was
geographical expansion, resulting from opening up of new markets with new
avenues for growth in Lebanon, Turkey, Algeria, Morocco, Mauritania and
China.

iii) Export Plans:

The focus, going forward, is to continue expanding the Company's presence
across these geographies and to exploit the opportunities that exist in the
neighbouring regions. Therefore, the Company would continue to invest in
brand building, manufacturing and infrastructure in order to capture the
opportunities that exist for the Company.

Total Foreign Exchange used during 2008-09: Rs.2572.56 lac.

Total Foreign Exchange Earned during 2008-09: Rs. 10987.39 lac.

Group for interse transfer of shares:

Pursuant to an intimation received from the Promoters, under Clause 3(1)
(e) of 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 aforesaid SEBI Regulations, are given
in the 'Annexure 8' attached herewith and forms part ot this report.

Operations Review:

For detailed operational review kindly refer to Management Discussion and
Analysis and the Report on Corporate Governance, which forms part of this
Annual Report.

Health Safety and Environmental Review:

Dabur India Ltd. has renewed its commitment towards Health, Safety and
Environment through its Policy, which focuses on People, Technology and
Facilities, supported by Management Commitment as the prime driver. A
Dedicated 'Safety Management Team' is working towards the prevention of
Man, Machine and Material incidents at the Corporate Unit level and to
educate and motivate the employees on various aspects on Health, Safety and
Environment through training program and seminars.

The Company is continuously monitoring its waste to ensure adherence to
pollution control norms within the prescribed limit. To maintain the ground
level water and commitment towards the society, Dabur has taken the
initiative to install the Rainwater harvesting which has shown a good
result in maintaining the ground water level.

Key Initiatives taken during the year.

* Revised Environment Policy has been launched with the commitment to
preserve the environment.

* Environmental Management Program has been taken by units on the concept
of Reduce, Reuse and Recycle.

* Carbon Foot Print Study undertaken at Unit level.

* Environmental Target has been taken to reduce the consumption of water
and energy.

* Environmental Monitoring carried out at unit level to check the impact on
the environment.

* Different Guideline and Standard Rolled out for implementation at unit
level and Focus on the training - on job and off job to minimize the TRFR
(Total Recordable Frequency Rate).

* Risk Assessment carried out at unit level for the operation.

* Installation of Fire Hydrant System in units as applicable.

* Emergency Preparedness plan is in place and the plan is audited through
mock drills.

* Health Check up for all employees carried out at unit level.

Quality Review:

We at Dabur are committed to the health and well being of every household
by ensuring safe and quality products. Our vision is the key driver to our
journey from good to great quality.

The Quality Assurance programme is based on stated Quality and Food safety
policy which are founded on an integrated documentation system of
Specifications, Standard Operating Procedures and Batch Production Records,
supported by validated equipment, processes and trained personnel.

All of our factories in India, Nepal and Ras-al-Khaima are fully equipped
with state of the art laboratories to ensure the best in class quality
control. All the facilities in India are GMP certified apart from ISO 9000
and ISO 2200 certification of Silvasa, Jammu and Alwar factories. Food
facilities at Nepal and Jalpaiguri are HACCP certified so as to ensure
complete food safety.

Quality Improvement of finished product is a key initiative as part of our
continuous effort to improve the delivered quality. The metrics of finished
product quality has moved from 4.3 sigma in 07-08 to 4.4 sigma during 08-09
resulting into an improvement of 27%.

The wing of corporate quality to ensure compliance and identify scope ot
improvements audits the full chain starting from supplier to distribution
including factories and market. A total of 105 audits have been carried out
during 08-09 including three market audits.

Awards & Recognitions:

Dabur has received many Awards and Accolades in recognition of its-
achievements at various levels. During the year Dabur bagged various Awards
and Recognitions in different categories and for different Brands. These
include:

For the Company

* Ranked amongst India's most innovative companies by Business Today-
Monitor Group Survey.

* Ranked 28th in the list of India's Top 50 Most Valuable (company) Brands
by Brand Finance.

* Ranked the Business Leader in FMCG-Personal care Category at the NDTV
Profit Business Leadership Award 2008.

* Listed among the super 100 of India Inc, prepared by Business India.

Its Brands

* Hajmola, one of the strongest brands in Dabur's Portfolio, has been
listed among the Top 18 Iconic Brands in India.

* Dabur India's fruit Juice brand 'Real' awarded the Reader's Digest Gold
Trusted Brand Award 2008 in the Food and Beverages Category.

* Dabur Brands-Hajmola, Dabur Amla and Vatika have debuted in the Economic
Times Brand Equity's Most trusted Brands 2008 list.

Its Chief Executive Officer:

* Mr. Sunil Duggal was named the best corporate leader of 2008 at the B&E
leadership and Excellence Awards, and also ranked among India's most
valuable CEOs by Business World.

Industrial Relations:

The Company maintained healthy, cordial and harmonious industrial relations
at all levels. The enthusiasm and unstinting efforts of employees have
enabled the Company to remain at the leadership position in the industry.
It has taken various steps to improve productivity across organization.

Acknowledgements:

Your Directors place on record their gratitude to the Central Government,
State Governments and Company's Bankers for the assistance, co-operation
and encouragement they extended to the Company. Your Directors also wish to
place on record their sincere thanks and appreciation for the continuing
support and unstinting efforts of Investors, Dealers, Business Associates
and Employees in ensuring an excellent all around operational performance.

For and on behalf of the Board

Place: New Delhi (DR. ANAND BURMAN)
Date : 29th April, 2009 CHAIRMAN

Auditors' Report on Corporate Governance :
Annexure T

To
The Members of
Dabur India Limited

We have examined the compliance of conditions of Corporate Governance by
Dabur India Limited, for the year ended March 31,2009, as stipulated in
Clause 49 of the Listing Agreement of the said Company with the stock
exchanges.

The compliance of conditions of Corporate Governance is the responsibility
of the Management. Our examination is limited to procedures, and
implementation thereof, adopted by the Company for ensuring the compliance
of the conditions of Corporate Governance.

It is neither an audit nor an expression of opinion on the financial
statements of the Company.

In our opinion, and to the best of our information and according to the
explanations given to us, we certify that the Company has complied with the
conditions of Corporate Governance as stipulated in the above mentioned
Listing Agreement.

We state that no investor grievance is pending for a period exceeding one
month against the Company, as per the records maintained by the
Shareholders/ Investors Grievance Committee.

We further state that such compliance is neither an assurance as to the
future viability of the Company, nor the efficiency or effectiveness with
which the Management has conducted the affairs of the Company.

For G. BASU & CO.
Chartered Accountants

(S. Lahiri)
Partner

Place: New Delhi
Date : 29th April, 2009

Annexure '6' FORM - A (See Rule 2)

Form of Disclosure of particulars with respect to Conservation of Energy

A. Power and Fuel Consumption:
2008-09 2007-08

1. Electricity

a) Purchased:

Units 30958858 29322821
Total amount (Rs.) 138562650 119940207
Rate per unit (Rs.) 4.48 4.09

b) Own (ieneration:

i) Through diesel generator:

Units 2029113 4785311
Unit per litre of diesel oil 2.78 3.00
Cost per unit (Rs.) 10.92 9.64
Total cost (Rs.) 22151084 46128393

ii) Through Steam Turbine/Generator
Units Nil Nil

Unit per litre of Fuel Oil Cost/Unit (Rs.)

2. Coal (specify quality and where used)
(Bio Briquettes/Ret Coke for steam
generation- Boiler):

Quantity (tonnes) 4103.86 Nil
Total cost (Rs.) 22319456
Average rate per tonne (Rs.) 5438.65

3. Furnace Oil:

Quantity (tonnes) 4536.92 7232.83
Total cost (Rs.) 127009100 181280160
Average rate per tonne (Rs.) 27994.58 25063.52

4. Others/internal generation:

HSD
Quantity (Kilo ltr) 369.64 265.22
Total cost (Rs.) 12125048 7663977
Average rate per Kilo ltr (Rs.) 32802.23 28897.11
LDO
Quantity (Kilo ltr) 357.86 221.05
Total cost (Rs.) 12362835 6388162
Average rate per Kilo ltr (Rs.) 34547.05 28898.65

B. Consumption per unit of production

The Company is engaged in production of variety of products, hence the
figures of consumption per unit ot production are not ascertainable.

Annexure '7' FORM-B (See Rule 2)

Form of Disclosure of particulars with respect to Technology Absorption.

Research & Development:

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

The R&D focus remains on development of safe and efficacious products to
meet health and well-being needs of the consumers. In addition to new
technologies and formulation innovations, R&D has improved consumer value
of existing products through product cost reductions and packaging
innovations. The combined efforts ensured a strong product portfolio in all
categories including Ayurvedic, Health Care, Foods, Personal Care and Home
Care products. An important thrust within Ayurvedic area was expansion of
Agro-biotechnology to medicinal plants for quality enhancement of several
health care products. At the plant level R&D was also carried out for:

* Manufacturing Process of Malt Drink (Chyawan Junior)
* Herbal extraction process using a modified system
* Fast Hydration Gum for oil well drilling

2. Benefits derived as a result of the above R&D

a. Ayurvedic

The above R&D efforts have lead to the development of new and improved
products such as an Antacid Suspension, Honitus Lozenges (Honimint
flavour), Honitus Chewable Tablets for cough, and a new variant of Hajmola
tablets. These new products were qualified with clinical trials and
toxicity studies. Pudin Hara Active has been developed as an improved and
more effective version of Dabur Pudin Hara.

Besides the aforementioned products, the portfolio of Ayurvedic Classical
products has been enriched with Hajrool yahood Bhasama, Tapayadi lauh, and
Trayodasang guggulu for urinary disorders, anaemic conditions and
neurological disorders respectively.

All developments benefited from an integrated robust R&D process in raw
material specifications development, efficacy optimization and safety
assessment to ensure quality and performance of the products. As part of
continuous quality improvement, R&D has enabled effectively for commercial
scale farming of nine plant species that posed challenges in availability
and medicinal quality.

b. Foods:

Dabur Chyawan Junior that combined technologies from Ayurvedic and Food
competencies was launched to extend the reach of herbal nutrition to new
segments of consumers. The manufacturing cost of Chyawan Junior came down
by l/3rd & gross margins improved from 13% to 36%. Six fruit based
beverages for modern trade are ready for launch. The beverage set offers
Crisp Apple, Mango, Pulpy Orange, Orange Peach, Forest Fruit and Mixed
Berries. Trendy Apple based drinks for out of home consumption by young
adults are ready for market introduction in PET bottles.

R&D developed sensory attributes were deployed to ensure consumer
acceptance and taste improvement. Process development work for Honey was
improved for capacity enhancement and efficiency improvement at the
commercial level.

c. Home Care:

Home Care category R&D efforts resulted in an expansion of Dazzle range of
products to Floor Cleaner, Kitchen Cleaner and Silver Cleaner using two
novel technologies for dirt trapping and stain removal. In the toilet
cleaning segment, Sanifresh Extra Power was launched with higher active
content and new formulation for better performance and consumer value. The
mosquito repellent category added Advanced Odomos Naturals as a new
offering. A lower-cost Odomos product is in the last stage of readiness for
market. The newest introduction in air freshener category, Advanced Odonil
Gel, benefited from a new technology of superior perfume incorporation and
delivery.

d. Personal care:

The above R&D efforts lead to the development and launch of many new
products in categories of Oils, Hair, Skin & Oral Care e.g. -Vatika
enriched Almond Hair Oil, Amla Flower Magic Hair Oil, Vatika Antidandruff
Shampoo variants, Vatika Conditioners, Gulabari Cold Cream, Gulabari Spray,
Total Protect Shampoo, Babool Neem Toothpaste and Promise Red Gel. A
Calcium Fluoride Toothpaste was developed and launched in Nigeria. Many of
these product variants helped expand International Business.

3. Future plan of action:

a. Ayurvedic

Committed to the Health Care through Ayurvedic products, R&D is actively
developing safe and effective remedies for lifestyle ailments and other
niche areas like sugar-free products for weight conscious consumers. R&D
continues to develop new capabilities modern science offers to discover,
develop and optimize products for performance with the highest possible
safety profile. Ten new products are in the pipeline in several therapeutic
areas for next year.

b. Foods:

Delighting consumers with taste and value, while also providing nutrition,
energy and meal replacement continue to be the theme ot Real, Real Burrst
and Active brands. A substantial part of the R&D efforts is dedicated to
Chyawan Junior for taste enhancement and nourishment improvement through
herbal science. This cost sensitive category is also expected to benefit
from many cost savings projects and raw material alternatives development
in progress.

c. Home Care:

Much of the Home Care R&D focus will be on formulation in all categories to
offer consumers variants in forms that fit the lifestyle and amenities
available in a diverse population to increase penetration and consumption.
Hard surface cleaners will offer variants for new surfaces, and air care
category will expand into electrical diffusers and aerosols. Cost-effective
formulations will also be a major thrust of the R&D.

d. Personal Care:

Within Personal Care, both Hair and skin products will be expanded with
Ayurvedic ingredients as natural solution to beauty problems. New
methodologies and health science based techniques are in use to make the
new products more efficacious and safer for daily use. New technologies and
products are also in development for male grooming and Oral hygiene. R&D
formulators are ensuring regulatory compliance for timely introduction of
the Personal Care products in overseas business.

4. Expenditure on R&D (2008-09):

a) Capital Rs. 21.93 lacs
b) Recurring Rs. 209.04 lacs
c) Total Rs. 230.97 lacs

d) Total R&D expenditure as a
percentage of Total Turnover 0.095%

Technology Absorption, Adoption and Innovation:

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

Energy Conservation and Efficiency improvement:-

> Uniform heating in VTDs by hot water against earlier by steam.

> Using non-stick coating and formulation change Upgradation in
manufacturing

> Product improvement on sensory evaluation Waste Management

> Developed in house technology to convert the fruit waste in to organic
manure by using the Culture Lactobacilus burchi

> Fossil fuel replaced by Agro Waste Bio Briquettes in Steam Boiler Water
Management and Conservation

> Minimum use of water in process by preconcentration of herbal extracts
and reduction in concentration time.

> Improvement in water treatment plant through introduction of RO (Reverse
osmosis system) for DM water. Reutilization of Waste water from Pump seal
cooling and RO Reject water.

> Introduction of water efficient CIP system with Recycling of water in
fruit juice manufacturing.

Innovative packaging concept:

> Dabur Chywanprash

> Total shampoo pack - New Launch

> Almond Hair Oil Pack - New Launch

> Dandruff control shampoo- New Launch

> Amla Flower magic - New Launch

> Meswak Family Pack- Table Top Dispenser

> Odonil Gel - Round Pack

2. Benefits derived as a result of the above efforts e.g. product
improvement, cost reduction, product development, import substitution etc.:

> 30% Reduction in Bulk wastage.

> Improved efficiencies and productivity.

> Resulted in cost saving of Rs.30 per kg for chyawan junior.

> Cleaner environment. No Flue gases through Waste burning.

> Saved through waste disposal and generated revenue through the sale of
organic manure.

> Improved hygiene conditions.

> Increased productivity.

> Improvement on water availability.

> Reduction in Water treatment cost.

> Minimising the use of water and hence better conservation of water.

> Decoration change with improved aesthetics.

> High lusture pigment based inks developed with Merck, Germany.

> Parallel development of alternate Indian ink source which helped to
generate the cost effective option.

> High value perception & added premiumness through use of Metallic Gold &
Red inks in the bottles & sachets.

> 2 component FT cap for ease of oil dispensing with pearlised master batch
for added premiumness.

> Unique & clutter Breaking shape in the shampoo category with excellent
sleeve design matching the shape of the bottle resulting in a very premium
looking pack.

> 3 layer metallised laminate structure for shampoo sachet for added
premiumness & high shelf impact.

> Unique & clutter Breaking shape in the Hair Oil Category with excellent
sleeve design matching the shape of the bottle resulting in a very premium
looking pack.

> Contemporary PP table top container for Meswak Toothpaste with three
toothbrush with new graphics to upgrade the brand significantly.

> With the Foil stamping on the front panel, gives distinctiveness from
competition.

3. Incase of imported technology (imported during the last 5 years reckoned
from the beginning of this financial year) following information may be
furnished:

a) Technology imported:

Odomos Coil manufacturing Technology from Malaysia

b) Year of import:

2006-07

c) Has technology been fully absorbed:

Yes

d) If not absorbed, areas where this has not taken place, reason therefore
and future plan of action:

N/A

Annexure '8'

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

1. Mr Ashok Chand Burman
2. AC Burman HUF
3. Dr Anand Burman
4. Mrs Minnie Burman
5. Mr Aditya Burman
6. Mrs Shivani Burman
7. Ms Anisha Burman
8. Mr Vivek Chand Burman
9. Mrs Monica Burman
10. Mr Mohit Burman
11. Mr Gaurav Burman
12. Mrs Karima Burman
13. Ms Sujata Burman
14. V C Burman HUF
15. Mrs Asha Burman
16. Mr Amit Burman
17. Mrs Divya Burman
18. Master Adhiraj Burman
19. Ms Diya Burman
20. Mrs Gauri Tandon
21. Mr Sandeep Tandon
22. G C Burman HUF
23. Mr Pradip Burman
24. Mrs Meera Burman
25. Mr Chetan Burman
26. Mrs Pooja Burman
27. Master Kamran Burman
28. Ms Eishana Burman
29. Ms Devika Burman
30. Pradip Burman HUF
31. Mr Sidharth Burman
32. Mrs Indira Burman
33. Mr Saket Burman
34. Sidharth Burman (HUF)
35. A.B. Propmart Pvt. Ltd.
36. A.V.B. Finance Pvt. Ltd.
37. Acee Enterprises
38. Adbur Pvt. Ltd.
39. Amit Laboratories Pvt. Ltd.
40. Angel Softech Pvt. Ltd.
41. B R Bee Products Pvt. Ltd.
42. B.A. Holdings Pvt. Ltd.
43. Wrapster Foods Pvt. Ltd.
44. Burmans Finvest Pvt. Limited
45. Cavendish Hotels Private Limited
46. Chowdry Associates
47. Chunilal Medical Trust
48. Consortium Consumercare Pvt. Ltd.
49. Dabur Ayurvedic Specialities Ltd.
50. Dabur Foundation
51. Dabur GI Invest Corp
52. Dabur Invest Corp
53. Dabur Investment Corporation
54. M.B. Finmart Pvt. Limited
55. Dabur Pharmaceuticals Ltd.
56. Western Enterprises
57. Dr S.K. Burman Charitable Trust
58. Eastern Enterprises
59. Estate of Durga Prasad Makkar Trust
60. Excellent (India) Private Limited
61. Gyan Enterprises Private Limited
62. Interx Laboratories Private Limited
63. K.P.H. Dream Cricket Pvt. Ltd.
64. KBC India Private Limited
65. Lite Bite Foods Pvt. Ltd.
66. Malhotras Trading Company Pvt. Ltd.
67. Milky Investment & Trading Company
68. Moonlight Ranch Private Ltd.
69. Newage Capital Services Pvt. Ltd.
70. Prayag Commercial Private Limited
71. Elephant India Advisors Pvt. Ltd.
72. Puran Associates Private Limited
73. Ratna Commercial Enterprises Pvt. Ltd.
74. Sahiwal Inv. & Trading Company
75. Shree Investments Limited
76. Southern Enterprises
77. Sunshine India Pvt. Ltd.
78. Upvan Farms & Services Pvt. Ltd.
79. Vansh Holdings Pvt. Ltd.
80. Vertex Broadcasting Co. Pvt. Ltd.
81. VIC Enterprise Private Limited
82. Welltime Gold & Investments Pvt. Ltd.
83. Ayurvet Limited
84. Betteroption Estates Pvt. Ltd.
85. Burman Resorts Pvt. Ltd.
86. CNS Infotech (I) Pvt. Ltd.
87. Dabur Securities Pvt. Ltd.
88. Northern Herbal Farms Pvt. Ltd.
89. Windy Investments Pvt. Ltd.
90. Sanat Products Limited

Management Discussion and Analysis:

The economic well-being of any country and the spending power of its people
play an important role in defining the characteristics of its FMCG sector.
In India, for four consecutive years till 2008, it was a dream run for the
economy, with the Gross Domestic Product (GDP) recording an increase of
7.5%, 9.5%, 9.7% and 9% from fiscal 2004-05 to 2007-08. This prosperity
augured well for the people, with per capita income growing at 7.4% p.a.,
representing the fastest ever improvement in living standards over a four-
year period. The gross domestic savings rate too shot up from 29.8% to
37.7% during the period 2003-04 to 2007-08. The key growth drivers for this
period were agriculture, services, manufacturing, along with trade and
construction.

This phase of strong growth has been impacted in 2008-09 by one of the
worst economic crises witnessed in the history of the world. The banking
crisis which started in the US sub-prime property market triggered the
collapse of several large financial institutions, including banks, mortgage
and insurance companies. The crisis deepened further impacting other
sectors of the US economy and spreading beyond the boundaries of US as \
well. Global growth and output plummeted I leading to a sharp fall in asset
values across advanced and emerging economies, decrease in household wealth
and incomes and thereby putting downward pressure on consumer demand. These
problems were exacerbated by the volatile price of various commodities,
crude and mineral oil. While commodity and oil prices eased in the latter
part of the fiscal, the slowdown intensified with the US, Europe and Japan
sliding into recession.

Probably no economy of the world can emerge completely unscathed in such an
adverse global environment. India, although affected to a lesser extent,
has not been insulated from the global events. The credit and fiscal
markets in the country have tightened and asset markets have declined
sharply. The growth rate in its GDP has slowed down and the Central
Statistical Organization (CSO) of India has pegged GDP growth for Fiscal
2008-09 at 7.1 per cent, which would be the lowest in the last 5 years.

India's Industrial output has seen a major contraction with growth coming
down to 2.8% during April 2008-February 2009 as compared to 8.8% in the
corresponding period in the previous year. The year-on-year growth in bank
credit to the commercial sector slowed down to 16.9% during 2008-09,
compared with 203% in 2007-08. The year also saw a period of commodity-led
high inflationary environment, which was followed by an acute correction in
the commodity prices globally following the crash on the world financial
markets due to liquidity and demand concerns. Inflation in India measured
through Whole Sale Price Index (WPl) rose to as high as 12% during
September, 2008 before cooling oft to 0.26% by the end of March, 2009.

In these uncertain and bleak market conditions, your Company has posted one
of its strongest performances in the last 5 years, growing the Revenues by
183% and Net Profit by 17.5%. In fact, the growth in Net Profit excluding
the loss in the retail venture is 19.6%. The highlights of the Company's
performance in 2008-09 on a consolidated basis are:

* Consolidated Sales increased to Rs. 2834.1 crore in 2008-09 from
Rs.2396.3 crore in 2007-08, registering agrowth of 18.3%.

* Earnings before interest, depreciation, taxes and amortization (EBIDTA)
increased to Rs. 517.3 crore in 2008-09 from Rs. 443.3 crore in 2007-08,
registering growth of 16.7%

* Consolidated Profits After Tax (PAT) went up to Rs. 391.2 crore in 2008-
09 from Rs.332.9 crore, going up by 17.5%.

* Earnings per share (EPS) went up to Rs. 4.5 in 2008-09 from Rs. 3.8 in
2007-08.

The strength of the Company's business strategies and competence in
execution were demonstrated in its strong performance during 2008-09, when
it not only weathered the storm unleashed by the global economic meltdown
but successfully delivered consistent growth, quarter on quarter. The 18.3%
growth in Consolidated Sales was driven largely by increased volumes, which
accounted for almost three fourths of the total revenue growth. This has
been one of the highest growths recorded during the last 5 years with the
exception of 2005-06, the year in which growth was boosted by the Balsara
acquisition that added additional 10% to the topline. (See Chart A)

Chart A: Consolidated Sales and growth during last 5 years:

Year Sales Growth %
FY 05 14.7% 14.7%
FY 06 24.0% 24.0%
FY 07 18.3% 18.3%
FY 08 15.2% 15.2%

In spite of the highly uncertain market conditions and apprehensions of a
slowdown, the Company continued to drive its key strategic initiatives and
invest aggressively behind its brands and businesses during 2008-09.

Pursuing its strategy of inorganic growth through acquisitions that provide
significant cost and revenue synergies and enhance its market position, the
Company announced the acquisition of 72.15% of Fem Care Pharma Ltd (FCPL),
a leading player in the women's skin care products market, for Rs.203.7
crore in an all-cash deal. The process of regulatory approvals for the
acquisition, including an open offer for an additional 20% of the equity,
is underway and is likely to be completed in the first qarter of next
fiscal. The Company believes this acquisition will open new vistas of
growth in the fast-growing mainstream skin care segment and will accrue
significant cost and revenue synergies.

On the operational front, one of the major challenges faced during the year
was the significant inflationary environment fuelled by upward movement
of crude and agri-commodity-based raw materials. Due to this, inflation
touched a peak of 12-13% in September 2008 (See Chart B). Responding to
this challenge, the Company embarked on a number of proactive measures to
manage the cost pressures. An aggressive planning, forecasting and hedging
strategy on the one hand, and efficient management of cost on the other
helped curtail the impact of inflation. Calibrated price increases taken by
the Company also helped in protecting the operating margins and yet
maintain its strong volume-driven growth. While the Company increased the
prices of its products to pass on some of the increase in costs, these were
quite moderate as compared to the average price hikes in the industry. In
fact, the price increases taken by the Company were among the lowest in the
industry thereby ruling out the need for any roll back of prices post the
correction in input costs, which has been the case in some categories where
steep price increases of 15-25% were witnessed.

In addition to excellent material cost management, a series ot strategic
initiatives helped the Company deliver even in these difficult times.
Product innovation and superior packaging coupled with effective
communication initiatives and a host ot consumer activations enabled the
company drive double-digit growth across its categories. While many of
the Dabur offerings became more modern and contemporary with the
introduction of new packaging and look and feel, the portfolio remained
aligned to the Company's core strategy of offering brands and products on
the herbal and natural platform.

The national launch ot Dabur Chyawan Junior, a malt-based nutritional drink
incorporating the goodness of Chyawanprash, was one of the milestones in
this journey and also marked the Company's entry into the large and growing
Malted Food Drink (MFD) market with a unique and well-researched Product
offering. For the third year in a row, the Company's Vatika Shampoo brand
remained the fastest growing shampoo brand in the country with growth of
31.5%, significantly outperforming the category.

Dabur Amla Hair Oil, one of the largest brands in Dabur portfolio, posted
its best- ever growth ot 20.4% with its revenues crossing the Rs.300-crore
mark. The Company's international business reported strong growth of 40%
during the year increasing its contribution to 18.5% of total consolidated
sales from 15.7% in the previous year. Some of the other key achievements
during the year were:

* Successful extension of Gulabari brand to a range of skin care products
accelerating the brand's growth to over 40%.

* Dabur Red Tooth Paste, a unique toothpaste based on Ayurvedic knowledge,
became a Rs.100 crore brand within a period of 5 years of its launch.

* Consumer Health Division, Dabur's original and oldest business division
bounced back with strong 20% growth aided by aggressive OTC launches.

* The company entered the fast growing hard Surface Cleaners category with
the national launch of Dazzl floor and kitchen cleaners.

Rural India has been the key growth driver for the FMCG market during the
year.

Recognizing the huge growth opportunity residing in rural & small town
India, Dabur undertook specific initiatives to strengthen its rural
penetration. These included the roll-out of a rural-focused sales
initiative across eight key states that contribute to a majority of overall
rural sales, sprucing rural distribution reach, developing innovative
trade promotions, launching consumer activation programmes and introducing
special product packs for these markets.

These initiatives paid good dividends leading to a strong momentum in the
Company's rural markets. Lastly, one of the Company's biggest successes
during the year has been its operational excellence, which is evident in
its EBIDTA margins remaining at 18.3% vis-a-vis 18.5% in the previous
year. This has been a result of its unwavering focus on maximizing
efficiency in all its operations be it soureing, manufacturing, sales &
distribution, supply chain, advertising & media costs and other indirect
costs. With this, the company delivered a good growth in its Net Profit,
which increased by 17.5% for the consolidated business and by 19.6% after
excluding the losses on account of the newly launched retail venture.

Strategic Business Units:

The Company's business is structured in three strategically aligned
strategic business units:

* Consumer Care Division (CCD) which markets a wide range of products
across various consumer categories. This division accounted for 72.8% of
the Company's consolidated sales in 2008-09. (Refer Chart C)

* Consumer Health Division (CHD) which offers over-the-counter (OTC)
products, branded ethical and classical products based on the Ayurveda
platform. This Division accounted for 7.3% of Consolidated Sales in 2008-
09.

* International Business Division (IBD) which has made rapid strides and
become a key growth driver for the Company, With its business spread over
Middle East, North Africa, West Africa and South Asia, the division
contributed to 18.5% of the Consolidated Sales in 2008-09.

Dabur's product portfolio is spread over a good mix of less penetrated and
high growth categories. The Company's positioning on the 'health and
wellness' platform, backed by its ANH (Ayurvedic / Natural / Herbal)
platforms provides it a unique distinctiveness and consumer appeal. This,
combined with the Company's ability to create new categories and sub-
categories, make it uniquely positioned to capture lifestyle and
demographic changes-led growth in the FMCG space.

Chart C : Division-wise Consolidated Sales:

CCD 72.8%
CHD 7.3%
IBD 18.5%
Others 1.4%

Consumer Care Division (CCD):

Extension of existing brands to more subcategories and making more choice
available to consumers, coupled with increased focus on rural penetration,
was the key platform on which CCD leveraged its growth during 2008-09. The
division reported growth of 13.8%, supported by-strong performance across
various segments. The CCD business is divided into four key portfolios:
healthcare, personal care, home care and foods. These cater to a number of
consumer market segments including hair care, oral care, baby and skin
care, health supplements, digestives, home care and foods. Share of these
product segments in CCD sales is presented in Chart D.

Chart D : Category-wise share of CCD Sales:



Hair Care 13.3%
Oral Care 18.4%
HealtH Supplements 18.8%
Digestives & Candies 7.3%
Baby Oils & Skin Care 5.7%
Home Care 5.7%
Foods 31.3%

Health Care:

With a share of 44%, the Health Care segment continued to be the largest
contributor to CCD's sales during the fiscal, reporting impressive growth
across all its three categories: Health Supplements, Oral Care and
Digestives.

Health Supplements:

This category reported an 11.3% growth during 2008-09.

Dabur Chyawanprash, which is the flagship brand in this category, recorded
good gains in market share which went up from 62.3% in 2007-08 to 64.1% in
2008-09 (volume-share as per A C Nielsen). This was supported by a number
of initiatives taken to enhance the brand image and increase consumer
awareness. The key among them was enlisting a new brand ambassador, youth
icon M.S. Dhoni in addition to Amitabh Bachhan, coupled with the unveiling
of a new, modern and attractive packaging format that enhanced the
product appeal while retaining its traditional legacy.

Chyawan Junior, a malted food drink format (MFD) with the benefits of
immunity, was rolled out in the North, East and West regions. The product
performed well, gaining 1% share of the MFD segment in these key markets
in just three months of launch. This breakthrough product, which marked
Dabur's entry into the large Rs.1900 crore MFD market, will be one of the
avenues for bringing in new and younger consumers into the Chyawanprash
fold and expanding its franchise.

The sugar-free variant Dabur Chyawanprakash also performed well during the
year as consumer acceptance increased for this product. Dabur Honey, the
largest selling brand of honey in the country, continued its steady
performance on the back of its compelling anti-sugar, high nutrition
proposition. For the first time in the history of advertising the Amitabh
Bachchan-MS Dhoni combine was leveraged to take the Dabur Honey brand
campaign to a new level. The duo takes forward Dabur's message to 'Drop
Sugar & Switch to Dabur Honey' for a healthier life. To drive consumption
among kids, Dabur Honey tied up with Disney's popular character Winnie The
Pooh', which now features on the new trendy Dabur Honey Eazee Squeezy pack.
The Company also came out with a coffee table book on honey-based recipes
for everyday cooking to increase awareness about the product.

Taking its celebrity-endorsement strategy ahead, the Company signed a new
brand ambassador, cricketer Zaheer Khan for its Dabur Glucose campaign.
Epitomizing and exemplifying the ' Total Energy' (energy for the body and
for the mind) theme, Zaheer Khan is expected to add pace to the Company's
flagship energy drink marketing campaign. Introduction of reusable are and
the launch of two variants (Orange and Lemon) continued to ensure steady
growth for Dabur Glucose during the year and helped it maintain its market
share.

Oral Care:

This category reported a growth of 4.8% during the year with toothpastes
segment growing by 11.3%. After three quarters of sluggish growth during
fiscal 2008-09, resulting mainly from cost inflation leading to higher
product prices of select SKUs, Babool brand bounced back with a double
digit growth during the fourth quarter. The Company further enhanced the
brand offerings across various value price points, The Neem variant of
Babool, which was launched during 2008-09, gained share in the neem
toothpaste category.

A star performer in the toothpaste portfolio, Dabur Red Toothpaste reported
21.4% growth during the fiscal on the strength of effective communication
underlining its superior herbal formulation which is based on Ayurveda and
has been scientifically validated. With targeted advertising and extensive
school activation programmes, the brand's market share went up from 3.0% in
2007-08 to 3.3% during 2008-09 (source: A/C Neilsen Retail Audit Report).
The fact that \ the brand has touched the Rs. 100 crore mark within 5
years oflaunch further reinforces the product excellence and popularity.

An important development during the year was the re-launch of Meswak. On
the back of new packaging and communication that focused on the wonderful
properties of the herb that forms the core of the toothpaste, Meswak
recorded an impressive 17.2% growth in sales.

Red Toothpowder declined marginally albeit maintaining its market share.
The toothpowder category reported lower growth as usage patterns are
changing and consumers are opting tor toothpastes rather than toothpowders.
Dabur's oral care portfolio offers a variety of choices to the consumers to
upgrade to toothpastes and therefore is largely able to retain the
consumers in some or other oral care format.

Digestives:

The Digestives category reported growth of 11.8%. The three key offerings
in this category are Hajmola tablets - focusing on the ' tasty digestives'
theme; Hingoli - on gas relief; and Hajmola candy -on the tangy and spicy
taste. Growth in this category was supported by Hajmola tablets, which grew
by 13.7% and Hajmola candy, which reported a robust 17.9% increase for the
fiscal 2008-09.

The company launched a new campaign with the theme ' Hajmola kare khana
complete', which established Hajmola's post-meal connect and boosted growth
for the brand. Alongside, a consumer contact campaign to promote Hajmola
among dabbawalas, dhabas, hotels, restaurant chains, food courts etc.
emerged as an effective strategy to take the post-meal association further
& boost sales. As part of this initiative, the Company adopted 140 dhabas
on the five highways connected to Delhi and branded these dhabas, giving
them a new look and feel. Customers at these dhabas were served Hajmola as
the post-meal digestive. Dabur is now preparing to extend this initiative
to cover over 1000 dhabas across the country. Similar branding and sampling
initiatives were also undertaken with the dabbawallahs (tiffin carriers) in
Mumbai and branded food retail chains in Delhi-NCR. The Company is now
introducing a 50-paise sachet containing two Hajmola tablets, targeted
mainly at institutional consumers. The introduction of new variants like
Pudina and Nimbu continued to add excitement around the brand , and these
flavours have become hugely popular.

A host of advertising and promotion initiatives pushed up sales of Hajmola
Candy during the year. The ' audio candy' advertisement campaign was
particularly beneficial in promoting Hajmola Candy, especially among
children. Innovative marketing and tie-ups with kids' TV channels helped
boost the campaign further. A key initiative undertaken during the year
was school activation, which covered almost seven lac students in schools
across the country. Another key initiative was the introduction of Mega
jars that enabled Hajmola Candy to make its way forcefully back into large
retail outlets where it was previously being overtaken by local and other
brands.

Personal Care:

Comprising Hair Care and Baby & Skin Care, this portfolio is the second
largest contributor to CCD sales, with a 37 % share. During 2008-09, this
portfolio reported a strong 21.5% growth, of which significant growth came
out of higher volumes a considerable achievement given the intense and
challenging inflationary scenario in terms of the input costs that impacted
the FMCG industry during the year. Led by impressive growth across brands,
the Personal Care portfolio emerged as the fastest growing segment in CCD
duringtheyear.

Hair Care:

Hair tare segment recorded impressive growth of 22.8% during the fiscal
2008-09.

The star performer in the hair oil segment was the flagship brand Dabur
Amla hair oil, which reported a growth of 20.4%, while i Vatika hair oil
turned around from lackluster performance last year to report double-digit
growth. Anmol coconut oil reported strong growth during this period on
account of its focus on value segment in select geographies.

The strong growth in Amla Hair Oil was led by the brand's focus on
conversion of customers from loose mustard oil and a nu mber of custo
mer activation programmes were launched to bring more consumers into its
fold and enhance usage. The brand crossed Rs.300 crore in turnover and
ranks as one of the largest and fastest growing brands in the hair oil
tategory. The year also saw the introduction of Dabur Amla Hair Oil in a Re
1 sachet, a move that is expected to add further momentum to the brand's
growth.

The growth ofVatika Hair Oil was d riven by a total revamp, encompassing
qualitative change in the product, new packaging and a new communication
strategy, which saw i.5 lakh households being directly contacted on the new
platform of ' scientifically proven to be better than normal coconut oil.'
The growth in the oils segment happened despite a hike in prices, primarily
on account of a stronger leverage of the distribution reach and an
excellent price proposition, combined with a geographically segmented
strategy focusing on East and North India, where the market was previously
dominated by smaller discounted brands.

Light hair oil market represents an exciting growth opportunity with
category size estimated at around Rs. 500 crore. The Company staged an
entry into this sub category with the launch of two variants Vatika
Enriched Almond Hair Oil and Dabur Amla Flower Magic Flair Oil. These two
variants are being test marketed in select markets.

Vatika range of shampoos emerged as the fastest growing shampoo brand in
India for the third consecutive year reporting 31.5% growth. Its variants,
namely Henna Cream, Root Strengthening and Black Shine shampoos, performed
exceptionally well j adding significantly to the overall growth. \ Vatika
now has a market share of 6.8% (volume share as per A C Neilsen Audit
Report) as compared to 5.7% for the previous fiscal 2007-08.

With the anti-dandruff shampoos constituting more than one-third of the
total shampoo market in India, the Company sees great growth potential in
this category. As a step in this direction, the j Company created a new
sub-brand Vatika Dandruff control under which three anti dandruff shampoo
variants are being launched.

In order to continue the momentum and take the new initiatives forward,
the Company has signed Preity Zinta as the new brand ambassador. This is
expected to enhance the brands connect and saliency among the target
consumer segment.

Dabur marked its entry into the health shampoo segment by test marketing a
new product - Dabur Total Protect Health Shampoo. This product is
formulated with Ayurvedic herbs and provides a natural and healthy
alternative to consumers who are wary of using chemicals. The results of
the test market will determine the future strategy for this product.

Baby and Skin Care:

The Skin Care category saw impressive growth, with Gulabari brand crossing
the Rs.40 crore turnover mark, reporting a growth of 40.6%) during the
year.

Culabari's growth was driven by increasing sales of Gulabari rose water and
its extension into mainstream skin care with the introduction of new
products like Dabur Gulabari Moisturizing Cold Cream and Dabur Gulabari
Moisturizing Lotion. The introduction of Dabur Gulabari Premium Rose Touch
Face Freshener Spray - a breakthrough product in the Indian skin care
market - also contributed to the growth ofthe Gulabari franchise.

Skin care is a focus category tor Dabur, and moving forward, the Company
plans to widen its offerings in this market while continuing to build on
its Ayurvedic domain knowledge. The company is planning to launch a range
of premium Ayurvedic skin care products in the coming fiscal under a new
brand name, further strengthening its presence in this very attractive &
high growth market.

These initiatives coupled with the acquired Fem portfolio would give the
Company a sizeable presence in the skin care market in the coming years.

Dabur Lai Tail which is a key player in the baby massage oil segment
reported strong growth of 19.6% backed by various consumer promotion
activities. The product's efficacy was also proven through an independent
clinical trial that rated Dabur Lai Tail as the most effective massage oil
for height and weight growth for infants. The study noted that Dabur Lai
Tail offers twice faster rate of height and weight growth among infants as
compared to no massage at all.

Some smaller brands in the baby care portfolio such as Dabur Janam Ghunti
and Gripe Water were transferred to Consumer Health Division (CHD) for
enabling better focus and channel synergies.

Home Care:

Dabur is a significant player in the evolving and under penetrated Home
Care category in India. Home Care portfolio, which came into the Dabur fold
with the acquisition of Balsara in 2005, has a share of 5.7% of CCD
revenues. The portfolio registered a growth of9.7% during 2008-09.

The portfolio comprises of 3 categories:

Air Care, Mosquito Repellants and Surface Cleaners.

In the Air Care category, the Company provides a range of products under
the Odonil brand. The Company launched Ail-Freshener Gels in this segment
during the year. The brand, though faced with increasing competition from
other players as well as private labels, continues to build its equity and
strengthen loyalty with its consumers.

In the personal applicator Mosquito Repellant Cream category, Dabur's
Odomos is a market leader with 84% share. As part of its efforts to offer
consumers a wider choice, the Company has, during the course ofthe year,
expanded the Odomos range with the introduction of a convenient spray
format and a new value added format, christened Odomos Naturals. Odomos
Naturals comes with the goodness of citronella (a natural mosquito
repellent) and aloe vera. Odomos is now certified by Indian Medical
Association (IMA) as safe for use on skin and being highly effective
against disease causing mosquitoes.

The year also saw Dabur enter the floor and kitchen cleaners market with
the national launch of Dazzl. Two new products - a disinfectant Floor
Cleaner and an antibacterial Kitchen Cleaner-were introduced under the
Dazzl brand. Popular television bahu Smriti Irani has been roped in as the
celebrity endorser for the brand.

Dazzl has already garnered a 5% share of the non-phenyl, branded floor &
kitchen cleaner market. Dazzl Floor Cleaners are available in Floral, Lemon
and Pine fragrances.

Dabur operates in another segment of the surface cleaning market with
Sanifresh, a specialized toilet cleaner. The focus was on winning the
consumer value equation through selective advertising, improved product,
and providing a better deal to the consumer. A new brand Ambassador,
popular TV star, Saakshi Tanwar was signed on for the brand. Scale
formation in toilets due to hard water in many parts of India is a big-
problem. Towards solving this problem, Sanifresh Extra Power was soft-
launched during the year as the most powerful toilet cleaner. All these
initiatives resulted in more than 30% growth for this brand. Our third
brand in the surface cleaning category, Odopic dish cleaner, also
registered double digit growths.

Foods:

Foods division, which was merged with CCD during 2008-09 is now fully
integrated with the consumer care division and contributes 13.3% to the CCD
sales, This segment comprises mainly fruit beverages under the Real & Activ
brands and culinary additives under the Hommade brand. The foods business
recorded a growth of 14.4% for the year, riding on the plank of health &
wellness and established superiority.

The growth was driven by a 14.9% increase in the Real and Activ range of
fruit juices, while the Hommade brand also recorded a strong growth of
19.6%.

The category achieved this growth despite a month-long shut down at its
plant in Nepal, which led to supply disruptions and hence some loss of
sales. However, the Company has taken appropriate steps to build a backup
plan in case such events re-occur in the future and has built additional
manufacturing capacities in India.

On the marketing front, the Company successfully aligned its Activ range of
fruit juices to its health & wellness' strategy through a new ' No Sugar'
campaign. A new Weekend' campaign to promote various flavours of Real was
launched during the year which was quite effective in increasing awareness
about its range and variety. In an effort to further sharpen the brand
positioning of Real fruit juice range, the company has launched a
campaign focusing on ' fruit power' and what it means for consumers,
especially children. The Company also launched a new flavour Apple
Nectar' under Real to leverage the growing preference for this variant.

The Dabur culinary range offered under the Hommade brand is performing
quite well and the Company is now looking at expanding the range and
getting it listed on more and more counters. With increasing consumption of
Ready to Cook products and ingredients, the Company sees good potential in
this category going forward.

International Business Division:

The division, which has been transformed from being a small operation into
a multi-location business spreading through the Middle East, North Africa,
West Africa and South Asia, grew by 39.9% during the year and emerged as
the fastest growing division of the Company.

The division's performance was supported by strong volume-led growth as
well as price increases undertaken to offset the impact of high inflation
on input costs during the year.

This acceleration in growth of IBO led to its contribution to Dabur's
consolidated revenue going up to 18.5% for FY09 from 15.7% a year ago.

The key categories accelerating the division's growth are Hair
Creams, Toothpastes, Hair Oils and Conditioners. is pertinent to mention
that the brand architecture in the Company's overseas markets remains
similar to that in India, though the products sold under these brands are
customized and modified to the requirements of these markets.

A significant contributor to the division's growth during 2008-09 was
geographical expansion, resulting from opening up of fresh markets like
Lebanon, Turkey, Algeria, Morocco and Mauritania that offer new avenues for
growth.

The division's topline growth was boosted by robust performances in key
geographies like (ICC. Egypt. Nigeria and Bangladesh. (ICC, which is one of
the Company's key markets, grew by 46% during the year as a result of
excellent offtakes witnessed in the Vatika Hair Oil Iranchise, and also
high growth in Vatika Naturals styling hair cream.

Egypt, which has emerged as another key geography, doubled itself with a
growth of 99% during the fiscal with strong performances from Vatika
Hair C'ream and Vatika Oli velite Hair Oil.

Nigeria, which is predominantly an Oral Care market for ]HI'), delivered a
strong 36% growth tor the year. Brands that delivered strong performances
during the year in this market were Dahur Herbal Toothpaste and Dahur
Herbal (ie. Asian Consumer Care, Bangladesh, performed exceedingly well,
reporting a growth of 56%) during the fiscal. The growth was led by
increased distribution \penetration and focused brand approach.

Nepal which is one of the key markets in the Indian subcontinent,
recorded a steady growth of 11 %. The Pakistan operations were, however,
impacted by the political uncertainty prevailing in the country. The year
saw the division continuing to pursue an aggressive new product
development strategy, marked by a slew of product launches. The Amla
franchise, which has been strong in the Hair Oil domain, was extended to
the Hair Cream Category with the launch of Dabur Amla Hair Cream. The
division also launched several attractive shampoo variants and hair
conditioners.

The Company is now looking at expanding to other parts of Africa, taking
Fast Africa in the first phase, followed by West and South. The Company's
vision is to become one of the biggest FMCG companies in North Africa and
the Middle East region.

Consumer Health Division (CHD):

The Consumer Health Division, comprising a range of healthcare products
that provide Ayurveda-based solutions for health related issues, continued
to be a key focus area for the Company during the year. With both the OTC
(Over the Counter) and Classical product categories continuing to drive the
Company's CHD business, the focus on consolidation of the business that was
initiated during the previous year con tinned.

As with other Ayurvedic products of the Company, this division also saw
extensive visibility campaigns undertaken across key-markets on the plank
of ' Asar Dikhta 1 lai'. The Company's campaign to promote Ayurveda as a
healthy and natural way to good health and good life, as validated by
scientific principles, gave dividends and the year 2008-09 turned out to he
a strong growth year lor this division.

During the year under review. CHD registered 18.9% growth, with both, the
hthical & OTC portfolio doing well across the range driven by packaging
upgradation, mass media activities and a whole range of on ground consumer
activations including Dahur Ayurvedic Health Camps.

With Juhi Chaw la as its brand ambassador, the Women's Health portfolio
comprising Dashmularishta and Ashokarishta did well growing by 13.2%' and
14.2% respectively. The newly launched Dabur Active Blood

Purifier also gained market share in this segment.

Other new products launched during the year - Dabur Super Thanda Tail and
Dabur Active Antacid evoked a good market response. Dabur Badam Tail,
launched during the previous year, recorded 20.6% growth, with sales
touching about Rs. 6 crore in the second year of its launch.

The Honitus franchise in this segment grew 13.6% during 2008-09 with new
variants Mulethi Power and Honey Mint, adding to the brand portfolio.

Some of the brands from digestives & baby care portfolio in CCD have been
shitted to CUD towards the latter part of the year to provide them with
better distribution alignment and better brand focus. Focused marketing
and distribution eftorts helped boost growth for the transferred brands -
Hingoli,Janam Ghunti, Pudinhara, Sat Isab Gol, Gripe Water - which almost
uniformly recorded a 20% growth during the year and continue to be
systematically integrated into the CHD portfolio.

Going ahead, the Company plans to further add to the OTC portfolio
through introduction of new Ayurvedic products in modern, ready-to-use
formats and re-packaging and re-launch of existing products, coupled with
extensive above- the-line marketing activities.

Sales & Distribution:

Continued focus on improving penetration, increasing product availability
and a realignment of the distribution framework were the key highlights of
the Company's sales and distribution strategy during 2008-09.

Significant investments to strengthen market presence, through activation
programmes targeted at key urban channels and rural markets, was a major
initiative aimed at strengthening the sales and distribution system, that
today covers 25 lakh retail outlets across the country.

Further, the integration of Dabur Foods with Consumer Care Division gave
the Foods portfolio access to platforms of strategic channel activation
programmes created by CCD, besides providing scale and cost benefits to
enable greater reach and efficiency tor the Foods portfolio.

Going forward, the Company is revamping its sales structure by dividing its
toot soldiers into three locus groups of Home & Personal Care, Healthcare
and Foods. This division is being effected in 100 key markets, which have
been identified as high- growth business markets. This restructuring is
aimed at creating focus groups within the Company's sales force and the
sales personnel with the Company's stockist, to enable them to sell
products more efficiently and effectively. Christened DARE 2, this
initiative is expected to further empower the Dabur sales force and create
greater bandwidth to beat any potential slowdown in the market.

Wholesale trade plays a crucial role in ensuring that Dabur brands reach
the most in accessible term rain in a highly cost-effective manner. During
the year, the activation programme for wholesale trade was extended to
350 towns covering almost 30% of the CCD business during the year,
resulting in increased brand availability across markets.

Special market activation initiatives, including the Dabur Parivaar'
programme was rolled out for the Grocery Trade during the year. Under this
scheme, the Company adopted and nurtured top 10,000 stores across the
country, providing a strong platform for building brand awareness and
consumer activation. This initiative sought to build long-term
relationships with grocery stores by offering them special discounts and
rewards, as well as merchandizing solutions to strengthen shell presence
and create customized displays.

In order to combat the widening turbulence in the modern retail market and
sustain growth in this scenario, the Company has developed a comprehensive
strategy focused on share gains in key categories, The thrust was on the
creation of a distinct identity for Dabur brands - core being its\herbal
expertise - that is relevant for shoppers. Building an effective servicing
and activation system to address complexities ot multiple formats and
supply chain configurations were critical elements of this approach.

The Company also widened its presence in the rural markets - which have
been resilient to the slowdown - to further build on its already strong
small town and rural franchise presence. The Company rolled out a special
rural focused sales initiative across eight key states - UP, Punjab, MP,
Chhattisgarh, Bihar, West Bengal, Maharashtra and Gujarat - that contribute
to approximately 70% of the rural potential. Rural distribution reach was
stepped up in these states by penetrating into villages with population
under 3,000. Under this initiative, Held resources were significantly
increased in the high potential districts of these states to increase
contact frequencies and improve coverage by over 30%. The rural trade
opportunity was also leveraged through Dabur Apiunio, I.akslmu l.aao
programme for the sub stockist network in these focus states.

Besides, a dedicated sales training initiative - ASTRA - was also launched
in order to enhance the quality of field execution. The programme is aimed
at managing channel complexities with respect to sales and distribution and
is undertaken through 'train the trainer' programme using 75 professional
actors to train more than 2,000 channel partners across the country. The
Astra training consultancy module has been created in five vernacular
Indian languages - Bengali, Tamil, Telugu, Malayalam and Kannada.

During the year, the Company also significantly enhanced the foot print of
its transaction software 'Drishti' for stockists, integrating the real
time market information into its IT network. The Drishti foot print now
covers almost 70% of business and is helping the Company improve field
efficiencies and quality of decision-making in sales, while also helping
it reduce costs.

Development of a comprehensive IT package 'MITR', integrating all aspects
of the modern trade channel, has also been rolled out to enable tracking of
service levels and prioritizing investments. Technologies like SMS
enterprise solutions have been harnessed to provide field teams with real
time information on sales updates and stock status, thereby improving
efficiencies.

The Retail Business - new:

In March 2008, Dabur had launched a chain of health and beauty retail
stores under the neww brand. During the year, the Company opened 9 stores
in the Delhi NCR region and South India. However, the organized retail
industry went through a severe crunch with slowdown in offtake and
financial pressures leading to closure of a few players. Also, the
continued churn in retail has seen many players put their expansion plans
on hold. This has brought the sector to a standstill with new store
rollouts coming to a halt and most retail chains looking at rationalization
of stores to improve business viability. Dabur's retail venture has also
been impacted resulting in lower than expected sales velocity. Moreover,
due to high prevailing rental costs it was decided to postpone some of the
store openings till a more opportune time. Although the initial experience
indicates that specialized health and beauty retailing has good long-term
potential and will gain currency with revival of this sector, the Company
has slowed down the pace of expansion keeping in view the turmoil in the
industry. In addition, the Company is fine tuning filestore format,
location strategy and renegotiating the rental costs in line with the
decline in real estate prices. All this is expected to lead to a quicker
break even at store level and reduce the loss incurred by the business.

Operations:

Dabur's businesses have a strong back-end support in Procurement,
Manufacturing, Research & Development and Human Resource management, all
of which witnessed several key initiatives to boost performance during the
year.

Procurement:

Controlling costs in the prevailing inflationary scenario was one of
the biggest challenges faced by the Company during the year under review.
The Company effectively tackled this challenge on the strength of its
strategic futuristic planning, use of calibrated hedging mechanisms and re-
sourcing initiatives.

One of the key factors that enabled the Company to keep costs under control
was the short and medium-term planning programme that ensured regular
forecasts from its team of strategic planners within each division and
department. Three-month forecasts on the industry scenario were provided by
these planners to the brand teams for taking effective measures to combat
inflation.

Concurrently, the creation of a Dabur Inflation Basket focusing on
the commodities most relevant to the Company's operations helped maintain
Mtd manage costs effectively. The Dabur Inflation Basket, which was linked
to WPI, helped the Company come out with actual Inflation figures that
enabled it to plan ahead in a more focused manner.

Participation in the Futures lixchange also helped prepare the Company
adequately against inflationary trends. Apart from incorporating more
commodities, the Company enhanced its activity on this front by
participating on international exchanges for procurement required in its
International Business Division.

Manufacturing:

Domestic:-

Dabur has 11 production facilities in India, out of which two main units
are at Baddi (Himachal Pradesh) and Pantnagar (Uttaranchal); and seven
factories which are located at Sahibabad (Uttar Pradesh), Jammu, Silvassa,
Alwar, Katni, Narendrapur and Pithampur. The Hoods business is serviced by
manufacturing facilities at Newai; (Rajasthan) and Siliguri (West Bengal).

Capacity expansion & facility tip-gradation: During the year, the Company
scaled up its operations in its Pantnagar facility and expanded sourcing
in both Pantnagar and Baddi. It increased capacity considerably for
production of Oral Care, Shampoo, Hair Oils, Creams and Lotions and Health
Supplements. The Company is i also in the process of expanding its
Clucose facilities at Uttaranchal.

In the fruit juice segment, the Newai (Rajasthan) facility, which was
an acquired unit, has witnessed doubling of volumes through increase in
capacity of the sterilizer.

International Footprint:

Since water in the region was scarce, the Company went in tor extensive
conservation and recycling of water and also got sanction from the state
government tor drawing more water. De-bottlenecking of some of the
manufacturing systems also contributed in a big way to capacity
enhancements at this facility.

Environment protection: A key thrust area at the manufacturing facilities
was environment protection, with structured initiatives undertaken to
control carbon emissions. The Company, after extensive screening of several
agencies, has tied up with a reputed consultant to stud) carbon greenhouse
gas emissions at three of its sites, namely Pantnagar, Baddi and Newai.

Efficiency enhancement: The Company continued to improve productivity at
all its manufacturing locations through various cost reduction Mid energy
saving initiatives. In Baddi, the Company initiated Total Productivity
Management (TPM) principles through an external consultant, moving towards
increased automation and multi-operator concept.

A number of cost reduction and process improvement projects were undertaken
to reduce costs in manufacturing of a number ol products. The Company also
implemented alternate fuel technologies for steam generation at its units
at Sahibabad and Katni.

In the future, the Company plans to set up new manufacturing facilities at
Baddi, Himachal Pradesh to cater to its future growth requirements in
addition to expanding its facilities at other locations.

International Operations:

During 2008-09, the Company expanded its capacities in IBD with the
commencement of operationsat Ras ahkhaimah in the CAR, enabling it to re
organize its operations in the Middle Last. The timely commissioning of
this plant helped support the Company's strong growth in IBO. During the
year, the Company also started its Nigeria operations by relurbishingan
acquired unit for the oral care segment.

Hgypt is an important destination for the Company with strong growth coming
from this market. The manufacturing facilities in I gypt have been expanded
and enhanced to meet the future growth requirements. Further, to service
the growing Hgypt market, the Company plans to set up another greentield
facility by 2010-11. The Hgypt facilities, catering to North Africa and
parts of Hast and Central Africa (Comesa region), will locus on manufacture
of Hair Care products, along with some Oral Care products.

Nepal turned out to be a significant contributor to the Company's growth
despite the political turmoil in the country. The focus in Nepal was on
getting more out of the existing assets, which was managed through improved
efficiencies and de-bottlcnccking. Despite a niontli-long strike, political
uncertainty and severe power cuts, which resulted in both energy and labour
costs going up significantly, the Company managed to increase production
volumes in Nepal.

R&D and Innovation:

At Dabur, R&D lies at the heart of everything the Company does. From
strengthening the Company's presence in the herbal niche, to innovating on
newer and differentiated herbal and natural products spanning newer
categories; from making a 3000-year old science contemporary to suit the
needs and aspirations of today's modern and urban consumers through path-
breaking packaging and product proposition, to scientifically validating
the widespread benefits of science for increasing acceptance of the
Company's products, R&D's role is axiomatic.

In terms of product and packaging innovations, the Company
successfully developed new variants in Hajmola, a new range of surface
cleaners, new variants in shampoo, a range of natural conditioners and
light hair oils, new packaging for Meswak toothpaste, Amla Hair Oil in
sachet format, new OTC products such as Harde Goli, Honitus chewable
tablets and Antacid.

Up-gradation of quality was another focus area and the Company's thrust was
on measuring and monitoring quality end-to-end - from suppliers to
marketing. Several products were repackaged and upgraded to better designs
and formats during the year as part of this exercise. These included Odonil
Cel, Chywan Junior pack, Meswak, Gulabari, fight Hair oil (Amla Flower
Magic & Vatika Fnriched Almond Hair Oil),Re hairoil sachets.

Human Resources:

People always have been, and shall continue to be, central to Dabur's
growth store. Always at the forefront in terms of employee engagement and
HR initiatives, the Company is continually investing in the development of
its human resources through a series of employee-friendly measures aimed at
talent acquisition, development, motivation and retention. Dabur's new
rewards programme for employees - Applause' - seeks to reward employees
in various categories like the Rising Star (best newcomer), Honours Club
(employee of the year), Trailblazer (employee of the year) and Eureka (for
the best idea generation).

Besides, spot awards are also given to recognize employees at any time
for demonstration of actions, which are innovative, save cost, promote
team spirit, institute new initiatives and raise standards of performance.
The rewards, presented at the annual L'tsav function, go beyond cash and
include goodies like LCD TV, Period, music system as well as Black
Berry handsets. Employees are also given a citation and other rewards.

With this system ol employee rewards, the Company's game plan is to
increase employee engagement levels and create more employee touch points
and opportunities to recognize talent, both on a formal and informal basis.

The company had also rolled out the 'Astra' programme, as detailed earlier.
Besides, a new programme was launched in March 2009 to address the business
complexities arising out of the increasing number of products. SKUs by
bringing a category focus into the organization, for which about 100
personnel were recruited.

A key MR initiative at Dabur is internal communication. Apart from
Intranet, each manufacturing facility and regional office has its own
newsletter, with a local language component. Also, annual scholarships are
given to children of employees under the Dabur protsahan programme as a
part of which 197 children were awarded scholarships.

In its overseas offices, the Company achieved a significant milestone in
the staffing of its Ras-L Khaimah factory, which was designed tor two
shifts but had to be expanded to include three shifts soon after operations
started.

The Company believes in total transparency and has put in place a number of
formal and informal processes to get employee feedback, along with a system
of holding a bi-annual survey.

A vibrant culture, average employee age of 31-32 years, direct recruitment
from some of the top B-schools in the country under the Young Managers'
Development Program and Conduct of Competency Development Centres for
elevation are some of the other important MR initiatives of the Company. As
of 31 March 2009, the company employs 4,222 people in various parts of its
business.

Industrial Relations:

The Company has an excellent track record of industrial relations, which,
by and large, remained good during the year. Though events outside the
Company's control impacted industrial relations in the Nepal facility, this
did not affect the performance, with the unit, in fact, delivering good
growth and output.

Corporate Social Responsibility:

As a responsible corporate citizen, the Company has put in place several
initiatives to fulfill its social responsibility and contribute actively to
the growth of the society.'these have been covered in detail in a
separate section of this report.

Financial Review (on a consolidated basis):

The Company reported healthy growth and profitability during 2008-09. Table
I below provides the abridged profit and loss account for the Company on a
consolidated basis.

Table 1: DIL's Abridged Profit and Loss Statement, on a consolidated
basis:

(Rs.crore)
2008-09 2007-08 Changes

Sales 2834.1 2396.3 18.3%
Other Operating Income 25.6 24.0 6.8%
EBIDTA 517.3 443.3 16.7%
Depreciation 49.2 42.1 16.9%
Interest 23.2 16.8 38.1%
PBT 444.9 384.4 15.7%
PAT (afterminority interest) 391.2 332.9 17.8%

With the strategic and operational initiatives outlined hereinabove, the
Company increased its Consolidated Sales by 18.3% to Rs. 2834.1 crore in
2008-09 from Rs. 2396.3 crore in 2007-08.

While the environment remained quite inflationary for most part of the
year, the Company was able to mitigate the impact of inflation and maintain
its EBIOT'A margin at 18.3% in 2008-09 as compared to 18.5% in 2007-08 (See
Table 2). In fact the KBIDTA margin for the core 'MCG business after
excluding the loss of the retail venture touched 18.9%(SeeTable3).

Tabic 2: Key financial ratios of DIL, on a consolidated basis:

(Rs.crore)
2008-2009 2007-08

EBIDTA/Sales 18.3% 18.3%
PAT /Sales 13.8% 13.9%
ROCE 38.8% 47.6%
RONW 48.4% 55.3%

During the year, the Company announced the acquisition of 72.15% of Fem
are Pharma Ltd (FCPI.) for Rs. 203.3 crore in an all-cash deal. This
amount has been deposited in an escrow account on which the beneficial
interest is accruing to the transferors. The acquisition process including
the open offer for additional 20% of FCPL's equity is under way and post
the completion of this process. FCPL will become a subsidiary of Oil.
Therefore the OH, hnancials for EY2008-09 do not include the sales and
profitability of FCIL As the funds have already been deposited in the
escrow and the corresponding returns are not yet accruing to the Company,
the ROCE of the company was impacted. However the ROCE will improve once
the acquisition of FCPL gets completed and its profits get consolidated
with DIE. The acquisition has been funded out of internal accruals of the
Company.

The ROCE was also impacted to some extent by the Retail Venture which has
been set up under H&B Stores Limited, a 100% subsidiary of DIL. 2008-09 was
the first full year of operations tor this business. As the venture is at
an initial stage, the subsidiary incurred a loss of Rs. 17.9 crore during
the year. Excluding the impact of Retail the profitability and financial
ratios of the core FMCCI were even better which are presented in Table
3 below:

Tabic 3: Key financial ratios of DIL, excluding Retail.

(Rs.crore)
2008-2009 2007-08

EBIDTA/Sales 18.9% 18.8%
PAT /Sales 14.5% 14.2%
ROCE 42% 47.8%
RONW 50.6% 55.2%

The net working capital of the company was at 18.4 days of sales as
compared to 6.4 days in 2007-08. However this increase was on account of
surplus cash to the extent of Rs. 100 crore excluding which the net
workingcapital was at 5.5 days of sales.

The Company declared a total dividend of 175% for the financial year 2008-
09 which translates into a payout ratio of 45% of consolidated net profit.

Internal Control Systems:

Dabur has a robust internal audit and control system manned and managed by
qualified and experienced people. Price Water house Coopers is the
internal auditor for the company and its subsidiaries.

The Company follows Standard Operating Procedures (SOPs) that are in line
with the best global practices, and have been laid down across the process
flows, along with authority controls for each activity.

Dabur has also introduced the COSO framework for internal controls and
adequacy of internal audit. Under this framework, various risks facing
the Company are identified and assessed routinely across all levels and
functions, and suitable control activities are designed to address and
mitigate the significant risks.

The internal audit department reports to the Audit Committee ot the Board
of Directors, which recommends control measure from time to time. To read
the report of the Audit Committee on internal control and adequacy, refer
to the section on Corporate Governance ot the Annual Report.

Risk Management:

Dabur like any other enterprise having national as well global business
interests, is exposed to business risks which may be internal as well as
external. In the broadest sense, we define risk as the eventuality of not
achievingoui financial, operative, or strategic goals as planned. To ensure
our long-term corporate success, it is therefore essential that risks be
effectively identified, analyzed and then mitigated by means ot appropriate
control measures. We have a comprehensive risk management system in place,
which enables us to recognize and analyze risks early and to take the
appropriate action. This system is implemented as an integral part ot our
business processes across the entire Dabur operations and includes
recording monitoring, and controlling internal enterprise business risks
and addressing them through informed and objective strategies.

The risk management system is spearheaded by the Chief Risk Officer (CRO)
of the Company, who is responsible for, and ensures, effective risk
management both risk identification and mitigation. A team of risk officers
at each Company location supports the CRO. Each employee is entitled to
identify risk and report it to the concerned risk officer, who in turn
reports it to the CRO.

The risks are reported in the Risk Register and classified in terms or
their impact and probability to occurrence. The Risk Register is an
invcntoi'y of risks affecting Dabur, and covers various functions like
marketing, operations, regulatory affairs, finance and human resource
development. The risks are further mapped in terms of mitigation action to
be taken and the people who are responsible for taking such actions. The
Risk Register is reviewed periodically by senior management and is
presented to the Audit Committee on a quarterly basis.

One of the key risks faced by the company in todays scenario is continued
economic slowdown and deterioration of macro economic indicators which can
impact the spending power of consumers and put pressure on their incomes
and consumption. A poor monsoon, it it happens, can impact rural incomes
and dampen rural consumption and spends. Increase of imitation / fake
products and brands cm hamper our growth. Any unexpected changes in
regulatory framework pertaining to fiscal benefits and health related
issues which may impact parts of our business or profitability is one of
risks faced by the company.

However the Company is well aware of these risks and challenges and has put
in place mechanisms to ensure that they are managed and mitigated with
adequate timely actions.

Cautionary Statement:

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 substantially or materially from

those expressed or implied. Important developments that could affect the
Company's operations include a downward trend in the domestic FMCC
industry, rise-in input costs, exchange rate fluctuations, and significant
changes in political and economic environment in India, environment
standards, tax laws, litigation and labour relations.

Sustainability Report:

At Dabur, environment and nature is the lifeline of our business. With a
portfolio of Ayurveda and nature-based products, conservation of nature &
natural resources is deep rooted in our organizational DNA, and in every
aspect of our ever-growingbusiness.

We, at Dabur, have not merely incorporated the concept of sustainability
into the core of our business but have, in fact, expanded it to encompass
our aspirations and responsibilities to the society and to the environment.
It is this concept that inspires us to optimize our business performance to
tackle the new and growing challenges of environment and technology.
Technology Absorption, along with Health, Safety and Environment
Protection.

Conservation of Energy:

The year 2008-09 was a landmark one for Dabur in terms of the various
energy conservation measures undertaken by the Company. Successful
implementation of various energy conservation projects led to a 13.8%
reduction in the Company's energy bill. What was noteworthy was the fact
that this reduction has come despite an 8-9% volume increase in
manufacturing, and an average 11.7% increase in cost of key input fuels and
improve hygiene conditions & productivity.

C) Technology Absorption;

During the year, Dabur has also made continuous efforts towards technology
absorption and innovation, which have contributed towards preserving
natural resources. These efforts include:

* Minimum use of water in process by pre-concentration of herbal extract
and reduction in concentration time

* Uniform heating using hot water as against steam earlier, resulting in
30% reutilization of waste water from pump &, seal cooling and RO reject
waste-water management Introduction of water efficient CIP system with
recycling of water in fruit juice manufacturing.

* Development ot in-house technology to convert fruit waste into organic
manure by using the culture Lactobacilusburchi Simultaneously, the Company
undertook a series ot innovative packaging concepts, relating to
distinctive repackaging of some of the top brands and launch of new
products in unique cost-effective packs.

As a result, the Company achieved a host ot significant benefits in terms
of product improvement, cost reduction, product development, import
substitution, cleaner environment and waste disposal, amongst others.

Health Safety & Environmental Review:

Renewing the commitment to Health Safety and Environment, Dabur has
formulated a policy focusing on People, Technology and Facilities. A
dedicated 'Safety Management Team' has also been put in place to work
towards the prevention of untoward incidents at the corporate and unit
level, besides educate &' motivate employees on various aspects of Health,
Safety and Environment.

The Company is also continuously monitoring its waste in adherence with the
pollution control norms. In pursuance of its commitment towards the
society, efforts have also been initiated to conserve and maintain the
ground water level. The efforts include implementation of rainwater
harvesting, which has deliveres encouraging results and has put the company
on the path to becoming a Water- Positive Corporation.

Dabur also initiated a Carbon Foot Print Study at the unit level with an
aim to become a carbon positive Company in years to come.

At Dabur, we are committed to sustainable development throughout our
diverse operations. And, we will strive to translate the good intentions
into concrete and lasting results, contributing to the ultimate good of the
society.